Energy 183 (2019) 1023e1031

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Energy
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Energetic and economic analysis of biogas plant with using the dairy
industry waste
Kamil Kozłowski a, Maciej Pietrzykowski b, Wojciech Czekała a, *, Jacek Dach a,



Alina Kowalczyk-Ju
sko c, Krzysztof Jo zwiakowski c, Michał Brzoski a
a
Institute of Biosystems Engineering, Poznan University of Life Sciences, Wojska Polskiego 50, 60-637, Poznan, Poland
b
Department of International Competitiveness, Poznan University of Economic and Bussines, Al. Niepodległo
sci 10, 61-875, Poznan, Poland
c
skiego 7, 20-069, Lublin, Poland
Faculty of Production Engineering, University of Life Sciences in Lublin, kr. St. Leszczyn

a r t i c l e i n f o a b s t r a c t

Article history: The aim of this study is to analyse the possibilities of use of waste from dairy production to produce
Received 27 February 2019 electricity and heat in the process of anaerobic digestion. The analysis covers one of the Polish dairies
Received in revised form located in Eastern Poland. The amounts of the substrates produced in analyzed dairy plant will enable
25 May 2019
the production of approx. 14,785 MWh electricity and 57,815 GJ of heat. This will allow the construction
Accepted 28 June 2019
Available online 1 July 2019
of biogas plant with an electrical power of 1.72 MW. The paper has been stated that the construction of
biogas plants for environmental and social reasons is beneficial.
© 2019 Elsevier Ltd. All rights reserved.
Keywords:
Dairy plant
Economic analysis
Biogas production

1. Introduction dioxide which is long-lived climate pollutant (up to 200 years at-
mospheric residence time) methane is short-lived but traps 84
The dairy sector is growing fast: World milk production exceed times more heat than carbon dioxide over the first two decades
800 million tonnes and is projected to increase by 177 million after it is released into the air. Therefore, the potential of reducing
tonnes by 2025, at an average growth rate of 1.8% per annum in the negative impacts on climate through increased productivity of ru-
next 10 years. Over the same period, per capita consumption of minants is important. Options aiming to reduce emissions per kg of
dairy products is projected to increase by 0.8% and 1.7% per year in milk exist and mainly target feed use efficiency and manure man-
developing countries, and between 0.5% and 1.1% in developed agement. An important element of reducing environmental pollu-
economies [38]. Cow’s milk production in European Union (EU) is tion by dairying is the proper management of waste produced in
24% from it [21]. Because of the sheer size of the dairy industry, dairies [16]. It has been estimated that 1.44 L of water is consumed
these growth rates can produce significant amounts of CO2 and can per liter of processed milk for drinking milk. Cheese production is
be associated with land degradation, water pollution, losses of more water-intensive and reaches 1.6e2 L of water per liter of
biodiversity or deforestation. processed milk. Approximately 80e90% of used water become
The dairy herd contributes to greenhouse gas emissions, espe- wastewater. The scale of this problem is enormous, as in Poland in
cially through rumination. Dairy animals produce around 3.1 gig- the years 2005e2014 the milk production increased from 11.92 to
atonnes of CO2 equivalent per year or 40% of global livestock 13.05 million m3.
emissions, with dairy cattle accounting for 75% of it. Enteric During production processes in dairies a number of types of
methane represent 51%e67% of the herd’s emissions, depending on waste and leachate are produced [39]. These are technological
the species and production system [15]. Compared with carbon waste, both in liquid and solid form. One of the liquid waste is
buttermilk, which is a byproduct of processing cream for butter.
However, buttermilk is not a nuisance waste material, as it can be
used for secondary processing as an intermediate for food butter-
* Corresponding author. Institute of Biosystems Engineering, Poznan University
milk production or certain types of melted cheese. The second
of Life Sciences, Wojska Polskiego 50, 60-637 Poznan, Poland.
E-mail addresses: [email protected] (W. Czekała), [email protected].
liquid waste is whey, which is produced from the processing of
pl (J. Dach). cheese milk [34]. Whey is a waste that is considered hazardous to

https://doi.org/10.1016/j.energy.2019.06.179
0360-5442/© 2019 Elsevier Ltd. All rights reserved.
1024 K. Kozłowski et al. / Energy 183 (2019) 1023e1031

than in the case of sludge from urban waste water treatment, as

List of abbreviations these sediments do not contain heavy metals and are characterized
by the low presence of pathogenic microorganisms [42].
BOD5 5-day Biological Oxygen Demand However, the use of modern biogas technologies enabling the
CHP Combined Heat and Power fermentation of a wide range of waste will not only eliminate the
COD Chemical Oxygen Demand dairy problem in a comprehensive way, but also use it for energy
EC European Commission purposes and reduce the energy consumption of conventional
E-LCC Environmental Life-Cycle Costing sources (coal still dominates in Poland).
ERO Energy Regulatory Office The aim of this study is to analyse the possibilities of use of
EU European Union waste from dairy production (permeate, sewage sludge and grease
LCA Life-Cycle Assessment flotation) to produce electricity and heat in the process of anaerobic
LCC Life-Cycle Costs digestion. The analysis embraces one of the largest Polish dairy,
LCIA Life-Cycle Impact Assessment which plans to build a biogas plant using fermentation of milking
LCNPV Life-Cycle Net Present Value waste.
LSU Livestock Unit In this work, biogas yield of substrates (whey, dairy sludge and
NPV Net Present Value fat sludge) were tested (1), their energy potential was calculated (2)
PPE Polish Power Exchange and a simplified financial and economic analysis of the construction
PULS - Poznan University of Life Sciences of a 2 MW biogas plant at a dairy plant (3).
SBR Sequencing Batch Reactor
SETAC The Society of Environmental Sciences and 2. Materials and methods
Chemistry
S-LCC Societal Life-Cycle Costing 2.1. Materials
VAT Value Added Tax
WIBOR 3 M  Warsaw Interbank Offered Rate 3 months The waste from dairy production (whey, dairy sludge and fat
sludge) used in research experiments has been obtained from the
big Polish dairies located in Eastern Poland. These materials were
sampled in a representative manner, and then stored under
the environment because it can contain about 600 mg/l of nitrogen, controlled conditions (at temperature of at 4
C, in a designated
and Chemical Oxygen Demand (COD) and 5-day Biological Oxygen room). The fermentative inoculum was separated liquid fraction
Demand (BOD5) can be respectively 60000 and 20000 mgO2/l [7]. (after dry mass separator) taken from operating agricultural biogas
In technological processes in dairies, while washing the instal- plant in Działyn
(Poland). The inoculum collected from the reser-
lation for milk production and other milk products, there are ef- voir was stored under anaerobic conditions at room temperature.
fluents that also contain high levels of organic pollutants [27]. They
are typically purified in a traditional way in dairy treatment plants 2.2. Analysis of basic physicochemical parameters
using the activated sludge flow or Sequencing Batch Reactor (SBR)
[45,46]. As a result of wastewater treatment are the solid wastes In order to select the proper proportions between the tested
present in the form of degreasers as well as excessive sludge which substrate and inoculum, the following parameters were examined:
is generated during the sewage treatment process. Total Solids (PN-75 C-04616/01), Volatile Total Solids (PN-Z-15011-
Waste materials from the dairy industry do not contain any 3), pH (PN-90 C-04540/01) [2]. These parameters enabled the
hazardous substances, therefore none of the listed waste group is subsequent calculation of the biogas efficiency calculated on Mg of
classified as hazardous waste. However, physio-chemical proper- fresh matter, total solids and volatile total solids of the substrate.
ties of dairy industry waste, especially the high content of biode-
gradable organic substances, can lead to the development of 2.3. Methodology of biogas efficiency research
eutrophication and water quality degradation. As a consequence,
dairies are considered environmentally harmful and are controlled The research on methane efficiency of the substrates in batch
by the relevant environmental services. culture technology was carried out in the Laboratory of Eco-
In order to reduce the impact of dairies on the environment, it is technologies at the Institute of Biosystems Engineering at Poznan
necessary to take measures that allow the proper disposal of indi- University of Life Sciences (PULS) on the basis of internal proced-
vidual waste streams from these plants. Liquid wastes: effluents ures, based on adapted standards: DIN 38 414-S8 and VDI 4630,
and leachates from anaerobic stabilization of sewage sludge are commonly used in Europe. Detailed methodology of performed
increasingly being treated with hydrophilic method [4], which is research was presented by Cie
slik et al. [2]. The fermentation set-up
normally used for domestic effluents [14,23,26,35]. In order to consisted of 21 biofermentors. Each individual biofermentor (made
optimize the effects of the removal of biogenic compounds from the from glass) had a working volume of 1.8 dm3. The process was
dairy effluents, it would be possible to consider the possibility of carried out under mesophilic conditions at 39
C±1
C. The pro-
using non-conventional methods, namely special P-filters filled duced biogas in each fermentor chamber was transported via
with carbonate-silica rock [24] or hydrogen peroxide [25]. Teflon pipe to the gas storage. These reservoirs were made from
However, dairy waste is characterized by high organic loading, plexiglass as an inverted cylinder immersed in water. Between the
sometimes reaching even 15 gL-1 COD [1,17], which makes it very water and gas areas, there was a liquid barrier preventing the
difficult to clean them in typical installations. Therefore, anaerobic dissolution of CO2 in the water.
digestion may be the most suitable method of their neutralization The measurement of daily biogas production was taken every
and environmentally safe management [8,33,37,41,44]. 24 h with an accuracy of 0.01 dm3. Qualitative and quantitative
At present only two biogas plants, which recycle some dairy composition of the fermentation gases was determined by gas
waste but only in liquid form, are operating in Poland [5]. The dairy analyser Geotech GA5000 company every time when the gas vol-
sludge after dehydration and stabilization, eg chemical or biological ume in the tube exceeded 450 ml (due to the analyser demand to
(aerobic), is usually used as a fertilizer. Its use in agriculture is safer measure).
 K. Kozłowski et al. / Energy 183 (2019) 1023e1031 1025

2.4. Situation of analyzed dairy plant purposes of these calculations, the efficiency of 45% was assumed
for the unit offered by PAKTOMA, a Polish manufacturer of modern
This paper described situation of a big scale dairy plant located co-generation units for biogas plants).
in Eastern Poland. Actually, the dairy plant uses the electric energy Table 1 shows data on the selling price of electricity, certificates
from national grid (connector 4 MW of electric power) and heat of origin and heat generated from the use of agricultural biogas in
generated by own coal furnace with heat power 12 MW. Part of the cogeneration in Poland. This data was used to conduct a financial
heat energy is transformed in cold by “icy water” technology (ef- analysis.
ficiency 60%).
Dairy plant produces daily over 1200 m3 of the liquid biowaste
3. Results and discussion
called “white water” which goes to the factory’s waste water
treatment plant. This waste, after treatment e is transformed in
3.1. Biogas efficiency of the substrate
26 Mg of dairy sludge produced daily, rich in proteins. Another
waste produced by factory is whey (400 m3/day). The whey creates
The first step of the research was preparation of basic physical
some problems for its management because actually it is used by
and chemical parameters, which are necessary to calculate ener-
farmers for animal feed. If the farmers needs are lower than pro-
getic potential of the substrate. The parameters were: pH, total
duction, than excess of whey is transported to biogas plants placed
solids and volatile solids content. The results of analyses of these
60 km around. However, this is quite expensive for factory. It should
parameters for microbial inoculum and substrate are presented in
be underlined that whey cannot be pumped out directly to the
Table 2.
environment (it is forbidden) or even to factory’s waste water
Waste materials from the dairy industry are characterized by
treatment plant because of extremely high BOD5 and COD. COD for
considerable hydration. The content of dry matter in whey, dairy
analyzed whey has reached 124500 mg O2/l e so it is over 4 times
sludge and fatty sludge amounted respectively 6.38% FM, 12.42% FM
higher value than slurry (20000e30000 mg O2/l) and over 50 times
and 45.67% FM. The biogas during the fermentation process is
higher than typical urban waste water (1800e2200 mg O2/l). This
produced from decomposed organic matter, decreased by the
high value of COD is the result of whey thickening process by
amount consumed by the fermentation bacteria. Consequently, the
ultrafiltration.
comparison of energy potential was possible after determining the
The last biowaste produced by analyzed dairy factory is fat
content of dry matter of every substrate. The tested substrates were
sludge. This is very energetic product, however its amount is very
characterized by high volatile total solids content, which amounted
low (0.8 Mg/day).
to 92.32% TS, 82.86% TS and 65.86% TS.
There are 3 main problems for dairy plant development. First e
The fermentation process of the analyzed substrates proceeded
caused by Russian embargo for milking products export, was
correctly. Fig. 1 shows the dynamics of cumulated methane pro-
practically solved by finding another markets for export. Second e
duction calculated on the fresh substrate mass, while Fig. 2 shows
related to proper biowaste management e is growing because of
the graph of cumulated methane production calculated on dry
strict legislation for environmental protection and should be solved
organic mass.
in a stable way in near future. Third problem is related to electric
The time of decomposition of the dairy industry waste was in
power supply from the national grid. The highest electric energy
the range of 13 (for whey) to 30 days (for fat sludge). At the stage of
consumption during working period can reach 3.8 MW per hour
planning of the future investment, this parameter allows to pre-
and this is over 90% of maximum power which can be offered by
estimate the size of the fermentation tank. However, in order to
connector with grid. Thus e lack of available power let the factory
define more specific technical parameters of the planned installa-
to look for optimization of electricity usage and to build own source
tion, it is important to determine the organic load rate (OLR) and
of energy: biogas plant working on dairy waste.
hydraulic retention time (HRT), which allows the process run in a
continuous mode [28,31,36]. However, it should be marked that a
2.5. Energetic calculations decrease of HRT of less than 15 days can contribute to the acidifi-
cation of the fermentation reactor, which is why the rate of leaching
Based on the conducted fermentation tests, calculations of the of methanogens is too rapid [9,32]. For dairy waste materials with
energy potential of substrates (whey, dairy sludge and fat sludge) low dry matter content (whey) it is significantly important, as it has
were made. The calculation methodology based on the formulas been shown in research of Kozłowski et al. [29], where the OLR
presented by Cie
slik et al. [2]. To determine the amount of elec- process collapsed at 3 kg VS/m3 per day. Table 3 presents the biogas
tricity and heat produced from combined heat and power (CHP), efficiency and methane concentration in biogas from dairy waste
equations (1) and (2) were used. treated with methane fermentation process under mesophilic
conditions.
EE ¼ VCH4 x ReCH4 x he (1) The highest efficiency of biogas and methane from 1 Mg fresh
mass was found in fatty deposits (349.61 m3/Mg FM). The signifi-
where: EE e produced energy amount [MWh/Mg FM], VCH4 cantly lower efficiency of biogas from whey and dairy sludge,
evolume of produced methane [m3/Mg FM], ReCH4 e energy effi- calculated on the fresh mass of the substrate, was directly related to
ciency ratio of methane [0.00917 MWh/m3], he e electrical effi-
ciency of CHP (for the purposes of these calculations, the efficiency
of 43% was assumed for the unit offered by PAKTOMA, a Polish Table 1
Prices of certificate of origin and heat determined from Polish Power Exchange and
manufacturer of modern co-generation units for biogas plants).
Energy Regulatore Office of 04 July, 2017 [11,12,40].
Heat produced in CHP unit can be calculated from equation (2):
Parameter Price Unit
EH ¼ VCH4 x ReCH4 x ht (2) Electricity price 54.65 EUR/MWh
Blue certificate price 73.46 EUR/MWh
where: EH e produced heat amount [MWh/Mg FM], VCH4 e volume Yellow certificate price 25.09 EUR/MWh
of produced methane [m3/Mg FM], ReCH4 - energy efficiency ratio of Heat price 15.55 EUR/GJ
Euro exchange rate 4.30 PLN
methane [0.00917 MWh/m3], ht e heat efficiency of CHP (for the
1026 K. Kozłowski et al. / Energy 183 (2019) 1023e1031

Table 2 (over 90% of grid connector capacity is already taken). The biogas
Physical and chemical parameters of substrates. plant working on dairy factory biowaste can supply the factory with
pH Total Solids [% FM] Volatile Total Solids [% TS] over 45% of consumed power.
Whey 4.56 6.38 ± 0.036 92.32 ± 0.188
It has to be underlined that COD measured in digestate was less
Dairy sludge 6.41 12.42 ± 0.038 82.86 ± 0.413 than 4000 mg O2/l so it is over 30 times lower value than concen-
Fat sludge 5.02 45.67 ± 0.617 65.86 ± 0.252 trated whey. This value is even significantly smaller than for slurry.
That is why digestate after dairy biowaste methane fermentation
can be without environmental problems spread on fields as valu-
able fertilizer.

3.3. Cost analysis

3.3.1. Assumptions of the analysis

When constructing a biogas plant, the initial analysis should
include such elements as the plant’s capacity, operating period,
operating costs, production costs, energy prices, existing support
and tax system, and above all the demand and the cost of sub-
strates. Generally it is assumed that a standard 100 kWel biogas
plant requires about 45 ha of agricultural land for the production of
substrate and 164.10 livestock units1 [47]. In the analyzed case, the
company has an advantage in that it does not have to acquire
substrate for biogas production because it can use its own pro-
Fig. 1. Cumulated biogas production for dairy wastes calculated on Mg Fresh Matter.
duction waste. As previously calculated, the dairy can generate 14
785 MWh of electricity and 57 815 GJ of heat from its production
waste, which corresponds to approximately 2 MW of nominal ca-
pacity. It is assumed [47] that a 2 MW installation is capable of
generating 15,453.06 kWh of electricity and 57,917.03 GJ of thermal
energy, which means that in the analyzed case there is still approx.
5% power reserve for a potential increase in waste processing. Thus,
in the subsequent analyses, the example of a 2 MW installation is
used to calculate financial performance indicators. The assump-
tions are presented in Table 5 [47].
It has been assumed that 9% of the energy obtained from the
plant will be used for the needs of the installation; whereas, as
regards heat, the figure will be as high as 24%. The depreciation rate
for biogas installations is 10% (Classification of Tangible Assets, gr. 2,
type 211, including distribution pipelines, telecommunications and
power lines, distribution lines), and although the biogas plant
Fig. 2. Cumulated biogas production for dairy wastes calculated on Mg Volatile Total
consists of various elements that can be assigned to different cat-
Solids.
egories, its main elements are included in this category and ac-
cording to tax interpretations such a designation is regarded as
high hydration. Consequently, it is necessary to take into account correct.2 Hence, the residual value will amount to 0.00 PLN after 20
the performance of Mg Volatile Total Solids in order to compare the years of operation. It has also been assumed that after 10 years,
energy potential of the substrates. For these calculations, the replacement investment amounting to 15% of the initial investment
highest yield of biogas and methane was obtained from the fatty will be necessary. Constant prices were adopted, the reference rate
sludge (1162.37 m3/Mg VS). Whereas, whey and dairy sludge were was set at 4%, and the analysis was conducted at net prices: the
characterized by a biogas efficiency of 859.56 m3/Mg VS and dairy, being a private entity and a Value Added Tax (VAT) payer, can
476.61 m3/Mg VS respectively. recover VAT on such an investment.
The analysis also assumes that the dairy will take out an in-
vestment loan amounting to 50% of the project’s value. The
3.2. Energetic analysis
following loan parameters were used in the estimations:

Furthermore, based on the amount of waste produced per year

 Loan period e 10 years
and its biogas efficiency, we calculated energy parameters for the
 Commission e 1.5%
planned biogas plant. The parameters of analyzed installations as
 Margin e 2.5%
well as the value of produced energy are shown in Table 4.
Calculation of installation parameters based on the amount of
waste produced and the efficiency of biogas production suggests 1
As defined by the European Commission (Regulation of the European Parlia-
that the planned biogas plant working on the waste from dairy ment and of the Council (EC) No. 1166/2008 of 19 November 2008), 1 LSU (livestock
production will generate 14,785 MWh of electricity and 57,815 GJ of unit) is a dairy cow weighing 600 kg and producing 3 thousand litres of milk per
heat energy. It has been stated that this can strongly improve the year, without additional concentrated foodstuffs. Other animals are assigned spe-
cific coefficients, which allows the aggregation of livestock from various species
profitability of analyzed dairy plant. Fig. 3 shows a block scheme of
(e.g. a broiler ¼ 0.007 LSU). In Poland, one livestock unit denotes an animal
the installation. weighing 500 kg.
But the most important value of the research is the solution of 2
See, for example, an individual interpretation by the Director of the Tax
third problem for the dairy plant: the barrier for available power Chamber in Warsaw, reference number IPPB3/423-124/12-4/MS.
 K. Kozłowski et al. / Energy 183 (2019) 1023e1031 1027

Table 3
Biogas efficiency of dairy wastes in mesophilic fermentation.

Fresh matter Volatile Total Solids

Sample Methane percent [%] Cumulated methane [m3/Mg FM] Cumulated biogas [m3/Mg FM] Cumulated methane [m3/Mg VS] Cumulated biogas [m3/Mg VS]
Whey 52.78 24.03 ± 0.371 45.53 ± 0.680 454.40 ± 6.857 859.56 ± 12.573
Dairy sludge 57.43 28.16 ± 0.944 49.04 ± 2.640 273.73 ± 9.176 476.61 ± 25.655
Fatty sludge 61.89 216.36 ± 1.222 349.61 ± 8.613 719.35 ± 4.061 1162.37 ± 28.636

Table 4
Possible electricity and heat production from dairy wastes.

Parameter Unit Whey Dairy sludge Fat sludge

Daily production Mg/d 400 26 0.8

Yearly production Mg/a 146000 9490 292
Biogas efficiency m3/Mg 45.53 49.04 349.61
CH4 concentration % 52.78 57.43 61.89
CH4 production m3/a 3508487 267273 63181
Total CH4 production m3/a 3 838 941
Electric energy MWh 14 785
Heat GJ 57 815
Electric power MW 1.72
Heat power MW 1.84
Electric energy value Euro/a 2 269 621
Heat value Euro/a 341 255

 WIBOR 3 M (Warsaw Interbank Offered Rate 3 months) e 1.70%

Fig. 4. Relationships between conventional, environmental and societal LCC [20].
(quoted on 24th May 2018).

sale of energy carriers represent savings resulting from not having

3.3.2. Revenue from the project to buy electricity and heat from transmission systems. As
The construction of a biogas plant can generate the following mentioned earlier, this solution is all the more important because
kinds of revenue for the company: the company has reached the limit of its mains power capacity
which prevents its further development and significantly increases
1) Revenue from the sale of electricity, the risk of its operations. The analysis omitted this aspect, although
2) Revenue from the sale of heat, it is obviously quantifiable and important in regard to the risks
3) Revenue from the sale of property rights (certificates). connected with the company’s further development.
In view of the dynamic changes occurring on the renewable
Currently, the dairy uses mains electricity. When the biogas energy market, it is difficult at this time to make any definite as-
plant has been built it will be able to use its own electricity, sumptions about the benefits from the sale of property rights. That
although formally it will have to sell it, so it is possible to estimate is why two scenarios were adopted: an optimistic one, based on the
revenues from the sale of electricity on the free market. The situ- current system (blue and yellow certificates); and a pessimistic one,
ation is similar with the heat that will be produced. The adopted which assumes no revenues from property rights.
prices are those quoted by the Energy Regulatory Office (ERO) as In the analyzed case, there will also be savings from reduced
rates “on the competitive market.” In a sense, the revenues from the

Fig. 3. Block scheme of biogas plant at dairy plant.

1028 K. Kozłowski et al. / Energy 183 (2019) 1023e1031

Table 5
Technological assumptions regarding energy production in a 2 MW biogas plant.

Items

Value of investment project (m PLN)a 31.00

Gross electrical energy production (MWh)b 14,785.00
Net electrical energy production (MWh)c 13,454.35
Gross thermal energy production (w GJ)b 57,815.00
Net thermal energy production (w GJ)c 43,939.40
Annual operating costsc 10.0% of investment project’s value
Operating period (in years) 20
a
e Data from the Energy Market Information Center, http://www.cire.pl/item,67859,1,0,0,0,0,0,eksperci-
koszt-jednego-mw-mocy-biogazowni-to-ok-15-16-mln-zl.html, accessed 20 02 2018.
b
e own calculations based on the technological parameters of production waste.
c
e own assumptions.

sewage disposal into the municipal sewage treatment plant. Table 7

Because the current cost connected with sewage disposal is un- Results of cost analysis.
known, this aspect was omitted, but it should be noted that this Items Optimistic scenario Pessimistic scenario
kind of savings would also improve the profitability of the project. A
NPV (PLN) 65,729,252.94 9,161,626.26
summary of the revenues is presented in Table 6. IRR (%) 22.94 0.43
Payback period (years) 4.36 233.02
3.3.3. Analysis results
Table 7 shows the results of the cost analysis. The calculations
clearly show that even in a situation when the company has its own Table 8
substrate, and it does not have to source this from the outside, Sensitivity analysis.
without the support of the property rights sale system the profit- Items NPV (PLN) IRR (%) PP (years)
ability of the undertaking is negative.
Output value 65,729,252.94 22.94 4.36
A 10% decline in revenues 51,344,377.00 19.20 5.21
3.3.4. Sensitivity analysis A 10% increase in investment costs 62,315,115.60 20.65 4.84
It is also worth investigating how the profitability of the venture A 10% increase in operating costs 61,657,731.73 21.89 4.57

changes when the key parameters of the project change. The cal-
culations were made only for the optimistic scenario. The results
are presented in Table 8. support system would have to provide approximately PLN
The revenues generated by the project have the most significant 1,150,000.00 annually, though a sum of PLN 700,000.00 each year
impact on the financial indicators; which, however, does not mean would make it possible to balance the project. Therefore, it can be
that the project is unprofitable. It would be unprofitable if the assumed that regardless of what kind of support system the state
revenues decreased by approximately 45,6%, in which case the Net adopts (certificates, auctions or other), its existence is essential for
Present Value (NPV) would fall to around 0. At the same time, a companies to consider the construction of such installations under
simulation was carried out to determine by how much the price of current technological and market conditions. It is also worth noting
electricity would have to increase on the competitive market in that as such projects are planned over many years, the financial
order to achieve the project’s profitability level if a property rights support system must also be long-term.
sale (certificate system) was not possible. It was found that the
price would have to increase by 30.17% to balance the project. It 3.4. Economic analysis
should be remembered, however, that the calculation was made for
an entity that does not have to purchase substrate for biogas pro- Financial analyses do not take into account the external effects
duction on the open market because it uses its own waste. Having that investment projects generate as part of their interaction with
to buy substrate would significantly reduce the profitability of the the environment or their impact on the well-being of society.
project. This means that a biogas plant without public funding is However, in the case of projects which use renewable energy
difficult to balance. Thus, it was calculated what amount of financial sources such an analysis is recommended. The public funding
support was needed for the company to achieve a so-called system, which subsidizes projects that by their very nature or due
“reasonable profit,” which was assumed to be at the level of 6% to existing technological limitations are often unprofitable, is based
with current energy prices on the competitive market. Such a on benefits that are not included in the cost analysis. Therefore,

Table 6
Project revenues [11,12,40].

Items Optimistic scenario Pessimistic scenario

Volume of electricity for sale (MWh) 13,454.35

Price of electricity (PLN/MWh) 171.85
Revenue from electricity sales (in PLN) 2,312,130.05
Volume of heat for sale (GJ) 43,939,40
Price of heat (PLN/GJ) 66.87
Revenue from heat sales (in PLN) 2,938,227.68
Revenue from blue certificates (in PLN) 4,250,363.71 0.00
Revenue from yellow certificates (in PLN) 1,451,724.37 0.00
Revenue (savings) from reducing the volume of waste disposed of Not available Not available
 K. Kozłowski et al. / Energy 183 (2019) 1023e1031 1029

other methodologies should be looked for that would make it (Canada), MSW-DST (USA), ORWARE (Sweden), EASEWASTE (EU),
possible to evaluate them and a number of external effects that are or LCA-IWM (EU) [18]. The models permit the quantification of both
important for the environment and society should be included in economic and environmental aspects. After the modelling param-
the analysis, regardless of who bears the costs and who benefits eters are entered and analyzed (input and output system), the
from the implementation of the project. One of the methodologies program makes it possible to determine the flows of waste fractions
that are used to analyse the profitability of installations in the field in individual processes. It also serves to determine the effects of
of renewable energy is the Life-Cycle Assessment (LCA), which in- substance emissions in terms of impacts or eco-points. A cash flow
cludes Life-Cycle Costs (LCC). LCA is a technique that assesses statement and profitability assessment are also generated, which
environmental impacts associated with all the stages of a product’s helps in making a decision whether to proceed with implementing
or service’s life, identifying the raw materials and energy used as a given investment project or look for alternatives. It should be
well as the waste streams generated, and then assessing the impact noted that there is no single commonly used methodology or
of these processes on the environment. Conventional LCC methods model, and that the results depend to a large extent on the as-
can be found in a number of financial analyses, used in both the sumptions adopted by a given expert and thus may vary.
public and private sectors; it is also extensively discussed in the Performing a full life-cycle analysis for the case presented in this
literature (by among others [6,13,19,20,22,30,43]. The Society of article is an extremely difficult task and one which goes far beyond
Environmental Sciences and Chemistry (SETAC), a non- the scope of this study. A full Life-Cycle Impact Assessment (LCIA)
governmental organization, has developed a new methodology, would require taking into account and estimating in terms of
consistent with LCA e Environmental Life-Cycle Costing (E-LCC), environmental costs the following processes:
and outlined a methodological framework for Societal Life-Cycle
Costing (S-LCC) [20]. E-LCC takes into account the costs incurred  Raw material stage 1: the environmental costs of preparing the
by all the entities that have come into contact with a product raw material (milk), i.e. all costs related to milk production at
throughout its life cycle, and not only by its producers and direct the volume projected for the biogas: including animal feed,
users, as is the case with conventional LCC (Fig. 4). It also includes energy, fertilizers, crop protection chemicals, water, labour
external costs related to, broadly understood, environmental pro- costs, emissions (from engines in the feed production and
tection; including hidden costs and less tangible costs [22]. These transport processes; or produced in the manufacture process
effects are monetized through economic policy tools (for example and the application of fertilizers; as well as emissions from dairy
state subsidies, environmental subsidies, fees for the emission of cattle), and waste;
harmful substances, etc.). S-LCC additionally takes into account all  Raw material stage 2: the environmental costs of preparing
external costs that may appear in the short and long term, including substrate for the biogas plant. In this case, the processing of milk
those related to society. Public fund transfers are removed from the into whey, milk sludge and fat deposits (energy, water, fuels,
cash flow to avoid double counting. Relationships between the reagents, labour costs, emissions, waste);
specific methodologies are presented in Fig. 3.  Technological stage: the environmental costs of the processes
Including in the methodology all the external effects important relating to the production of biogas, electricity and heat; as well
from the point of view of society and the environment is significant as the emissions and waste from technological processes.
for designing an economic policy and the proper application of the
tools of this policy. The comprehensive inclusion and monetization The assessment of the environmental aspects ought to be
of external effects makes it possible to assess the effectiveness of complemented by an assessment of societal costs. Thus, the anal-
solutions beneficial from the point of view of the well-being of ysis would cover all the elements included within the framework of
society, as well as comparing alternatives. The final measure of an the E-LCC and S-LCC methodologies developed by SETAC. Alterna-
investment project’s performance assessment is the Life-Cycle Net tively, one also could use the categories of damage and impacts as
Present Value (LCNPV), calculated on the basis of cash flows in a specified in the Eco-Indicator 99 methodology. Within this meth-
given reference period, taking into account environmental issues. odology, three basic categories have been selected in which po-
The LCNPV value is calculated in a standard manner, but the cash tential damage is estimated [3,10,18]:
flows include all the described environmental costs and benefits:
 Human health (climate change, radiation, depletion of the ozone
layer, carcinogenic substances, substances harmful to the res-
X
n
CFi
LCNPV ¼ (3) piratory system),
i¼0
1 þ ri  Quality of the ecosystem (acidification, eutrophication, soil
erosion, ecotoxicity);
where: CF e cash flow in a given year “i”, n e number of years  Resources (damage resulting from the extraction of solid fuels
(taking into account the product’s life cycle), r e discount rate. and minerals).
The discount rate can take those values recommended by the
European Commission, determined on the basis of benchmark Within these categories, over 200 eco-indicators were calcu-
bond yields, or by means of the weighted average cost of capital lated for the most frequently used materials and processes.
method [22]. The reference period is slightly longer due to the In the analyzed case, in addition to the cost analysis, a simplified
longer life cycle of products. The economic interpretation of the economic analysis could be performed. Currently, the dairy plant
indicator is standard and specifies that the higher the LCNPV value, processes the raw material (milk) using energy from the national
the more profitable the project is. A negative value means that at a transmission system and heat produced in the factory’s coal
given discount rate the project is unprofitable. furnace, which generates waste that is processed at the municipal
Performing a full life-cycle analysis is complicated and requires sewage treatment plant. Implementing a project to build a biogas
a knowledge of many methodologies that enable the calculation plant would mean that the waste could be used for generating
and subsequent monetization of environmental effects, such as the electricity and heat, which would considerably reduce the volume
emission of harmful substances. Therefore, various models, meth- of sewage. For this reason, it is not necessary to analyse the raw
odologies and databases are used for such calculations; for example material stage 1 because the implementation of the project will not
Eco-Indicator 99, IWM-2, WISARD, WRATE (UK), EPIC/CSR affect it in any way. Therefore, an analysis can be conducted for the
1030 K. Kozłowski et al. / Energy 183 (2019) 1023e1031

Table 9
Comparison of environmental and societal costs for the non-investment and investment variants.

Item Non-investment variant Investment variant

Electrical energy production Supply of electricity from the national energy and Electricity is produced by the biogas plant. The savings and
transmission system. As the greatest volume of environmental benefits include the elimination of CO2 and
electricity is produced from coal, the emission costs the dust emissions connected with the production of energy
are estimated for coal. from coal. Benefits in all the areas indicated in Eco-Indicator
99, in particular reduced depletion of the ozone layer,
reduced adverse climate change, lower emissions of
substances harmful to the respiratory system, and lower
consumption of fossil fuels
Thermal energy production Heat is produced at the dairy plant using a 12 MW Thermal energy is produced by the biogas plant. The savings
coal furnace. This generates costs associated with and environmental benefits include the elimination of CO2
CO2 and dust emissions. and the dust emissions connected with the production of
energy from coal. Other benefits are the same as those for
electricity.
Biogas production No costs Environmental costs resulting from technological processes.
Electric and thermal energy is neutral as it is generated as a
result of the system’s operation. Other costs that should be
taken into account include the costs of the reagents used as
well as the costs incurred during the construction of the
biogas plant and its subsequent operation.
Emissions Emissions related to electricity production in the Emissions related to biogas production and waste disposal
national energy and transmission system, heat (but reduced in comparison to the non-investment variant)
production in the on-site coal furnace, as well as
waste disposal.
Waste Waste is first pre-treated at the factory sewage The amount of waste is significantly reduced due to the
treatment plant and then discharged to a municipal utilization of its main and most harmful part. This creates
treatment plant. significant benefits for both the environment and society

non-investment and investment variants in the proposed form as biogas installation with electricity power of 1.72 MW and heat
well as estimating the environmental and societal costs. A sum- 1.84 MW can be constructed. This can replace 45% of factory
mary of this analysis is presented in Table 9. maximum power demand supplied by national grid.
The cost analysis showed that if the support system based on the 5. The creation of a system for the production of electricity and
sale of property rights or auctions is discontinued, and in view of heat from a biogas plant without financial government support
the current energy prices, the biogas plant project will not be viable is economically unjustified.
(although the dairy does not have to buy substrate for biogas pro- 6. For environmental and social reasons, the construction of a
duction). However, it can be stated with certainty that in environ- biogas plant is beneficial and should be implemented.
mental and societal terms this project could be extremely beneficial
and should be implemented. This also means that if the system of
certificates, or auctions for larger installations, is discontinued, Declaration of interests
other public funding systems should be created so that such envi-
ronmentally and socially beneficial projects can be implemented. In ☒ The authors declare that they have no known competing
order for such projects to be implemented, however, the support financial interests or personal relationships that could have
should be steady and long-term because otherwise the projects will appeared to influence the work reported in this paper.
not be “bankable” e no financial institution will want to finance a ☐ The authors declare the following financial interests/personal
project that does not show a positive NPV value, and without relationships which may be considered as potential competing
external support it is difficult to implement projects which require interests:
such a high level of investment.
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