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A comparison of cost-benefit analysis of biomass and natural gas CHP projects in Denmark and the Netherlands

01 Feb 2016-Renewable Energy (PERGAMON-ELSEVIER SCIENCE LTD)-Vol. 86, pp 1095-1102

AbstractWe investigate what drives differences in the project appraisal of biomass and natural gas combined heat and power (CHP) projects in two countries with very similar energy profiles. This is of importance as the European Commission is assessing the potential scope of harmonizing renewable electricity support schemes post 2020. Concurrently, it is also promoting the use of cost benefit analysis (CBA) for transnational energy infrastructure projects. We use CBA to assess the same project proposal in Denmark and the Netherlands, following the respective country's guidelines. We find that especially the fuel costs and the valuation of emissions drive the differences. Furthermore, we establish that the sensitivity of the CBA results not only from policy differences in the countries, but also from differences in the methodology used.

Topics: Project appraisal (53%)

Summary (2 min read)

1. Introduction

  • Full harmonization of common, binding provisions for the support of renewably sourced electricity is a long-term aspiration for the EU Commission (EC), where full harmonization extends across the level of support, the support schemes and the legal framework including regulatory issues [1].
  • Externalities relating to energy generation and the valuation perspective of consumers are usually being investigated with willingness to pay studies.
  • The methodology aims to find out whether benefits of a project or policy actually outweigh its costs, and by how much in relation to the alternatives (among which usual a ‘do nothing’ option) [7].
  • The purpose of their paper is to demonstrate the extent and determinants of any disparities between two EU member states, the Netherlands and Denmark, by applying their respective CBA methods to the same case study.
  • Both countries have significantly higher shares of CHP generation than the EU-28 as a whole, and both countries are net exporters of natural gas.

2.1. Background of the case study

  • Assuming that support policies are related to an ex post estimation of net benefits and to correct market externalities, it makes sense to use CBA to determinewhether disparities in CBA methodology might threaten potential gains from harmonizing energy policy across EU member states.
  • Any such differences in conditions between countries might be reflected in the socioeconomic values for economic externalities e positive and negative e set for the CBA of public projects.
  • Natural variations between states in, for instance, electricity prices are assumed to reflect national priorities and comparative advantages.
  • The energy profiles of Denmark and the Netherlands share a number of common characteristics, such as substantial natural gas fields and an abundance of biomass and wind resources.
  • For Denmark the average share for 2011 was 46%, with corresponding values for the Netherlands and the EU-28 at 33% and 11% respectively.

2.2. CBA analysis

  • Cost-benefit analysis (CBA) is an approach that is used for estimating the strengths andweaknesses of several project alternatives [6,7].
  • The extra electricity produced by the natural gas CHP systemwas sold to the grid previously, but with the biomass unit, all electricity produced is used onsite instead.
  • The Dutch price projection is based on the background data used to evaluate the Dutch energy agreement [24].
  • After the net tax impact factors, the values correspond roughly with the price projections used in the recent public CBA analysis of a 6,000 MW wind farm [29].
  • The amount of emissions associated with each generated unit of energy (emission intensity) depends not only on the fuel type but also on technology characteristics of the energy plant used [39].

3. Results

  • Table 3 provides the results of the NPV calculations.
  • These are net benefits of the biomass CHP over the natural gas CHP.
  • Deadweight social loss has a minor impact in both states and for both alternate natural gas systems in this case study.
  • The Danish subsidy levels are significantly lower than the Dutch ones for the same technology, and they do change in line with the reduction in NPV from one comparison to the other.
  • In their fifth sensitivity analysis, the authors increase respectively decrease electricity costs with 25% and calculate the impact on the net NPV as reported in Table 3 (Panel C) and in the first line of Table 5.

4. Conclusion

  • The aim of this paper was to examine sources of any discrepancies in cost-benefit analysis (CBA) methodology and to estimate how this might impact the results.
  • The authors want to find out whether the CBA yields similar results for identical projects located in two EU member states with highly identical preferences.
  • Any differences in the results of their case study would suggest that there is divergence in the methodology or a natural variance between the two countries, or a combination of both.
  • These differences are pervasive enough that the net fuel costs are included as a benefit in the Danish case, i.e. the switch from natural gas CHP to biomass CHP results in annual fuel cost savings, while net fuel costs in the Netherlands impose an additional cost on the biomass CHP owner.
  • Related is that the inclusion or exclusion of the impact of methane on the environment turns out to make a huge difference regarding the value and appraisal of the investment projects.

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University of Groningen
A comparison of cost-benefit analysis of biomass and natural gas CHP projects in Denmark
and the Netherlands
Groth, Tanja; Scholtens, Bert
Published in:
Renewable Energy
DOI:
10.1016/j.renene.2015.09.032
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Groth, T., & Scholtens, B. (2016). A comparison of cost-benefit analysis of biomass and natural gas CHP
projects in Denmark and the Netherlands.
Renewable Energy
,
86
, 1095-1102.
https://doi.org/10.1016/j.renene.2015.09.032
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A comparison of cost-bene t analysis of biomass and natural gas CHP
projects in Denmark and the Netherlands
Tanja Groth
a
, Bert Scholtens
b
,
c
,
*
a
Department of Economics and Business, Aarhus University, Fuglesangs All
e 4, 8210 Aarhus V, Denmark
b
Department of Economics, Econometrics & Finance, University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands
c
School of Management, University of Saint Andrews, Saint Andrews, Fife, KY16 9RJ, Scotland, UK
article info
Article history:
Received 5 June 2014
Received in revised form
2 September 2015
Accepted 14 September 2015
Available online xxx
Keywords:
Cost-benet analysis
Combined heat and power
Net present value
abstract
We investigate what drives differences in the project appraisal of biomass and natural gas combined heat
and power (CHP) projects in two countries with very similar energy proles. This is of importance as the
European Commission is assessing the potential scope of harmonizing renewable electricity support
schemes post 2020. Concurrently, it is also promoting the use of cost benet analysis (CBA) for trans-
national energy infrastructure projects. We use CBA to assess the same project proposal in Denmark and
the Netherlands, following the respective country's guidelines. We nd that especially the fuel costs and
the valuation of emissions drive the differences. Furthermore, we establish that the sensitivity of the CBA
results not only from policy differences in the countries, but also from differences in the methodology
used.
© 2015 Elsevier Ltd. All rights reserved.
1. Introduction
Full harmonization of common, binding provisions for the
support of renewably sourced electricity is a long-term aspiration
for the EU Commission (EC), where full harmonization extends
across the level of support, the support schemes and the legal
framework including regulatory issues [1]. Arguably, full harmo-
nization of support schemes will ensure that sites with natural
comparative advantages in terms of renewable energy source
availability will be developed until any nancial advantage gained
using the support schemes has been exhausted. Externalities
relating to energy generation and the valuation perspective of
consumers are usually being investigated with willingness to pay
studies. As to renewable energy generation, examples of this type of
studies are [2e5]. However, governments are not always inclined to
rely on these solutions and they may also have other motives to
advance renewable energy generation and consumption.
If we assume that government support is required due to
inherent market failures in the energy markets, notably environ-
mental pollution, resource exhaustion and the emission of
greenhouse gases, then this support should in some way relate to
the size of these market externalities not already accounted for. One
way to determine the value of such externalities is to perform a cost
benet analysis (CBA) on a given energy project to estimate what
monetary and non-monetary costs and benets are generated
outside the direct transaction between the supplier and the buyer
[6,7]. CBA is an analysis of benets and costs of a project, including
an account of foregone alternatives and the current situation. The
methodology aims to nd out whether benets of a project or
policy actually outweigh its costs, and by how much in relation to
the alternatives (among which usual a do nothing option) [7].
CBA is commonly used in public projects, with some member
states providing manuals such as the Green Book in the UK [8], the
Vejledning for Samfundsøkonomiske analyser energi-området (in
English: Guidance for socio-economic analysis in the eld of en-
ergy) in Denmark [9], and on the EU level [10]. The advantage of
such an ofcially sanctioned manual for public projects is that it
sets out clear steps for performing an investment analysis appro-
priately weighted by socioeconomic factors, such as environmental
externalities, valuation of non-traded resources such as land, and
regional wage distortions.
At present, CBA guidelines for electricity infrastructure, gas
infrastructure and smart grids are being rened by the EC in order
to address trans-European energy infrastructure projects [11].
Existing literature on the use of CBA to assess welfare impacts in an
* Corresponding author. Department of Economics, Econometrics & Finance,
University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands.
E-mail addresses: Tanja.groth@gmail.com (T. Groth), l.j.r.scholtens@rug.nl
(B. Scholtens).
Contents lists available at ScienceDirect
Renewable Energy
journal homepage: www.elsevier.com/locate/renene
http://dx.doi.org/10.1016/j.renene.2015.09.032
0960-1481/© 2015 Elsevier Ltd. All rights reserved.
Renewable Energy 86 (2016) 1095e1102

international context is found primarily in the general social
studies [12]. According to this literature, divergent CBA practices
may give rise to indirect barriers to trade and a reduction of eco-
nomic efciency.
Disparities in CBA methodologies from state to state are already
recognized by the EC, which explains the need of having common
guidelines for transnational projects. The purpose of our paper is to
demonstrate the extent and determinants of any disparities be-
tween two EU member states, the Netherlands and Denmark, by
applying their respective CBA methods to the same case study. The
two countries are selected on the basis of their similarities in their
energy prole. The share of renewable energy is predominantly
sourced from biomass and waste for both Denmark and the
Netherlands, with wind being the other main contributor. Both
countries have signicantly higher shares of CHP generation than
the EU-28 as a whole, and both countries are net exporters of
natural gas. With these similarities in mind, this paper compares a
biomass CHP system with a natural gas CHP system. By using the
same case study in the two countries, we hope to detect whether
any differences in the CBA are a result of either natural variance
between the two countries or of discrepancies in the CBA method
itself. We want to point out that stated preference methods can be
used to quantify in monetary terms the externalities from biomass
technologies [13,14], but these gures are not considered in our
analysis since the current policy framework does not rely on this
type of analysis.
Section 2 presents the materials and methods employed in the
CBA for Denmark and the Netherlands. Section 3 contains the re-
sults for each country and a comparison of the two, as well as the
impact of a sensitivity analysis on the results. Section 4 discusses
factors inuencing the results and concludes with policy
implications.
2. Materials and methods
2.1. Background of the case study
The EC is keen to promote CBA to guide investment in trans-
national energy projects [12] and determined to nd out whether
harmonization of renewable electricity policies at the central EU
level would be more efcient than letting it be set at the EU
member state level. Assuming that support policies are related to
an ex post estimation of net benets and to correct market exter-
nalities, it makes sense to use CBA to determine whether disparities
in CBA methodology might threaten potential gains from harmo-
nizing energy policy across EU member states.
A key criticism regarding determining support schemes at a
central EU level is that each member state has different
geographical, legal, political and market conditions which inuence
the optimal level of renewably sourced electricity. Studies [15,16]
show that institutional factors may impact development and
environmental quality of a country. Ideally, a common framework
would result in overall cost savings with favourable conditions for
sites with comparative advantages, e.g. wind farms in areas with
relatively high average annual wind speed, but it might also result
in unacceptable high rents being earned at the most advantageous
sites.
Any such differences in conditions between countries might be
reected in the socioeconomic values for economic externalities e
positive and negative e set for the CBA of public projects. Pre-
sumably, the more similar the geographical, legal, political and
market conditions between two countries, the more similar the
socioeconomic weights attached to the externalities. As such, this is
at the basis of our investigation. The main hypothesis to be tested in
this study is that we expect similar results for CBAs of the same
project located in two EU member states with highly identical
preferences.
In our analysis, regional differences in land costs, electricity
prices etc. are ignored in favour of using national averages in order
to provide more comparable results. Natural variations between
states in, for instance, electricity prices are assumed to re
ect na-
tional priorities and comparative advantages. It is interesting to
determine whether any differences are motivated by natural vari-
ations in price levels and energy costs or whether they are driven by
other factors such as monetary estimates of greenhouse gas emis-
sions. If these differences result from natural variations in the price
level, the path towards full harmonization is much more straight-
forward. However, if the differences are mainly driven by differ-
ences in valuation methodology, then a key requirement is that
member states harmonize their public policy valuation guidelines.
We compare projects in two highly similar countries. The energy
proles of Denmark and the Netherlands share a number of com-
mon characteristics, such as substantial natural gas elds and an
abundance of biomass and wind resources. Both countries have
negligible shares of geothermal and hydro energy sources and solar
energy is a minor contributor, with only 1% share in the renewable
energy primary production [17]. In contrast, for the EU-28 as a
whole, geothermal and hydro energy represent 4% and 16%,
respectively, and photovoltaic energy an additional 4% [17]. Primary
renewable energy production in Denmark and the Netherlands is
instead dominated by relatively large shares of biomass (including
waste) and wind power. A second similarity in the energy proles
of the two countries is the high share of combined heat and power
(CHP) generation, measured as a percentage of gross electricity
generation. For Denmark the average share for 2011 was 46%, with
corresponding values for the Netherlands and the EU-28 at 33% and
11% respectively. The shares for CHP generation in the Netherlands
and Denmark are substantially higher than in the EU as a whole,
with only Latvia, Lithuania and Finland showing similar CHP
prevalence [18].
A nal similarity relevant for this paper is the natural gas energy
prole for the two countries [19]. Relative to primary natural gas
production in 2011, the share of imports was 5% for Denmark and
29% for the Netherlands, compared with 251% for the EU-28 as a
whole. Gross inland consumption was 59% of primary production
for both countries, while it was 284% for the EU-28. Both countries
are net exporters of natural gas, and consumption does not exceed
production in either country, unlike the EU-28 as a whole [19].
2.2. CBA analysis
Cost-benet analysis (CBA) is an approach that is used for esti-
mating the strengths and weaknesses of several project alternatives
[6,7]. These alternatives usually have to satisfy transactions, activ-
ities or functional requirements for a business. CBA can also be used
to calculate and compare the costs and benets of public project or
of projects with a mixed public-private nature. In general, the aim
of CBA is to compare projects along their net present value.
CBA is an instrument that has been applied to assess options
regarding the choice among alternatives and practices in terms of
nancial benets, and savings in terms of labour, time and re-
sources [7]. Often, CBA is used to nd out if a particular project is a
sound investment and whether the decision to go ahead with a
project can be justied in terms of costs and resources. It also can be
used as a feasibility study. Furthermore, CBA is used as a means to
compare alternative, competing projects. As such, it aims at
arriving at a comparison of the expected costs and benets of
alternative projects. Costs and benets usually are expressed in
nancial terms and are adjusted for the time value of money [6].
This is not always possible and stakeholders will not always agree
T. Groth, B. Scholtens / Renewable Energy 86 (2016) 1095e11021096

about the categories of costs and benets that have to be accounted
for and how to arrive at monetary values for all the categories.
Table 1 gives an overview of the assumptions used in the anal-
ysis. Please note that all prices are reported in real prices at the 2011
price level. We report costs and benets and values in Euros. In this
respect, for the Danish Krone (DKK) we use an exchange rate of DKK
7.5 per Euro [26]. Another issue is that the physical size of our
project, that is the CHP system being investigated, is small. As such,
the project is not automatically included in the EU Emissions
Trading System (ETS), which would make it eligible for additional
carbon costs.
As to the discount rate, the Danish Ministry of Finance recom-
mends that a 4% interest rate is used for analyses conducted in the
time horizon 0e35 years, dropping to 3% for years 36e70 and 2% for
the years following [27]. The Dutch Ministry of Finance recom-
mends a discount rate of 5.5% or 4% for public investments, con-
sisting of a risk-free rate of 2.5%, with a risk premium of 3% in the
general case or a risk premium of 1.5% when valuing specic
negative externalities which are irreversible [28]. These rates were
most recently used in a CBA of 6000 MW onshore wind de-
velopments by the Dutch Central Planning Bureau (CPB) [29],
where the 5.5% rate was used for the general analysis and the 4%
rate was used to value emissions with a negative impact on the
environment.
The recommended social discount rate from the European
Commission's Guide to cost benet analysis of investment projects
[10] is 3.5% for mature economies within the EU, and is partially
derived from per capita growth rates. Particularly for renewable
energy investments, where the benets accrue over a long lifetime
while the costs are mainly upfront, a lower discount rate may have
a signicant impact. That both Denmark and the Netherlands use
higher discount rates (4% for the long term [27,28]) than recom-
mended by the EU (3.5% [10]) hints at an undervaluation of long-
term externalities in these two countries.
The time horizon used in the analysis is based on the expected
technical lifetime of the biomass-based CHP solution used in the
reference scenario, set at 15 years [20]. Assuming a contract is
signed in the beginning of January 2014 and a six month delivery
and installation time, the plant will run from mid-2014 to mid-
2029.
The choice of baseline is very important in CBA. The reference
scenario consists of a small-scale woodchip powered combined
heat and power system (CHP), while two alternative scenarios are
considered. The rst is an electric spark ignition engine and the
second is a mini single cycle gas turbine, both of which run on
natural gas and are CHP systems. The technical data is taken from
Technology Data for Energy Plants, published by the Danish Energy
Agency [20].
Please note that the technical lifetimes of the three technologies
actually differ. While the biomass-based CHP system has a technical
lifetime of 15 years, the mini single cycle gas turbine has an ex-
pected lifetime of 10 years, and the electric spark ignition engine
has a lifetime of 20e25 years. For the mini single cycle gas turbine,
there should be a capital reinvestment in year 11; for the electric
spark ignition engine, there should be some residual value of the
system after a 15-year operation period. However, the emphasis in
this paper is on how the differences in CBA methodology between
Denmark and the Netherlands in combination with country char-
acteristics will produce different results; in this case, both countries
would follow the same approach (accounting for residual value at
the end of the technical lifetime). As a result, the effect would
cancel out in a cross-country comparison. For the sake of simplicity,
we have therefore assumed a lifetime of 15 years across all three
technologies.
The economic agent proled in the case study is an industrial
greenhouse owner who uses process heat to grow vegetables. The
average physical size for a greenhouse in Denmark is 4000 square
metres (sqm) and a greenhouse owner will typically have six of
these. To grow vegetables requires a temperature of 18
C, roughly
equal to 2800 MWh of heat and 70 MWh of electricity annually.
Greenhouse owners use natural gas boilers, natural gas CHP units
or a combination of these two to provide energy to the greenhouses
[30].
We assume that the natural gas systems can be installed in the
existing buildings as a replacement for the system in operation,
while in this case study the biomass system must be installed
Table 1
Key assumption of the CBA analysis.
Denmark The Netherlands
Discount rate 4%
Time horizon (years)
a
15
Heat capacity biomass CHP unit (kW)
a
420
Heat capacity natural gas CHP unit (kW)
a
360
Electrical capacity biomass CHP unit (kW)
a
105
Electrical capacity natural gas CHP unit (kW)
a
300
Total cost of biomass CHP unit, installed (in Euros, including buildings)
a
707,500
Total cost of natural gas engine CHP unit, installed (in Euros, excluding buildings)
a
450,000
Total cost of natural gas turbine CHP unit, installed (in Euros, excluding buildings)
a
630,000
Utilization rate natural gas unit
a
95%
Utilization rate biomass gas unit
a
87%
Volume of gasied biomass per hour of full load combustion (in Nm
3
)
b
407.6
CO
2
emission intensity of natural gas (in kg/GJ)
c
56.7 56.6
Energy content of the natural gas (in MJ/Nm
3
)
c
39.51 31.65
Projected CO
2
quota values 2014 (in Euros/ton)
d
12.07 5.97
Projected CO
2
quota values 2020 (in Euros/ton)
d
25.31 9.07
Projected CO
2
quota values 2025 (in Euros/ton)
d
29.53 12.83
Projected CO
2
quota values 2029 (in Euros/ton)
d
32.90 15.83
Emission values SO
2
(in Euros/kg)
e
12.62 5.24 (L)/10.49 (H)
Emission values NOx (in Euros/kg)
e
6.54 5.24 (L)/10.49 (H)
Emission values PM2.5/10 (in Euros/kg)
e
14.90 2.41 (L)/52.44 (H)
a
Ref. [20].
b
Ref. [21].
c
Ref. [22] for Denmark, Ref. [23] for the Netherlands.
d
Ref. [22] for Denmark, Ref. [24] for the Netherlands.
e
Ref. [22] for Denmark, Ref. [25] for the Netherlands; L ¼ low, H ¼ high.
T. Groth, B. Scholtens / Renewable Energy 86 (2016) 1095e110 2 1097

greeneld, i.e. on new land with new buildings. This is partly to
account for the much larger area required to house woodchip fuel
in contrast to natural gas, which has a much higher energy density.
In the Danish case study, it is assumed that a greenhouse owner
wishes to test a biomass CHP unit in one of the greenhouses. This is
motivated by the Danish greenhouse association HortiAdvice
Scandinavia A/S, which works with Danish greenhouse owners to
test carbon neutral solutions for 2017, and by the Danish govern-
ment's offer of tax breaks and subsidies for carbon neutral energy
solutions. The Dutch greenhouse industry is roughly thirty times
larger than the Danish one when measured by sqm, but an average
Dutch vegetable grower has a comparable greenhouse area, capable
of tting up to seven greenhouses on 4000 sqm. Much like the
Danish sector, energy demand is primarily fuelled using natural gas
[31]. Given that the sizes and energy proles are quite similar, we
assume that energy consumption for the same types of vegetables
is similar as well. In 2008, the Dutch agricultural industry signed a
sector-specic agreement with the government to increase energy
efciency by 2% annually and to aim for a renewable energy share
of 20% by 2020 [32]. The sector scheme mimics the setup of the EU
emissions trading scheme (ETS) without being a formal part of it, in
return for investment subsidies and a reduction in energy taxes.
As heat is the primary energy output the greenhouse owner is
interested in, all the plants are scaled according to their heat output
rather than their electric output. The extra electricity produced by
the natural gas CHP system was sold to the grid previously, but with
the biomass unit, all electricity produced is used onsite instead. The
costs and/or benets of the change in grid balancing itself is
ignored in this paper as the unit capacities are so small that any
change in the grid balancing costs from the sale of electricity to the
grid will be minor.
The biomass CHP unit will be installed as a greeneld invest-
ment, that is, built on a site located near the greenhouse where
there are no previous installations. For the sake of simplicity, we
ignore the costs of extending the grid infrastructure, but an esti-
mate of the building costs to house the biomass CHP unit is
included. This is obtained directly from the manufacturer, Stirling
DK Ltd. (2012), and covers the costs of installing the equipment in a
series of standard-sized shipping containers, ready to be placed on
site. In order to cover the average estimated heat demand of the
greenhouse, the owner has decided to invest in a 105 kW electric
unit, which will provide 420 kW heat, enough to cover the esti-
mated average annual heat needs þ15% at full load production.
Disposal costs of the systems (existing and new) are assumed to
net to zero once the scrap value has been accounted for. Operation
and maintenance (O&M) costs are technical costs and constant
regardless of whether the unit is located in Denmark or in the
Netherlands. These O&M costs are slightly higher per unit of energy
generated for the biomass-based system than the two natural gas
based systems. Basing annual operation hours on the heat demand,
both the natural gas units would operate at 95% of the year at full
load, while the biomass unit would operate at 87% [20]. Hence, the
corresponding annual O&M costs are 20% lower for the biomass
unit than for the natural gas units. We may expect some labour
costs on the side of the greenhouse owner, both in the installation
phase and the operation phase of the plants, but for our analysis
these costs have been excluded. There is a change in land use from
switching from the natural gas system to the woodchip system,
equal to the land costs necessary for housing the new energy sys-
tem plus woodchip storage. Land cost estimates for the Dutch case
are derived from the direct cost estimates [33], and inated with
respect to the 2011 price level. Land cost estimates from the Danish
case are taken from average alternate use estimates in a recent CBA
of biogas installations [34].
The biomass unit uses a small amount of natural gas to start up
the system, and then switches to woodchips. The gas units only use
natural gas. The amount of natural gas used in the biomass unit for
a start-up is very small (less than 1% of total fuel use) and is
therefore ignored in this analysis [21]
. There are no ofcial Dutch
statistics on wood fuel prices [35]. Instead, cost projections have
been taken from an EU report providing an illustrative case study of
woodchips supplied to the Netherlands [36]. These woodchips are
provided as factor price estimates including cultivation, harvesting,
storage and transportation, but excluding taxes. The prices are
modied using a net tax factor of 1.166 [37]. Danish woodchip price
projections are provided by the Danish Energy Agency, including
socioeconomic estimates of transport and storage costs up to the
delivery point. These prices also are provided as factor prices and
have subsequently been adjusted using a net tax factor of 1.17 [38].
Natural gas prices for the Netherlands are based on [24], while
natural gas prices for Denmark are based on [39]. The Dutch prices
were only available for 2010, 2020 and 2030, and strict linear
interpolation is used to provide estimates for the other years. The
Danish prices are available including estimates of transport and
storage costs up to the delivery point. None of the reviewed liter-
ature provided similar estimates for the Dutch prices, so these
modications are ignored in the analysis in favour of using com-
parable values. Gas prices are adjusted with their respective net tax
factors, as are the woodchip prices. The prices per cubic metre of
natural gas were converted according to national estimates of the
energy content of the fuel (see Table 1).
For electricity prices, the Danish price projection is taken from
Ref. [38]. The Dutch price projection is based on the background
data used to evaluate the Dutch energy agreement [24]. Both pro-
jections are in factor prices and adjusted with their respective net
tax impact factors. Unfortunately, only data for 2014 and 2020 for
the Dutch projection were released to the general public, so the
remaining data has been derived on the basis of linear interpola-
tion. However, after the net tax impact factors, the values corre-
spond roughly with the price projections used in the recent public
CBA analysis of a 6,000 MW wind farm [29].
In the reference scenario, the system is fuelled by biomass
gasied onsite, which is combusted directly in the CHP unit. No
woodgas is upgraded and exported to the biogas grid. Excess
electricity is exported to the grid for balancing purposes. With the
natural gas units, excess electricity produced is sold to the grid,
giving rise to energy income. It is assumed there are no grid inte-
gration issues with replacing the existing natural gas unit with a
new one.
We include subsidies and taxes in our calculation of the dead-
weight loss, which estimates the costs to society of nancing
changes in the tax base [37,39]. In Denmark the social deadweight
loss is calculated by multiplying changes in the tax base by 20% [9].
Noteworthy taxes are the energy tax on natural gas (energiafgift),
the energy savings tax (energispareafgift), previously the carbon
dioxide tax) and taxes on emissions of NOx and SO
2
. The effects of
these taxes are likely to be minor, especially since greenhouse
owners are exempt from 98.2% of the energy tax on natural gas [40].
There was no mention of this practice in the Dutch CBAs reviewed,
so it is clearly not common practice and is therefore excluded from
the Dutch CBA case in our analysis.
In Denmark, industrial energy producers can choose between a
subsidy covering upfront investment costs or a feed-in tariff sup-
porting electricity fed into the grid. As this CHP unit produces
correspondingly more heat per unit of electricity, all of which is
used onsite, we would expect the greenhouse owner to apply for
the upfront capital subsidy. The upfront capital subsidy is valid for
investment costs exceeding a conventional energy alternative, up
to a maximum of 65% of the whole investment cost for small in-
dustries or DKK 23 per GJ fossil fuel replaced over a 10-year period
T. Groth, B. Scholtens / Renewable Energy 86 (2016) 1095e11021098

Citations
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Journal ArticleDOI
Abstract: Biomass is one of the renewable energy sources (RES) with highest potential to contribute to the world's energy needs and can thereby play a key role in the path towards smart energy systems. Smart energy systems aim to integrate all energy sectors to increase the penetration of RES in the energy supply. Biomass gasification is a key technology to fulfil the goal of sustainable RES systems. Its main product (syngas) can be used as fuel, in various conversion technologies, to produce different products, including electricity, heat, cooling, biofuels and chemicals, which makes this technology an important tool for the energy system flexibility. Initially, the present manuscript reviews the relevant studies on the use of biomass gasification in trigeneration and polygeneration systems. Subsequently, it presents a case study that assesses the potential of the use of biomass gasification in an existing Portuguese trigeneration natural gas-fired plant located in Lisboa. The literature review revealed that most of the studies analysed are based on modelling data and not on experimental and/or pilot installations data. These studies show the environmental and energy added value of this type of system but stress the system's complexity and high investment costs. As for the case study, all scenarios considered show a negative net present value; nevertheless, the decrease of the biomass cost or the increase of the natural gas cost can turn financially feasible some scenarios.

46 citations


01 Jan 2007
Abstract: Abstract We present the findings of a choice experiment designed to estimate consumer preferences and willingness-to-pay (WTP) for voluntary participation in green energy electricity programs. Our model estimates WTP for a generic “green energy” source and compares it to WTP for green energy from specific sources, including wind, solar, farm methane, and biomass. Our results show that there exists a positive WTP for green energy electricity. Further, individuals have a preference for solar over a generic green and wind. Biomass and farm methane are found to be the least preferred sources.

24 citations


Journal ArticleDOI
15 Apr 2018-Energy
Abstract: This paper aims to evaluate and compare the potential cost savings and greenhouse gas (GHG) reduction of district heating (DH) systems using heat from nuclear combined heat and power plants (NCHP) in Europe. Fifteen DH þ NCHP systems, spread throughout seven countries, are studied. The selection was made in collaboration with 'the Ad-Hoc Expert Group on the Role and Economics of Nuclear Cogene-ration in a Low Carbon Energy Future' from the Organisation for Economic Cooperation and Development. Firstly, the linear heat density of the modelled DH networks was determined, including locations with poorly developed DH networks. A large potential for extending DH networks was identified for France and the United Kingdom despite the expected decrease in the heat demand due to building renovation. Secondly, the costs and GHG emissions of DH þ NCHP systems were evaluated via a cost-benefit analysis. It concluded that 7 of the 15 projects would be cost-effective if 25% of the total urban heat demand was supplied. Implementing NCHP-based systems would reduce GHG emissions by approximately 10 Mt eCO 2 /a. Four additional DH þ NCHP systems could become competitive if a larger share of the total demand was supplied. Finally, a sensitivity analysis was performed to evaluate the uncertainty affecting the key parameters.

19 citations


Journal ArticleDOI
Abstract: Heat prices are crucial for the revenues that biogas plants can generate; they can make or break a plant’s business. But little empirical price data exists. To remedy this and to identify factors influencing heat prices received by biogas plants, we surveyed 602 plant operators in Germany, yielding 1035 price points. We found a mean price of 1.91 EuroCt/kW h on the contract level, a mean revenue of 2.1 EuroCt/kW h on the plant level, and a wide variation in prices across utilization paths. Five factors were identified that together explain almost 50% of the price variance observed. The top three all contribute to higher prices: first, that the operator of the plant also operates the heat grid; second, that the heat contract offer full supply security; and third, that the heat be sold for heating buildings. Heat sold for agricultural drying processes commands significantly lower prices. Macroeconomic characteristics of a region do not affect prices; local factors seem to play the decisive role. This leads to wide price variations and the limited influence of any one factor on heat price. Companies and investors are thus advised to enter into pre-negotiations with prospective heat customers so that realistic site-specific numbers for off-heat prices can be used in planning; anything less puts a biogas venture at risk. Policy makers, when setting subsidies for biogas plants, also have to factor in revenues from heat; the results of this study can help them do so.

17 citations


Journal ArticleDOI
TL;DR: A day-ahead scheduling framework of integrated electricity and NG system (IENG) is proposed at a distribution level based on the fast alternating direction multiplier method with restart algorithm considering demand side response and uncertainties.
Abstract: Power generated by the natural gas (NG) is a promising option for solving the restrictions on the development of the power industry. Consequently, the high interdependence between NG network and electricity network should be considered in this integration. In this paper, a day-ahead scheduling framework of integrated electricity and NG system (IENG) is proposed at a distribution level based on the fast alternating direction multiplier method with restart algorithm considering demand side response and uncertainties. Within the proposed framework, the detailed model of the IENG system at a distribution level is established, where the NG flow equation is processed by incremental linearization method to improve the computational efficiency. The objective is to minimize the operation costs of the entire system. With consideration of the uncertainties of distributed generation and electricity load as well as the uncertainties from the NG load, a two-stage robust optimization model is introduced to obtain the worst case within the uncertainty set, which is solved by column and constraints generation algorithm. In addition, the demand-side response (DSR) model including the decentralized air conditioning (AC) load model and the centralized ice-storage AC load model is integrated into the scheduling framework. Finally, the proposed day-ahead scheduling framework is verified by numerical studies where the optimal scheduling schemes are obtained in different cases, both the effects of the uncertainties and the performance with introducing DSR to the system operation are analyzed.

16 citations


References
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Book
26 Jan 1996
Abstract: Cost-Benefit Analysis provides accessible, comprehensive, authoritative, and practical treatments of the protocols for assessing the relative efficiency of public policies. Its review of essential concepts from microeconomics, and its sophisticated treatment of important topics with minimal use of mathematics helps students from a variety of backgrounds build solid conceptual foundations. It provides thorough treatments of time discounting, dealing with contingent uncertainty using expected surpluses and option prices, taking account of parameter uncertainties using Monte Carlo simulation and other types of sensitivity analyses, revealed preference approaches, stated preference methods including contingent valuation, and other related methods. Updated to cover contemporary research, this edition is considerably reorganized to aid in student and practitioner understanding, and includes eight new cases to demonstrate the actual practice of cost-benefit analysis. Widely cited, it is recognized as an authoritative source on cost-benefit analysis. Illustrations, exhibits, chapter exercises, and case studies help students master concepts and develop craft skills.

1,602 citations


"A comparison of cost-benefit analys..." refers background or methods in this paper

  • ...CBA is an instrument that has been applied to assess options regarding the choice among alternatives and practices in terms of financial benefits, and savings in terms of labor, time and resources [7]....

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  • ...Cost-benefit analysis (CBA) is an approach that is used for estimating the strengths and weaknesses of several project alternatives [6, 7]....

    [...]

  • ...The methodology aims to find out whether benefits of a project or policy actually outweigh its costs, and by how much in relation to the alternatives (among which usual a ‘do nothing’ option) [7]....

    [...]

  • ...One way to determine the value of such externalities is to perform a cost benefit analysis (CBA) on a given energy project to estimate what monetary and non-monetary costs and benefits are generated outside the direct transaction between the supplier and the buyer [6, 7]....

    [...]



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Abstract: Increasing the proportion of power derived from renewable energy sources is becoming an increasingly important part of many countries's strategies to achieve reductions in greenhouse gas emissions. However, renewable energy investments can often have external costs and benefits, which need to be taken into account if socially optimal investments are to be made. This paper attempts to estimate the magnitude of these external costs and benefits for the case of renewable technologies in Scotland, a country which has set particularly ambitious targets for expanding renewable energy. The external effects we consider are those on landscape quality, wildlife and air quality. We also consider the welfare implications of different investment strategies for employment and electricity prices. The methodology used to do this is the choice experiment technique. Renewable technologies considered include hydro, on-shore and off-shore wind power and biomass. Welfare changes for different combinations of impacts associated with different investment strategies are estimated. We also test for differences in preferences towards these impacts between urban and rural communities, and between high- and low-income households.

448 citations


"A comparison of cost-benefit analys..." refers background in this paper

  • ...As to renewable energy generation, examples of this type of studies are [2-5]....

    [...]


Journal ArticleDOI
Abstract: We present the findings of a choice experiment designed to estimate consumer preferences and willingness-to-pay (WTP) for voluntary participation in green energy electricity programs. Our model estimates WTP for a generic “green energy” source and compares it to WTP for green energy from specific sources, including wind, solar, farm methane, and biomass. Our results show that there exists a positive WTP for green energy electricity. Further, individuals have a preference for solar over a generic green and wind. Biomass and farm methane are found to be the least preferred sources.

362 citations


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  • ...As to renewable energy generation, examples of this type of studies are [2-5]....

    [...]


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Abstract: We examine small/medium commercial and industrial customers' choices among energy suppliers in conjoint-type experiments The distribution of customers' willingness to pay is estimated for more than 40 attributes of suppliers, including sign-up bonuses, amount and type of renewables, billing options, bundling with other services, reductions in voltage fluctuations, and charitable contributions These estimates provide guidance for suppliers in designing service options and to economists in anticipating the services that will be offered in competitive retail energy markets

356 citations


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Frequently Asked Questions (2)
Q1. What are the contributions in "A comparison of cost-benefit analysis of biomass and natural gas chp projects in denmark and the netherlands" ?

The authors investigate what drives differences in the project appraisal of biomass and natural gas combined heat and power ( CHP ) projects in two countries with very similar energy profiles. Concurrently, it is also promoting the use of cost benefit analysis ( CBA ) for transnational energy infrastructure projects. The authors use CBA to assess the same project proposal in Denmark and the Netherlands, following the respective country 's guidelines. This is of importance as the European Commission is assessing the potential scope of harmonizing renewable electricity support schemes post 2020. Furthermore, the authors establish that the sensitivity of the CBA results not only from policy differences in the countries, but also from differences in the methodology 

The authors suggest that further research in the formulation of CBA methodology for a common EC policy framework includes case studies to demonstrate the extent of sensitivity both due from natural variations between states and from discrepancies in the approach used.