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Journal ArticleDOI

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
TL;DR: In this paper, 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.
About: This article is published in Renewable Energy.The article was published on 2016-02-01 and is currently open access. It has received 14 citations till now. The article focuses on the topics: Project appraisal.

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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Citations
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Journal ArticleDOI
TL;DR: In this paper, the authors present the outlook and current scenario of cogeneration systems in Malaysia by observing performance and the challenges confronted by the technologies and investigate technical issues concerning the key players of the technologies.
Abstract: The development of biomass-based cogeneration energy systems in Malaysia is progressing to meet the circular economy concept and sustainability goal. This comprehensive review aims to report recent advancements in biomass-based cogeneration/biomass co-firing technology in Malaysia correlated with the optimization modeling role. First, this work presents the outlook and current scenario of cogeneration systems in Malaysia by observing performance and the challenges confronted by the technologies. Next, investigation of technical issues concerning the key players of the technologies and the biomass supply chain. This work had prepared using quantitative content-based analysis-meta-analysis. The practical implication of this review enables a complex optimization model that integrates biomass-based cogeneration and biomass supply chain considering economic and environmental viability. It will further enhance progress toward the Malaysian “Industry 4.0-driven” energy initiative. A novel optimization model grounded on Industry 4.0 parameters will foster new opportunities for researchers.

13 citations

Journal ArticleDOI
TL;DR: Simulation results show that the proposed DDRO method can reduce the day-ahead and real-time dispatch costs of energy conversion equipment while ensuring the robustness of IEGS system dispatch.

9 citations

Journal ArticleDOI
TL;DR: This preliminary feasibility study showed that running a carbonation plant may be profitable and sustainable for Estonia and this is the first study to demonstrate FA management options with economic and environmental benefits.

8 citations


Additional excerpts

  • ...In the energy field, Groth and Scholtens (2016) conducted a CBA to compare biomass and natural gas combined heat and power (CHP) projects in Denmark and the Netherlands....

    [...]

Journal ArticleDOI
01 Jan 2022
TL;DR: In this article , the authors proposed a two-stage dispatch model for distribution-level integrated electrical and gas system (IEGS) based on a data-driven robust optimization (DDRO) method.
Abstract: The increasing popularity of distributed renewable power generation represented by wind turbines and solar plants and the deployment of gas turbines (GTs) and power-to-gas (P2G) facilities have promoted stronger interdependence between the power grid and the natural gas system, which makes the economic dispatch of the integrated electrical and gas system (IEGS) more challenging. This paper proposes a two-stage dispatch model for distribution-level IEGS based on a data-driven robust optimization (DDRO) method. First, for distribution-level IEGS, a network model of IEGS is established, and the nonconvex constraints are relaxed by the big M method and second-order cone (SOC) relaxation. Considering the correlation between wind and solar output in multiperiod, a wind-solar output ellipsoid uncertain set is constructed through the minimum volume enclosed ellipsoid (MVEE) algorithm to obtain extreme scenarios. Finally, a column-and-constraint generation (C&CG) method based on extreme scenarios is proposed to solve the two-stage robust optimization model. Simulation results show that the proposed DDRO method can reduce the day-ahead and real-time dispatch costs of energy conversion equipment while ensuring the robustness of IEGS system dispatch. In addition, the economics of IEGS system dispatch is improved.

7 citations

23 Jul 2018
TL;DR: In this paper, the authors focus on the creation of a sustainable pilot district for the city of Turin, which can be representative for its entire urban system, through the application of different sustainable policies on it, and compare the saving of energy consumptions and the emissions reduction.
Abstract: Many studies are shifting their attention from the sustainability of a single building to the one of the entire urban system. This is the reason why we decided to focus on the research of policies that allow to achieve a more sustainable way of life for the entire urban system. Starting from the first chapter, we discuss the European and international targets designed to keep the emissions produced under certain levels and to have a shift to a decarbonised society. Moreover, we also analyse several case studies to categorize their main features and the measures applied to improve the sustainability at the district and urban level. In the second chapter, we describe manifold policies that can be applied to reach the reduction of fossil fuels consumptions and of the emissions while, in the third one, we analyse the structure of a cost-benefit analysis and the environmental, social and economic benefits that can be achieved with the application of these measures. Afterwards, we focus on the creation of a pilot district for the city of Turin, which can be representative for its entire urban system. Through the application of different sustainable policies on it, the aim is to compare the saving of energy consumptions and the emissions reduction. The sectors that we consider, and on which we are going to intervene, are the buildings, mobility, waste and street lighting sectors. Since the measures applied on different sectors are manifold, we create several scenarios, composed by one policy for each sector, on which we evaluate costs and benefits. After that, we calculate the economic indicators of the cost-benefit analysis, which allow to choose the best project from the environmental, social and economic point of view. This thesis shows which is the best scenario and that, if the proper measures are foreseen, we can also obtain an economic return for the whole society. Therefore, in a key sentence, the main and ambitious purpose of this thesis is to create a sustainable pilot district for the city of Turin that can be reproduced on its entire territory to develop in the future a sustainable way of life for its entire urban system.

4 citations

References
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Book
26 Jan 1996
TL;DR: Cost-benefit analysis as discussed by the authors provides accessible, comprehensive, authoritative, and practical treatments of the protocols for assessing the relative efficiency of public policies, including 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, and other related methods.
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.

1,637 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]....

    [...]

  • ...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]....

    [...]

Journal ArticleDOI
TL;DR: In this article, the authors 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.

481 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]....

    [...]

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TL;DR: In this article, the authors 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.

391 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]....

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TL;DR: In this paper, the authors examined small/medium commercial and industrial customers' choices among energy suppliers in conjoint-type experiments and estimated the distribution of customers' willingness to pay 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.
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

369 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]....

    [...]

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.