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How can forest-derived methane complement biogas from anaerobic digestion in the Swedish transport sector?
KTH, School of Chemical Science and Engineering (CHE), Chemical Engineering and Technology, Energy Processes.ORCID iD: 0000-0002-4321-6894
KTH, School of Chemical Science and Engineering (CHE), Chemical Engineering and Technology, Energy Processes.ORCID iD: 0000-0003-3315-4201
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Sustainability and Industrial Dynamics.
2016 (English)Report (Refereed)
Abstract [en]

Forest-derived methane may contribute significantly to a vehicle fleet independent of fossil fuels by 2030. At present, there is sufficient technical knowledge about energy conversion methods and several Swedish actors have investigated and prepared investments in production facilities, but the technology is not commercially mature yet and it needs support during a development period. Investments in the technology have become less favorable because of the drop in the oil price in 2014. In addition, the predictability of the policy instruments supporting production and use of renewable energy are perceived as low by investors. This report emphasize that these factors combined are major reasons why potential investments are postponed.

We have conducted a literature study and an interview study with three industry actors to answer the question “How can forest derived methane complement biogas from anaerobic digestion in the Swedish transport sector?” Interviews were mostly conducted in situ and in co-operation with the f3 project “Examining systemic constraints and drivers for production of forest-derived transport biofuels” (f3 2014-002370). The literature study included the recent development of renewable transport fuels in Sweden, existing and proposed policy instruments, and possible technical pathways from forest biomass to transport fuels.

Sweden has accomplished a high share of renewables in the transport sector – 12 % based on energy content or 17 % when accounting in accordance with the EU Renewable Energy Sources Directive (RES). Thus, Sweden has the highest share of renewables in the transport sector among the member states and has with a good margin accomplished the EU-RES target of 10 % renewables by 2020. The use of electricity in plug-in electric vehicles is not included in these figures and the number of electric vehicles is increasing rapidly.

The most common biofuels in transport are biodiesel, ethanol, and biogas. Biodiesel increases rapidly, mainly through low blend-in, and is now the most common biofuel in the Swedish transport sector. The majority is HVO (Hydrotreated Vegetable Oils), but the share of FAME (Fatty Acid Methyl Esters) is still considerable. The use of ethanol peaked during 2008 and has been decreasing since then. Ethanol is distributed through both low and high blend-in (E5 and E85).

The use of upgraded biogas in the transport sector has increased continuously since its introduction 1996. Upgraded biogas is complemented by natural gas to meet the vehicle gas demand. A voluntary agreement among the distributors maintains a minimum biogas share that corresponds to 50 %. The biogas share is much higher today (74 % by volume, average Jan.-Aug. 2015) and some large end-users use pure upgraded biogas. Upgraded biogas is mainly distributed in compressed form through gas cylinders (79 %), but also through injection to the natural gas grid (21 %). Very little biogas is distributed in liquid form (LBG).

Studies of the practical production potential shows that the current vehicle gas demand could be met entirely with upgraded biogas. However, an increased demand will eventually require other production pathways based on other feedstocks. Gasification of forest biomass is one such pathway. One alternative is that an increased demand is met with natural gas, resulting in fossil lock-in effects. Another alternative is a stagnated vehicle gas market.

Production of upgraded biogas and use in the transport sector have been promoted in different ways, e.g., demand on handling of waste that will promote anaerobic digestion, investment support to production facilities, support to distribution infrastructure, environmental car premiums, and exemptions of energy and CO2 taxes. The tax exemptions are only granted until the end of 2015 but the Swedish government has applied for permission to the European Commission for a tax exemption until the end of 2020. A biofuel may only be compensated to a certain level to comply with rules set by the European Commission. If the renewable alternative is cheaper because of tax exemptions or tax reductions it is considered as overcompensation and illegal state aid and the compensation has to be adjusted. This has in Sweden occurred for FAME, E5 and E85, but since the cost for biogas is almost twice that of natural gas, it is not likely that the tax exemptions for biogas will be considered as illegal state aid. 

Among the suggested policy instruments in the FFF inquiry are the price premium model and the quota obligation. The government prepared for a quota obligation but it was later withdrawn because the European Commission considered it as illegal state aid when combined with Sweden´s current CO2 tax. These changes decrease the predictability for potential investors. The actors that we have interviewed propose different policy instruments to promote production of transport fuels from forest biomass: the price premium model, a quota obligation, or a system inspired by the tradable green certificate system. However, more important than the type of policy instrument is that the support is substantial and predictable during the pay back period of the investment.

There is a large potential in forest biomass for transport fuel production in Sweden. Different pathways, which result in different transport fuels, compete not only for the feedstock and the end-users, but also for financing, research & development funds, and the policy makers’ attention. This study suggests that:

  • In order to attract investments in forest-derived methane, the vehicle gas market must continue to increase.  Increased policy support directed at the demand may be needed. This is because the gasification technology is sensitive to economies of scale and the size of the facilities that have been considered are equivalent to the entire market for upgraded biogas. To invest in such a facility implies too large a risk given the size of the current demand and the uncertainties of the future market.
  • If methane should be able to play an increasingly important role in a future transportation sector, the gasification technology need policy support during a development period.
  • The predictability of policy support is perceived as low. The predictability is more important than the specific type of policy instrument to attract investments. The interviewees in this report suggest the following policy instruments for the support of forest-derived methane: the price premium model, a quota obligation, or a system inspired by the tradable green certificate system.
  • The current low oil price decreases the likelihood for investments. Policy instruments that compensate for the oil price risk are needed, e.g. the price premium model.
  • Swedish industry actors can realize the potential in forest biomass through production of transport fuels if beneficial conditions are given. Such a development does not only contribute to a vehicle fleet independent of fossil fuels but also to regional development.
Place, publisher, year, edition, pages
f3 The Swedish Knowledge Centre for Renewable Transportation Fuels , 2016. , 49 p.
National Category
Energy Systems
URN: urn:nbn:se:kth:diva-182568OAI: diva2:904793

QC 20160229

Available from: 2016-02-19 Created: 2016-02-19 Last updated: 2016-05-30Bibliographically approved

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