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 percent 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.

Heckelei, Thomas
Issue Date:
Jan 07 2011
Publication Type:
Working or Discussion Paper
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Total Pages:
JEL Codes:
Q16; C31; C63
Series Statement:
Agricultural and Resource Economics, Discussion Paper

 Record created 2017-04-01, last modified 2018-01-22

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