BioChain Project

Workpackage 1: Value chain optimisation

DTU Management EngineeringJune 19, 2013

2 DTU Management Engineering, Technical University of Denmark

Overal project relation

Output market -EnergyInput market

Output market –Fertilizer and manure treatment

Logistics

Logistics

Environmental impact

Biomass analysis

3 DTU Management Engineering, Technical University of Denmark

WP1Input markets

Output markets Fertilizer and manure

treatment

Output marketsEnergy 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 ToolPrivate

Socio EconomicScal

e eff

ects

Logistics

Logi

stic

s

4 DTU Management Engineering, Technical University of Denmark

WP1 Value chain optimisation and modellingActivities 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

5 DTU 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 plantCombined Heat and Power plant

6 DTU 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 marketsOutput markets

Energy markets

Output markets Fertilizer and manure

treatment

7 DTU 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 marketsPower price fluctuations- Heat supply obligations - Risk hedging

Optimisation

Input markets Output marketsEnergy markets

Output markets Fertilizer and manure

treatment

Regulation and financing- Ownership structures- Risk handling- Market structures- Choice of primary output- Incentive regulation- Command & control

8 DTU 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

9 DTU Management Engineering, Technical University of Denmark

Organisation and incentivesAlternative 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

Måbjerg Bioenergy

Leverandør-foreningen

Leverandør-foreningen

Vinderup Fjernvarme

10 DTU 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

11 DTU 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

12 DTU 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