Journal of Management Control

, Volume 23, Issue 1, pp 53–70 | Cite as

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

Original Paper

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.

Keywords

Optimization Biomethane Biogas Business models Demand-oriented electricity generation 

Nomenclature

Indices

el

Electricity

h

Index of period (hour)

i

Discount rate

inst

Installed

max

Maximum

min

Minimum

t

Index of period (month)

T

Index of period (year)

Parameters

C0

Net present value

CC

Capacity component (130 €/kWel)

Efix

Continuous expenditures

EEX

Spot market price

fcor

Correction factor

FFIT

Fixed feed in tariff

FP

Flexibility premium

I0

Initial investment

Lmax

Maximum electricity output

Lmin

Minimum electricity output when producing electricity

MPt

Market premium in period t

MPh

Market premium in period h

\(\mathrm{MW}_{\mathrm{t}}^{\mathrm{EPEX}}\)

Mean value on the spot market

Padditional

The additionally provided installed power output

Pinst

Installed capacity

Prated

Rated power output

RampUpCost

Costs due to load switching

Smax

Maximum storage level

Smin

Minimum storage level

Variables

CM

Contribution margin

L

Electricity output

RampUp

Positive load change between two periods

S

Storage level

List of abbreviations

a

Year

CC

Capacity component (130€/kWel)

CHP

Combined heat and power station

CM

Contribution margin

cor

Correction

EEG

Renewable Energy Act

EEG2009

Outdated version of the Renewable Energy Act

EEG2012

Up-to-date version of the Renewable Energy Act (Reforming the legal framework for the promotion of renewable sources of electricity)

Euro

€ct

Eurocent

FIT

Feed-in tariff

FFIT

Fixed feed in tariff

FP

Flexibility premium

kW

Kilowatt

kWh

Kilowatt hour

MP

Market premium

k

Thousand

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Copyright information

© Springer Verlag 2012

Authors and Affiliations

  • Tobias Heffels
    • 1
  • Russell McKenna
    • 1
  • Wolf Fichtner
    • 1
  1. 1.Chair of Energy Economics, Institute for Industrial Production (IIP)Karlsruhe Institute of Technology (KIT)KarlsruheGermany

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