Thesis title: Energy cooperatives as a new model for renewable energy development in Croatia: investigation into biogas production from agricultural waste in Gundinci municipality

Mak Đukan Student no: 954210 WS 12/13 Mentors: Peter Heck, PhD Michael Knaus, PhD

Program: International Master in Material Flow Management

Main motivation

•  Nitrates Directive •  Undeveloped manure management systems •  Small average farm size •  Developing communal, centralized biogas plants

Research questions

Are energy cooperatives an applicable model for producing biogas from agricultural waste in Croatia? Would Croatian farmers have the willingness to create cooperatives? What benefits would this bring?

Research sub-questions

1)  What is the economic biogas potential in Gundinci? 2)  Is biogas in Gundinci economically feasible? 3)  What is the local cooperation potential?

Research methodology

Research scope

Field research

•  43 structured interviews – family farm owners and households

•  5 semi-structured interviews – mayor and local community members

Structured interviews question flow

Biogas partner selection tool based on three indicators

DYNAMIC DEVELOPMENT

Land under cultivation and livestock unit now, compared to past five years & future ambitions + manure management system + own land (ha)

BIOGAS POTENTIAL

Volume of biogas from manure and land availability for energy crop growth

BIOGAS COOPERATION

Willingness to provide manure, grow energy crops and invest jointly into AD plant

Weight

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Total 100%

Material Flow Analysis

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Strenghts Weakness

Threats Opportunities

!  Technology well suited for high-moisture content biowaste !  Compliance with EU manue management regulations !  New revenue stream for local community – contract with

HEP to sell electricity at FIT for 14 years !  Fertiliser as end product !  Reduction of odour from current manure management !  GHG emiission reductions !  Decrease in nutrient run off to ground water !  Local ownership of biogas plants reduces the Not in My

Back Yard (NIMBY) problem !  Creation of local jobs !  Strenghening of social cohesion of the village

!  Biogas and fertilizer production very sensitive to feedstock quality

!  Small changes lead to proces instability !  Lack of existing demand for thermal energy !  Relatively expensive technology !  Harder access to finanicng from business banks – more

owners means more risk !  Energy cooperatives have many members with equal

votes – decision making made harder !  Local skills set very low – biogass technology completely

unknown

!  Economic recession could lead to decrease in number of animals in municiplaity due to smaller demand for agri products

!  Monopolistic milk price setting !  Change in political leadership of municiplaity !  “Not in My Back Yard” problem !  Bad internal relations among farmers could break up the

energy cooperative !  Low levels of dry matter content in local manure, due

water permeable storage facilities !  Decrease in Feed in Tariff for biogas production

!  Sales of electricity diversifies local revenue streams – farmers less dependent on price changes of main products (milk, meat etc.)

!  Possibility to charge gate fees for processing of organic waste from households and industry

!  Thermal energy utilization for greenhouse !  Fertilizer savings due to better AD digestate nutrient

quality than raw manure !  Carbon credits earning within ETS system

AD SWOT analysis

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Discounted cash flow analysis: Net Present Value, Internal Rate of Return and Payback Period

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Scenario analysis results

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Main findings

•  Worst case scenario (No. 4) achieves IRR of 11.34% and payback of 10.13 years

•  Compared to IRR of 15.17% and payback of 8 years

for best case (No. 1)

•  Increase in energy crop price for 15% changes IRR by – 0.61% on average and payback + 0.35 years on average

•  Increase by 30% has slightly worse effects

Based on Base A (most realistic)

Above the hurdle rate of 8.6% = projects are

acceptable

Analysis of local cooperation potential

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90% of farmers would willingly provide manure for AD, 46% would grow energy crops and 70% invest jointly into biogas

70% of the farmers do not sell any products within the municiplaity and 40% do not purchase anything

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Semi structured interviews on the Gundinci Agricultural Cooperative (GAC)

Mr. Marijan Lučić, Chicken husbandry, former member of GAC, 15th November 2012, Gundinci •  Cooperative founded in 1968 and broke apart in 1995 •  Had one director who managed trade deals •  Financing of production materials through a collective loan – the

farmers did not have to invest money themselves

Mr. Marijan Lučić, Pig husbandry, director of GAC for 25 years, 16th November 2012, Gundinci •  Jelaousy and individual rows between locals problem for cooperative •  Difficult to get the people to invest jointly into the plant

Are energy cooperatives an applicable model for producing biogas from agricultural waste in Croatia?

•  Most Croatian farms are small in size, meaning that

developing biogas economically is possible only through aggregating manure into centralized plants

•  Energy cooperatives create a model for investing into biogas plants by the community. These investments would be economically viable provided there is enough biomass

What benefits would this bring?

•  Sharing of investment risk among the farmers •  Ability to take advantage of more manure produced on

Croatian farms •  Compliance with the Nitrates directive •  Greater added value chain in the local economy – job

creation, introduction of new skills to the locals, marketing of the municiplaity

•  Reduction of water pollution from nutrient runoff and

methane emissions •  Health benefits due to cleaner local drinking water

Would Croatian farmers have the willingness to create biogas energy cooperatives?

•  Farmers are willing to cooperate with the biogas plant

(provide manure) because this would help them get into accordance with the Nitates directive (efficient manure management and 170 kg N/ha)

•  Growing of energy crops depends on price negotiations with the farmers

•  But in real life the majority would most likey not be willing

to invest into the plant. In general they do not want to take any more financial risk.

•  Local financing could be the greatest obstacle for cooperatives development

What are the obstacles for developing energy cooperatives in Croatia?

MACRO LEVEL •  Top down structure of Croatian cooperatives

governance and lack of institutional support •  Lack of governmet leadership in promoting

cooperatives as form of social entreprenuership MICRO LEVEL •  Misunderstanding of the cooperatives by the general

pubic – seen as relics of socialism •  Lack of education and skills at the local level •  Weak sense of group and tollerance among people

Policy recommendations

•  Create pilot project, which would serve as an example for farmers that IT CAN BE DONE

•  Involvement of international development organizations

that have a brand name and financial power to finance this

•  Local shared interest crucial in bringing the farmers together. They have to see the benefits and this means EDUCATING them

•  Create easier access to finance – business banks perceive communal projects as risky