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Biogas: market policies in Germany

By Kristina Köätterheinrich, edited by Leon Dijks

Product and technology

Biogas is produced from waste, residues and energy crops through anaerobic digestion. Methane fermentation belongs to the biochemical transformation methods of biomass (s. Wieland 2010, p.849). It is a complex process, which can be divided into four phases: hydrolysis, cidogenesis, acetogenesis/dehydrogenation, and methanation. The individual degradation steps are carried out by different consortia of microorganisms, which partly stand in syntrophic interrelation and place different requirements on the environment (s. Angelidaki et al. 1993, p.159).

Thermochemical processing and combustion are the most effective ways to maximize the generation of energy. Combustion is only efficient if the water content of the biomass is below 60% since otherwise most of the energy is used for the evaporation of water. If the biomass has a very high water content (e.g., liquid manure, freshly harvested plants), it is best to select and accept a process which provides only about 70% of the energy resulting from the combustion of dry material (s. Deublein/ Steinhauer 2011, p.89).

All types of biomass can be used as substrates for biogas production as long as they contain carbohydrates, proteins, fats, cellulose, and hemicelluloses as main components (s. Wieland 2010, p.849).

The theoretical gas yield varies with the content of carbohydrates, proteins, and fats. Only strong lignified organic substances, e.g.,wood, are not suitable due to the slowly anaerobic decomposition. Historically, anaerobic digestion has mainly been associated with the treatment of animal manure and sewage sludge from aerobic wastewater treatment (Deublein/ Steinhauer 2011, p.93). Nowadays, most of the agricultural biogas plants digest manure from pigs, cows, and chicken with the addition cosubstrates to increase the content of organic material for achieving a higher gas yield. Typical cosubstrates are harvest residues, e.g., organic wastes from agriculture-related industries, and food waste, collected municipal biowaste from households and energy crops. Winter rapes, sugar beets, maize and cereals are the crops with the highest energy yield (s. Wieland 2010, p.851).

As an advantage, the residues can be easily returned to nature, especially since no materials enriched with minerals and thus plant-incompatible ash are generated.


Biogas market

With 31,9 TWh, Biogas accounted for 16,9 % of the German electricity production in 2016 from renewable energy sources. In the heat production, biogas accounted for around 10 % of the renewable energies (s. UBA 2017).

The biogas market is mostly dominated by small and middle size companies. The number rose from 139 in 1992 to 9000 in 2016 with an installed capacity of 4000 MW. The sector holds around 43,000 jobs. With these biogas production, Germany is by far market leader in the European union. Biogas plants are most common in the northern region of Lower Saxony, an agricultural region in Germany (s. Hoffman 2016, p.10).

It has been evaluated as one of the most energy-efficient and environmentally beneficial technology for bioenergy production (Fehrenbach et al. 2008, p.50). Moreover, in the electricity and heat production biogas is seen as a reliable resource since it is not subject to strong fluctuation as wind and solar power is. It can therefore help to cover the base load of energy demand to all times.


Policy measurements

The continuous increase of biogas production in Germany was possible due to the Act on Renewable Energy Sources (EEG) from the year 2000. The Act included fixed prices for the production of renewable energy decoupled and higher than the market prices. Furthermore an incentive program by the government granted 30% of the investment cost per plant (s. Graaf/ Fendler 2010, p. 4). This shows that the development of biogas plants is fundamentally dependent from policy measurements.

In the amendment from 2004 an additional funding was implemented for smaller plant in order to diversify and decentralize the market. Moreover construction regulations for the building of new plants were relaxed and only 50% of the processed biomass had to be harvested from the personal or neighboring farms (s. Scholwin 2008, p. 10). The renewals were made to foster the structural change in the agricultural sector. Additional bonuses could be achieved for the usage of liquid manure and materials that support the landscape conservation. However, the Bonus for the Usage of Renewable Raw Materials was the most successful and leaded to a specialization on agricultural primary products instead of waste products.

The governmental regualtions started a boom for biogas production and headed to environmental problems of monoculture and water and soil pollution. Consequently, also the prices for agricultural products rose rapidly and led to a biogas crisis in 2008. In the following years the Renewable Energy Law increased the feed-in compensation for biogas marginally (s. Graaf/ Fendler 2010, p. 8).

The amendment from 2012 changed the funding network to an easier system. The compensation system was divided upon performance and charge material. Plants for organic waste and small plants charge with 80% liquid manure got a special compensation. The usage of corn and cereal was restricted to maximal 60% per plant. The new compensation system aims to be more market orientated and more efficient to reduce the costs for subsidies. Plant owners get an incentive to operate the plants market-based by increasing the market premium when the market price is high (s. BMWi 2014).A new market premium was furthermore implemented for the investment in gas storages and generators.

In 2014 the funding for biogas was almost abolished because it was too expansive compared to wind and solar. In 2017 the picture changed again. Tendering processes were implemented: the tender who bids the fewest subsidies for operating a biogas plant, get the premium (s. natGAS 2016, p.1).



Biogas benefited in the first years extremely from the Act on Renewable Energy Sources. The results were better then forecasts expected. The grid expansion and the technological innovations for storing energy could not keep pace. The subsidies, therefore, became inefficient because too much power was been produced that was not accessible (s. Schwarz 2014, p. 27). Consequently, the electricity price for households rose. As biogas production in the coming years turned out to be more cost intensive than wind and solar power and environmental problems arose, the government concentrated its funding to other technologies (s. Schwarz 2014, p. 28).

In my opinion the Act’s design from the first few years was rather good. Even though biogas spread larger than anyone expected, it was a favorable development for small farmers in order to diversify their businesses. The environmental problems of liquid manure and chemical fertilizer could be reduced as long as biogas was a small scale development. The bonuses for renewables raw material and the market-oriented premium model revoke these effects. In favor of lower consumer prices, more efficient big companies were favorized, because tendering processes require higher financial resources and knowledge. An often discussed issue, that came with the relaxation of the regulations, is the pressure on the arable land and competition with foodcrops. Locally, prices for leasing agricultural land increased strongly (66% in 5 years) and outcompeted foodcrops (LSN 2014). Also, land degradation due to surface-water runoff is strongly associated with the main biogass crop: mais. (R. C. Palmer/ Smith 2013)

However, critics arose on the Act on Renewable Energy Resources because it offered many discounts for the industry (s. Dieckhörner/ Domnik 2014, p.1). Shutting down these loop holes would have also decreased the electricity price for households without leaving small biogas plant owners unemployed.

I favorize the funding for investments in storage technologies as well as the premiums and regulation on the use of organic waste and liquid manure. Since biogas will be needed in the long run in order to reach the goal of a 80% share of renewable energy in the power supply, the stock of biogas plants should as least be hold constant.




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