Page 1 Report Substrate Materials for intersectoral biogas strategy Foreword

Part 2 - Value Chains

Here we will look at the economic impact of the production and utilization of biogas in two of

value chains that are described in the value chain report (CPA, TA 2704/2011): the use of biogas in

buses / fleet vehicles and feeding of biogas in natural gas grid in Rogaland. Costs and emissions

associated with the production of biogas will be included in the user actions, so that the entire value chain is

represented in each measure. After input from agencies and industry stakeholders, it is clear that the fuel is

most appropriate application of biogas, as well as utilization via gas grid in Rogaland . This

coincides with our own assessment (see Chapter 1). We have therefore chosen to only quantify these two

value chains.

In value chains, only including investment and general operation of the distribution system, but not

operating costs of the actual transportation of the gas. The reason for this is that in the reference scenario, the

be needed to transport both diesel and natural gas to retail outlets. We have therefore made a

rough assumption that the cost of transporting diesel or natural gas is comparable with

the cost of transporting the biogas so that the shuttle does not entail a

social cost. For natural gas, this is probably a fair assumption, while the comparison

transport of diesel fuel is less obvious. A given amount of energy gas takes much more space than

equivalent amount of energy fuel, which means that the tankers running multiple trips back and forth between

production facilities and sales outlets with biogas. On the other hand, it is expected that

petroleum products in the cut must be transported substantially longer than the average for biogas, which can

compensate for the difference in energy density. It is therefore difficult to estimate the cost of transport is

over-or underestimated in this analysis.

Value chain - biogas buses

In this chain, we look at the use of biogas as a fuel for buses. As described in section

1 is the application in fleet vehicles in the short term, easier and less expensive than the use of private cars

since it requires less infrastructure. Buses are selected as an example of fleet vehicles, but

cost of application in other heavy vehicles in fleet operations are assumed to be comparable. Since

gas operation reduces the emission of air pollution compared with diesel operation, and it is

mainly in urban areas that a reduction in air pollution will have a great value, has

we have chosen to concentrate on city buses in this analysis.

The value chain thus shows emission reductions and costs of using biogas buses, as a

substitute for diesel buses. We have assumed that the buses purchased does not displace existing

capital, but replaces the purchase of new diesel buses. In other words, the reference situation that

bus operators purchasing new diesel buses, which have lower emissions of components that contribute to

local air pollution than older diesel buses.

We see here two chains, where biogas in the one produced by manure, while

production in the second chain is based on organic waste. In both value chains used

biogas as fuel. We have chosen to show both value chains to illustrate the range of

cost between manure and organic waste. In addition, we illustrate what the costs

if the full potential is triggered, ie the separate treatment of manure and

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organic waste. Both value chains shows costs and emission reductions for the full potential of

the two substrates, but this can easily be changed by a linear scaling

19

. Cost Effectiveness

will be independent of the size of the measure.

New Effects

Beneficial effects on the production of biogas are described in sections presented above. As

described the production from manure lead to a CO

2

Reduction of 152,000 tonnes of CO

2

-

eq, given that the potential is triggered. Production of organic waste causes increased emissions

equivalent to 7000 tons of CO

2

-Eq for the potential. In addition, there will be a new value associated with

reduction of ammonia and nutrients in organic fertilizer, which is appreciated and drawn from

production costs. The reduction in greenhouse gas emissions from the use will come from

replacement of diesel with biogas. The magnitude of this reduction will depend on the quantity

biogas, and the difference in energy consumption between diesel and gas-powered buses. At present diesel buses more

energy efficient than gas buses, so one needs 1.25 GWh of gas to replace one GWh with

diesel. In addition, gas-powered vehicle leaking of methane from the engine. These emissions will

offset some of the reduction in greenhouse gas emissions, but the effect is relatively small. For biogas produced

of manure (740GWh) will reduce CO

2

Emissions from the substitution of diesel, including an increased

methane emissions from the engine, be 153 000 tonnes of CO

2

-Eq. For biogas produced from organic waste (990

GWh) substitution contribute to emissions reductions equivalent to 203 000 tonnes CO

2

-Eq.

Greenhouse gas emissions for the entire value chain of production from manure is then given by:

Reduced methane and nitrous oxide emissions from + reduced emissions from application =

152 000 + 153 000 = 305 000 tonnes of CO

2

-Eq.

The value chain where manure is used in production providing:

Emissions Increase the production of biogas + reduced emissions from application =

7000 + 203 000 = 196 000 tonnes of CO

2

-Eq

The distribution of emissions through value chains shown in more detail in Figure 4.8. Triggering the entire

realistic potential can thus achieve a total reduction of greenhouse gas emissions equivalent to 500

000 tonnes of CO

2

-Eq. Of the total emission reduction, around 29% come from the production stage,

while almost 71% of reduction is the replacement of diesel with biogas, as shown in Figure 4.6.

Another advantage of using biogas in urban buses is that you can reduce local air pollution,

particularly the levels of NO

X

and particulate matter (PM10). Health and environmental value of such a reduction would

depend greatly on where the reduction occurs. Since the benefits but also the potential for replacement of

buses, the largest in the major cities in Norway, we have assumed that the measures implemented in major Norwegian cities.

NO

X

Emissions from gas bus depends on the engine type: stoichiometric engines provide very low NO

X

-

emissions, while the engines which use little fuel compared to the amount of air (lean combustion) will

19

Cost functions will most likely not be linear, but a linear scaling may nevertheless be

a good approximation to the actual cost figures.

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provide emissions equivalent to emissions from diesel engines (see also Figure 1.5). Institute of Transport Economics

estimates that an average gas buses will reduce NO

X

Emissions by 50% compared to a

diesel bus

20

. At the same time reduce PM10 emissions by around 80%. The reduced air pollution is

valued at 175 million per year for the amount of gas from manure (740 GWh) and 232

million per year for the amount of gas from organic waste (990 GWh). Altogether this gives a

benefits due to improved air quality almost 408 million per year.

Figure 4.6: Distribution of emissions reductions in the production and use of biogas in city buses, by

feedstock.

Costs

In order to use biogas in buses is required that the gas is compressed. Costs related to

upgrading of biogas, we have included in the production costs of biogas, while we have chosen to

the costs of compression to apply part, as not all applications require

the gas is compressed. Compression cost is taken directly from Klif value chain report (CPA,

2011), and have then been verified through the survey. After removing the fees are

the social cost of compression 5 cents per kWh.

On average driving a city bus 50 000 kilometers per year. Gas Buses spend an average of 25% more energy than

diesel buses, which means that one can not replace the corresponding amount of energy in diesel

amount of gas you use. That is, if one uses 1.25 kWh with biogas in a gas bus, can

you only replace one kWh with diesel. With an energy consumption of 5.0 Sm

3

gas per mile will

thus requires less than 3,000 gas buses to utilize 740 GWh of biogas and 4000

gas buses to utilize 990 GWh of biogas, providing just under 7,000 buses for the

potential. The additional cost of purchasing a biogas bus compared to a diesel bus is about 250

000 without tax per bus. It is assumed that the remaining operating costs (excluding fuel expense)

20

Based on an underlying assumption that gas buses have stoichiometric engines.

61%

39%

Potential for emission reductions in the production and

application of biogas buses allocated to raw materials.

Total emission = 500 000 tonnes of CO

2

-Eq.

Fertilizer

Organic waste

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for gas buses is approximately equal to the equivalent cost of diesel buses, which means that

incremental cost of operation is only given by the difference in fuel costs.

By using biogas will save costs associated with the purchase of diesel. This will result in an

annual cost of 340 million biogas from manure (740GWh) and

NOK 451 million manufacturing organic waste (990GWh). This provides a cost reduction of

340 + 451 = 791 million, if all the realistic potential realized.

In addition to the buses must be invested in a distribution system for biogas, the gas containers (flakes)

and fuel stations with backup system to ensure operational stability. It is believed that a backup

system can ensure the operation of two filling stations, and two filling stations can operate 150 buses. In addition, the

such a system may require 10 flakes, to transport biogas from production facilities

filling stations. Upscale it to full potential (about 7000busser) corresponds to a

investment of 2.079 billion dollars.

The annual incremental cost of operation of the distribution system is assumed to be 6.5% of

investment cost. Costs for the transportation of gas from the plant to the filling stations are

believed to be comparable with the corresponding transport costs for diesel fuel filling station, so that

this does not imply an economically extra cost.

Overall, the economic capital and operating costs for the distribution system and

biogas buses totaled to 241 + 319 = 560 million annually, to exploit the full potential.

The net cost for the production and use of biogas consisting of (production cost

biogas) + (increased expenses related to the use of biogas buses) - (reduced expenses due

reduced air pollution and reduced fuel use). For the full potential net cost 914

million. This gives an emission reduction of 500 000 tonnes of CO

2

-Eq. Cost-effectiveness of

the potential is thus 1800 NOK / ton CO

2

-Eq. Due to the very different gas yield is large

difference in production cost when using manure and organic waste in

production. This difference continued into value chains. The value chain using

manure in the production gives a measure price of 2,300 U.S. $ / ton CO

2

-Eq and organic waste provides a

measures price of 1100 NOK / ton CO

2

-Eq. Detailed overview of the costs and effects as well as new

distribution of these through value chains illustrated in Tables 4.2 to 4.4 and Figure 4.7 to 4.10 below.

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Table 4.2: Cost and benefit effects in the value chain of production based on manure and application of

city ​​buses.

Table 4.3: Cost and benefit effects in the value chain of production based on organic waste and the use of

city ​​buses.

Organic waste: 990 GWh / year used in city buses.

Value chain: production based on

organic waste, used in city bus.

Costs

Reduced

greenhouse gas emissions

(Million / year)

(Tonnes CO

2

-ekv/år)

Production

534

7000

Compression of CBG

50

Application - Investment and operating costs

319

Annual capital cost bus

128

Annual capital cost terminals and backup

93

Annual capital cost flakes

21

Operating tank and backup

77

Methane emissions from motor

8000

Reduced fuel use

-451

211 000

Reduction of NO

X

and PM10

-232

Total

221

196 000

Cost (U.S. $ / tonne CO

2

-Eq)

1100

Fertilizer: 740 GWh / year used in city buses.

Value chain: production based on

manure, applied in city bus.

Costs

Reduced

greenhouse gas emissions

(Million / year)

(Tonnes CO

2

-ekv/år)

Production

929

152 000

Compression of CBG

38

Application - Investment and operating costs

241

Annual capital cost bus

96

Annual capital cost terminals and backup

70

Annual capital cost flakes

16

Operating tank and backup

58

Methane emissions from motor

6000

Reduced fuel use

-340

159 000

Reduction of NO

X

and PM10

-175

Total

693

305 000

Cost (U.S. $ / tonne CO

2

-Eq)

2300

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Table 4.4: Cost of the value chain for biogas produced from both manure and organic waste and

use the bus

The potential: 1730 GWh / year used in the bus.

Value chain: biogas produced from both

manure and organic waste,

used in the bus.

Costs

Reduced

greenhouse gas emissions

(Million / year)

(Tonnes CO

2

-ekv/år)

Production

1464

145 000

Compression of CBG

88

Application - Investment and operating costs

560

Annual capital cost bus

224

Annual capital cost terminals and backup

163

Annual capital cost flakes

37

Operating tank and backup

135

Methane emissions from motor

0

15 000

Reduced fuel use

-791

369 000

Reduction of NO

X

and PM10

-408

Total

914

500 000

Cost (U.S. $ / tonne CO

2

-Eq)

1800

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Figure 4.7: Economic costs and savings through the value chain of production based on

manure and application in city buses. Each column shows the costs / savings to the total emission.

Figure 4.8: Distribution of emissions through the supply chain, as a share of total emissions.

Production

Reduced fertilizer use

Reduced NH

3

Emissions

Compression

Annual capital cost bus

Annual capital cost terminals and

backup

Annual capital cost flakes

Operating tank and backup

Reduced fuel use

Reduction of NOx and PM10

Cost of measures

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Costs

Revenue

Net

Costs

Revenue

Net

NOK / kWh

£ / tonne CO

2

-Eq

Value chain - production of biogas from manure, used in city buses.

Upgrade

Maintenance

Electricity

Work

Transport

Annual cost of capital

Biogas production from manure

Application in city buses

Biogas production from manure

Application in city buses

-20

0

20

40

60

80

100

Production

Reduced

fertilizer use

Net

emission reduction

the production

Methane emissions from

engine

Replacement of diesel

Total

emission reduction

%

Emission reduction in the production of biogas from manure and

use in city buses. Total emissions: 305 000 tonnes of CO

2

-ekv/år.

Production

Application

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Figure 4.9: Economic costs and savings through the value chain of production based on

organic waste and use in city buses. Each bar shows the cost / savings divided by total

emission reduction.

Figure 4.10: Distribution of emissions through the supply chain, as a share of total emissions.

Production

Reduced fertilizer use

Compression

Annual capital cost bus

Annual capital cost terminals and

backup

Annual capital cost flakes

Operating tank and backup

Reduced fuel use

Reduction of NOx and PM10

Cost of measures

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Costs

Revenue

Net

Costs

Revenue

Net

NOK / kWh

£ / tonne CO

2

-Eq

Value chain - production of biogas from organic waste, used in city buses.

Work

Transport

Annual cost of capital

Biogas production from organic waste

Application in city buses

Application in city buses

-20

0

20

40

60

80

100

Production

Reduced

fertilizer use

Net

emission reduction

the production

Methane emissions from

engine

Replacement of diesel

Total

emission reduction

%

Emission reduction in the production of biogas from organic waste and

use in city buses. Total emissions: 196 000 tonnes of CO

2

-ekv/år.

Production

Application

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