Cooperation Challenges of Developing Centralized Biogas Plant in China

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Cooperation Challenges of Developing Centralized Biogas Plant in China ‐A Material Flow Management Approach Dr. Hongyan Lu Department of Environmental Science and Engineering, Sustainability Research and Education Center Sichuan University Wangjiang Road No. 29610065 Chengdu, China Email: redbird66@gmail.com

Dr. Jiong Yan* (corresponding author) Department of Environmental Science and Engineering, Sustainability Research and Education Center Sichuan University Wangjiang Road No. 29610065 Chengdu, China Email: yanjiong99@gmail.com

Dr. Bing Xue Institute of Applied Ecology, China Academy of Sciences Xuebing.China@yahoo.com.cn

Prof. Dr. Peter Heck Institute for Applied Material Flow Management University of Applied Sciences Trier, Germany p.heck@umwelt‐campus.de Abstract Biogas industry has been undergoing a rapid growth in China for the sake of generating renewable energy and protecting environment and climate in China. But the development of centralized biogas plants is still in the very beginning phase and little experience is gained regarding opportunities and challenges for realizing the centralised biogas plants in China. The study applies stakeholder oriented material flow management methods to analyze a pioneering centralised biogas plant in Yangling. It can be shown that the centralised biogas plant will have a good contribution to production of renewable energy, protection of local environment and global climate as well as recycling of manures slurry. The obstacles for realization of the CBP Yangling mainly concentrate on stakeholder cooperation challenges. One challenge exists between the livestock farms and the investment company of the centralised biogas plant in Yangling and another one is between the investment company of the centralised biogas plant in Yangling and the German biogas technology company. Further analysis demonstrates that the direct stakeholder cooperation challenges in material flow system are mainly affected by the lack of coordination among the indirect stakeholders‐ national and local governments, who regulate the relevant policies and actions. Therefore, current policies, such as biogas plant subsidy policies and environmental protection

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enforcements, need to be improved to better cultivate development of the biogas industry.

Keywords Centralized Biogas Plant; Stakeholder; Intensive Livestock Farm; Material Flow Management; Large and Middle Size Biogas Plant

Introduction Biogas industry development in China has featured with household biogas and middle and large‐scale biogas projects over the past sixty years. Development of household biogas digesters started in the 1950s in rural China [Li and Xue 2010]. It aimed at protecting rural sanitation, clean energy for cooking and nutrient cycling for vegetable and fruit farms. In addition to household biogas digesters, large and medium‐scale biogas projects (LMBP) have also been increased quickly over the past 10 years, as the results of rapid growth of intensive livestock farming in China. The rapid growth of LMBP is mainly driven by government capital input and pollution control requirements for livestock farms. According to the biogas project standards issued by China Ministry of Agriculture, large‐scale biogas projects refer to those for which the net volume of digesters is upwards

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1000m3, while the net volume of medium‐scale projects is 100‐1000 m3 [CMA 2008]. During the 11th Five Year Development Plan (2006‐2010), China Ministry of Agriculture (CMA) has supported about 23 million new household biogas digesters and 4,000 new LMBP [CMA 2007]. 16 billion Yuan (~€1.85 billion) has been invested by the ministry to support LMBP and household biogas during 2006 to 2009 [Hao 2010].

The capital input from the government covered more than 50% of the total construction investment of LMBP [CMA 2009].

Such a development model driven by the government, though successfully promotes establishment and expansion of LMBP, it also brings forth challenges in operation and market phases, such as low gas productivity, inefficient use of clean energy and poor profitability. In China, 500KW installed electricity capacity is the minimum requirement by the grid companies to let biogas produce electricity connected to the grid [ADB 2009]. LMBP is the typical decentralized biogas project model which is owned and operated by the livestock farm itself and only treats organic residues from own farm. Due to the relatively small sizes of LMBP, the quantity of biogas produced by LMBP does not meet the required scale of 500KW installed electricity capacity. For most LMBP, the incomes from selling the biogas or biogas converted energy are very limited. So the efficiency of biogas yields has no strong influence on the profitability of an LMBP. As a result, reduction of investment and saving of operating costs become more important for the developer of an LMBP, which in turn worsens the efficiency and profitability of the LMBP. By the end of 2007, a survey of 172 LMBP in Fujian province, a southeast China region demonstrated that about 81% of the projects only used lower than 30% of the produced biogas and most of biogas was emitted into air. LMBP often stop operation to save cost [Xu et.al. 2010].

To tackle the drawbacks of LMBP, centralized biogas plant (CBP) is considered as an alternative. In European countries such as Denmark and Germany, the centralized biogas plants have been developed since 1980s and proved to be economically viable [Kurt 2002, Weiland 2003]. They have just started to be constructed in China in the past few years. One advantage of developing CBP in China is that the scale of a CBP at least reaches the minimum requirement for selling electricity to the grid. In addition, CBP has two important features different from an LMBP. The first feature is on the input side. It co‐digests mainly

manure from different livestock farms, together with other organic waste from households and food market, kitchen waste of restaurants and organic residues of food processing enterprises. CBP needs to organize or buy substrates from other suppliers. The second feature relates to its production. CBP has higher gas productivity than LMBP and its products include grid‐ connected electricity or bio‐methane extracted from biogas, heat from cogeneration, and organic fertilizer from digester. The greater energy efficiency and variety of products provides CBP a more stable profitability.

CBP faces challenges as well because they requires higher investment, more advanced technology and more complicated stakeholder cooperation than LMBPs. This article aims to analyze the stakeholder cooperation challenges for establishing centralized biogas plants using a case study in Yangling, Shaanxi Province, China. Analysis of the potential problems as well as reasons, policy impacts, and suggestions regarding the existing cooperation challenges along the value added chain of building a CBP in Yangling is discussed.

Methodology Material Flow Management The methodology applied in our study combines material flow management (MFM) with a structural selection of relevant stakeholders. MFM has become an increasingly useful tool for optimizing material and energy flows at a company/region/nation level [Ackerman 2005, Binder et.al. 2004, Lang et.al. 2006, Kytzia et.al. 2004, Wagner and Enzler 2006]. It was defined by the Enquete‐Commission of the German Bundestag as “management of material flows by the involved stakeholders refers to the objective‐oriented, responsible, integrated and efficient controlling of material systems, with the objectives arising from both the economic and ecological sector and with the inclusion of social aspects…” [EKSMUDB 1992]. MFM aims to make responsible, integrated and efficient influence on material flow systems towards the optimization of the economic, ecological and social aspects of the material flow system. But stakeholder cooperation is often the challenge for MFM due to the complexity of stakeholders’ constraint, motivation, expertise and power. Stakeholder analysis and involvement are therefore integrated into the key procedures of MFM (Fig. 1).

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FIG. 1 MAIN WORKING PROCEDURES OF MATERIAL FLOW MANAGEMENT IN YANGLING

In our study, the stakeholders involved into material flow management are examined and divided into two categories [Wagner and Enzler 2006]: Direct material flow stakeholders refer to those who directly manage the material flows and/or have a direct influence on the material flows.

Indirect material flow stakeholders have only indirectly impacts on the material flows by, e.g., “setting up the general framework conditions for the respective value‐added chain” [Wagner and Enzler 2006].

Fig. 1 demonstrates 8 major working procedures of MFM in Yangling. In the first procedure (P1), the value‐added chain of CBP in Yangling is defined as the system boundary of MFM. The goal of MFM is to optimize material flows and stakeholders cooperation of Yangling CBP. Five different questionnaires are designed based on MFM principles to collect material flows information about livestock farms, vegetable farms, fertilizer companies, local Environment and Sanitation Bureau and landfill administration (P2).

Data collection process will be explained in details in section 2.3 (P3). Based on the first‐round data analysis, present material flow of Yangling organic residues and relevant stakeholders are analyzed (P4). The second‐round data collection is conducted based on the analysis results (P3, P4). The strategy of optimizing the present material flow and the pilot project to establish CBP is designed (P5). Biogas project technology and cooperative partners are identified based on CBP strategy (P6). Economic, ecological and social impacts and outputs of the CBP are analyzed (P7). Stakeholder meetings are held to evaluate and negotiate the development and implementations of the pilot project (P8). Further modifications are made with the inputs of stakeholders. At each procedures of MFM, opportunities and challenges of stakeholder cooperation are examined.

Study Area

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Yangling Agricultural Hi‐tech Industries Demonstration Zone is located in mid‐China, Shangxi province, China. It comprises an area of 94 km2, 160,000 residents and about 95% of the population are farmers [YLRG 2010]. Livestock breeding and farming, and high‐tech agriculture are the leading industries in the region.

Yangling is selected as the study area for three reasons.

Firstly, Yangling has great potential to develop biogas project. In 2008, livestock farming in Yangling reached a scale of 9, 072 cattle, 17,643 pigs, 3,416 sheep and 350,000 poultry. None biogas project was developed to treat livestock farm manure yet. Secondly, Yangling is the only high‐tech agricultural industries demonstration zone in China for research and promoting high‐technologies in the agricultural field.

Yangling government has strong interests to promote biogas project in Yangling for a circular agricultural economy. Third, a Chinese company intended to invest a CBP in Yangling. Therefore, MFM data and stakeholders information are collected based on the real business preparation and negotiation instead of a theoretical circumstance.

Data Collection From April to June 2008, a full sample investigation regarding material flows was carried out.

Questionnaires of material flow analysis were collected from all farms within 12 km of the planned biogas plant, including 29 livestock farms, 8 vegetables farms and 1 fertilizer company. In addition, Yangling Environment and Sanitation Bureau and Yangling Landfill Management Center were also interviewed. In May 2008, further on‐site visits and interviews were made to 5 livestock farms, 2 vegetable farms, 3 fertilizer companies, 2 schools, 1 residential community management center, Yangling Landfill, Yangling Environmental Bureau, Yangling Waste Management Bureau, Yangling Agricultural Bureau, Yangling Sanitation Bureau and Yangling

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Development and Reform Bureau. Data from questionnaire survey were further confirmed during the site visits and interviews. According to the results of material flow analysis in Yangling, a German company provided a technical design of the CBP in Yangling under the investment request of the Chinese company. The technical design was finished in 2008 and the business contract for know‐how transfer from the German company and the Chinese company was negotiated.

In May 2008, October 2009 and May 2010 three stakeholder meetings were organized for CBP cooperation. Participants include potential investor, local fertilizer company, local government authorities, grid company, owners of livestock farms and vegetable farms.

Result and Discussion Material Flow Analysis of the CBP in Yangling The CBP Yangling was designed to locate in Dazhai County, nearby 21 livestock farms, the middle school and elemental school of Dazhai County. The CBP Yangling will have the installed electricity capacity of 1 MW. Material flow system of the CBP Yangling includes three parts as shown in Fig. 2. Part I is the process of collecting co‐substrate. Part II is anaerobic digestion, combined heat and power generation and the digestate processing. Part III is utilization of products.

As presented in Part I, input materials are from 21 livestock farms, including 16 cow farms, 4 pig farms and 1 sheep farm. The total manure is 45,444 ton per year with 25.5% of dry matter, of which 43,161 tons are cattle manures, 1,188 tons pig manures and 1,095 tons sheep manures. Around 95% of the inputs are cattle

manures. Among the 21 livestock farms, 12 are located within 5km from the planned Yangling CBP, 7 are within 10km and 2 are 11.1 km away. Road conditions among the farms are convenient for transportation (asphalt or concrete pavement).

Part II is the technical core of the Yangling CBP. It turns manures into biogas and organic fertilizer.

Furthermore, it converts biogas into electricity and heat. A Germany company was invited to make the technical design of Part II. The total investment is estimated 2.3 million EUR (based on European price).

At Yangling CBP, one anaerobic digester (AD) is designed with the net volume of 3200 m3 (diameter 27meter, height 6 meter). Biogas output is calculated about 4 million Nm3 (55% CH4). Biogas will be cleaned and stored in a biogas holder of 500m3. Combined heat and power unit of the CBP Yangling will expect up to a 40% of electricity converting efficiency and 42% of heat recovery efficiency. The theoretical output of electricity is 8,932,305 kWh/a, and the heat output is 9,378,919 kWh/a. The installed capacity is 1.02 MW of electricity and 1.07 MW of heat. The electricity demand of operating the CBP Yangling will be about 6% of the total generated electricity and heat demand is about 10% of the total produced heat. At Part II, besides biogas generation, the anaerobic digesting process will also produce digested residues, called digestate. Digestate could be used as organic fertilizer.

The nutrient content of digestate is estimated about 2.4 kg/m3 NH4‐N. The CBP Yangling will produce 50,252 t/a (15.2% DM) digestate. After the dewatering process, digestate is separated into solid and liquid parts, which is 21,666 tons solid digestate (30% DM) and 28,586 tons liquid digestate (4% DM). Among the total liquid digestate, 10,000 t/a will be circulated into the anaerobic digestion process.

FIG. 2 MATERIAL FLOW SYSTEM OF THE CENTRALIZED BIOGAS PLANT (CBP) IN YANGLING

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Part III is the economic and ecological core of the material flow system for Yangling CBP. Five types of products will be generated according to the design of the Yangling CBP. Electricity is planned to be sold to the electricity grid according to renewable energy law of China. Heat will be sold to Dazhai elementary and middle schools, as well as the surrounding households.

The solid organic fertilizer would be sold to a local organic fertilizer company. The liquid organic fertilizer would be delivered to local fruits and vegetables farms by the same organic fertilizer company. For the CBP Yangling project, the total amount of greenhouse gas emission reduction will be 10,772 t CO2‐eq, calculated by the Clean Development Mechanism (CDM) methodology ACM0010.

Overview of Stakeholder Cooperation Relationships of the Yangling CBP Designing and calculating the material flow system for the CBP Yangling only demonstrate economic and ecological feasibility of the Yangling CBP. Whether the CBP can be realized and operated with sustainability or not, to a great degree, depends on the stakeholder cooperation along the material flows through Part I, II and III. By examining the material flows of the Yangling CBP, 7 stakeholder cooperation relationships are identified and demonstrated in Fig. 3. The direct cooperation is expected among: 

Relationship 1: 21 livestock farms and the manure collector

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Relationship 2: manure collector and CBP investors

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Relationship 3: CBP investors and CBP engineering company

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Relationship 4: investors and electricity grid operator

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Relationship 5: investors and heat customers

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Relationship 6: investors and organic fertilizer company

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Relationship 7: organic fertilizer company and fertilizer customers

Among the 7 stakeholder cooperation relationships, relationships 4, 5, 6 and 7 are in good conditions to reach the final cooperation. For relationship 4, Northwest Grid Power Company declared to accept electricity produced by renewable energy projects with the installed electricity capacity above the minimum level of 500KW, which will apply to the CBP Yangling too. According to the China’s Renewable Energy Law, the electricity tariff is 0.6 RMB/kWh (~ €0.07/kWh). For relationship 5, heat will be supplied to the schools and households through the local heat supply company. The heat company is one of the branch companies of the investor company. The foreseeable cooperation and business complement between the CBP Yangling and the heat company is one reason why the investor company started Yangling CBP. For relationship 6, a local fertilizer company in Yangling has basically agreed to buy the solid digestate and distribute the liquid digestate produced by the Yangling CBP, because the company has being expanded production capacity and will use the solid digestate as raw material. The solid organic fertilizer will be paid in the price of 600RMB/ton. Eight vegetable and fruit farms in Yangling would like to use liquid digestate as fertilizer. But they would not like to pay for liquid digestate but only covering transportation cost.

FIG. 3 STAKEHOLDER COOPERATION RELATIONSHIP OF YANGLING CBP

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As for relationships 1, 2 and 3, cooperation agreements are not reached yet among the stakeholders. These relationships contain the biggest challenges for realizing Yangling CBP. Section 3.3 gives an in‐depth analysis of the cooperation challenges.

Except for these stakeholders who are directly involved into material flows from part I to part III, there are also indirect stakeholders outside of the CBP Yangling material flow system, which includes Ministry of Agriculture, Ministry of Environmental Protection and National Development & Reform Commission, provincial and local agricultural bureaus, environmental protection bureaus, and development and reform commissions. Cooperation relationships 1 to 7 are significantly shaped and influenced by the policies, regulations and actions implemented by these national and local governments. Section 3.4 will focus on the impacts of the policies and regulations.

Cooperation Challenges of the CBP Yangling among Direct Stakeholders 1) Cooperation Challenges of Manure Collection and Supply As shown in Fig. 3, relationship 1 is to develop cooperation for collecting manures, while relationship 2 links part I and II to supply manure slurry to Yangling CBP. During interviews and stakeholder meetings, two major challenges emerge, which hinders establishment of manure slurry collection and supply system for the project.

The first challenge is the potential price increase risk of buying manure slurry. At present, part of the cattle manure could be sold directly to farms nearby as the fertilizer in the price of 35RMB/ton (~€4/ton); the pig manure 20RMB/ton (~€2.3/ton) and the sheep manure 100RMB/ton (~€11.6/ton).

The investor company offers same prices for buying all generated manure slurry from the 21 livestock farms. But the company concerns that the price of manure slurry from the farms will be continually increased once the CBP is established, because the project will rely on manure slurry supply from the farms as the main input raw material. Many biogas project for crop straws in China experienced similar challenges that local farmers raised straw price constantly, which even resulted in stopping operation of the project due to the shortage of the input straws [Chen et.al. 2010].

The second cooperation challenge is related to the first challenge. It is about management structure of

organizing manure slurry to Yangling CBP. In order to get the manure supply in a stable price and suitable collecting process for prevention of animal disease spreading, the investor company of the CBP Yangling asked the local government to take part in the raw material collection and transportation. One proposal is that the local government shall set up a public company to be responsible for delivering manure slurry to the CBP Yangling with an agreed price for certain amount of quantity and quality of manure slurry.

The biogas company would directly buy the manure from the government organized company instead of dealing with 21 livestock farms respectively. An alternative solution was that local government and the biogas company co‐organized a company which would be in charge of manure collection and transportation.

2) Cooperation Challenge of International Technology Transfer For realizing the Yangling CBP, another crucial cooperation challenge is the cooperation model between a German company and the investors of CBP Yangling, identified as relationship 3 at Fig. 3.

The CBP Yangling investor company prefers to use German technology for the engineering design of the Yangling CBP, because the German company has demonstrated the efficiency of its anaerobic digester and the rich experiences of designing and operating CBP. According to the engineering design of the German company for the Yangling CBP, the organic load of the anaerobic digester could be as high as 8.1kg organic dry matter per cubic meter per day. It is about twice higher than the average value achieved by Chinese biogas companies.

The key challenge of the business negotiation focuses on the protection of the intelligent property.

Two different cooperation models were presented

by China and German companies. Establishment of a new Sino‐German joint‐venture was discussed and was given up due to the organization complications. Chinese investor of the CBP Yangling proposed to pay for the engineering service to the Germany Company based on each project conditions. Such project‐based cooperation model is commonly used by many biogas companies in Europe. But the German company didn’t want to deliver its engineering service on project based model in China. Instead, the German company offered to sell its technology license to the

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Chinese company. Technology license cooperation model means Chinese investor of the CBP Yangling will pay the German company certain percentage of total investment for a fixed amount of CBP projects in certain period of time.

The reason that Chinese investor of the CBP Yangling choose project‐based cooperation model is because CBP projects in China are still in the beginning phase. Complexities and challenges to optimize the material flows for CBP projects make it difficult to anticipate how many new CBP projects could be established within a fixed period of time. Therefore, technology license cooperation model contains high economic risks for the investor of CBP Yangling.

The German company prefers to cooperate in the technology license model for the sake of intelligent property protection. With transferring technology know‐how in a project‐based model, the company is concerned of losing their intelligent property in China market.

Cooperation Challenges among Direct Stakeholders Impacted by Policies and Regulations of Indirect Stakeholders 1) Challenges Caused by the Enforcement of Environmental Protection Policies and Regulations The regulations issued by national and local environmental protection bureaus, play a key role in shaping the cooperation willingness between the livestock farms and the investors of Yangling CBP. Currently, the livestock farms in Yangling pay little for storing/dumping manure slurry in the open space, despite serious environmental pollutions caused by the manure slurry. That is why the investor company concerns that the livestock farms may increase manure price continually, because the farms have no economic cost if not treating the manure slurry. Two reasons contribute to the situation. Firstly, although there are 7 laws to regulate pollution emissions from the livestock farms [CMEP 2010], however, the laws on water/air/environmental pollution control have no clear standards regulating livestock farm waste dump and runoff. Secondly, challenges in enforcing existing regulations in rural areas are beyond the capacity of the environmental bureau.

Starting on July 1st, 2010, the implemental standards, “Farmland environmental quality evaluation standards for livestock and poultry

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production” just enters into force [CMEP 2010].

Through the enforcement of regulations on pollution control by the environmental protection bureaus, the livestock farms will have to pay more for pollutions caused by untreated manure slurry.

It will influence the livestock farms not to increase the price of manure slurry as high as they like because the farms will have to consider the treatment costs of manure slurry by themselves if their manure slurry could not be treated by the Yangling CBP. In sum, it shows the better enforcement of environmental protection regulations, the more possibility for the livestock farms to join in the Yangling CBP. 2) Challenges Caused by the Subsidy Policies for Supporting LMBP of Livestock Farms In order to reduce environmental pollution, generate renewable energy and produce organic fertilizer, Chinese governments provide financial subsidy to share construction costs of Livestock farms’ LMBP. These financial subsidies are mainly provided from the central governmental budget and small amount of matching fund shall be provided from the local governmental budget.

Local governmental matching fund is between 5‐ 15% of construction costs. Total governmental financial subsidies normally cover over 50% of total investment and the rest amount should be financed by livestock farms. But governmental budget is not available for every livestock farm.

Among the 21 livestock farms in Yangling CBP, there are 5 cattle farms having over 400 milk cattle, 11 farms having milk cattle from 50 to 399, 3 farms with over 500 pigs and 2 having less than 500 pigs.

According to subsidy policies and feedbacks from local agricultural bureaus and development and reform commission, the 5 cattle farms have better chances to receive the governmental subside for building LMBP. But the other 16 livestock farms are too small and have less chance to receive governmental capital for building their own LMBP. There are two reasons for the livestock farms intended to establish own LMBP: it is easier to evade environmental monitoring conducted by the environmental protection bureaus. It is possible for the livestock farms spend very little or much less amount of own capital than that declared in the report. The other 16 livestock farms, with joining Yangling CBP, will not receive any subsidy for treating manure. Therefore, the benefits among the 21 livestock farms for joining the CBP Yangling are

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different.

In Yangling, till August 2008 there was no LMBP of livestock farms receiving governmental subsidy.

But till August 2010, there are 11 livestock farms in Yangling receiving governmental subsidies to build LMBP at their own livestock farms. This quick growth of LMBP within 2 years was resulted from the rise of Chinese governmental spending for stimulating the economic development of China during the period of international financial crisis.

The more subsidies available from the central governmental budget provides, the more livestock farms could receive from governmental subsidies although they are relatively small ones. But in Yangling, none of the 11 LMBP which have got governmental subsidies over last two years could connect the electricity to the grid. Because all the 11 LMBP could not reach the installed capacity of electricity more than 500KW. According to the feasibility study reports of the 11 LMBP, utilization of biogas is based on two options. One option is to directly sell biogas nearby households or other potential commercial customers. Another option is to produce electricity for own use when it is necessary. These two options of using biogas are not included in the renewable energy law and therefore the incomes of producing biogas are limited when LMBP could not sell electricity to grid. In addition, these two options of using biogas have no excess heat to maintain the all year round stable temperature required by the anaerobic digestion process. Therefore the quantity and quality of biogas produced by LMBP vary among different seasons. It will need additional operation costs to provide the heat demand for LMBP if the operator has to or want to maintain a stable temperature of anaerobic digestion process, which is actually the precondition for a good performance of LMBP. This case is different for CBP which has the combined heat and power generation unit.

Electricity connected to grid and heat could be used for anaerobic digestion process and excess heat could be sold to nearby customers if the location of CBP is selected properly.

Conclusions and Suggestions Material flow analysis of the CBP Yangling shows the project will have a good contribution to production of renewable energy, protection of local environment and global climate and recycling of manures slurry.

According to the economic sensitivity analysis of CBP

Yangling, the period of static investment return will be between 2‐7 years according to the different scenarios for the prices of the electricity, digestate and certified emission reductions [Ifas 2008].

The obstacles for realization of the CBP Yangling mainly concentrate on stakeholder cooperation challenges. One challenge exists between the livestock farms and the investment company of CBP Yangling and another one is between the investment company of CBP Yangling and the German biogas technology company. The two cooperation challenges among the direct stakeholders of the CBP Yangling will also likely take place for other CBP projects in China. Because the challenge of organizing manure slurry from different livestock farms is mainly affected by the lack of coordination among the indirect stakeholders, who regulate the subsidy policies of LMBP, the requirement of connecting electricity from LMBP to grid, and the enforcement of environmental protection regulations. Therefore, the development of CBP is also highly correlated with performances of LMBP. The lack of policies coordination between subsidy policies of Agricultural Ministry and the regulations of connecting electricity to grid should be improved. The governmental subsidies aim to support livestock farms to establish LMBP. But most of the LMBP have less 500KW as the installed electricity capacity. But the regulations of grid companies require minimum 500KW installed electricity capacity to allow the connection of biogas produced electricity to the grid.

Such uncoordinated situation causes two problems: on the one hand, LMBP can hardly sell electricity to the grid, which often results in direct emission of biogas directly into the air, receiving little incomes from producing energy and even ending the operation of LMBP due to poor profitability. On the other hand, CBP faces challenge to organize input materials and cooperation with the large and middle size livestock farms, because the livestock farms prefer to build their own LMBP with governmental subsides. So the regulation on the minimum requirement of 500KW should be redefined. It will require further researches to define the requirements of connection electricity of LMBP to grid.

The governmental subsidies for supporting LMBP of livestock farms should be improved. The present subsidies focus on the construction costs sharing instead of the efficiency of LMBP. Once the feasibility report of a biogas project is approved by Development and Reform Bureau, the governmental subsidy is fixed

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according to the calculated total investment. Subsidies will be reimbursed to the livestock farms with the invoices of their expenses. One issue coming along with the construction oriented subsidy system is the livestock farms which have the interests to reduce the engineering and construction costs of LMBP as much as possible, and even spends very little or much less amount of own capital than that written in the feasibility report. The present way of delivering subsidies is successful in promoting the establishment LMBP. But it does not make contributions to the efficiency of the LMBP unless there is a good market demand for the products of LMBP or a good monitoring system to request the performance of LMBP. Therefore, it is highly suggested to improve the enforcement of environmental protection regulations in order to reinforce the monitoring and feedback system about the performance of LMBP. Although Ministry of Environmental Protection and local bureaus have issued many regulations and standards, there is big gap to establish matching function system to enforce the laws, regulations and standards.

Without the strict enforcement of those regulations on pollution control of livestock farms, the proper performance of LMBP will not be concerned by livestock farms because the establishment of LMBP itself has provided a green light as a measure for livestock farms to comply with the environmental protection regulations. If the effective enforcement of environmental protection regulations exists, livestock farms will then compare the costs of proper design, construction and operation of own LMBP and the costs of cooperating with CBP. Up to now, due to the lack of effective enforcement of environmental protection regulations, livestock farms often incline to have own LMBP with governmental subsidies for construction costs.

Improvement of the coordination among the indirect stakeholders is of high importance for the cooperation among the direct stakeholders of CBP projects in China. This improvement is also a crucial need for fulfilling the renewable energy plan of China, which expects that the installed electricity capacity of biogas generated electricity shall reach 3 GW in 2020 from its starting point of 0.3GW in 2005 [NDRC 2007].

ACKNOWLEDGEMENT

The study was co‐funded by Federal Ministry of Education and Research, Germany (FKZ: 0330847A‐H)

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and Ministry of Science and Technology, China (2009DFA32710).

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