Decisional Processes and Business Models

1. Decisional Processes and Business Models Stefano PROIETTI ISIS Istituto di Studi per l’Integrazione dei Sistemi Aarhus 12 September 2013

2. IN THIS PRESENTATION • Identification of purposes • Business models and involved stakeholders • Chicken/egg dilemma • Costs, revenues and biomethane cycle economy • Steps for success • Barriers and drivers • European perspectives and work in progress

3. Objectives in Biomethane’s Choice Differentmotivationsfromregiontoregion, butgenerallywith some common factors: • environmental • economic • political

4. EnvironmentalObjectives • Reduction of traffic induced CO2 emissions • Replacement of fossil fuels • Improved air quality • Sustainable waste management

5. EconomicObjectives • Solutions for economical and energy efficient vehicles and fuels • Development of new markets and/or job creation • Creation of stable and independent supply and demand on the local, regional or national market of fuels and vehicles

6. Political and Social Objectives • Building an image as a progressive city/ region • Creating positive partnerships with new, community-based stakeholders • Developing efficient, best-practices for solving municipal problems

7. Business Development • Establish a partnership from a core group of stakeholders: • Broad selection of potential partners maximises the types of synergies (feedstock, production and markets) • Partnerships are long-term commitments • Consider different contexts: rural/urban, political, municipal, business etc. • The partners should work to create a vision based on their objectives, with targets to focus their aims

8. Stakeholders (Owners) • Different professionals need to be engaged in the biomethane process • Requiring at least one of : • Feedstock source • Biogas/biomethane production • Biomethane market • Synergies among different stakeholders is crucial to guarantee the success to a biomethane project

9. Partners (Supporters) A successful biomethane enterprise depends on support from key partners: • European Union • National government • Regional and municipal authorities • Media • Motorist and consumer organisations • Vehicle manufacturers • Gas distributors • Potential consumers

10. Customers Relations • Important to provide clear explanations on safety of biomethane for transportation, cost savings, environmental advantages • Be honest about challenges: lower energy density (affects range) and higher capital costs of vehicles • Different categories of vehicles lead to different types of customers/users with different needs • Long-term development and commitment to an accessible fuelling infrastructure is critical • Major challenge is how to develop a critical mass of methane vehicle drivers to develop biomethane market?

11. Chicken/Egg Dilemma (1) • Gas distributors and OEMs need a certain number of drivers to develop fuelling infrastructure and make new vehicles available • But users needs fuelling stations and available methane vehicles… • First vehicles or stations? How to solve the problem???

12. Chicken/Egg Dilemma (2) • The introduction of clean and energy-efficient vehicles in the market should be accompanied by the parallel build-up of refuelling infrastructures • Intervention of public authorities: the purchasing policies for cleaner vehicles in captive fleets (also through green joint procurements) and the corresponding build-up of fuelling facilities in order to create the critical mass to influence market prices and industry choices against the limited number of vehicles models and their higher costs • Moreover public bodies improve their environmental image by providing the right example to citizens

13. Production Costs • Price and availability of biomassasstartingpoint to planbiomethane production • Biogas upgrading costs depend on size of biomethane production plant • Revenueslinked to wastecollectionfeesor landilltaxes • In agricultural settings there are cases where no payment is made for feedstock, but farmers delivering biomass receive digestate fertilizer in return

14. OperationalCosts • Staff • Insurance • Feedstock transportation • Licenses • Pollution limitation and control • Excess fertilizer disposal costs • Repair and maintenance

15. Distribution Costs • Depending on distribution and fuelling infrastructure available • If grid injection possible, then most economical to build a biogas plant in a location that is already connected to the natural gas grid • If pipeline not available, costs can be high (construction can cost € 150,000/km) • Either fuelling depot near the plant, or distribution of biomethane via other means (trucking)

16. FuellingStationsCosts • Investments in fuelling station include: - costs of compressor - intermediate storage capacity - dispensers and - construction • Size of fuelling station affects cost of the fuel price

17. End Use • Cost of biomethane should be 20-40% lower that petrol or diesel - To attract average vehicle user; - To compensate for higher vehicle investment costs of OEM NGVs: * LDV cost from €1,500-€3,500 more than a petrol vehicle * Heavy duty vehicle (truck, bus) typically 25-30% more • Faster payback can be achieved by high-km users

18. AvoidedCosts • Avoided costs of biomethane consumption include avoided emissions: - Carbon dioxide (CO2), Nitrogenoxide (NOx), Particulatematter (PM) • Grants, tax incentives and subsidies for low pollution energy sources are a crucial part of the business case

19. Revenues • Sale of biomethane and by-products determines the success of biomethane enterprise • Comparison with other plants can be useful for setting benchmarks and evaluating approach • Indicators commonly used to evaluate biomethane plants’ income: • m³ of biomethane produced/ton of waste treated • Price of m³ of biomethane sold (linked to natural gas price?) • Production cost: €/Nm ³ • Electric kWh input/thermal kWh produced • Raw biogas input/upgraded biomethane output

20. EightSteps for Success (1) • Find buyer for biomethane: ensure that there is one or more stable, consistent buyer e.g. fleet owner • Obtain feedstock for digestion: determine which feedstock source (s) will be used in the digester. Ensure that quality feedstock is available locally in substantial quantities throughout the year • Transport & storage of biomethane: what needs to be transported (feedstock, biogas) to which location (on-site/off-site) and over what distances • Location of upgrading plant: when first three steps have been identified, the location can be selected

21. EightSteps for Success (2) 5) Technology: - multiple technologies available for the (pre)treatment of feedstock, anaerobic digestion and upgrading - Operation requirements, performance and capital costs are three main criteria • Finances: cost analysis, financial planning and application for funding • Permitting: requirements, timescales, ongoing costs 8) Building: consult, select the designer and contractor

22. Barriers • Limited number of vehicle models • Higher costs of gas vehicles • Lack of refuelling stations • Lack of economic incentives for using biomethane as a vehicle fuel instead of for energy production • Lack of knowledge, information and awareness about biomethane • High investment costs for biogas plants • Lack of biomethane quality standards

23. Drivers • Environmental awareness • Local production and reduced dependancy from importations • Economic incentives for biomethane production • Public procurement of vehicles • Subsidies for purchase and conversion of gas vehicles • Lower or free parking and accessfees • Reduced fuel taxes on biomethane • Lower vehicles circulation taxes • Biomethane quality standards

24. Amendment of RES Directive • On March 2012 the EU Commission adopted the Proposal COM(2012) 595 final for a Directive amending the RES Directive in the view, among others, to limit at 5% the contribution that biofuels produced from certain food and feed crops (with a risk of Indirect Land use Change, emissions) make towards the attainment of the targets in the Directive itself (10%), so providing incentives to biofuels produced, among others, from waste and agricultural residues.

25. CEN/TC 408 “Project Committee - Biomethane for use in transport and injection in the natural gas grid” Mandate M/475 • M/475 Mandate to CEN for standards for biomethane for use in transport and injection in natural gas piplines • Object : Biomethane for use in transport and injection in natural gas piplines • Directive : 2009/28/CE Promotion of the use of energy from renewable sources • Aim : Development of the use of biomethane • Needs : Specifications (parameters and values) for the biomethane • Origin : European Commission – DG Energy (Dr. KyriakosManiatis) • Text of the mandate : http://ec.europa.eu/enterprise/standards_policy/mandates/database/index.cfm?fuseaction=search.detail&id=459

26. Clean Power for Transport package • On January 2013 the EU Commission adopted the Communication COM(21013) 17 final on “Clean Power for Transport: A European alternative fuels strategy” and the Proposal COM(2013) 18/2 for a Directive on the deployment of alternative fuels infrastructure which provide an important accent, among others, on biomethane. • The package aims to facilitate the development of a single market for alternative fuels for transport in Europe. In particular it defines a comprehensive policy framework for the development of alternative fuels, with binding targets for the necessary infrastructure build-up, including common technical specifications (in order to solve the “chicken and egg” dilemma) and appropriate information to transport fuels to consumers (through fuel labelling at refuelling points and on vehicles).

27. Whom to contact… Stefano PROIETTI Coordinatore del Progetto BIOMASTER ISIS – Istituto di Studi per l’Integrazione dei Sistemi Via Flaminia, 21 00196 Rome, ITALY Tel: 0039 06 321 265 5 Email: sproietti@isis-it.com www.biomaster-project.eu

28. Thank you for attention!