Straw Pellets for Heat Supply in the Countryside: Economic, Environmental and Circular Economic Indicators

Abstract

The country settlements of Ukraine use primarily natural gas for heating. Last year there was a drastic rise in natural gas prices. It burdens the budget of village councils. This state forces the local authorities to look for alternative energy resources. Currently, in Ukraine, large amounts of agricultural residues are left in the field. They can be used for heat generation. That is why the purpose of this paper is to make an assessment of economic viability for substitution of natural gas by straw pellet production and utilization. Renewable energy is a pillar of the circular economy. The circular economy is an alternative to the linear economy in solving global issues. This study determines some indicators which are improved by the straw-based heat supply system in the countryside. We have made a feasibility analysis (economic, energy, environmental, and sensitivity) for pellet heat supply in the Shevchenkovo village council (Mykolaiv province, Ukraine). Investment and operating costs were estimated at a pellet plant capacity of 590.27 t (annual pellet demand). Feedstock (straw) is the largest component (34.71%) in the production costs structure. The current energy prices at EUR37.98/GJ for natural gas and EUR11.98/GJ for straw pellets are favorable for biomass pellets to be competitive. The calculated straw pellet production cost is EUR172.87/t. The simple payback period is less than one year. Sensitivity analyses have shown that the project is most sensitive to investment costs and natural gas prices.