How do agricultural biogas investments affect Czech farms?

Abstract

The article aims to evaluate the impacts of strategic investments in biogas plants on the economic sustainability and vulnerability of farms with a special focus on investment subsidies. Data spanning 148 farms from the Czech Republic over a thirteen-year period (2004-2016) are used to estimate random effects panel regression models to quantify the short-term and long-term economic sustainability and vulnerability of integrated energy production in the context of mixed type farming. Investments in biogas plants can negatively affect the viability of agricultural companies in the short term because farms which invest in biogas suffer from debt pressures due to inadequate revenues in the construction phase. However, in the long term, the effects of biogas plant operations are positive: economic sustainability is enhanced and vulnerability is reduced mainly due to public support for renewable energy production in the form of feed-in tariffs and green bonuses. Comparing farms that received investment subsidies with nonparticipating farms indicates a high deadweight loss effect which means that programme participants would undertake a similar investment without programme support. However, the investment subsidies improve recipients' cash flows.