An Emission-Free Future. Costs? Strategies?

As part of the Climate Protection Program 2030, the previous German government established CO₂ pricing for fossil fuels. This pricing has applied since 2021 and will increase each year at a fixed rate until 2025. What costs can breweries and malt houses expect as a result? Authors Matthias Kern and Georg Schu of the Ingenieurbüro für Energie- und Umwelttechnik (Engineering Office for Energy and Environmental Technology) illustrate strategies for reducing costs.

Pricing for fossil fuels

Energy-intensive companies like breweries and malt houses are directly affected by CO₂ pricing. It is essential for companies to be aware of the cost increases expected in the coming years and find solutions for reducing these costs – while at the same time improving their own environmental balance statement.

Trend of CO₂ costs

In 2021, companies were charged €25 per tonne of CO₂ emissions. Bearing in mind the specific emission factor for natural gas, its use resulted in a cost of about 0.5 cents/kWh.

As a result, a brewery with an annual fuel consumption of 5 million kWh, for example, was subject to a cost increase of about €25,000. The use of light heating oil (which has a higher specific emission factor) would have resulted in a cost increase of around €33,000. And CO₂ pricing continues to increase each year. For 2022, the price is already at €30/tonne; in 2025, it will reach €55/tonne.

In the example mentioned above, in 2025, the cost increase would reach about €55,000 (natural gas) or €73,000 (heating oil). Simply switching from extra light heating oil to the slightly more climate-friendly natural gas would pay for itself with the associated CO₂ tax savings.

After 2025, pollution permits will have to be purchased at auction. With the change in government and stricter climate goals, further price increases are likely. It remains to be seen if and to what extent relief (for example, a reduction of the EEG levy) will ease the situation.

Estimating overall emissions

Based on statistical data, it is possible to estimate and project the specific and absolute cost increases for breweries of different sizes. Compared to 2019 (2020 and 2021 were outliers), a good 1,550 German breweries produced more than 86 million hl of beer. Nearly 75 percent of this beer production came from breweries with an annual output of more than 500,000 hl. In total, these breweries require around 2.2 TWh of heat and 1.0 TWh of electricity per year. Assuming, for the sake of simplicity, that all companies are supplied with natural gas and that the German electricity mix applies to the electricity consumed (0.408 t CO₂/MWh 2019), this would result in yearly CO₂ emissions of around 445,000 tonnes (natural gas) or 413,000 tonnes (electricity) for German breweries. Total CO₂ emissions would therefore reach more than 850,000 tonnes per year. Emissions also result from refrigerant losses and fuel consumption. Upstream and downstream processes are not taken into account in this assessment.

Brewery-specific cost increases

If these brewery companies are split into different emission classes and statistical demand values for the individual company sizes are applied, companies can use the resulting curves to estimate both their specific and their absolute cost increases from CO₂ pricing in 2021 and 2025. One thing stands out: The higher the production, the lower the specific cost increases (Photo 1). A brewery with an annual output of around 10,000 hl can expect cost increases of around 75 cents/hl in 2025, while the cost increases for a brewery that produces 1 million hl per year will be just 23 cents/hl. In absolute terms, a large brewery will of course pay more for its CO₂ emissions, but here too the curve levels out (Photo 2). The company that produces 10,000 hl per year can expect a four-figure fee, while the large brewery (1 million hl per year) will pay more than €200,000 per year.

CO₂ footprint

The cost increases from CO₂ pricing are not the only relevant matter here. Of course, the goal should be to achieve long-term climate neutrality. It is therefore important for companies to reduce their energy consumption in the long term. To do this, they must first know the current state of their company. CO₂ footprint models are the perfect tool for this job. A company can determine its climate footprint using nationally and internationally recognized standards – resulting in both an absolute and a specific value (for example, in kg CO₂/hl).

Globally recognized standards, such as the DIN EN ISO 14064 or the Greenhouse Gas Protocol, have been developed by the World Resources Institute and the World Business Council for Sustainable Development. These split the scope of the emissions to be assessed into three categories – scopes 1, 2 and 3 (Photo 3).

Scope 1 comprises all the emissions that result from the company itself. Essentially, these are emissions from burning fuel and from refrigerant losses. Scope 2 incorporates emissions from outside the company due to energy conversion, such as emissions from purchased external energy or district heating. Scope 3 factors the entire upstream and downstream value chain into the overall picture. Companies must always include scopes 1 and 2 on their balance sheet – in line with the official standard. This is also required for certifications and similar procedures. Scope 3 is carried out on a voluntary basis, as producing a complete overview can be extremely time-consuming. However, it can certainly be useful to perform a detailed analysis of areas that are particularly relevant to the company.

Funding opportunities

From concept to action plan

As part of this concept, companies need to create a model of their CO₂ footprint and conduct a detailed evaluation of the current state of their energy usage. Ultimately, a company will determine a specific goal to reduce greenhouse gases by at least 40 percent over a 10-year period. Another element of the concept is the formulation of a greenhouse gas neutrality goal by no later than 2045. This element then serves as the basis for an action plan to achieve the goals outlined and transform the company from its current energy usage state to its target state.

Detailed development of at least one concrete measure as part of the energy-saving concept is as integral as the anchoring the transformation concept in the company structure. Other items can also be considered, such as risk and reward assessment or comparison of alternative courses of action.

Incurred energy consulting costs are not the only costs eligible for funding – costs for legal and financing advice, as well as other necessary services, are also eligible. It is also possible to receive funding for taking measurements and collecting data. Small and medium-sized enterprises (SMEs) can receive 60 percent funding for transformation concepts. Non-SMEs receive 50 percent funding up to a maximum contribution of €80,000.

The path to climate neutrality

A long-term strategy should serve as a common thread that orients the company throughout the intended implementation period. Generally, companies should first determine their existing savings potential and implement the necessary measures to make use of it. This will primarily enable them to obtain fuel savings.

It should be noted that there are large grants available through various funding programs for investment in energy-saving measures. Often the extent of the funding depends on the level of CO₂ savings that can be attained. Listed energy-efficiency experts can lend support, both by selecting an appropriate program and by calculating the level of funding.

For example, a company could reduce its supply of external energy by using energy-generation systems (photovoltaics). A combined heat and power system can also improve a company’s carbon footprint. When selecting fuel for generating steam or high-pressure hot water, it is possible to use renewable raw materials, such as woodchips. However, natural gas can also be a useful transitional technology. The regenerative share of the natural gas network will continue to increase in the coming years thanks to the admixture of biogas, hydrogen and synthetic methane.

In the long term, hydrogen-based technologies will play an increasingly significant role. Purchasing green energy should be considered as a last resort to compensate for unavoidable emissions.

Summary

In the future, companies can expect considerable price increases in their energy supply owing to various factors. The CO₂ pricing of fossil fuels will also play a meaningful role. To counteract these price increases and achieve the goal of greenhouse gas neutrality, a useful long-term strategy is essential for industrial companies. With a company’s current energy usage status (determined, for example, by modeling its CO₂ footprint) as a basis, it is possible to develop appropriate concepts that outline concrete measures. Support is available in the form of various funding programs. In addition to the support for investments in energy-saving measures, transformation concepts can also be heavily subsidized.

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Would you like to find out about current trends on the beverage market and exchange professional information? Then we invite you to take part in the next drinktec, which will be held in Munich from September 12 to 16, 2022.

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