Aarhus University Seal / Aarhus Universitets segl

No. 383: Environmental and socio-economic analysis of integrated grass biorefinery scenarios

Martinsen, L. & Andersen, M.S. 2020. Environmental and socio-economic analysis of integrated grass biorefinery scenarios. Aarhus University, DCE – Danish Centre for Environment and Energy, 91 pp. Scientific Report No. 383 http://dce2.au.dk/pub/SR383.pdf 

Summary

This report presents financial and welfare economic analyses of two scenarios for production of green proteins. The scenarios have been defined as the most relevant based on the knowledge available at the time of the project inception, and thus do not reflect an optimization based on the current results.

The two scenarios feature production of green protein at a biorefinery, integrated with a biogas facility, and with some synergies exploited. Residual biomass resources from the protein production provides input to biogas generation, which in turn supplies process energy for the biorefinery. Surplus biogas is upgraded to biomethane and is fed into the general gas grid, substituting natural gas. The protein production is based on highly fertilized grasses (450 kgN/ha) that supplant conventional crops. The analyses include and reflect the agricultural implications of changes in land use.

The two scenarios differ with regard to overall production volume, biogas investment needs and the use of protein production residuals. One scenario features a smaller biorefinery, scaled according to an annual grass input of 20,000 tonnes of dry matter, and with only the juice fraction being supplied to the biogas plant, while fiber residuals are sold for cattle feed. In this scenario the protein plant is localized in the vicinity of an existing biogas plant with upgrading facilities, on the assumption of excess capacity, whereby investment needs are limited. Another scenario features a large-scale protein plant with an annual grass input of 150,000 tonnes of dry matter. In this case residuals of both juice and fiber are used for biogas generation, with significant investments required for a new biogas plant.

The financial analysis shows that the small-scale plant can generate a surplus to the biorefinery owners, while the large-scale plant will be making losses. Still, both scenarios feature net results relatively close to a break-even, and the uncertainties associated with several cost and income components imply that the results should be seen as an approximation, rather than representing exact figures for the profitability of small- and large-scale green protein biorefineries.

Deviations in use of residual products along with the assumptions on the need for biogas investments create differences in the significance of individual cost and revenue components. Grass biomass constitutes the single most important cost item in both scenarios, though in relative terms its share is greater in the small-scale scenario. The large-scale scenario features more substantial investment costs, in relative terms more than twice the share in the small-scale scenario. With regard to revenues, subsidies and product sales each generate about half the income in the large-scale scenario, whereas in the small-scale scenario subsidies are less important, securing only about 10 % of revenues, while incomes from sales of fibers for cattle feed bring about 50 %. Revenues from the protein product constitute about 30-35 % of income in both scenarios.

With regard to public expenditures, both scenarios involve considerable spending, though of different magnitudes; it is about five times higher per tonne of dry matter for the large-scale plant due to both juice and fiber being supplied for generation of biogas. The small-scale scenario has less biogas generation as only the juice fraction is used. This public spending is due to the generous subsidies (feed-in tariffs) available for biogas.

Both scenarios result in a negative welfare economic result. The outcome per tonne dry matter is about ten times less in the small-scale scenario, however. The relative significance of the various cost items is similar to findings in the financial analysis, while with subsidies excluded, some changes appear in the relative significance of the income components. The fiber fraction remains the most important source of revenue (57 %) in the small-scale scenario, with the protein product in second place (39 %). In the large-scale scenario, the protein product accounts for 63 % of incomes, with biomethane and degassed biomass accounting for 23 and 14 % respectively.

The net value of externalities is negative in both scenarios; however they become more significant to the final outcome of the small-scale scenario, due to a lesser deficit prior to externalities. The externalities considered in the analysis comprise GHG emissions, air pollution, N and P leaching, cadmium as well as road and off-road transport. The small-scale scenario involves positive externalities from reduced N and P leaching as well as from less off-road transport, but the remaining environmental impacts are all negative, with GHG, ammonia and road transport dominating. The large-scale scenario sees a reduction in GHG emissions (due to higher biogas generation), along with less P leaching and off-road transport, but the remaining externality components serve to offset these, rendering the final result negative in monetary terms. The economic value of a potential GHG reduction from less import of soy has not been included, due to its non-domestic features and the uncertainties involved.

In summary, the analysis shows that protein production in association with biogas generation, based on biomass input of highly fertilized grass, can be commercially attractive, though depending on scale and the specific assumptions made. However, from a public expenditure perspective such production will be burdensome, due to the generous feed-in tariffs awarded to biogas. The welfare economic analysis shows that the aggregate externality balance does not suffice to justify the level of public support that would be involved. Still, other considerations, i.e. related to potentials for future technological developments or novel markets for the residual products, might provide reasons for maintaining the high level of public support.