The renewable energy landscape in Germany is changing rapidly. After huge capacities of renewable energy being set up, limited land is now available for solar and wind projects. The country has almost stopped setting up wind projects and in solar, the focus is on small-scale rooftop plants. The bioenergy segment too is going through a transition. Many investors that have set up biogas projects under the feed-in tariff (FiT) regime face the prospect of the government reducing tariffs for these projects. In an interview with Renewable Watch, Michael Köttner, chief executive officer, International Biogas and Bioenergy Competence Center, talked about the current status, trends, issues and challenges in Germany’s bioenergy segment, and possible solutions to retain investor interest. Excerpts…
What is the status of the bioenergy segment in Germany?
Germany’s bioenergy segment took off in 1991 when FiTs were introduced for renewable energy projects. The tariff for bioenergy projects was around 7 cents per unit. With this policy initiative, there was a tenfold increase in the number of biogas plants, from 100 to over 1,000 in the following decade. Apart from FiTs, the willingness of farmers to become prosumers of electricity and be self-sufficient in fertilisers gave a fillip to the segment. The bioenergy segment now accounts for 8 per cent of the energy mix in the country, with about 5 GW of installed capacity. Most of the biogas plants are decentralised, with an average size of around 500 kW, and are located mainly on farms. Some large-size centralised plants have also been set up. A 24 MW plant in East Germany is reportedly the biggest biogas plant in the world and uses over 500 million tonnes of energy crops.
What have been the key drivers of growth for the bioenergy segment?
The transition to the FiT regime was obviously a key change that helped the segment grow. This was so because there was an increase of almost 20 per cent in tariffs for all renewable energy projects. For bioenergy projects, there was an additional 60 per cent increase in two phases. This increase incentivised farmers to use their fallow land for producing energy crops like maize and silage. Apart from this, technology advancements and the development of standards helped the segment grow.
European Union countries, moreover, give huge subsidies to farmers, which leads to overproduction of agricultural produce. With overproduction, farmers get a low price for their produce and a lot of the food gets wasted. Because of this, a major portion of farmland started getting used for setting up biogas plants for electricity generation.
What are the issues and challenges being faced by the segment?
With the growth of the bioenergy segment, several experts have started criticising it. They say that bioenergy is expensive and costs almost twice or thrice more than other renewable energy sources like wind and solar. However, we need to keep in mind that the low tariffs for wind and solar do not include the cost incurred on storage to make it into a firm power. Bioenergy projects, meanwhile, have storage capabilities inbuilt and can provide electricity on demand. Apart from electricity, bioenergy projects provide fertilisers as a by-product. The value of the fertiliser should also be factored into the high tariff for bioenergy projects. In the past one year, the segment has not grown much due to the government’s decision to cut the tariffs of renewable energy projects. The tariff reduction can work for solar and wind projects, but not biogas. This is because biogas projects entail high labour, logistics and operating costs. Despite the fact that biogas projects have various benefits, the government has lowered its support for these projects. Only small manure-based biogas plants are still being supported under the FiT regime. But there are not more than a hundred such biogas plants, which produce just 22-25 MW of electricity cumulatively. With tariffs falling, investments in this segment will reduce and lead to the use of inferior quality equipment, which will increase operations and maintenance costs. Increasing regulations and stringent safety standards are other impediments to segment growth. Another concern is that for most of the biogas plants, the 20-year contracts are going to run out by 2021. In the worst scenario, these plants could shut down unless the government offers incentives.
What are the solutions to these issues?
A possible solution is to use biogas for producing heat and as fuel for cars, apart from the generation of electricity. A possible way forward could be to run all tractors on the farms on biofuels. This would help in decentralised consumption of the manure produced. More incentives are required to set up biogas plants in the country. That said, the segment can move forward even without incentives if the high energy taxes applicable in the country are reduced and the regulations for the segment are simplified.