Cost of Environmental Protection: A Case Study of a Biomass Power Plant in Serbia

Abstract

Biomass power production offers significant potential for the Republic of Serbia, especially for AP Vojvodina, as it is an agricultural area with large quantities of plant residues. However, in order to use these resources sustainably, the price of the produced energy should include the cost related to environmental protection. The aim of this paper is to use the LCC method to determine the cost arising from environmental protection in a biomass power plant. The results show that the investments in equipment for reducing pollution in a biomass power plant of the capacity 1MW accounts for 1.08% of the total investments. Also, the environmental cost accounts for the lowest share in the cost price. If investments are (voluntarily) made in purifier filters, they amount to 1.53 EUR/1,000kWh (1.52% of the total cost). If the investments in filters are excluded from the calculation (as under the existing legislation these filters in Serbia are still not mandatory), then the environmental cost is 0.91 EUR/kWh (only 0.91% of the cost price). Therefore, in financial terms the cost of environmental protection does not pose, as is often assumed, a threat for business of such a plant and socially responsible producers should not try to avoid them.

Keywords

• biomass
• cost internalisation
• life cycle
• economic instruments