In Germany, power generation from biogas is only profitable due to grid connection and supporting feed-in tariffs. In contrast, in most developing countries the power generation seems to be profitable especially in settings far away from the national grid and other energy sources, because the legal framework conditions and the lack of appropriate feed-in tariffs do not support feeding into the grid. However, there are first signs of financial and legal support for feeding-in electricity from biogas power plants in some countries such as Brazil. Output-oriented support schemes (like the German EEG) proved to be more successful than investment-oriented financial support.
Subsidies and Public Financial Contributions
Direct subsidies and public financial contribution to the installation costs were crucial for the installation of some pilot plants. But they did not provide incentives for proper and efficient operation. In contrast, the establishment of appropriate feed-in tariffs stimulates a construction of efficient plants and their continuous and efficient operation.
Hence, GIZ through its projects and programmes recommends the establishment of guaranteed feed-in price schemes similar to the one in Germany.
However, besides prices there are still many other barriers relevant to market penetration and development of the biogas sector:
- Awareness about opportunities from biogas,
- high upfront costs for Potential assessments and feasibility studies
- Lack of access to finance
- Lack of local capacities for project design, construction, operation and maintenance
- Legal framework conditions that complicate alternative energy production and commercialization. For example, the mere right to sell electricity at local level has to be in place.
As long as the national framework conditions are not favourable, electricity generation from biogas will remain limited to few pilot applications.