Outlook on Market Segments for Biomass Uptake by 2020 in Germany

Transcription

1 Biomass role in achieving the Climate Change & Renewables EU policy targets. Demand and Supply dynamics under the perspective of stakeholders. IEE SI Outlook on Market Segments for Biomass Uptake by 2020 in Germany Arthuro Castillo; Calliope Panoutsou (Imperial College) Uwe Fritsche (Oeko) December 2011 Acknowledgments: The Biomass Futures team would like to thank Birger Kerkow (FNR); Matthias Dees (University of Freiburg); Daniela Thraen & Frank Scholwin (DBFZ) & Bettina Kretschmer (IEEP) for their support throughout the study and for sharing their valuable knowledge for the country. 1

2 Contents Introduction Energy markets, renewable energy and bioenergy Key national policies Demand Current state of bioenergy consumption in the German energy market Projected targets Supply Bioenergy supply Comparison with biomass futures supply curves for 2010 and Market segment analysis Heat and electricity/ CHP Key influencing factors and potential market volume of the heat, electricity- CHP sector Quantitative assessment of the heat, electricity and CHP sectors in Germany for Transport Key influencing factors and potential market volume of the transport sector Quantitative assessment of indigenously produced biofuels for transport in Germany for Analysis and recommendations Annexes Annex I Heat; Electricity/ CHP Transport Annex II Cases modelled in the heat, electricity/ CHP sectors Annex III Key figures of selected biofuels chains

3 Introduction The first section of this report provides background to national renewable energy use as well as the targets and the most significant support mechanisms to enable further deployment of renewable energy generation. The emphasis is on biomass energy in the electricity, heating/cooling and transport sectors. An overview of the expectations by 2020 for demand of renewable energy is presented as expressed by the German government, in particular in the recently submitted National Renewable Energy Action Plan (NREAP) Energy markets, renewable energy and bioenergy Between 1990 and 2010, the share of renewable energy in energy supply in Germany increased more than fivefold - from 2 % to 11 % of the final energy consumption 1 (BMU 2012). This is a unique success story. While originally the main renewable energy source in the electricity sector was hydropower and more traditional use of wood for heating purposes prevailed, nowadays advanced technologies are to be found in all application areas of renewable energies. A mix of wind, biomass, geothermal and photovoltaic systems is deployed in the electricity sector. In the heating sector, modern pellet heating, efficient biomass heating plants, biomass heat and power stations, geothermal heating plants and solar thermal systems are increasingly replacing fossil and fuels. Biofuels provide an important and significant contribution to reducing greenhouse gas emissions in transport, accounting for 5.8 % of the fuel consumption in the sector. Electricity generation from all renewable energy sources has increased more than fivefold, from 17 terawatt hours (TWh) in 1990 to over 104 TWh in 2010, representing more than 17% of all electricity generation. Whereas in % of renewable electricity was produced by hydropower, in 2010 it was only 20 % while over 36 % derived from wind power and 32 % from biomass. In 2011, the share of all renewables in electricity generation increased even beyond 20%. In the heating sector, the energy supply from renewable energy sources from 1990 to 2010 more than tripled from just over 32 TWh to about 145 TWh. The use of solid biomass (mainly wood) was predominant throughout this period, and in 2010 still amounted for approximately 68 %. If biogas, bioliquids and the biogenic share of waste are also included, use of biomass for heating purposes accounted for 92 % of all renewable resources. The years in particular recorded a boom in the use of biofuels in the transport sector, as their share in total fuel consumption rose from 0.4 % in 2000 to 7.2 % in From 2008 onwards, sales declined to 5.5 % in 2009, and rose again slightly to 5.8 % in 2010, representing an amount of 35.5 TWh. At the same time, the use of 1 All data in this section are from BMU (2011): Development of renewable energy sources in Germany in 2010; Berlin 3

4 biodiesel and especially vegetable oil decreased, while consumption of bioethanol continued to grow Key national policies In the German NREAP, the Federal Government estimates the share of renewable energies in gross final energy consumption to be 19.6 % in This is higher than the EU Directive's binding national target of 18 %. The share of renewable energy in major sectors is expected to be: 38.6 % in the electricity sector; 15.5% in the heating/cooling sector; 13.2% in the transport sector. The NREAP states that the measures and instruments that are necessary to achieve the national target of 18 % renewable energies by 2020 have basically already been established. In the electricity sector, the Renewable Energy Act (Erneuerbare-Energien- Gesetz EEG) is the crucial basis for further development in the production of renewable energies. This also applies to the production of combined power and heating/cooling based on renewable energies. The EEG is here supplemented by the Combined Heat and Power Act (Kraft-Wärme-Kopplung-Gesetz KWKG), by the Renewable Energies Heat Act, and indirectly by the European Emission Trading Scheme. The EEG was developed further with its amendment in 2011 (coming into force in 2012) the field of bioenergy, photovoltaics and wind: Feed-in tariffs and the targets for the annual market volume for PV were adjusted. This amendment focused in particular on the better system integration of renewable energies, stimulating demand-oriented power feed-in, load management and direct marketing of electricity from renewable energy sources. In this respect, grid connection requirements, grid reconstruction and development, as well as the promotion of storage technologies, will be of fundamental importance. In the heating/cooling sector, the main package of measures includes a Market Incentive Program (Marktanreizprogramm MAP), the Renewable Energies Heat Act (Erneuerbare-Energien-Wärmegesetz EEWärmeG), support programs of the KfW and the Energy Saving Ordinance (Energieeinsparverordnung EnEV). These instruments have allowed for a significant expansion in the use of renewable energies in recent years. Before 31 December 2011, the Federal Government will submit a progress report on the EEWärmeG, which will focus on the possibilities of an increased use of renewable energies within buildings. The Federal Government is also examining the conditions within tenancy legislation for energy-efficient refurbishment of rented housing stock and thus for fostering the use of renewable energy. In the electricity sector, the promotion of electric mobility is of crucial importance. The 4

5 Federal Government wants to achieve its ambitious targets in this area through the implementation of the measures agreed upon in the National Development Plan for Electrical Mobility. In the transport sector, compliance with the sustainability criteria for biofuels contained in Articles 17 to 20 of Directive 2009/28/EC plays a major role. In Germany, these requirements have been implemented through the Biofuels Sustainability Ordinance (Biokraftstoff-Nachhaltigkeitsverordnung Biokraft-NachV) as well as in the field of power generation by the Biomass Power Sustainability Ordinance (Biomassestrom-Nachhaltigkeitsverordnung Bioster-NachV). 5

6 2. Demand This section defines the market segments in the heat, electricity and transport sectors in terms of user type and user needs. It identifies for these segments recognised by government and industry any specific support mechanisms and active monitoring via collection of statistical data for these segments. Using available data and forecasts, such as those published in the NREAP, this section describes their current status and expected development by The table below lists segments, their user types and needs, and relevant support mechanisms. These segments are recognised by the German government and industry. This is evidenced by the references made to these segments in government policies and plans, including the NREAP, and the fact that these segments are targeted by support mechanisms. It shows how some instruments apply to several segments and also aim at fostering supply and/or demand. Segment User type / needs Support mechanism Heat for households and individual buildings District heat including CHP Biogas for heat Dedicated biomass plants for electricity Households installing modern, wood chip and wood pellet boilers. Public, commercial and residential buildings, supplied from district heat. Operators of anaerobic digestion facilities require sewage sludge or biodegradable fraction of waste from municipal and other sources, notably food waste. Biomethane injected into national gas grid; this gas will be primarily used for heat though it could be used by power generators. Larger stations that demand secure supplies of indigenous wood chip. Market Incentive Program (Marktanreizprogramm MAP) provides subsidies to qualifying, high performance installations. Different support levels according to installation size and whether automatic-fed. Combined Heat and Power Act (KWKG): construction, modernization and operation of CHP plants and heating networks. Also, Renewable Energies Heat Act (EEWärmeG): renewable energy in heating of new buildings. And MAP. These are all sources of potential subsidies typically to 20%. MAP, EEG, EEWärmeG and Gas Grid Access Ordinance. These provide preferential rights for biomethane, priority grid access for biomethane and gas grid connection requirement. The Renewable Energy Law (EEG) provides sector specific tariffs for electricity from 6

7 Cofiring Liquid biofuels Cofiring biomass in larger coal power stations Investors and oil refineries Biodiesel pant owners and potential investors for bioethanol plants Suppliers of imported biodiesel or bioethanol renewable energies fed into the public supply grid. Includes tariffs for electricity from biomass, up to 5MWth. (A CHP bonus applies for electricity produced from biomass CHP) Biofuels Quota Act (BioKraftQuG): minimum share of biofuels of total fuel put into circulation, and tax incentive for certain biofuels. Table 1. Summary of policies that foster bioenergy 2.1 Current state of bioenergy consumption in the German energy market In 2010, solid biomass, biogas, bioliquids and the biogenic share of waste accounted for 92 % of all renewable resources used for heating purposes, or 125 TWh. In the same year, biomass accounted for 32 % of all renewable energy used for electricity generation, or 33 TWh. Also in 2010, biofuels for transport accounted for around 36 TWh. In 2010, biomass supply for the three major sectors totalled TWh. Due to the various support mechanisms outlined above, recent years have seen a significant increase in modern heating technologies both individual household / building systems and district heat schemes. The combined heat and power (CHP) market segment has grown. Dedicated biomass-only electricity generation is uncommon. Cofiring biomass in large power stations is expected to become significant. 2.2 Projected targets The following figures summarise the anticipated share of biomass types in the provision of the bioenergy required to meet the contribution to the overall renewable targets by heat, electricity and transport market sectors. Figure 1 presents current and anticipated contribution (in 2020) of biomass to the heat sector in Germany, according to the NREAP. Heat from biogas is expected to greatest relative growth from 2010 to Nonetheless, solid biomass remains the dominant source for renewable heat. There is a contribution to the heat sector from bioliquids but this is minor. 7

8 Solid biomass Bioliquids Biogas Figure 1. Biomass-derived heating and cooling (ktoe) Figure 2 shows current and anticipated contribution (in 2020) of biomass to the electricity sector in Germany, according to the NREAP. The two main biofuel types, namely solid biomass and biogas, are shown. These two sources of fuel are of similar importance. Biogas installed capacity is somewhat lower than solid biomass but is expected to show faster growth over the coming decade Solid biomass Biogas 0 MW GWh MW GWh Figure 2. Biomass-derived electricity Figure 3 shows current and anticipated contribution (in 2020) of biomass to the transport sector in Germany, according to the NREAP. The figure shows bioethanol and biodiesel and the relative importance of imports for both these fuel types. The use of 8

9 biodiesel is currently much more significant, and this predominance is expected to continue to Imports are important for both biodiesel and bioethanol. In the case of biodiesel, around half is accounted for by imports. Imports will be increasingly important to Bioethanol including imports Bioethenol domestic supply Biodiesel including Biodiesel domestic imports supply Figure 3. Contribution to transport energy by biofuel type (ktoe) 9

10 3. Supply This section addresses the supply of indigenous and imported biomass feedstock that supports the market segments described in the above section. The potential supply by 2020 is described using data from the NREAP and comparing them to the supply curves developed within the Biomass Futures project. 3.1 Bioenergy supply Figure 4 shows the current and estimated future domestic supply of biomass from different sources. The total supply by year is as follows: 2006, 18,100 ktoe 2015, 22,200 ktoe 2020, 23,900 ktoe Figure 4. Domestic supply by biomass type (ktoe) The NREAP expects primary energy demand for biomass to be about ktoe (1 400 PJ) by As shown above, the contribution of domestic biomass is expected not to exceed ktoe (1 000 PJ) of primary energy in The corresponding difference 10

11 of approximately ktoe (400 PJ) between biomass demand and domestic supply could be covered through: yield increases in energy crops (e.g. through breeding progress) increased energy use of forest wood and landscape management residues cultivation of fast growing tree species on agricultural land future use of residues from areas covered by nature protection law imports With regards to imports, the German NREAP suggests that fuels with highest transportability are most likely to be imported. This means high energy density combined with logistics concept. These conditions currently exist for: liquid bioenergy sources (biodiesel, bioethanol, vegetable oil) solid bioenergy sources and raw materials with high bulk density (pellets, grains and seeds, etc.) biomethane (biogas processed to natural gas quality) over the natural gas grid. 3.2 Comparison with biomass futures supply curves for 2010 and The Biomass Futures project within the framework of the Intelligent Energy Europe Programme has combined modelling efforts and data across leading bioenergy research institutions (see Amongst other objectives it assessed the potential supply of biomass for bioenergy across Europe. By collating cost and availability data, cost/supply curves were generated for each member state. Figure 5 German biomass cost ( /GJ) and supply (Mtoe) for

12 The cost/supply curves for Germany in 2010 is shown above. The cost/supply curve for 2010 suggests availability of domestic biomass totals 55 MtOE with costs up to around Euro 10 per GJ. As noted above, the NREAP reports that 18 MtOE of biomass was supplied from domestic sources in The Biomass Futures cost/supply curve for 2020 suggests availability of domestic biomass will increase only slightly to around 60 MtOE (for RED scenario) and 55 MtOE (for RED+ scenario) with costs up to around 14 /GJ. The NREAP projects that domestic supply will reach almost 24 MtOE. The Biomass Futures 2020 cost/supply curves indicate that the quantity 26 MtOE should be available at costs lower than 4 /GJ in both the RED & RED+ scenarios. The latter figures do not include the primary forest residues category which would increase the supply to 32 MtOE and 36 MtOE at a cost of 5.5 /GJ - this could still be acceptable for the industry. Just for comparison reasons: this would approximately double the biomass quantities supplied in As presented above, the Biomass Futures supply curves present much higher figures to the NREAP in terms of the technical potentials but are projecting that the amounts foreseen by the German report can be available at competitive price levels that both industry and potential investors can afford to pay. Figure 6 German biomass fuels cost ( /GJ) and supply (MtOE) for 2020 for the two scenarios RED & RED+ The table below shows major sources of biomass feedstocks and their cost points, in 2010 and

13 Biomass feedstock Cost point /GJ Contribution ktoe 2010 RED 2020 RED Cost point /GJ Contribution ktoe Cost point /GJ Contribution ktoe Black liquor Wet manure Dry manure MSW (landfill) Post consumer wood Perennial Not significant woody crops MSW (compost) Saw dust Straw Perennial Not significant grassy crops Landscape care wood Sawmill byproducts Other industrial wood Grassland Not significant cuttings Primary forest residue Forage maize Not significant Not significant Paper and card Used oils and Not significant fats Additional roundwood Oil seed rape Cereals Not significant Current roundwood Table 2 Key biomass feedstocks under the German cost / supply curves 13

14 4. Market segment analysis This section provides analysis of key influencing factors on market segments. Key factors within technical, economic and organisational categories were extensively described in Biomass Futures Report D2.2 and were used to analyse the EU27 bioenergy market segments and described in Biomass Futures Report D2.3. This section uses the same influencing factors and the same methodology at the national level. Finally this section presents the results of the quantitative assessment under different scenarios. 4.1 Heat and electricity/ CHP Key influencing factors and potential market volume of the heat, electricity- CHP sector In order to visualise the level of influence of relevant factors on the studied market segments, columns have been set up for the segments and rows for the factors in Annex I. The scores in the intersecting cells denote whether the factor is a driver, a barrier or neutral for the corresponding segment as follows: 3 very strong driver; 2 strong driver; 1 weak driver; 0 neutral; -1 weak barrier; -2 strong barrier; -3 very strong barrier; NA not applicable. Percentage scores for the technical, economic and organisational categories of factors are shown below. Scores are based on the maximum attainable score, making an allowance for factors that are not applicable to any particular segment. Finally, the results are described graphically showing the overall percentage score. Table 6 presents the resulting percentage scores that show how each factor category influences each segment relative to the maximum possible point score of influence per category. Heat for households and individual buildings Dedicated biomass plants for electricity District heat including CHP Biogas for heat Cofiring Technical Score % 48% 76% 57% 67% 81% Economic Score % 25% 38% 50% 21% 71% Organisational Score % 39% 52% 48% 30% 70% Total Score % 36% 52% 49% 33% 70% Table 3 Summary percentage scores for influencing factors by segment 14

15 80% 70% 60% 50% 40% 30% 20% 10% 0% Heat for households and individual buildings District heat including CHP Biogas for heat Dedicated biomass plants for electricity Cofiring Figure 7 Overall percentage scores by segment Figure 7 depicts total point scores for each segment as a percentage of the maximum possible point score across all categories. Biomass use for cofiring and district heat including CHP as well as biogas appear the most attractive segments for the 2020 bioenergy market penetration. Co-firing is expected to increase massively after 2013 (due to ETS auctioning) while direct heat for households and buildings is expected to loose due to building efficiency retrofits, and cost increase of woody biomass. An interesting observation is that while technically all the segments have relatively high scores, biogas heat and cofiring seem to be economically the most attractive options and dedicated electricity the least one. 15

16 4.1.2 Quantitative assessment of the heat, electricity and CHP sectors in Germany for 2020 Based on the selection of sub segments that are promising for biomass applications in the 2020 timeframe, a quantitative assessment has been undertaken by evaluating the most promising applications in each sub- segment in the following two scenarios: a reference scenario based on the initial market segment selection from the Biomass Futures qualitative assessment and the figures stated in the German NREAP, and a RED based scenario based on results from the Biomass Futures qualitative assessment and the cost supply curves estimated within the project for Germany in the timeframe of 2020 (section 3.2). a RED plus scenario based on results from the Biomass Futures qualitative assessment and the cost supply curves estimated within the project for Germany in the timeframe of 2020, extending the sustainability criteria to all feedstocks. Reference RED RED+ Supply NREAP Biomass Futures supply with RED criteria on liquid biofuels related feedstocks only Biomass Futures supply with RED criteria on all feedstocks Demand Biomass Futures/ NREAP Biomass Futures Biomass Futures Technical potential Based on feedstock and plant scales Economic Potential Strictly limited for applications where the cost of producing 1KWh heat/ electricity is to the respective selling price in the country (accounting for subsidies and FITs) Table 4 Scenario assumptions for Germany by 2020 Feedstock type Heat for households and individual buildings Heat (TWh) Biogas heat District heat including CHP Electricity (TWh) Dedicated biomass plants for Cofiring electricity Post consumer wood Landscape care wood (2010) Perennial woody Sawmill by-products (excl saw dust) Other industrial wood residues Primary Forestry Residues Common sludges Animal waste MSW (landfil) Totals per segment Table 5 Reference scenario for Germany by 2020 (based on national figures from NREAP) 16

17 This scenario uses the biomass potentials estimations that are projected by the German NREAP and performs economic modelling for a set of promising applications per segment. The economic modelling allows an analysis of which market segments are potentially the most profitable under the current policy and price level conditions, and based on the economic parameters and assumptions in Annex II. Heat (TWh) Electricity (TWh) Feedstock type Heat for households and individual buildings Biogas heat District heat including CHP Cofiring Dedicated biomass plants for electricity Post consumer wood Landscape care wood (2010) Perennial woody Sawmill by-products (excl saw dust) Other industrial wood residues Primary Forestry Residues Common sludges Animal waste MSW (landfil) Totals per segment Total heat & electricity Table 6 RED scenario (based on sustainable biomass supply curves from Biomass Futures project) This scenario uses the sustainable supply curves based on RED criteria for biofuels only estimated in this project and performs economic modelling for a set of promising applications per segment. Under this scenario a total of 147 TWh of energy demand can be met by biomass in the different sectors by 2020, with heat accounting for 86 TWh and electricity for 61 TWh. The following scenario (RED+) uses the sustainable supply curves based on RED criteria for all bioenergy carriers plus a mitigation potential of 70% for the bioenergy value chains estimated in this project and performs economic modelling for a set of promising applications per segment. 17

18 Under this scenario a total of 125 TWh of energy demand can be met by biomass in the different sectors by 2020, with heat accounting for 76 TWh and electricity for 49 TWh. Heat (TWh) Electricity (TWh) Feedstock type Heat for households and individual buildings Biogas heat District heat including CHP Cofiring Dedicated biomass plants for electricity Post consumer wood Landscape care wood (2010) Perennial woody Sawmill by-products (excl saw dust) Other industrial wood residues Primary Forestry Residues Common sludges Animal waste MSW (landfil) Totals per segment Total heat & electricity Table 7 RED+ scenario for Germany by 2020 (based on sustainable biomass supply curves from Biomass Futures project) All data presented in the tables are aligned with the modelling and scenario work within the Biomass Futures project. 18

19 4.2 Transport The next section of analysis corresponds to the qualitative evaluation of the potentially most promising segments within the transport sector, as it has been expressed by the opinion of the various stakeholders and a quantitative assessment of biofuels produced with indigenous resources in terms of land use requirements, CO2 savings and investment required Key influencing factors and potential market volume of the transport sector Taking the same methodological steps as explained in section the most promising segments have been identified and are presented in table 10. The assessment of their potential according to categories of influencing factors is shown as the partial score for technical, economic and organisational factors. Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine Technical 76% 67% 62% 57% 14% 10% Economic 75% 58% 33% -17% 0% -6% Organisational 11% 44% 67% 72% 39% 6% Table 8 Summary scores for influencing factors by transport segment Considering the overall market penetration potential by segment across all categories of factors produces the profiles depicted in figure 8 as a proportion of the maximum attainable score. 60% 50% 40% 30% 20% 10% 0% Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine Figure 8 Overall percentage scores by segment 19

20 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine Technical Economic Organisational Figure 9 Technical, economic & organisational percentage scores by segment 20

21 4.2.2 Quantitative assessment of indigenously produced biofuels for transport in Germany for 2020 The German NREAP projects that the biofuel market will comprise of 4.4 Mtoe biodiesel from which almost 44% (1.96 Mtoe) will be indigenously produced & 0.9 Mtoe bioethanol (from which indigenous supply is estimated at 0.6 Mtoe, a share of 68%). Forecasted imports in the NREAP account for almost 62% of the total supply. As presented in the qualitative assessment road is expected to be the major market segment for biofuels in the 2020 timeframe, with public/ private vehicles having the major share. Aviation is also considered a promising option, despite the high costs. In order to proceed to the quantitative assessment, the three scenarios have been framed by the following assumptions: Reference RED RED+ Supply NREAP Biomass Futures supply with RED criteria on liquid biofuels related feedstocks only Demand Biomass Futures/ Biomass Futures NREAP Technical potential Economic Potential Biomass Futures supply with RED criteria on all feedstocks Biomass Futures Based on feedstock and plant scales (e.g. straw & perennial grassy crops are being considered for 2G bioethanol production for 2020) Strictly limited for applications where the cost of producing1lt of biofuel is to the respective prices for oil in the country. Table 9 Scenario assumptions for Germany by 2020 Three different cases for the interpretation of the above mentioned scenarios have been considered, taking into consideration the present biofuel market conditions and the projected for Germany; i) the combination of biodiesel and bioethanol in the total fuel mix, as projected by NREAP ii) the use of only indigenous biodiesel, and iii) the use of only indigenous bioethanol (1 st & 2 nd generation). As indicated in the qualitative assessment the major share of indigenously produced biofuels consumption is expected from road transport private fleets, accounting for 2,5 Mtoe in the NREAP/ reference scenario; for 1,8 Mtoe in the RED and 1,3 Mtoe in the RED+. The major share in the reference scenario is expected from rape and used fried oils biodiesel while indigenous bioethanol will be cereal based first generation. In the other two scenarios, bioethanol has the major share, based on the assumption that one third of the indigenous potential for straw and perennial grassy crops could be exploited in Germany for the production of second generation ethanol. From the above figures it can be estimated that the NREAP reference scenario for the indigenous biofuel production would cost approximately 2.68 billion and result in CO 2 savings in the range of 4 million t/year. Assuming that the total amount would be first generation biofuels (from oilseeds- sunflower, rapeseed, cereals) if their production was indigenous this would require almost 3.9 million ha of cultivated land. 21

22 100% bioethanol 100 % biodiesel Biofuels mix The RED scenario, based on the Biomass Futures estimations for sustainable indigenous supply, can only reach up to 1,8 Mtoe for the 2020 timeframe. The fuel mix would be again first generation biodiesel from oilseeds & used oils as well as bioethanol from cereals and 2G bioethanol from lignocellulosic feedstock. The respective figures for land requirements are 3.26 million ha while the cost rises up to 2.2 billion and the CO 2 savings are in the range of 3 million t/year. The most interesting results for indigenous biofuel production derive from the RED+ scenario. Based on the cost supply analysis, indigenous biodiesel will only be produced by used oils while indigenous bioethanol production could occur only from 2G plants as the respective first generation supply chains cannot meet the high mitigation targets (of above 70%). The respective figures for cost rises up to 1.6 billion and the CO 2 savings are in the range of 2.2 million t/year. Table 10. Impacts from the use of indigenous biofuels in transport in Germany under the various scenarios Scenario for year 2020 Biofuel (Mtoe) Investment required (billion ) Land required (millio ha) CO 2 (tco 2/m 2 ) Reference RED RED Reference RED RED Reference RED RED Based on the results of the RED & RED+ scenarios, indigenous biofuels can meet a much lower demand than the one projected in the first NREAP report for Germany, even when 2G bioethanol is taken into account (in the analysis it is assumed that one third of the indigenous biomass supply for straw & perennial grassy crops will be used for ethanol production in Germany). 22

23 5. Analysis and recommendations This section provides an analysis of the market segments, taking into consideration current status, predicted growth, available feedstock, the role of influencing factors and hurdles to development. The aim is to assess whether or not government expectations, as stated in the NREAP, are realistic. This section then sets out recommendations for policy makers and industry. Supply The Biomass Futures supply curves are much higher to the NREAP in terms of the technical potentials but are projecting that the amounts foreseen by the German REAP 2010 report can be available at competitive price levels that both industry and potential investors can afford to pay. The Biomass Futures 2020 cost/supply curves indicate that the quantity 26 MtOE should be available at costs lower than 4 /GJ in both the RED & RED+ scenarios. The latter figures do not include the primary forest residues category which would increases the supply to 32 MtOE & 36 MtOE at a cost of 5.5 /GJ - this could still be acceptable for the industry. Just for comparison reasons: this would approximately double the biomass quantities supplied in Heat, Electricity & CHP Biogas installed capacity is somewhat lower than solid biomass but is expected to show faster growth over the coming decade. Bioelectricity in Germany accounted for 33.3 TWh in The Biomass Futures analysis estimates that an additional of TWh can be generated by 2020 with cofiring presenting a substantial increase. Renewable heat accounted for 145 TWh in 2010, with biomass having the major share (92%). The analysis presented in this report forecasts that an additional of TWh can be generated by 2020 with district heating (incl CHP) and biogas heat being the market segments with the higher shares. Co-firing is expected to increase significantly after 2013 (due to ETS auctioning) while direct heat for households and buildings is expected to loose due to building efficiency retrofits, and cost increase of woody biomass. Biofuels The German REAP projects that the biofuel market will comprise of 4,443 ktoe biodiesel from which almost 44% (1,957 ktoe) will be indigenously produced & 857 ktoe bioethanol (from which indigenous supply is estimated at 579 ktoe, a share of 68%).The total indigenous sourced biofuels account for 2,536 ktoe while the forecasted imports in the NREAP account for almost 62% of the total. Based on the results of the RED & RED+ scenarios, indigenous supply biofuels can meet a much lower demand than the one projected in the first NREAP report for Germany, even when 2G bioethanol is taken into account (in the analysis it is assumed that one third of the indigenous biomass supply for straw & perennial grassy crops will be used for ethanol production in Germany). 23

24 Annexes 24

25 Annex I Heat; Electricity/ CHP Technical Heat for households and individual buildings District heat including CHP Biogas for heat Dedicated biomass plants for electricity Cofiring 1 Proven, reliable technology Technology / energy demand 2 match Demand proximity Fuel supply logistics Fuel quality Space requirement Conversion efficiency SUBTOTAL Economic 8 Capital cost Operation and maintenance cost Fuel cost versus fossil fuel Heat sales revenue na 1 2 na na 12 Electricity sales revenue na na na Capital grants Emissions trading incentives na na Access to capital / cost of capital Eligibility for favourable loans na na na na na 17 Other adminstrative costs SUBTOTAL Organisational 19 Potential for carbon displacement Employment creation Social acceptability Educational policy instruments Amenity issues Organisational capacity Fuel infrastructure availability Security of fuel supply Fuel price stability Regulatory frameworks Admistrative issues SUBTOTAL GRAND TOTAL

26 Transport Public/ private fleet Road cars private Road Motorcycle private Aviation Rail Marine Technical Reliable technology Biofuel content in mass market GHG savings from full chain Extensive refuelling infrastructure requirements Safety and standardization Ensure compatibility of new engines in higher blends Labelling SUBTOTAL Economic Financing new technology Capital costs Variable subsidies and grants na na na Oil and gas price increases Operating and maintenance costs na na na Access to loans-cost of capital SUBTOTAL Organisational Variable reliability of incentives Lack of joined-up Government policy across different ministries Security of feedstock supply Good organizational capability Administrative issues and planning Challenge of balancing short-term interests and environmental agenda SUBTOTAL GRAND TOTAL

27 Annex II Cases modelled in the heat, electricity/ CHP sectors CASES MODELLED Germany HEAT Rural households stoves/ boilers Scale (in kw) 10; 30 Conversion efficiency (in %) 80 Biomass Fuel woody biomass (saw mill by products/ incl residues); agro residues (fruit tree prunings) Fossil Fuel Alternative Heating oil; Capex /kW Opex (excluding feedstock costs) /kW Rural services boilers Scale (in kw) 50; 200 Conversion efficiency (in %) 80 Biomass Fuel woody biomass (saw mill by products/ incl residues); agro residues (fruit tree prunings) Fossil Fuel Alternative Heating oil; Capex /kW Opex (excluding feedstock costs) /kW ELECTRICITY/ CHP Solid biomass > 1MW 5MW Scale (in MW) 1; 5 Conversion efficiency to electricity (in %) 30 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite; Oil; Capex 2,300-2, /kW Opex (excluding feedstock costs) /kW Biogas > 1MW 5MW Scale (in MW) 1; 5 Conversion efficiency to electricity (in %) 30 Biomass Fuel Sludges; MSW (landfill) Fossil Fuel Alternative Lignite; Oil; Capex /kW Opex (excluding feedstock costs) /kW Solid biomass > 5MW Scale (in kw) 10; 30;50 Conversion efficiency to electricity (in %) 35 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite; Oil; Capex 2,100-2, /kW Opex (excluding feedstock costs) /kW Biogas > 5MW Scale (in kw) 10; 30; 50 Conversion efficiency to electricity (in %) 35 Biomass Fuel Sludges; MSW (landfill) Fossil Fuel Alternative Lignite; Oil; Capex /kW Opex (excluding feedstock costs) /kW Utilities power generation/ cofiring Scale (in kw) 10; 30; 50 Conversion efficiency (in %) 35 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite Capex /kW Opex (excluding feedstock costs) /kW 27

28 1 st generation Annex III Key figures of selected biofuels chains Biofuel Biodiesel Bioethanol Feedstock LHV 2 (MJ/kg) Density (kg/l) Biofuel Costs at filling station ( 2002/ GJ) 3 CO 2 Savings with respect to fossil fuels emissions t CO 2eq/m 3 % Average Biofuel Yield (t/ha) Land requirements for the production of 1 tonne biofuel (ha) Rapeseed % Sunflower % Sugar beets % Wheat % Maize % nd generation Lignocellulosic Ethanol SRC % Lower Heating Value Energy Content 3 Source: Varela et al., Source: EU, Source: Panoutsou, et al., Source: BFIN, Reduction of 7% because although process costs will be reduced about 20%, feedstocks are expected to increase by 15% 8 Reduction of 25% is due to process & feedstock costs reductions of 5% & 17% respectively BUT mainly due to incresed efficiencies by 25% 9 Reduction of 40% is due to process & feedstock costs reductions of 24% & 15% respectively BUT mainly due to incresed efficiencies by 40% 10 For 10t/ha of SRC in 2005 and 12 t/ha in