Page 1 Report Substrate Materials for intersectoral biogas strategy Foreword

141

A production support in U.S. / kWh will provide a stronger incentive to maximize biogas production than

use of investment. Whether there is a need for such an incentive is however unclear. If one

is not combined with a requirement for incorporation of manure in the plant, a production support cause

that plants will generally choose to treat organic waste, since the gas yield is higher here,

and that one gets revenue from gate-fee. If you want your plants to treat manure

it is possible to either connect production support for an interference requirements for manure, or

differentiated rate on the basis of interference percent. In order to provide sufficient predictability to

players in the market, the size and conditions of a production support be guaranteed in

several years. If you do not have this predictability, the risk of investment is increased,

which in turn increases the cost of capital. Since production support depends produced

gas flow, this provides greater risks associated with revenues compared with investment.

This increases the capital cost of the plant.

A production support can be designed to either be granted only to new biogas plant, or so that

existing facilities are supported. In this way one can avoid discrimination between new and old

plants, which are much more difficult if an investment introduced.

A combination of investment and production support, where production rests on a guaranteed

level for a long enough time to come, can be a good solution for market participants. It is conceivable that one

In such a model can reduce the number of years of production support should be guaranteed for comparison

with a clean production support. A disadvantage of this model is that it will require some increased

administrative resources to manage both schemes.

How fast increase of biogas production is desired?

If there is a desire to have caused much of the potential in the space of a few years, you

tool design provide incentives for this. Some examples of this are:

 High production support facility begins production early

o For example, 0.80 NOK / kWh for biogas production starting in 2014, guaranteed

for example 15 years ahead

o Reduction of the amount of aid by 0.05 NOK / kWh for each year later the plant begins

production, guaranteed for 15 years

 Construction starting up in 2015, is a support amount of 0.75 NOK / kWh

 Construction starting up in 2016 is a support amount of 0.70 NOK / kWh etc.

 Increased investment to plant being built early

o For example, 50% investment support facility that will be completed by 2015

o Cool down to today's 30% investment up to 2020

While this may lead to a rapid increase in the development of biogas, it is important to note that

It also may reduce the ability of learning and adaptation during which increases the risk

for unsound.

Page 142

142

How to prevent fossil natural gas displaces biogas?

The application is fossil natural gas and biogas perfect substitutes (assuming that biogas is

upgraded to natural gas quality). For example, by providing support to purchase gas-powered vehicle,

therefore not only support biogas use, but also to the use of fossil natural gas. The effect on local

air quality will be similar to the application of these two fuels, but the effect on inter alia

greenhouse gas emissions and contribute to a transition to renewable energy is very different. When introducing

instruments in use since for biogas is therefore important to consider whether they should simultaneously introduce

measures that prevent increased use of fossil natural gas. This can be a difficult balancing act, since

Fossil natural gas is used as back-up to ensure adequate supply of biogas

value chain. If the gas price to the consumer increased significantly (for example, due to increased

tax on fossil natural gas), therefore the cost of biogas use also increased although not to the same

scope. Measures that limit natural gas use could destroy the construction of infrastructure

and supply side and introducing biogas depends.

A possible solution to this could be to increase the tax on fossil natural gas, unless there is a

Biogas interference, for example at least 30%. Incorporation requirement may be increased as

biogas production in Norway increased. Incorporation requirement may also be replaced by a wagering requirement per

tank station, ie fossil natural gas is exempt from tax provided that, for example, a maximum of 50% of

turnover of the gas per calendar year.

Use of tax on alternatives to biogas

One way to increase the production and use of biogas is to increase the prices of alternative fuels

through a surcharge. The fee does biogas relatively cheaper than the alternative and thus incentives to

substituting for example diesel with biogas. Use tax is often the most cost-effective

instrument for reducing a problem such as greenhouse gases. The reason is

that it leaves the decision on how emissions should be cut to end users who are often the

know best how to do this at the lowest possible cost. Taxes on polluting energy sources will

also be in line with the Pollution Control Act intends that the polluter should pay. Decentralized

decision making tax cost effective but is also what makes the instrument is less

apt to elicit specific solutions such as the use of biogas to reduce emissions from

transport. For example, an increase of CO

2

Tax on fuel with 0.40 NOK / liter for our

calculations make biogas business sense, given that the bus companies to purchase biogas

natural gas price without tax. This will increase the production and use of biogas in the transport sector. It is

however, difficult to estimate how much of the potential for the use of biogas which is triggered by such

tax increase because the fee can also trigger other solutions such as increased involvement of

biodiesel / bioethanol, more electric cars or more fuel efficient vehicles. We have therefore chosen to ignore

From this type of financial instruments when below has made instrument packages as we

assumes that the primary objective is to increase the production of biogas. Nevertheless, it is clear that any

form of higher prices for alternative fuels will provide increased incentives for the production and use of

biogas and the relatively moderate tax increases may make it economically profitable to

produce and use biogas.

Page 143

143

Discussion of legal and informational measures to increase the supply of organic waste

the biogas plant

There are some measures that can help to increase the supply of organic waste for biogas plants,

including:

 Requirements for separation and biological treatment of waste

 Prohibition of incineration of waste

 National target for biological treatment of waste

A legal instrument for achieving greater separation of food waste is to introduce a rejection of

food waste . Municipalities are above pollution law to provide for the collection and

treatment of household waste. Industry actors are not bound by municipal election of

handling solutions, but has an independent responsibility for delivering waste to approved.

It may be appropriate to align the requirement for sorting the food waste from households and

catering / commercial and non organic waste in general, because the food waste from

residential / institutional households are harder to get into the market without sorting / recycling

from other waste. Increased availability of organic waste from other types of employment (such as

food processing) for biogas production, is expected to be easier when the waste largely

generated in the clean waste streams.

The requirement for separation of food waste can for example be paid to municipalities over a certain size and

or businesses in the catering trade and generating over a certain amount of food waste

per week. The requirement for separation of food waste should be organized so that it leads to recycling, and not to

central sorting through the MBT method (mechanical-biological treatment), because experience shows that

source separated food waste and cleaner than compost and biogjødselprodukter Central sorted waste.

To ensure that the separated waste goes to biological treatment and nutrients

bio fertilizer / compost used, it introduced an additional requirement that the unsorted food waste should go

Biological treatment and nutrients to be returned to circulation . This requirement may be directed to

waste possesses as an obligation to deliver food waste for biological treatment where residual products

(Compost and organic fertilizer) is utilized. This requirement may also be aimed at the treatment plants.

Requirements for separation and biological treatment of waste will not necessarily lead to a

capacity building for biogas treatment in Norway, but can also lead to increased exports. We know that

In 2010, exports totaled about 70 000 tonnes of food waste from Norway to Denmark and Sweden for biological

treatment. In addition, this instrument also lead to increased composting instead

Biogas treatment.

Requirements for separation of food waste and biological treatment could lead to an increase in the number of

biogas plants in Norway. Predictability in the municipal food waste, will provide plant owner

long term perspective of access to raw materials required for construction of facilities. If plants

dimensioned so that it is possible to treat the waste beyond household waste, this can also lead

an increase of biogas processing of industrial waste.

An alternative means to demands for separation of food waste is to introduce a ban on incineration

of food waste. requirement may be directed to plant victory, partly also to possess waste (municipal,

Page 144

144

private and public entities). If the claim is directed towards the combustion plants, the plants themselves

controlling residual waste delivered to the facility. Since it is not technically possible to sort it all out

food waste from other waste, the requirement structured as a percentage of claims against the content of food waste in

residual waste that can be incinerated. This requirement may lead to increased exports of waste to

energy for example in Sweden or Denmark.

A requirement for separation of food waste can be combined with a national target for the amount of biowaste

waste to be biologically treated in a particular year. To facilitate the objectives, it may

limited to food waste and non organic waste in general. For example, a specific target as

to be achieved within a given year be a control signal to municipalities and private operators of their choice

Waste solutions. Such a goal can be a basis to determine other specific measures to

achieve the objective. It may be considered whether to set various interim destination, eg. in two stages

with an evaluation when the goal of stage 1 is reached, as this provides the opportunity to assess the environmental benefits of

measures and change remedies under this process.

Page 145

145

Feedback from the survey - instruments

The replies have been received in connection with the survey provided a number of suggestions to

means necessary to increase the resource base, improve production and increase the use of

biogas both in transport, but also for heating purposes. It should be noted that the value chain

both for bio fertilizer and biogas is important and measures are proposed to increase the demand for

both types of products.

To increase resources for biogas, it is pointed out both economic and legal instruments.

Ban on incineration of waste and requirements for separation of food waste from household,

catering and trade proposed by others. It also proposed subsidies for biogas production

based on manure and other raw materials.

In connection with the production of biogas and bio fertilizer, it is primarily economic instruments

mentioned. This agrees well with the answers given regarding barriers in the

survey - the main problem is the lack of profitability in the production stage.

Operating mentioned by others, while a form of investment for production is the instrument that

mentioned most frequently. Supporting production from manure is specifically mentioned by several.

For the final market are the financial instruments in the majority. Support vehicles and infrastructure, and

long-term tax exemptions on both biogas and bio fertilizer is suggested by many. Change of

registration tax, so it gives poor results for "heavy biogas cars" and "green certificates" for

Biogas is also mentioned. But legal remedies have been proposed, including requirements for municipalities and

public enterprises to use biogas.

In general, the more input on support for research and development. Need for more effective

processing and optimization of substrate compositions, improve resource utilization / increase

gas yield, mentioned by several. Need for knowledge about fertilizer effect and climate using

bio fertilizer is also important R & D areas.

Figure 6.1: Summary of the survey - instruments

2

4

3

3

11

4

5

4

6

3

5

4

RAW MATERIAL

Requirements for separation of wet organic fraction

Ban on burning of organic waste

Support for the introduction of manure

PRODUCTION

Operational production

Investment manufacturing facility

APPLICATION

Investment vehicles / buses

Investment infrastructure

Requirements for biogas in public / fleet vehicles

Green energy prices / increase the CO2 tax

Operational use of digestate

Long-term tax freedom (veibruksavgift)

GENERAL

Support for research and technological development

Means - the number of inputs from the survey

Page 146

146

Examples of tool menus

To increase the production of biogas, it is appropriate to consider several type of instruments

context, depending on the goals to be achieved and in what way. One goal is of course to

increase the production and use of biogas, but this can help achieve other goals simultaneously.

Examples of goals include reducing emissions of greenhouse gases (or in some specific sectors), increased proportion

renewable energy in the transport sector, increasing employment in rural areas, increased resource utilization in

organic waste, more recycling, etc. Depending on the goals that are most important to achieve, can

means be assembled in different ways. Furthermore, different combinations of instruments

used to achieve the same objective. We outline three tool menus in this chapter to

illustrate some possibilities. It is of course possible to imagine many other remedies menus,

such combination of pull and push factors, which can achieve the same or different

objectives. Instrument menus presented are not impact rated, but it's done

some qualitative considerations about the advantages, disadvantages and risks of each menu.

Instrument Menu 1: "pull"

It is possible to create a tool menu based on pull-factors in the value chain, as discussed earlier,

For example, focusing on the use of biogas in the transport sector. A possible menu is to introduce

 Feed-in-tariff

32

the biogas producer, the sale of biogas filling stations

 Subsidy to tank station that covers the incremental cost of biogas relative to retail

 Fee for nitrogen and phosphorus in fertilizers

To ensure that the biogas is used in the transport sector, one can imagine a tool that provides a

guaranteed feed-in-tariff for biogas sold at filling stations. Fuel stations are then obliged to sell

biogas at a price that is slightly lower than the gas price to the transport market. If a subsidy to

filling stations, the state pays the difference between the feed-in-tariff and retail, as illustrated in Figure 6.2 below.

Figure 6.2: Illustration of the feed-in-tariff

For filling stations already sell gas as fuel, this solution does not cause any

costs. Fuel stations that have gas pumps at present will have to invest in this. It may

conceivable that imposes stations that have a large sales volume to offer gas, alternatively, one can

imagine a investment aid stations. If the measure is aimed

fleet vehicles, it will not require as many new gas pumps. One can imagine that means therefore

for some years directed towards fleet market, with a view to include private car market later.

32

A feed-in-tariff acts as a price guarantee to ensure that the manufacturer will cover production costs.

Page 147

147

In Chapter 4 we have seen that the basis of our calculations, the use of biogas buses in a

commercial loss of 4 cents / kWh (including investment and operating costs for

filling stations, flakes and backup system). This is partly based on the biogas purchased at

natural gas price. If biogas can be purchased for around 4 cents / kWh less than the natural gas price,

measure be profitable for bus operators. One of the assumptions here is that the difference between

price of diesel and gas prices remain constant. If the gas charged veibruksavgift so

the difference is reduced, the retail price of biogas is further reduced in order to maintain

profitability of bus companies.

To stimulate biogas production from manure can feed-in-tariff for biogas

set at different levels depending on the amount of manure used in biogas production, see

Figure 6.3 below. Since biogas production from organic waste, according to our calculations,

economically profitable if the biogas can be sold to natural gas price, need feed-in-tariff

for biogas made from waste to be very much higher than the price of natural gas

This combination of feed-in tariff and subsidies designed as described above will cause the

we increase the production of biogas, and that the biogas will be used for transport purposes. The amount

biogas from manure that is triggered depends on the slope of the feed-in-tariff. By

Guide rise in feed-in tariff steeper or flatter can get triggered more or less of

potential for biogas produced from manure.

Figure 6.3: Possible feed-in-tariff for biogas sold at filling stations. The figures are only illustrative.

To ensure that organic fertilizer is used as fertilizer in suitable areas can impose a tax on

nitrogen and phosphorus fertilizer. This will make it more attractive for agriculture to use

organic fertilizer instead of using fertilizer. The fee will also make it more attractive to use

manure as fertilizer on the soil, ie the instrument is less effective governance with a view

the increased biogas production. This instrument can also cause adverse regional effects since

regions with easier access to bio fertilizer and manure will have greater profitability than regions

Page 148