A biogas plant has few but large cash flows, many invoices from third parties, and fixed assets that are replaced and renewed over the years. Here, we show how a plant’s bookkeeping is set up so that you can see each month what electricity, heat, and substrate actually bring in and cost.
One plant, many invoices
Unlike in most businesses, the operator of a biogas plant does not invoice a large portion of its revenue directly. The grid operator bills for the amount of electricity fed into the grid; in cases of direct marketing, the direct marketer also issues an invoice. In addition, there are the plant’s own invoices for heat, credit notes for substrate deliveries, and invoices for maintenance and service.
These invoices arrive at different times, often with advance payments and later adjustments. Bookkeeping must allocate them to the correct month so that the report shows what the plant actually generated that month, and not just when the money came in.
EEG payments and direct marketing
How a plant is compensated depends on its age, size, and the provisions of the Renewable Energy Sources Act (EEG) that were in effect when it was commissioned. Older and smaller plants often receive a fixed feed-in tariff from the grid operator. Many plants, on the other hand, sell their electricity through direct marketing.
In direct marketing, a direct marketer sells the electricity on the exchange and pays the operator the market value, minus its commission. In addition, the grid operator pays a market premium that compensates for the difference between the legally stipulated value and the market value. Additional payments may apply for flexibly operated plants.
For accounting purposes, this means there are at least two sources of revenue for the same electricity, which must be recorded separately and reconciled with one another. The quantities on both statements should match. If they differ, this indicates an incorrect or missing statement.
Advance payments, credit notes, and annual settlement
Grid operators usually make monthly advance payments and issue a final settlement later. These settlements often come as a credit note, that is, an invoice that the grid operator issues itself as the recipient of the electricity. Credit notes must contain the details required for an invoice, so check that your master data with the grid operator is correct.
At the end of the year, there are almost always open items: additional payments or refunds from the annual settlement that don’t arrive until months later. Bookkeeping records them as receivables or payables so that the annual financial statements show the correct figures. A list of these open settlements is a great help to the tax advisor.
The payments also depend on reports and supporting documentation, such as registration in the market master data register and the feedstock log. If these are missing, the grid operator may reduce payments. These obligations rest with the operator; however, bookkeeping notices early if the payment for a month is unusually low.
Heat: sales and self-consumption
The waste heat from the combined heat and power plant is often a second source of revenue. It is supplied to neighbors, municipalities, commercial enterprises, or the operator’s own facilities, sometimes via a dedicated local heating network. For these deliveries, the operator issues separate invoices based on meter readings and agreed-upon prices.
A portion of the heat is often used internally, for example for the digester, for drying, or for the operator’s own buildings. The tax advisor assesses whether and how free or discounted heat supplies, for example to shareholders or affiliated businesses, are treated for tax purposes. Bookkeeping makes sure that quantities, customers, and prices are fully documented.
Substrate and affiliated businesses
Liquid manure, solid manure, energy crops, and residual materials are the plant’s raw materials. Many plants source these from local farmers or from affiliated businesses owned by the same family. Digestate is often returned to the same businesses. To ensure transparency regarding which business supplied and received what, deliveries and corresponding payments are recorded separately by supplier.
Energy crops are often purchased in large quantities at harvest time and consumed over several months. This puts a strain on liquidity in the fall and distorts the monthly report when the purchase appears as an expense in a single month. At the end of the year, inventories such as silage must be recorded and valued. The tax advisor handles the valuation; bookkeeping provides the quantities and purchase prices.
Fixed assets and depreciation
A biogas plant consists of many components with varying useful lives: digesters and tanks, gas storage tanks, combined heat and power units, engines, pumps, agitators, and control systems. These components are replaced at different times. For depreciation purposes, it is important to list them separately in the fixed asset register.
A particularly common question is whether a major repair, such as an engine overhaul, counts as an immediate expense or must be depreciated as a capital acquisition. The tax advisor assesses this based on the nature and scope of the work. Bookkeeping records such invoices separately, with a description of exactly what was done, so that this decision can be made without further questions.
The tax advisor determines useful lives based on official depreciation schedules and the specific conditions of the asset. Grants and subsidies paid for investments are also recorded separately because they can affect depreciation.
Financing and subsidies
Biogas plants are usually financed with loans, often from development banks, and sometimes with repayment subsidies. In the books, interest, principal payments, and subsidies are posted separately, and loan balances are reconciled every year with the bank’s balance confirmations. Unscheduled repayments and refinancing are documented together with the contracts.
For meetings with the bank, for example before an expansion or a major engine overhaul, you need up-to-date and reliable figures. Bookkeeping that is closed every month makes such meetings much easier. In addition, simple cash flow planning helps by showing large one-time payments, such as substrate at harvest time, insurance, and overhauls, well in advance.
Multiple companies, one operation
Often, the plant is organized as a separate company, while farming, the heating network, or land are held by other companies or by the farmer himself. Substrate, digestate, heat, lease payments, and labor services flow between these entities. Each of these transactions requires a contractual basis and an invoice, and the intercompany accounts must match each other.
If the same bookkeeper keeps the books for all companies, these reconciliations can be done every month rather than only at year-end. This saves the tax advisor a lot of work and spares you follow-up questions.
Tax questions for the tax advisor
There are several tax issues around a biogas plant that require careful assessment. Bookkeeping prepares the figures; the tax advisor makes the decision:
- Agriculture and forestry or commercial business: the classification of the activity has consequences for VAT and trade tax
- VAT: treatment of electricity supplies, heat supplies, and self-consumption
- Electricity tax: whether it is due or an exemption applies, including dealings with the main customs office
- Investments and companies: structuring for expansion, repowering, or new operating companies
- Annual financial statements: depreciation, provisions, inventory, and open settlements
A month in the bookkeeping of a biogas plant
- Settlements from the grid operator and the direct marketer are allocated to the month and reconciled
- Heat invoices created or recorded based on meter readings
- Substrate deliveries and credit notes posted by supplier
- Maintenance, service, and repairs recorded with descriptions
- Loans: interest and principal payments posted separately
- Bank accounts reconciled, open settlements listed
The result is a report showing what the plant earned in the month and a list of settlements still outstanding. To learn how we organize this for operators, visit the biogas and bioenergy page. For operators who need a dedicated bookkeeper, we offer an external bookkeeper.
Sources
Laws and bodies named in the article. The legal texts link to gesetze-im-internet.de, in German.
This article is for general informational purposes only and does not constitute tax or legal advice in specific cases. A tax advisor is responsible for tax-related questions.