BioChain Project Workpackage 1: Value chain optimisation DTU Management Engineering June 19, 2013

2DTU Management Engineering, Technical University of Denmark Overal project relation Output market -Energy Input market Output market – Fertilizer and manure treatment Logistics Environmental impact Biomass analysis

3DTU Management Engineering, Technical University of Denmark WP1 Input markets Output markets Fertilizer and manure treatment Output markets Energy markets Certificates? Regulation and financing -Ownership structures -Risk handling -Market structures -Choice of primary output -Incentive regulation -Command & control -Optimal use of biomass Scale effects Optimisation Tool Private Socio Economic Scale effects Logistics

4DTU Management Engineering, Technical University of Denmark WP1 Value chain optimisation and modelling Activities and present stage 2 PhD positions within value chain modelling and analysis 1 PhD modelling the value chain from an operational research background including methods from stochastic programming 1 PhD modelling and analysing incentives, ownership structure and interaction with national level energy model Intensive collaboration between the 2 Phd’s on the model properties and integration between plant level and national energy system level The positions are in the interview phase and will be filled from August 1. Last week an initial meeting with the Norwegian partner Østfoldforsking that will contribute in the comparison of results from value chain optimisation under Danish and Norwegian conditions/cases. Research exchange and supervision is also planned. A first optimisation model has been developed by a master student which will serve as inspiration for the value chain modelling. This work used information and data from visit at Måbjerg, Suppliers and Vinderup District Heating

5DTU Management Engineering, Technical University of Denmark Visit and sketch of BiogasChain Måbjerg BioEnergy. - Three parts of the chain Suppliers Transporterer og leverer valle fra Arla samt gylle fra Svin Køer og Mink Måbjerg BioEnergy Afgasser gyllen Renser gassen Forbehandler fibre Producerer varme Vinderup heating plant Combined Heat and Power plant

6DTU Management Engineering, Technical University of Denmark - Organisation and focus of value chain Suppliers - Logistics - Dry matter content - Fertilizer value - phosphor content - Incremental investments - Supply obligations - Insurance against stricter manure regulation Måbjerg BioEnergy Investment/financing/ ownership Risk hedging – input and outputs Regulation Logistics Choice of technology inputdependent (mink, mesofilt) Number of treatment facilities – input- dependent (Arla) Public acceptance Vinderup varmeværk - Valg af teknologi - Kvalitet af gas - Regulering og markeder - Forpligtigelse/ Risikoafdækning Optimisation Input markets Output markets Energy markets Output markets Fertilizer and manure treatment

7DTU Management Engineering, Technical University of Denmark Måbjerg BioEnergy and Vinderup District Heating: Optimisation criteria vary and flexibility on inputs conflicts with output/sales risk to Måbjerg Suppliers - Logistics - Dry matter content - Fertilizer value - phosphor content - Incremental investments - Supply obligations - Insurance against stricter manure regulation Måbjerg BioEnergy Investment/financing/ ownership Risk hedging – input and outputs Regulation Logistics Choice of technology input dependent (mink, mesofilt) Number of treatment facilities – input-dependent (Arla) Public acceptance Vinderup District heating - Choice of technology - Quality of gas - Regulation and markets Power price fluctuations - Heat supply obligations - Risk hedging Optimisation Input markets Output markets Energy markets Output markets Fertilizer and manure treatment Regulation and financing -Ownership structures -Risk handling -Market structures -Choice of primary output -Incentive regulation -Command & control

8DTU Management Engineering, Technical University of Denmark Risk and distribution of risk is an important element for value and incentives Input costs – long term contracts for supply (volume and price for manure) (including treatment service) Input costs - flexible input mix of biomass crops/waste (volume and price) Output biogas– long term contracts for supply to CHP/upgrading plant or gas grid (volume and/or price) Output biogas– long term alternative option for use (access to variable volume - local heat) Output – fertiliser (value) price will be determined by competitive alternative Risk reduction for risk averse farmers and biogas plant More flexible inputs (technology+potentials) reduce risk to biogas plant Reduce risk to biogas plant if price and volume risk covered – risk reduction for CHP only for price contract Diverse distribution/use channels reduce risk to biogas plant Risk reduction (volume) for biogas plant

9DTU Management Engineering, Technical University of Denmark Organisation and incentives Alternative organisational setup can change incentives and may reduce risks - Assumption 3 independent entities – farmers – biogas plant – CHP/heat plant Integrated biogas plant – CHP - optimise the use of the biogas resource (fixed flow) - optimise a short term biogas storage with power prices - reduce the volume risk for biogas demand (biogas plant part) Integrated biogas plant – suppliers/farmers - farmers and biogas plants eliminate the conflicting price incentive from the input manure price - volume risk for manure supply reduced Integrated biogas plant, farmers + local heating plant (district or CHP) demand - reduce the price conflict between entities and reduce heat demand uncertainty - reduce uncertainty on future heating supply costs Måbjerg Bioenergy Vinderup Fjernvarme Måbjerg Bioenergy Leverandør- foreningen Vinderup Fjernvarme

10DTU Management Engineering, Technical University of Denmark Scale effects – economies of scale Collection costs and density of resources –trade off between distance and size of resource Scale of biogas plant Scale and costs of biogas storage Scale of upgrading facility and costs

11DTU Management Engineering, Technical University of Denmark Scale effects for biogas plant– possible tradeoff Scale of biogas plant Costs Average production costs Excess supply of biogas locally/demand risk Expected “flaring” costs

12DTU Management Engineering, Technical University of Denmark Biogas plant modelled costs and constraints Investments –Funktion af mængde –Type(meso/termofilt) –HRT(hydraulic retention time) –Varmeforbruget –Varmetab, varmegenanvendelse –Biogasproduktion antaget konstant –Høj investerings omkostning - lavt varmeforbrug, Lav investeringsomkostning – højt varmeforbrug Operational costs –Varme –Elektricitet –Løn –Vedligeholdelse –Administration Biogasmotor( Inputmængde ) –Dække varmebehov –Forbedre egen økonomi