Model 2: Fuel and Electricity from Biogas
The type is formed by processing companies aiming to replace fossil energy, but what sets it apart from the previous type that used woody biomass for solid fuels, is different biomass inputs and output of gaseous fuels as this type was formed on the basis of companies producing biogas from agricultural wastes such as slurry, manure and silage and using it for electricity, heat and selling compressed natural gas (CNG) for industrial and private customers. Three out of four companies in this type were established during the period from 2007 to 2016, illustrating more than threefold increase in the production of biomass-based biogas in the Baltic Sea Region (Trømborg et al., 2019).
Value proportion
The main value proposition is to produce biogas for fuel and electricity from slurry, manure and silage collected from farms. The biomass is sustainable and renewable, production helps to address slurry and manure management in farms and provide consumers with lower priced energy. Digestate leftovers from fuel, heat and electricity production replace mineral fertilizers in agriculture.
Infrastructure
The upstream key partnerships include cooperation with farmers who are main biomass providers. In several cases, the farms providing the biomass were related companies. Relationships with operators of gas stations, owners of electricity infrastructure and district heating providers is required. Other partners include substrate and technology suppliers, financial capital providers. Municipal authorities setting requirements for construction of facilities, biogas use have considerable impact on the planning, infrastructure development and access.
Key activities are processing activities, starting with acquisition of cattle manure and maize silage from own production and other farmers, supply and storage of own and purchased/collected substrates, and preparation of slurry, silage and manure, production of biogas, heat and electricity. Main activities also include distributing heat and electricity, cleaning raw biogas into biomethane and compression of biomethane and transportation to gas stations and industrial consumers.
The tangible key resources are raw material (slurry, silage and manure), biogas and biomethane production plants, equipment and technology, incl. collection container, compressing technology, cleaning device, fermenter, gas storage, combined heat and power (CHP) production equipment, digestate storage, equipment and vehicles for storage and transportation. Intangible key resources include staff and the technical and innovation know-how.
Keyword ratings for enterprises in Fuel and Electricity from Biogas Business Model type
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Customer interface
The enterprises established their customer relationships via operators of gas stations, electricity energy suppliers and industrial consumers. Gas stations are automated self-service stations. Personal direct sales are used for certain industrial customers and for selling digestate.
The customer segments included electricity and heating companies that provide respective infrastructure and energy suppliers. Other customers include industry and transportation companies. The end users of the products are persons using biogas powered vehicles, local residents buying directly their electricity and heating in some cases, industrial consumers that use biomethane to replace natural gas, and agricultural producers using digestate.
The distribution channels depend on connection with existing electricity grid, heating network and fuel stations. Enterprises use their own filling stations and sell through channels owned by other actors.
Business Model Canvas for Fuel and Electricity from Biogas Business Model type
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Key partners Farmers Gas filling stations Electric grid owners Technology suppliers Municipal authorities Financial capital and services providers |
Key activities Collection and preparation of slurry, silage and manure Procurement of biomass Production of biogas Distribution Marketing and sales of biogas |
Value propositions Biogas from agricultural wastes for fuel and electricity Digestate as biofertilizer for farming |
Customer relationships Automated self-service stations Personal direct sales |
Customer segments B2B, B2C Biogas Industry Regional public transportation companies Electricity and heating companies Users of CNG vehicles Local residents using heating and electricity Digestate Farmers |
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Key resources Raw material (slurry, manure, silage) Biogas production plant Distribution network Equipment and technology Staff Know-how |
Channels Own filling stations CNG filling stations of other intermediaries Natural gas pipelines Local heating infrastructure Local electricity infrastructure |
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Cost structure Investment into biogas plant Equipment and technology costs Production costs Maintenance costs Distribution costs Labour costs Environmental taxes |
Revenue streams Biomethane sales Government subsidies Sales of digestate as biofertilizer Cost reduction from waste utilization |
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Financial viability
The cost structure included investment in to equipment and technology and construction of biogas plant, biogas and other production costs, maintenance costs of the CHP equipment, transportation costs, personnel costs, and certain activities were also subject to environmental taxation in some countries.
The revenue stream comes from the sale of products (gas, electricity and heat), subsidies for renewable energy production, sales of the digestate and cost reduction on fertilisers used in own farm, income from better utilisation of waste and raw materials.
Socio-economic aspects and novelty
A notable environmental and social aspect of these businesses is the reduction of odour pollution in the local community. Digestate or high-quality fertilizer, a by-product of biogas production, is used to fertilize arable land instead of raw manure, thus supporting development of more circular production. The environmental benefits also include waste reduction, use of renewable biomass, increased energy efficiency.
The positive economic impacts for the local communities include employment, facilitation of local entrepreneurship, regionally more balanced development that utilizes local resources and cooperation with local actors (farmers as biomass providers). However, the Business Models of those companies are very policy dependent, as energy policies and their bioenergy targets and related measures on investment subsidies for biogas plants have affected the investments into biogas plants and related gas distribution infrastructure. The companies in this type were mostly specialised to biogas production, although in some cases the slurry provider was a sister company in the same corporate group.
Novelty of this Business Model is relatively low and it is easily transferable but dependent on regulations and investment policies.
Other related Business Models
Archetype of replacement of fossil fuels with bio-based fuels includes Business Models focusing in substitution of fossil energy with solid, gaseous and liquid bio-fuels for energy production. This archetype was formed from five Business Model types that included Business Models of producers of biofuels and energy companies using biofuels and Business Models with various combination of those activities. Four of those types represent incremental innovations and easily transferable Business Models. In case of converting fossil-fuel based energy production into bioresource based production, Business Model innovation lies in required changes in Business Model elements such as key relationships, key activities, and key resources in order to update their value proposition. Side streams of new activities require identification of new customer segments and channels for reaching them. The archetype also includes more complex knowledge intensive Business Models focusing on innovation in bio-chemistry that have high potential for creating radical product and process innovations and new markets for their biomass use.
Model 1: Heat and Fuel from Woody Biomass
Model 3: District Heating and Electricity from Various Biomass Sources
Model 4: Specialized Heat and Electricity Production and Services
Model 5: Innovation in Novel Fuels and Bio-chemicals