Governance for securing feedstock supply of biogas plants

As stocks of fossil fuels become harder to access and exploit worldwide, renewable energies as a sustainable option have entered the limelight in recent years. Bio-energy plays an essential role in the current mix of renewable energy technologies. In Germany, the state fosters insistently biogas technology within the concert of bio-energy options. Literature suggests that long-term stable economic ties with supplying farmers are the pivotal managerial challenge of bio-energy plant operators to secure a constant and competitively priced feedstock supply. Biogas plant operators are generally in a vulnerable position vis-à-vis their suppliers due to their substantial specific capital investment and a rather restricted economically viable catchment area. Transactional uncertainty due to volatile agricultural market prices, changing yield quantities, and unpredictable behaviour of suppliers makes biogas plant operators aim for effective governance. The study aims by means of in-depth interviews to explore how biogas plant operators perceive their specific situation of transactional uncertainty and which instruments (concerning formal and relational contracts) they use for securing stable and constant feedstock supply. Findings indicate that mutually reinforcing interaction of formal contracts, business partnerships, and equity participation with relational contracts proves to be successful in establishing long-term stable feedstock supply. While the specific rural societal culture has an ambiguous impact on governance design, local rootedness of biogas plant operators provide high levels of social capital and thus clearly facilitate the search for effective solutions that satisfy all parties.