Biogas - Costs and Benefits

Economy and Financing

Techno-economic assessment

Before a biogas plant is built or a biogas program is implemented, a techno-economic assessment should be made. For this, two sets of cost-benefit analyses have to be carried out:

The macro-economic analysis (economic analysis) which compares the costs of a biogas program and the benefits for the country or the society. The micro-economic analysis (financial analysis) which judges the profitability of a biogas unit from the point of view of the user.

In judging the economic viability of biogas programs and -units the objectives of each decision-maker are of importance. Biogas programs (macro-level) and biogas units (micro-level) can serve the following purposes:

• the production of energy at low cost (mainly micro-level);
• a crop increase in agriculture by the production of bio-fertilizer (micro-level);
• the improvement of sanitation and hygiene (micro and macro level);
• the conservation of tree and forest reserves and a reduction in soil erosion (mainly macro-level);
• an improvement in the conditions of members of poorer levels of the population (mainly macro-level);
• a saving in foreign exchange (macro-level);
• provision of skills enhancement and employment for rural areas (macro-level).

Comparison with other alternatives

After selecting objectives and counterchecking if biogas technology can fulfill the objectives at an acceptable cost-benefit ratio, it is still not certain, that expenses are invested in the best possible way. For this, a comparison with other alternatives to biogas programs and biogas plants is necessary. The expected cost and benefits are to be shown in the form of suitable investment criteria to allow statements regarding the economic advantage of the project. Often, alternatives to biogas have only a 'benefit-overlap' with biogas and several alternatives have to be combined to 'produce' the same quantity and quality of benefits.

On the other hand, alternatives to biogas programs may have benefits that a biogas program cannot deliver. Afforestation programs, for example, deliver energy and soil protection, but also building material.

Apart from the viability of the project, its financial effects on the decision-makers and the parties it touches financially are important: are a certain group of farmers able to invest in a long-term project like biogas generation? The cost per m³ of biogas and the cost for the same amount of alternative energy forms the basis for most economic comparisons.

Considering development tendencies

The economic analysis should not only be limited to the initial period of operation of a biogas plant. Development tendencies should also be considered which influence the amount and structure of the costs and benefits set against the economic lifetime of the plant. Here, special attention should be paid to the development in supply from other sources of energy which compete with biogas. The national economic development of the country in question features in as well. If import substitution to save foreign currency is one of the primary objectives, biogas energy and biogas fertilizer may be valued highly. If a stronger world market integration is envisaged energy and fertilizer from biogas has to compete directly with internationally traded energy and fertilizers.

Economic evaluation of a biogas plant

The benefits for individual households (biogas, biodung, etc.) Costs of a biogas plant (production, running and capital costs) Cost benefit relation Macro-economic evaluation (ecological and social effects, etc.) Financing and public support

Social policies

Biogas technology not only supports national economies and the environmental protection, but as its main outcome for the local population it provides for a wide range of improvements in overall living conditions. Sanitary and health conditions improve and the quality of nutrition is enhanced by an improved energy availability. Through the provision of lighting and the reduction of time-consuming fuel gathering cultural and educational activities are supported.

Employment, professional qualification and overall food supply of the local population can be improved as well. But biogas technology can also contribute to an accentuation of existing differences in family income and property. Establishing community-level biogas systems is a way to ensure that the technology benefits a greater number of residents.

If social policies of a developing country are clearly focusing on poverty alleviation, biogas technology may not be the first choice among other "village technologies". It's place is shifting rather towards the rural agricultural middle class, communities (for waste water treatment) and industries.

Benefits for the environment

For many years the rational behind using biogas technology (or anaerobic technology) was the search for renewable sources of energy. In the meantime, other environmental protection aspects gain additional importance: A technology which previously just filled a "niche" is now becoming a key environmental technology for integrated, solid and liquid waste treatment concepts and climate protection both in industrialized and developing countries. Biogas technology is linked to the atmospheric budgets of many greenhouse gases. Another major environmental target is the mitigation of deforestation and soil erosion through the substitution of firewood as an energy source. The macro-economic benefits from biogas use in this field should be approached within the scope of the specific condition in the household energy sector and possible alternative protection measures.