CHP or Biofuel Production in Europe?

In this study, the opportunity to invest in combined heat and power (CHP) plants and second-generation biofuel production plants in Europe is investigated. To determine the number and type of production plants, a mixed integer linear model is used, based on minimization of the total cost of the whole supply chain. Different policy scenarios are studied with varying values of carbon cost and biofuel support. The study focuses on the type of technology to invest in and the CO2 emission substitution potential, at constant energy prices. The CHP plants and the biofuel production plants are competing for the same feedstock (forest biomass), which is available in limited quantities. The results show that CHP plants are preferred over biofuel production plants at high carbon costs (over 50 EUR/tCO2) and low biofuel support (below 10 EUR/GJ), whereas more biofuel production plants would be set up at high biofuel support (over 15 EUR/GJ), irrespective of the carbon cost. Regarding the CO2 emission substitution potential, the highest potential can be reached at a high carbon cost and low biofuel support. It is concluded that there is a potential conflict of interest between policies promoting increased use of biofuels, and policies aiming at decreased CO2 emissions.