Model 3: District Heating and Electricity from Various Biomass Sources
This Business Model type is based on five enterprises that use waste and other various sources of biomass for the production of heat and electricity, and bioethanol (one company). It is set apart from other Business Models as it includes the enterprises that establish their own biomass plantations, but also enterprises that buy a wider variety of the biomass and biowaste for processing and their output is heating and electricity for local districts.
Value proposition
The main value proposition is use of various sources of biowaste and biomass (from slaughterhouses, slurry, manure, silage, maize, beet, etc.) to produce heat, electricity, biogas, digestate and fertilizers for local districts. The enterprises reuse nutrient rich waste, contribute to significant biomass yield improvement on marginal lands and to production of renewable biomass energy at a competitive price.
Infrastructure
The upstream key partnerships include the raw material suppliers (farmers, landowners, and bioethanol plant), technology suppliers. Municipal authorities impact the planning and regulations for the production, and district heat and electric grid owners impact the access to the infrastructure the companies need for the BM to work.
Key activities are connected with establishing the plantations, collection or purchasing the biomass and biowaste, processing activities, selling the electricity and heat. Digestate is separated during processing by screw presses and dried.
The tangible key resources are land for biomass, raw material (biowaste, cattle slurry, whole plants silage, maize, sugar beets, etc.), equipment and technology for production. Staff and intangible key resources such as the technical competence and knowledge are required.
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Customer interface
The enterprises establish their customer relationships by direct contacts, by sales force establishing mostly long-term contractual B2B relationships.
The customer segments included local settlements (heat and electricity for local districts), farms and national electricity distribution network. Farmers are customers for the digestate from the biogas production.
For customer channels, the national distribution grid is used for selling electricity, while heat is sold to the customers by local heat distribution piping. Digestates and fertilizers are delivered by mobile transport. Contacts with customers are created by enterprises’ sales force as well as by intermediaries.
Business Model Canvas for District Heating and Electricity from Various Biomass Sources Business Model type
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Key partners Landowners Farmers Biogas and wastewater treatment plants Technology suppliers Municipal authorities Electric and heat grid owners |
Key activities Establishment of biomass plantations Collection of biomass Procurement of biowaste and biomass Production of heat, electricity, biogas Sales of heat and electricity Sales of digestate |
Value propositions Heat, electricity and biofuels for local area from various sources of biowaste and biomass with utilization of marginal lands Digestate and biofertilizers for local farming |
Customer relationships Personal direct sales |
Customer segments B2B, B2C Heat and electricity Electricity and heating companies Local residents Bioethanol Industry Digestate Farmers |
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Key resources Marginal or infertile land for biomass plantation Raw material (variety of biomass and biowaste) Biogas production plant Equipment and technology Staff Know-how |
Channels Sales force Intermediaries Delivery District heating grid National electric grid |
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Cost structure Land costs Biomass plantation establishment costs Raw material costs Equipment and technology costs Harvesting costs Production costs Maintenance costs Distribution costs Costs of spreading sludge, digestate and biomass ashes Labour costs |
Revenue streams Sales of heat Sales of electricity Sales of bioethanol Sales of digestate Cost reduction from waste management |
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Financial viability
The cost included investment in land, harvesting and processing the biomass, raw materials costs, establishment of biogas plant, technology and equipment, maintenance and transportation costs as well as costs related to dealing with sludge, digestate and biomass ashes, and labour costs.
The revenue stream comes from the sale of products (electricity, heat, digestates and fertilizers).
Socio-economic aspects and novelty
The social benefits of those companies include creation of new jobs in rural areas and development of regional supply chains for heat and electricity, and strengthening rural areas by promoting decentralized bioenergy production plants. The environmental benefits relate to reduction of air and water pollution and waste reduction, development of circular production. The Business Model itself is transferable. The regulation dependence lies in the local and national regulation and policies for heat and electricity grid access, prices and bioenergy targets.
The novelty of companies is at an average level. The novelty lies in incremental changes in production technology and processes. This is illustrated by several Business Cases. The Business Case of Kurana (Case 3.1: Kurana – production of bioethanol, electricity and heat from renewable resources in a closed technological loop – Lithuania) demonstrates a company that was the first company inside EU to connect manufacturing of bioethanol, electricity and thermal energy from renewable energy sources into one closed technological loop. This technological loop produces zero waste plus valuable organic fertilizers that are becoming more and more popular in contemporary farming. The Business Case of 3B Bioenergie (Case 3.2: 3B Bioenergie – energy production and special processing of digestate – Germany) represents biogas producer utilizing novel technological solution for processing digestate.
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 2: Fuel and Electricity from Biogas
Model 4: Specialized Heat and Electricity Production and Services
Model 5: Innovation in Novel Fuels and Bio-chemicals