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Direct marketing of electricity from biogas and biomethane: an economic analysis of several business models in Germany

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  • Tobias Heffels
  • Russell McKenna
  • Wolf Fichtner

Abstract

At the beginning of 2012 the legal framework for the promotion of electricity generation from renewable energies in Germany was amended. The compensation scheme for electricity generated from biogas and biomethane, previously based on a fixed feed-in tariff, will henceforth be supplemented by an alternative direct marketing option, which consists of market-based and flexibility premiums. In this article two possible business models for the direct marketing of electricity from biogas and biomethane are economically compared to two state of the art business models based on fixed feed-in tariffs. A linear optimization model taking into account economic and technical restrictions is developed and applied to the two business models based on direct-marketing, in order to compare the costs and revenues for these two models to state of the art biogas plants generating base-load electricity. The key findings are that by applying direct marketing, additional income can be generated that more than compensates for the necessary additional investments. The results also show that the income from direct marketing of electricity generated from biogas mainly consists of the market and flexibility premium and the revenues generated on the spot exchange are of minor importance. Hence the direct marketing of electricity from biogas and biomethane remains heavily dependent on subsidies. The fact that the developed model assumes perfect foresight regarding the development of market prices means that the determined additional incomes represent an upper limit. Copyright Springer Verlag 2012

Suggested Citation

  • Tobias Heffels & Russell McKenna & Wolf Fichtner, 2012. "Direct marketing of electricity from biogas and biomethane: an economic analysis of several business models in Germany," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 23(1), pages 53-70, September.
    • Handle: RePEc:spr:metrik:v:23:y:2012:i:1:p:53-70
    DOI: 10.1007/s00187-012-0153-z
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    References listed on IDEAS

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    1. Mario Ragwitz & Claus Huber & Gustav Resch, 2007. "Promotion of renewable energy sources: effects on innovation," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 2(1/2), pages 32-56.
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    Cited by:

    1. McKenna, R.C. & Bchini, Q. & Weinand, J.M. & Michaelis, J. & König, S. & Köppel, W. & Fichtner, W., 2018. "The future role of Power-to-Gas in the energy transition: Regional and local techno-economic analyses in Baden-Württemberg," Applied Energy, Elsevier, vol. 212(C), pages 386-400.
    2. Steinhorst, Martin Philipp & Empl, Johannes-Baptist & Bahrs, Enno, 2014. "Interdependenzen Zwischen Risikoeinstellungen Und Entscheidungen In Der Planung Sowie Im Betrieb Von Biogasanlagen," 54th Annual Conference, Goettingen, Germany, September 17-19, 2014 187894, German Association of Agricultural Economists (GEWISOLA).
    3. Fichtner, Stephan & Meyr, Herbert, 2019. "Biogas plant optimization by increasing its exibility considering uncertain revenues," Hohenheim Discussion Papers in Business, Economics and Social Sciences 07-2019, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    4. Lauven, Lars-Peter & Geldermann, Jutta & Desideri, Umberto, 2019. "Estimating the revenue potential of flexible biogas plants in the power sector," Energy Policy, Elsevier, vol. 128(C), pages 402-410.
    5. Francis Kemausuor & Muyiwa S. Adaramola & John Morken, 2018. "A Review of Commercial Biogas Systems and Lessons for Africa," Energies, MDPI, vol. 11(11), pages 1-21, November.
    6. Yakubu Abdul-Salam & Melf-Hinrich Ehlers & Jelte Harnmeijer, 2017. "Anaerobic Digestion of Feedstock Grown on Marginal Land: Break-Even Electricity Prices," Energies, MDPI, vol. 10(9), pages 1-21, September.
    7. Steinhorst, M.P. & Empl, J.-B. & Bahrs, E., 2015. "Interdependenzen zwischen Risikoeinstellungen und Entscheidungen in der Planung sowie im Betrieb von Biogasanlagen," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 50, March.
    8. Engelken, Maximilian & Römer, Benedikt & Drescher, Marcus & Welpe, Isabell M. & Picot, Arnold, 2016. "Comparing drivers, barriers, and opportunities of business models for renewable energies: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 60(C), pages 795-809.
    9. Björn Christensen & Alexander Himme, 2017. "Improving environmental management accounting: how to use statistics to better determine energy consumption," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 28(2), pages 227-243, May.

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