Economic Evaluation of Bioenergy Production from Biomass in Germany

Abstract

The production of bioenergy from plant sources has been an emerging issue in the global bioeconomy. This is as a result of the depletion of fossil fuel sources and its high adverse effects on the environment as the main source of conventional energy. Biobased products from fruit trees and crops have been thought and proven to play an important role in supplying future bioenergy and contributing to the achievement of some sustainable development goals. Many studies have focused on this novel technology without focusing on the economic aspect of it. In a bid to build and improve on literature, this study sought to economically evaluate the production of bioenergy from biomass using robust and standard profitability measures like the net present value (NPV), internal rate of return (IRR) and the payback period (PBP). Data was obtained through expert interviews from the Klein-Altendorf project site in Bonn, Germany. A business as usual scenario and a carbon avoidance scenario were investigated to ascertain the economic viability of this sustainable activity. Results in the business as usual scenario showed the process as a non-profitable venture. However, based on the carbon avoidance scenario, we argued that the project is economically viable especially in terms of carbon avoidance which reduces emissions and goes a long way to protect the environment. These social benefits obtained make the investment worthy. The greatest constraint and cost come from establishing such initiatives. The study found initial investment costs to be very high. Moreover, bioenergy produced is valued at the same price like energy produced from fossil fuels despite its numerous benefits to the environment. The results recommend to policy the maintenance of such initiatives as they have a big role to play in the global bioeconomy. In addition, other countries should join Germany in supporting this initiative by subsidising producers of bioenergy. This is justifiable and arguably the reason for Germany’s global recognition in bioeconomic issues.

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“…Ruiz et al (2020) reported IRR of 10.2%, this seems to be higher when compared with this study, the higher values however could be attributed to the inclusion of other revenue from the energy production process. Another study on the economic evaluation of Bio-based products from fruit trees and crops in Germany indicated negative values for NPV and IRR (Tabe-Ojong and Habiyaremye, 2017). This indicates that the substrate plays a major role in the profitability of the bioenergy project.…”