how distorting policies can affect energy efficiency and sustainability: the case of biogas...

18
How Distorting Policies Can Affect How Distorting Policies Can Affect Energy Efficiency and Energy Efficiency and Sustainability: the Case of Biogas Sustainability: the Case of Biogas Production in the Po Valley (Italy) Production in the Po Valley (Italy) Giulio Mela and Gabriele Canali Centro ricerche economiche sulle filiere suinicole (Crefis) Università Cattolica del Sacro Cuore Mantova – Italy [email protected] Paper prepared for presentation at the 17th ICABR Conference "Innovation and Policy for the Bioeconomy" Ravello (Italy): June 18-21, 2013

Upload: rebecca-craig

Post on 26-Dec-2015

216 views

Category:

Documents


2 download

TRANSCRIPT

Page 1: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

How Distorting Policies Can Affect Energy Efficiency How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in and Sustainability: the Case of Biogas Production in

the Po Valley (Italy)the Po Valley (Italy)

Giulio Mela and Gabriele CanaliCentro ricerche economiche sulle filiere suinicole (Crefis)

Università Cattolica del Sacro CuoreMantova – Italy

[email protected]

Paper prepared for presentation at the 17th ICABR Conference"Innovation and Policy for the Bioeconomy"

Ravello (Italy): June 18-21, 2013

Page 2: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Aim of the workAim of the work• Estimating the impact of policies stimulating

EE production from renewables energy sources – specifically biogas – in the Po Valley

• Evaluate the consequences of badly designed and implemented energy policies in Italy

• Provide possible solutions and recommendations for future policy changes

Page 3: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

What are we talking about? 1/3What are we talking about? 1/3• In recent years energy production from

renewable sources has been increasingly subsidized in many countries– Was it good or bad? Controversial findings…

• Biogas, in Italy, has rapidly become one of the most subsidized forms of renewable energy

• Biogas is produced from anaerobic digestion of organic matter– Landfill materials, energy crops, residues, slurry…

Page 4: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

What are we talking about? 2/3What are we talking about? 2/3• Biogas can be used in 4 ways:

– Burned directly to produce heat (efficiency 85%)– Used to produce electricity (eff. 35%)– Used to co-generate electricity and heat (eff. 75%)– Upgraded to biomethane

• Most Italian biogas plants produce only electricity -> incentives are high enough

• Biomethane still not very developed but technology is now mature

Page 5: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

What are we talking about? 3/3What are we talking about? 3/3• In Italy biogas is mainly produced in the

agriculture-intensive and densely populated Po Valley

• Why?– (relative) land availability to produce energy crops– Strong livestock sector– Bigger and more organized farms

Page 6: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Where's the Po Valley?Where's the Po Valley?

Page 7: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

The policy framework 1/3The policy framework 1/3• Many countries focused on policies promoting

electric energy production, which is not always is the most efficient option

• Biogas [biofuels] subsidized because:– GHG emissions reduction– Raises farmers' income– Good opportunities for other sectors of the

economy– "green washing"???

Page 8: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

The policy framework 2/3The policy framework 2/3• The EU started promoting renewable EE production with

Directive 2001/77/EC– MS had to take "appropriate steps" to encourage a greater

consumption of EE from renewables– National targets to accomplish Kyoto protocol

• Italy implemented the directive in 2003 (most supportive system in Europe)– Green certificates– Consumption mandates increasing over time (7.55% in 2012).– EE from biogas had the highest multiplicative coefficient for green

certificates computation– Special tariffs for small producers (<1 MW) for plants built after 2007 -

> duration 15 years

Page 9: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

The policy framework 3/3The policy framework 3/3• The EU changed its policies with Directive 2009/28/EC (RED)

which sets consumption targets for renewables• The RED states that biogas production can yield great advantages

in terms of sustainability and rural develop.• Italy implemented the RED in 2011 with Legislative decree

28/2011 and then Ministerial Decree July 6th 2012• New incentives -> into force from January 2013

– All-inclusive tariffs decreasing with plant size– National registry -> ceiling of maximum number of plants to be built– Upper limit for subsidies to be awarded every year (5.8 billion euro)– Subsidies depend on the type of feedstock used and installed power– Subsidies awarded through auctions– Still waiting for measures for biomethane…

Page 10: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Data and methodologyData and methodology• Data on biogas plants and installed power are from Fabbri et al.

(2013) -> No official sources available -> double checking needed• In 2012 in Italy there were 994 biogas plants, 744 in the Po Valley• Installed power was 756 MW, 75% of which in the Po Valley

– Animal slurry 3.2%– Animal slurry + agro-industrial wastes + energy crops 11.8%– Animal slurry + energy crops 38.2%– Animal slurry + agro-industrial wastes 24.4%– Energy crops only 22.4%

• Conversion coefficients were applied to compute the amount of EE and biogas produced in 2012

• Assumptions had to be made on the substrates used…

Page 11: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Results 1/3Results 1/3• In 2012, in the Po Valley, almost 17,800 TJ (or 4,9 million MW) of

EE from biogas were produced, 8,546 in Lombardy only• Biogas needed to produce all the EE generated in 2012 was 2.2

billion m3 in the Po Valley regions• Our estimates indicate that 7.3 million tons of corn silage were

used for biogas production in 2012 in Italy, 5.4 in the Po Valley only

• Corn silage usage was highest in Lombardy (2.6 million tons)• Biogas plant typologies that used up most corn silage were those

fed with animal slurry and energy crops and those using energy crops only (2.5 million tons each)

• Average corn silage yield in the Po Valley -> 60 t/ha

Page 12: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Results 2/3Results 2/3• In 2012 more than 90,000 ha were cropped with energy crops

(corn silage) for biogas production in the Po Valley– 43,000 ha in Lombardy– 17,000 ha each in Emilia Romagna and Veneto– 12,000 ha in Piedmont

• 11.4% of total corn area, in the Po Valley – was used for biogas production– 20.2% in Lombardy– 15.5% in Emilia Romagna

• Exponential growth during the last few years:– In 2011 just 5.8% of corn area in the Po Valley was used for biogas– 2.9% in 2010– 0.5% in 2007

Page 13: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Corn area for biogas production and its share on total Corn area for biogas production and its share on total corn area in the Po Valley (Italy).corn area in the Po Valley (Italy).

Own elaborations.

Page 14: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Results 3/3Results 3/3• What if biomethane were produced instead than

electric energy?• From biogas produced in Italy, in 2012, it was possible

to obtain EE for 23,854 TJ, with an energy efficiency of 35%

• If that biogas were upgraded into biomethane it would have been possible to inject into the natural gas grid about 59,000 TJ of methane, net of the energy for upgrading and compressing the gas and ceteris paribus.

• This would yield an efficiency gain of about 150%

Page 15: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Conclusions and policy recommendations 1/2Conclusions and policy recommendations 1/2• Apparently "good policies" can lead to unwanted consequences• It is hard to imagine that the strong increase in biogas

production and area cropped with energy crops did not have any effect on agricultural markets…

• While corn area for biogas has been increasing, total corn area has been declining since 2005 -> CAP reform

• Parallelism with what has been happening in the US with ethanol– Increased demand– Increased competition for land (high degree of urbanization)– Increasing agricultural commodity prices– Negative repercussions on livestock farming (concentrated in Northern

Italy)– Negative repercussions also for quality products of animal origin

Page 16: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Evolution of total corn area in Italy 1966-2012Evolution of total corn area in Italy 1966-2012

Own elaborations on Istat data.

Page 17: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Conclusions and policy recommendations 2/2Conclusions and policy recommendations 2/2• The role of policy in the recent price spikes is key -> many factors

influenced agricultural prices but the recent surge would not have happened without biofuel policies (de Gorter et al., 2013)

• The real effectiveness of biofuels in reducing GHG emissions is at least controversial… is it worth to subsidize them?

• Lack of foresight -> "sustainability trap"• New Italian policies move to the right direction but it is not

enough… main problems are still there:– Promotion of inefficient forms energy– Bad planning, lack of monitoring– Lack of data

• Biomethane seems best solution but interest at stake are many…

Page 18: How Distorting Policies Can Affect Energy Efficiency and Sustainability: the Case of Biogas Production in the Po Valley (Italy) Giulio Mela and Gabriele

Thank you for your attention!Thank you for your attention!Questions???Questions???

[email protected]@[email protected] [email protected]