Modelling regional input markets with numerous processing plants: The case of green maize for biogas production in Germany

The location of first generation processing plants for biogas using bulky inputs is a prominent example of locational decisions of plants that face high per unit transport costs of feedstock and simultaneously depend to a large extent on feedstock availability. Modelling the resulting regional feedstock markets then requires a spatially explicit representation of demand. With production capacities of plants small in comparison to market size, large numbers of possible type-location combinations need to be considered, requiring considerable computation time under existing integer programming-based approaches. Therefore, in this paper we aim to present an alternative, faster and more flexible iterative solution approach to simulate location decisions for processing plants. And with greater flexibility, this approach is able to take into account spatially heterogeneous transport costs depending on total demand. The approach is implemented in a modelling framework for biogas production from green maize in Germany, which currently accounts for ca. five per cent of Germany’s agricultural area. By modifying green maize prices, demand functions are derived and intersected with regional supply functions from an agricultural model to simulate market clearing prices and quantities. The application illustrates that our approach efficiently simulates markets characterised by small-scale demand units and high, spatially heterogeneous transport costs.

► New methodology to simulate locations and sizes for processing plants.
► High flexibility in decision rules to determine large number of type-location combinations.
► Allows us to treat both input and output quantities as endogenous.
► Importance of energy efficiency for market clearing quantities and prices.
► Results under the current policy suggest the erection of mainly medium-size plants.