Analysis of subsidy for biogas plants' commercialized concentrated biogas supply on breeding farms

Abstract: The high construction cost of biogas project on China's breeding farms and the low direct economic effect severely impede the commercialization of concentrated biogas supply. At present, there are no feasible subsidy policies such as subsidy for raw materials and end product or tax reduction despite the fact that subsidy is the effective way for biogas project investment and operation. A number of Chinese scholars study the successful experience of German biogas product subsidy which can improve profit, and propose changing the existing subsidy method and adding the subsidy content. Yet there are few researches focusing on calculating the price subsidy standard for biogas project end product. Some scholars propose the subsidy from the perspective of external effectiveness of biogas projects, which is however infeasible because of the difficulty of quantifying social and environmental effect of applying biogas projects. By the method of cost pricing, this article analyzes construction cost, operation cost, and opportunity cost of biogas projects of various sizes. The advantage of this analysis is the convenience of collecting cost data and the feasibility. When the biogas project supplies for 100 households, per capita investment is 17900 yuan/household, and when the biogas project supplies for 1 500 households, per capita investment reaches 4 100 yuan/household. According to the U-shaped curve of average cost, when supplying for more than 800 households, the concentrated biogas supply project is the optimum. This indicates that the concentrated biogas supply projects comply with the rule that the cost decreases when the project size goes up. By analyzing biogas supply cost, it is found that the change range falls into 3 different stages. When supplying for less than 200 households, the cost decreases at a sharp rate with the expansion of size. When supplying for 200-800 households, the cost goes down at a slower rate. And when supplying for more than 800 households, especially 1 000 households, the biogas supply cost curve approaches a line, demonstrating that it reaches the optimum point of biogas supply size. Thus, a subsidy price is calculated based on supply cost: subsidy price is 4.73 yuan/m3 when supplying for 100 households; 2.98 yuan/m3 for 200 households; 1.63 yuan/m3 for 800 households; 1.51 yuan/m3 for 1000 households; and 1.42 yuan/m3 for 1 500 households. By this way, this article estimates the supply cost of biogas projects with various supply scales, and calculates a subsidy criterion for biogas projects with varied biogas supply scales on breeding farms. Small supply capacity requires high subsidy cost, whereas large supply capacity requires low subsidy. Consequently, a subsidy criterion is put forward and a subsidy method is suggested: A combination of enhancing the government subsidy before the project and the subsidy for the users. This subsidy criterion provides the advice for the government, which is beneficial to motivating enterprises to establish the profit earning model of concentrated supply of biogas project and improving the commercial and sustainable operation of concentrated biogas supply projects. Therefore, it has important meaning for the appropriate upgrading of biogas projects of breeding farms.