Biogas investment and electricity production costs

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An analysis by RESFARM project for Spain

Source: Breure et al. (2017)[1]

Large investments are needed in energy production in order to realise ambitious goals for reduction of greenhouse gases presented in the Paris Agreement. Entrepreneurs are facing major challenges in developing new renewable energy capacity. Lack of affordable capital is one of the most important barriers for renewable capacity development. The RESFARM project, assisting farmers to obtain market capital needed for development of solar, wind and biogas energy, collected information on investment needs and economic performance of on-farm installations.

An innovative model was developed to estimate investment requirement and annual costs for operation and maintenance of farm-level digesters from literature and practical experiences. Literature and field survey data were analysed and applied using an exponential function to assess investment costs in relation for new biogas installations in Spain.

Investment costs range between €2  and €6 million per per MWel installation capacity depending on digester size. Highest costs were found for small (500 kWel) installations, with costs decreasing fast with increasing capacity (Figure 1).

Electricity production costs were calculated from lifetime costs and electricity output. Levelized Cost of Electricity (LCOE) are used to evaluate investment needs, feedstock costs, and operation and maintenance (finance, transport, taxes, insurances, fees and subsidies) in comparison to fossil and other renewable energy systems including wind and solar.

Average production costs exceed reports from literature which mostly refer to Germany. Results suggest that support is needed to help develop co-digestion biogas systems in the Spanish farming sector. Digester profitability is often limited by high feedstock costs, but investment costs may be expected to decline. Viable biogas development will depend on availability of affordable feedstocks (including crop and industrial residues), capital and cost-effective digester management.

[1] Breure MS, Langeveld JWA, Pombo J, 2017. A generalised model for the calculation of renewable energy production costs with special emphasis on co-digestion biogas chains in Spain. Poster presented at the European Biomass Conference and Exhibition, 12-16 June 2017, Stockholm