Proceedings

PR – The Economics Of Biogas In Denmark – A Farm And Socital Economic Perspective

Denmark has been one of the leading European Countries in using Biogas for Combined Heat and Power (CHP), since the 1980’ties. However, in the last two decades, the increase has been limited. A new energy policy aimed at increasing the profitability of Biogas was introduced in the spring of 2012. The analysis here shows that the new agreement will improve the profitability of biogas plants and increase the biogas production although the political ambition of an increase from 4 PJ to 14 PJ by 2020 seems unlikely. The analysis shows that biogas plants can be profitable even if the input is a mix of manure and solid fractions/farm yard manure given the present level of support. The analyses show that although maize increases the gas output somewhat, it increases the profit only slightly as the costs of the input is high (41€ per tonne). The overall production costs are around 0.53 € per m3 methane. Even without an investment subsidy of 30%, the case 2012, is profitable. Financing the biogas plants is a challenge. The interest used of 4.25% requires bank guaranties which in practice can be hard to get. Using a more likely interest of 7-8% reduces the yearly profit to 400.000 €. The socioeconomic analyses show that the costs of biogas as a measure to reduce CO2 emissions, are around 135 € per tonne CO2 and using maize is an expensive way to reduce emissions of CO2 as the CO2 reducing effect is limited. The new Danish energy agreement gives subsidies to biogas used in the natural gas grid. The upgrading, including pressure adjustment, is 0.16 € per m3 methane. The analysis shows that the profit from upgrading biogas is only to be preferred if the sales prices of heat are very low. The socioeconomic cost of upgrading is, in most cases, not better than CPH. In order to reduce the cost of reducing CO2 emissions, the input to the biogas plant has to be based on farm yard manure and deep bedding as well as slurry.

Keywords: biogas, economics, upgrading biogas, cost of CO2 reduction, environment

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Author(s): Dubgaard, A., Jacobsen, B.H., Laugesen, F.M.

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Organizations(s): Department of Food and Resource Economics, University of Copenhagen