Due to the energy crisis, the EU wants to increase biogas production, and our plants are generating losses

Original article (in Croatian) was published on 25/11/2022

Most Croatian biowaste ends up in landfills, and owners of biogas plants warn of the consequences of inflation and the energy crisis in their sector.

While the European Union, as a result of the energy crisis triggered by the Russian invasion of Ukraine, is making efforts to increase biogas production, more and more such plants are currently generating losses in Croatia.

The increase in the price of raw materials for production, and the fact that their high price exceeded 120 percent of the total cost of electricity, resulted in twenty biogas power plants leaving the incentive system, terminating the contract with the Croatian Market Energy Operator (HROTE).

This was confirmed by the Croatian Chamber of Commerce (HGK), which operates a group that brings together owners of biogas plants who have been warning for some time about the consequences that inflation and the energy crisis have had on their sector.

Biogas, a gas mixture of methane (60 to 70 per cent), carbon dioxide (30 to 40 per cent) and other gases, produced by the bacterial decomposition of organic substances without access to air, plays a significant role in the green transition.

In some countries, such as the UK, where 80 per cent of biogas is obtained from landfills and sewage sludge, biogas production is seen as a way of managing waste, while in others, such as Germany, where 93 per cent of biogas is obtained from crops, uses it as a means of producing renewable energy (1, 2).

However, Croatia fails to use its potential.

Unconnected agriculture, energy and waste management departments have failed to build a system based on the circular economy, and the country still needs to succeed in encouraging the development of micro-plants on small farms and energy cooperatives at the level of local communities.

At the same time, adopting a strategy that would more clearly define the directions in which the biogas industry should develop, as well as regulations that would help biogas producers survive disruptions in the market, is lagging behind.

Unprofitability

Out of slightly less than one hundred biogas plants in Croatia, 42 biogas power plants had the status of privileged electricity producers. For producers with a tariff contracted with HROTE, the purchase price of electricity is adjusted based on the average annual inflation rate, which according to the National Bureau of Statistics for 2021 was 2.6 per cent.

At the same time, as HGK told us, the price of silage for biogas has increased by up to 100 per cent.

Marijan Cenger, president of the Croatian Association of Biogas Producers, says that the rise in the prices of input raw materials started last year.

“Such a situation resulted in the fact that those producers who left the system and thus solved their problems fared better. The price on the market is a minimum of HRK 2.5 to 3 per kWh, with a three-and-a-half-year contract, which ensured that the plants that agreed to this would survive and repay the loan during that time. We are currently operating with losses of HRK 350,000 per month”, he told Faktograf.

He says that the owners of biogas plants started talking about price correction last year.

“We also had a meeting at the Ministry of Economy and Sustainable Development, we proposed a model based on a bonus that would be paid out on an annual basis, and which would cover the price difference caused by the increase in the price of raw materials. We were promised that the Ministry would pass a regulation, however, we have had no more information for six months, and at the same time we are operating at a loss. We don’t know what stage the regulation is in, and we don’t even know when to expect it, but I believe that it will solve many problems”, Cenger told us, stating that the regulation has been in the works for a year.

Since the rise in energy prices and the high inflation rate have led to an increase in all electricity production costs (transport, services, spare equipment), HGK, through the OIE association, has requested a price correction for privileged electricity producers who have contracts with HROTE. The correction of the tariff items for which the contracts were signed in accordance with the Consumer Price Index takes place annually, making it difficult to do business in times of crisis.

“It is proposed to change the dynamics of the incentive price correction for the Consumer Price Index instead of the annual calculation to the quarterly calculation, instead of the total Consumer Price Index (CPI) to take into account the energy CPI, the change of corrective factors that correct the basic tariff items in such a way as to take into account it takes an increase in the price of raw materials, the possibility of temporarily exiting the incentive system, with the possibility of return”, HGK told us.

When asked whether we can expect the aforementioned regulation to be adopted soon, the competent Ministry of Economy and Sustainable Development replied that the Regulation on the promotion of electricity production from renewable energy sources and high-efficiency cogeneration is in the final stages of drafting and will be sent to e-consultation, while not defining exactly when.

Big plans

Biogas can also be upgraded to biomethane, also called renewable natural gas (RNG), and injected into natural gas pipelines or used as vehicle fuel.

Based on the fact that this energy source, produced from agricultural waste, sewage or city garbage, is a 100% sustainable energy source, the European Commission plans to increase the production of this gas to 35 billion cubic meters by 2030, compared to 3 billion cubic meters in 2020.

Production should already be increased by 0.5 billion cubic meters before the end of 2022.

“It is absurd that Croatian biogas is facing collapse while the European Commission is making plans like this. In the situation we are in, I don’t see who would invest in that business in Croatia”, says Cenger.

EU countries are increasingly investing in biogas infrastructure. France currently has 365 installations designed to inject biomethane into natural gas networks, with a capacity of 6.4 terawatt-hours (TWh) per year (Euroactiv).

Croatia needs to catch up in this regard, Cenger notes, confirming that we are far from such projects.

The 10-year plan for the development of the gas transportation system of the Republic of Croatia 2021-2030 by Plinacro states that at the moment, the gas transportation system can also transport all other types of gases (biogas, mixed gas, gas from biomass and UPP) to the extent that such gases can be technically and safely mixed into the flow of natural gas and thus distributed.

Not so long ago, the operator of the transport system announced that the existing gas infrastructure represents only technical potential that can be opportunely repurposed and used for the transport of biomethane and hydrogen, as well as the transport, collection and storage of CO2 (Jutarnji list).

Municipal biowaste as a resource

Anaerobic digestion already occurs in nature, in landfills and in some manure management systems. The decomposition of organic waste creates large amounts of methane, a greenhouse gas that retains heat in the atmosphere more efficiently than carbon dioxide. In addition, the process of anaerobic digestion produces digestate that can be used as fertiliser.

By producing biogas from biowaste, it is possible to influence the reduction of greenhouse gas emissions responsible for climate change. According to some estimates, the reduction in methane emissions resulting from exploiting the full potential of biogas in the United States would be equivalent to the annual emissions of 800,000 to 11 million passenger vehicles. It is estimated that with only 100 tons of food waste per day, anaerobic digestion can produce enough energy to power 800 to 1,400 homes each year (EESI).

In Croatia, most municipal biowaste ends up in landfills.

According to the Municipal Waste Report for 2021, a total of 494,583 tons of biowaste was generated from municipal waste in 2021, of which 122,175 tons of biowaste were collected separately. Ten compost plants received 88,227 tons of waste for composting, and in 11 biogas plants, only 17,295 tons of municipal waste were processed by anaerobic digestion.

Biowaste, which is part of biodegradable municipal waste, was collected separately in the area of 215 local self-government units, which is an increase of 23 units compared to the previous year. In Croatia, it is still more profitable to dispose of waste than to use it as a resource for biogas production.

“About 115,000 MW hours per year could be obtained from 530,000 tons, i.e. 7.5 per cent of the total amount of electricity produced from RES in 2021 in the Republic of Croatia”, explains Marko List from Consultare, a company that deals with consulting in the field of bio-waste management.

The company worked on a project implemented by the Daruvar utility company Darkom in cooperation with the biogas plant in Hercegovac, which related to the collection of biowaste from 40 housing units with a total of 96 tenants and its use as a co-substrate for anaerobic digestion.

Laboratory analysis of three representative samples of bio-waste (which consisted of fruits and vegetables, coffee grounds, and egg shells) calculated the average biogas potential of 70 m3 per ton of fresh bio-waste.

List states that since waste management centers have not yet come to life, a possible solution to the problem of biowaste lies in establishing cooperation between local self-government units and the owners of biogas plants. He cites the cities of Varazdin, Vinkovci and Daruvar as successful examples.

“When it comes to reaching European goals, we are very bad, I would dare to say catastrophic, because we dumped 225% of the allowed amount in landfills. The answer to that is very simple, the low cost of waste disposal and the populist policies of local self-government units”, says List, thus emphasising that more public-private partnerships are needed for the bio-waste management system to function.

Once and when it reaches the plant, separately collected biowaste often has the problem of impurities, which is also stated in the Municipal Waste Report for 2021 as a reason for the reduced amount of municipal biowaste processed in biogas plants.

In order to increase the share of use of biodegradable waste, it is necessary to educate citizens about the correct way of sorting biodegradable waste.

“The problem of greater use of biowaste in biogas plants starts from the very beginning, that is, poorly sorted waste that must be additionally selected before entering the production process, therefore only a few biogas plants have a permit for waste management. In order to increase the share of use of biodegradable waste, it is necessary to educate citizens about the correct way of sorting biodegradable waste”, states HGK.

Wrong direction

List adds that 98 per cent of biogas plants in Croatia use two basic raw materials from agriculture: corn silage and manure from pigs, cows, calves, and chickens.

The composition of the agency for biogas production depends on the availability of raw materials near biogas plants, so most of them are located in the continental part of Croatia due to the accessibility of raw materials for biogas production.

In Croatia, there is also the possibility of using large unused agricultural areas, that is, in their rational use for growing biomass (Energy, Sustainability and Society).

However, biogas is currently viewed only through electricity production, and the potential realized by saving greenhouse gas emissions is ignored. In addition to being able to produce electricity, biogas opens up the possibility of involving livestock farmers in programs to reduce their carbon footprint.

“The primary purpose of biogas plants is the quality disposal of by-products of the livestock industry and the food processing industry, and most of us believe that biogas should be developed in that direction. However, the development went in a different direction, large plants were developed, which in turn have high operating costs. We need a concept that will represent smaller plants on livestock farms where biogas will give its contribution in reducing CO2, and to put these small plants on the level of Germany”, says Cenger.

In the last ten years, the development of micro energy cooperatives and small projects at the local community level has not been encouraged, although there have been such attempts.

For example, five years ago, Josip Juraj Strossmayer University in Osijek and the City of Osijek founded a company that was supposed to build a Scientific Research Center with its own biogas plant, which was supposed to deliver electricity to the power grid at preferential purchase prices, and the produced quantity would be sufficient to meet the needs of all components of the University.

Since we could not find information about the completion of the project, and since it was announced for the first part of 2019, we sent an inquiry to the company “Obnovljivi izvori energije” (eng. “Renewable energy sources”) Osijek d.o.o. and the City of Osijek, but we did not receive an answer.

The era of biogas

The installed capacity of biogas energy worldwide reached about 21.4 gigawatts in 2021, an increase of 4.6 per cent compared to the previous year (Statista).

The World Gas Association states that humans produce 105 billion tons of organic waste annually, and only 2 per cent of that amount is sent for further recovery. It is estimated that by applying measures that would encourage the development of biogas, global CO2 emissions could be reduced by 10 per cent by 2030.

The European Biogas Association predicts that by 2050, biomethane will cover 30-50 per cent of future gas demand in the EU. An essential role in achieving this goal should be played by Germany, which has almost 9,800 biogas plants, of which about 20,000 are in the entire EU (Euroactiv).

In Croatia, the government is preparing to adopt strategic frameworks for developing this area.

Only last month, a decision was made to start the process of creating a Strategy for the development of the bioeconomy until 2035, which is the responsibility of the Ministry of Economy and Sustainable Development, the Ministry of Agriculture, the Ministry of Regional Development and European Union Funds, and the Ministry of Science.

The strategy, as stated in the decision, should define the vision and strategic goals of the development of the bioeconomy and include public policies from all sectors relevant to the area of the bioeconomy, all based on the principles of ensuring food security, sustainable management of natural resources, reducing dependence on non-renewable energy sources and the impact to climate change. HGK, a drafting committee member, emphasises that biogas, as one of the circular and sustainable economy segments, should be part of this strategy.

The strategic document is only entering the preparation phase almost 13 years after the first biogas plant was opened in Croatia. Considering the pace at which the measures from the action plans are adopted and implemented in Croatia, it will undoubtedly take some time until the sector comes to life in its full form.