_ Yuri Kofner, economist, MIWI Institute. Munich, December 15, 2022.
Due to limited import options for gas from abroad in the coming years and an ever-increasing undersupply of electricity due to a one-sided expansion of volatile PV and wind power, biomass can play an important role in Germany’s future energy policy. Biomass is a domestic, base load capable and controllable energy source. It can produce industrial-grade biomethane, synthetic fuels and hydrogen, and generate heat. And it is regenerative, environmentally friendly and low in CO2. Thanks to its extensive agriculture and forestry, Germany is suitable for this kind of energy source.
According to the Agency for Renewable Energies, the entire technical biomass potential in Germany is almost 400 TWh per year, which corresponds to almost 40 percent of domestic natural gas consumption, 80 percent of former Russian gas exports to Germany in 2021 or 78 percent of nationwide electricity consumption.[ 2]
In order to use the energy potential of existing and future biomass plants in Germany without impairing food production, this analysis paper proposes extensive deregulation and a reduction in bureaucracy in domestic biogas production.
Immediate deregulation for until early 2024
All four planned north German LNG terminals are to have a total annual capacity of up to 195 TWh by 2024, which corresponds to only 35 percent of the previous Russian gas exports to Germany and 19 percent of the federal German gas demand. A delay in commissioning is also likely.
In view of the loss of natural gas imports from Russia, leading German research institutes believe that gas rationing will also be necessary for German industry in the winter of 2023/24. The gas shortage could be even more pronounced in the winter of 2023/24 than in the winter of 2022/23. This assessment is, among other things also shared by experts such as the economist Dr. Daniel Stelter and Qatar’s Energy Minister Saad Sherida al-Kaab.
It should be the federal government’s top priority to avert the impending shortage of gas and electricity by expanding the energy supply as soon as possible. Domestic biogas can play an important supporting role here.
In 2020, the 9,660 biomass plants in Germany with an installed capacity of 9.3 GW generated around 45 TWh of electricity (8.1 percent of nationwide electricity generation) and almost 132 TWh of heat (5.7 percent of gross heat generation).
Due to the short-term and temporary suspension of regulatory restrictions, German energy production from biomass could be increased by almost 16-20 percent by winter 2023-24, i.e. by a total of 7 TWh or tending to 19 TWh of biomethane of sufficient purity for feeding into the natural gas grid. That would correspond to at least 38 percent of the potential gas shortage expected in Germany in December 2023.
For these reasons, the federal government should temporarily suspend regulatory restrictions on increasing energy production from biomass (until January 1st, 2024).
The most important proposed measures relate to the Renewable Energy Sources Act (EEG) and the Federal Immission Control Act (BImSchG):
- EEG: In order to tap the unused liquid manure potential of livestock farms and to avoid the unjustified but legally necessary use of excess biogas via an alternative gas consumption device, the upper limit for all existing small manure systems should also be raised to a rated output of 150 kW.
- BImSchG: A temporarily increased gas production does not have to be re-approved for a limited period of time or be able to be notified unbureaucratically.
Additional measures can be taken in the law on environmental impact assessment (UVPG), in the EEG and in the 4th Federal Immission Control Ordinance (BImSchV):
- Renewable Energy Sources Act (EEG) and specialist law (Regulations on systems for handling water-polluting substances – AwSV, technical instructions for keeping the air clean TA-Luft, fertilizer ordinance): The requirements for the storage of fermentation products should be equated with the requirements for the storage of liquid manure and the specifications for the minimum hydraulic residence time be temporarily relaxed.
- BImSchV: It should be possible to exceed the limit for plants approved under building law to gas production of 1.2 million standard cubic meters of biogas per year for a limited period.
- UVPG: The obligation to carry out a preliminary assessment of an environmental impact assessment is to be suspended for a limited period.
No to skimming off electricity revenue – also for biomass
According to the Federal Ministry of Economics (BMW), the national implementation of the EU Council’s proposal no. 12999/22 “on emergency measures in response to high energy prices” provides for plant-specific capping limits based on the previous EEG remuneration rates and a retrospective skimming of the electricity market revenues achieved since March 2022.
From the point of view of the Federal Ministry of Economics, the proceeds from bioenergy plants should not be completely excluded from excess profit skimming (especially in the case of residual wood power plants).
The costs for technical components and operating materials for biomass plants have risen sharply in recent years, and since the start of the Ukraine war there have been further sharp price increases for agricultural raw materials and wood. The “safety buffer” of 3 ct/kWh provided by the BMWK is far too small to even come close to covering the current cost increases.
The BMWK’s approach of siphoning off 90 percent of all revenues that plants can also generate through flexible operation is completely counterproductive from an economic point of view. This “excess profit tax” is a serious, damaging interference in the free market. According to the IW Cologne, it is very difficult to define profit taxes, to correctly narrow down the companies and sectors affected, and to tax international corporations correctly. Above all, the taxation of increased profits due to a scarcity situation reduces the incentive to expand the energy supply in the future and thus further exacerbates the unfavourable market situation.
The proposal to skim off electricity revenue, i.e. plant-specific caps based on the previous EEG remuneration rates and retrospective skimming of the electricity market revenues from infra-marginal electricity producers that have been achieved since March 2022, must be rejected completely.
Fundamental medium-term deregulation
In addition to the priority task of ensuring energy security in the winter of 2023/24, the federal government should completely realign its long-term energy policy after February 2022. The energy transition with its previous dependence on foreign suppliers of cheap natural gas should be reconsidered.
Biomass and in particular biomethane can play an important supporting role in Germany’s future energy policy, since it is a base load capable, controllable, storable, domestic, regenerative, environmentally friendly and low-CO2 energy source.
With gas and electricity prices projected to remain 2-3 times higher in the current decade than in 2019, bioenergy will also become more profitable in the long term.
Around 220 biomethane plants are currently in operation in Germany, which fed 5 to 7.5 TWh of biomethane into the natural gas grid in 2020. The main problem when connecting biogas plants to the gas network in Germany are the distances and the connection price. Models such as those in France and Austria, where the connection to the gas network is guaranteed, subsidized, organized quickly and without many conditions, can be seen as role models here. France is the leader in feeding biomethane into the gas grid (over 37 TWh per year) thanks to a very favourable legal framework.
In 2020, energy crops for biogas plants were cultivated on around 1.5 million hectares of arable land. This means that energy crops account for around 14 percent of the total agricultural area. The proportion of corn in the area remained unchanged at around two-thirds. Canola cultivation for biofuels, which was still declining in 2019, rose to 575,000 hectares in 2020.
In order to make more efficient use of the energy policy potential of the existing plant park of biogas plants, wood-fired power plants and biomethane combined heat and power (CHP) as well as open biomass potential without impairing domestic food production, the federal government should enforce extensive deregulation, in particular by amending the relevant laws, including the Renewable Energy Sources Act (EEG), the Building Code (BauGB) and the Federal Immission Control Act (BImSchG):
- The profitability of existing plants after the end of the EEG remuneration period must be ensured – this applies in particular to biogas plants with low to medium output. This could be enabled using one of two options:
Proposal 1: Extension of the existing surcharge for systems with low output to 450 kW rated output.
Proposal 2: Introduction of a new connection regulation with a fixed fee for systems with a rated output of up to 450 kW.
- The framework conditions for making the existing biogas plant park more flexible should be improved by further developing the flexibility bonus without an upper limit.
- The permitted proportion of grass must be increased in the regulatory specifications, or the word “grass clover” must be replaced in the EEG by the words “grass and grass clover”. This means that more landscape care products could be used and leftover meadows better utilised. To this end, the state government should work to amend the relevant laws, including the Building Code (BauGB) and the Federal Immission Control Act (BImSchG).
- The permanent size adjustment for small manure systems (150 kW rated output) should not only be for new systems, but also for existing small manure systems.
- A staggering of the proportion of usable biomass substrates is to be introduced in order to enable smaller farms to ferment liquid manure and manure and thus reduce methane emissions: Up to 75 kW a substrate proportion in the ratio 50/50, up to 100 kW 60/40 and every kW above that – 70 percent liquid manure or manure, 10 percent clover grass and another 20 percent renewable raw materials.
- Poultry manure should also be counted as liquid manure.
- Basically, the feed-in management should be simplified by removing the extreme bureaucratic hurdles at the electricity suppliers and it should be ensured that the first payment is made a maximum of four weeks after the electricity is first fed into the grid.
Gasification of residual and waste materials as the future of bioenergy?
Deregulation plays an important role in using existing biomass capacities more efficiently. Technological innovations are required in order to expand capacities for the production of biomass in the future without impairing domestic food production.
The gasification of biogenic residues and waste using the dual-fluidized-bed gasification (DFB) method for the production of energy sources, heat and electricity has many advantages in terms of potential use, economy, environmental protection and CO2 avoidance.
The greatest advantage is that a large number of biogenic residual and waste materials can be used as fuel for the DFB process, which are still largely unused for large-scale energy production: wood chips, forest residues, leaves, straw, reed grass, sewage sludge, conventional grasses, etc. Thus, this method does not compete with food production.
According to the Agency for Renewable Energies, the technical gasification potential of biogenic residual and waste products in Germany is 248 TWh per year, which corresponds to just under a quarter of domestic natural gas consumption or the annual capacity of the still functioning Nord Stream 2 pipeline.
Due to the wide and partly “free” availability of the fuels, the relatively low capital costs and a high efficiency of 83 percent, the average generation costs of the DFB technology of 3.5 euros per kg hydrogen, 6 cents per kWh natural gas and 7 cent per kWh of electricity more than competitive.
Using the versatile two-bed fluidized bed method, methane (10 percent), hydrogen (35-45 percent), ethene (2-3 percent), district heating, electricity and also synthetic diesel fuel (according to the Fischer-Tropsch method) can be produced.
In view of the current energy crisis, the federal government should provide administrative and financial support for the research, development and market ramp-up of DFB technology as a base load, domestic, environmentally friendly, regenerative, low-carbon energy source that does not compete with food production.
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