A key factor in understanding BMDH development in Austria is the difficult economic situation of farmers, particularly in areas with low tourism and a declining industrial base. The majority of Austrian farmers are also forest owners. Farmers own about half of the Austrian forests and their properties are usually smaller than 40 ha. Thus farmers in areas with low rates of development are eagerly seeking alternative income sources within agriculture and forestry.

During the last 20 years, there has been an oversupply of wood in the market. Meanwhile, wood prices have decreased significantly due to competition with cheap wood imports, periodic crises in the pulp and paper industry and increased use of recycling paper. The substantial decline in wood prices was a major driving force behind BMDH development. This technology offered a chance to add value to wood that was neither suitable for sawmills nor paper production.

Thus, not surprisingly, most BMDH plants in Austria were established in peripheral regions and were motivated by the opportunity to improve local socio­economic conditions. Normally, in places where there are economic opportunities in other sectors such as tourism or industry, the interest in establishing BMDH is low. This is true for most of the western states of Austria.

Still, it is possible to motivate the technology in other socioeconomic contexts for other reasons. There are cases of prosperous tourist villages where BMDH plants were established for reasons such as comfort, local air pollution and prestige. In these cases, more advanced technologies such as flue gas condensation were necessary to prevent any visible emissions which might bother the tourists.

4.2. ECONOMIC ASPECTS OF PLANTS

In practice, the specific investment costs of biomass district heating plants show widely differing values, which depend on local preconditions, planning competence and philosophy, operators etc. The range of costs is from 360€/kW of installed power to 1800€/kW with average values around 850€/kW. The costs of the boiler amount to one-third of the total investment, and the grid another third. Figure 4.3 shows the average contribution of different plant components to the total investment costs of 80 plants investigated.

Figure 4.4 shows the composition of the operational costs of BMDH plants. While data on investment costs were available from most of the 80 plants inves­tigated, many operators did not provide data on operational costs. Thus Figure 4.5 is based on the data of 3 plants only. Nevertheless, it does illustrate well what charac­terizes all plants, that is, the main cost factors in the operational costs of biomass district heating plants are capital costs and fuel costs.

To analyze the role of different factors in the economic performance of a plant, a sensitivity analysis was conducted for the specific case of a 1000 kW plant built in 1995 in the province of Styria. This plant had moderate investment costs of 640 000 €, a short district heating grid of 600 m and a heat production of 1300 MWh per year. The biomass used is a mixture of 25 per cent dry woodchips supplied by farmers (heating value 3400kWh/ton, price 82 €/t) and 75 per cent industrial

wood chips (2800 kWh/ton, 32€/t). The average heat price for customers was 0.063 €/kWh (all prices excluding value added tax). The capital for investment is composed of 15 per cent private capital from the members of the cooperative, 15 per cent connection fees, 35 per cent subsidies and 35 per cent agro-investment loan with 4.5 per cent interest and 15 years payback time. The calculated interest rate for privately invested capital was 4 per cent.

The dynamic model Biowirt commonly used for calculating the economics of BMDH plants was used to analyze how the variation of different parameters affected the amortization time of the project. It turned out that the two most critical factors for the economy of the BMDH are the heat price and the heat sales that can be achieved. A crucial precondition to make the project viable is the readiness of consumers to connect to the district-heating grid and pay a somewhat higher price than for individual heating. This readiness is in fact achievable, as biomass district heating offers significantly enhanced comfort compared to individual heating systems that are frequently in poor conditions in rural areas. Surprisingly, some consulting firms advised operators to sell heat as cheap as possible to increase sales fast — a disastrous proposal when considered in light of the findings of the sensitivity analysis.

Besides enhanced comfort, environmental protection and local self-sufficiency also play a significant role in the motivation of district-heating customers. Economic considerations play neither a central role nor are they consistent. This conclusion is

Insurance,

administration

Personnel

Fuel costs

39°,

Capital costs

43%

Electricity

emphasized by a survey on the opinions and experiences of customers in different villages. The survey showed no consistent relationship between the economic evaluation of BMDH by consumers and the actual heat prices paid (which differed by more than 20 per cent).

4.3. THE SOCIOCULTURAL CONTEXT

A major barrier found particularly early in the innovation process was distrust of the new technology. Will it work? What will be its impact on village life? Who is going to profit from the project? These were some of the questions usually discussed for months at the village inns. Conflicts have been observed in the majority of villages where plants were installed and these were often rather serious. Figure 4.5 illustrates the level of resistance observed.

Such mistrust of new technology is by no means unusual and is often observed regardless of the type of innovation and specific context. It has to do with the cultural integrity of a society. Thus it is not simply an individual phenomenon, but also a social one. Rational economic and technical considerations will only serve to create trust if they both symbolically and factually converge with the social meaning accepted by the majority of the society affected.

Since the 1950s, rural communities in Austria have experienced the profound impacts of technical innovations in agriculture that not only completely changed the way agriculture was conducted but also changed the rural culture. New forms of life and increasing economic pressure on farmers led to social disintegration and a feeling of meaninglessness in many places. The result is suspicion regarding any form of innovation that can possibly change further or destroy local cultural habits. Parallel to that, there is a genuine desire to support initiatives that may bring new hope for rural development. The tension between these two dispositions explains the wide spectrum of reactions towards BMDH projects. The full collective support as well as vivid conflicts may be associated with such a project (see Figure 4.5). In most cases, the conflicts could be settled. However, BMDH consultants report of villages where local conflicts caused the cancellation of projects.

Two basic categories of conflicts could be distinguished in the Austrian case. The first one is related with the so-called syndrome of acquired depression that seems to be related to the general cultural and social disintegration of rural areas as mentioned earlier[6]. The retraction of the village economy, often combined with a long-lasting autocratic local political elite, may lead to a total apathy of the population. People have lost all hope for a better future. An innovative project not only challenges this depressed attitude but perhaps also the ruling elite. The typical attitude in such a village is distrust and rivalry. Under these conditions, the main arguments against a BMDH project are irrational or pseudoeconomic.

The second type of conflict is related to the NIMBY Syndrome (i. e. Not-in-my — backyard Syndrome). BMDH is nice for everybody except those who live close to the chimney and fear to be bothered by smoke or noise. This type of conflict appears quite often in places with many new settlers, usually upper class residents from urban areas seeking unspoiled nature in the countryside. These settlers are usually well organized and try to use rational or even scientific arguments to stop the project.

It is of central importance for a BMDH project that conflicts are properly and timely addressed to avoid unnecessary costs. We found that the average investment costs for plants meeting strong or very strong resistance were 30 per cent higher than for plants with no resistance. Cost increases were caused, for instance, by the necessity to change the location of the project or due to extra requirements for licensing. Lower heat sales due to the unwillingness of opponents to connect to the grid may also have a serious economic impact on the project.

The institutions that were managing technology deployment were so geared to deal with economic and technical questions that they did not address the social aspect of technology introduction adequately. Any systemic management approach needs to take this point as a key issue to avoid economic inefficiencies and limited diffusion of the technology. It is quite possible that many villages, potentially suited to receive the technology, were lost due to mismanagement of local conflicts.

This serves to explain the early decline in the rate of establishment of new BMDH systems.