Biogas investment in South Africa remains a largely untapped opportunity, yet recent developments in the Western Cape, spearheaded by GreenCape, have begun to shift this narrative. In this report, EPCM analyses the business feasibility based on individual projects ongoing in the Western Cape region. It aims to inform any interested biogas developer on the project logistics in this region and across South Africa.

This summary discusses the following sectors:

  • Anaerobic digestion process
  • Factors favouring the biogas industry in South Africa
  • Case studies in the Western Cape
  • General biogas investment scenario
  • The potential of biogas investment in South Africa
  • Conclusion

1. Greencape Biogas Report: Anaerobic Digestion Process

Anaerobic digestion technology breaks down the organic molecules in solid waste anaerobically (in the absence of oxygen). Initially, the hydrolysis process breaks down fats, proteins, and carbohydrates into fatty acids, amino acids, and sugars, respectively. The acidogenesis process then forms alcohol and carbonic acids. Finally, acetogenesis forms acetic acid, hydrogen, and carbon dioxide, while methanogenesis forms methane.

The entire process results in the release of gas, now called biogas, and a by-product called digestate (slurry). The chemical composition of the biogas produced is mainly carbon dioxide and biomethane, with traces of other gases such as hydrogen sulphide. The ratio of these gases depends on the original feedstock composition.

1.1 Applications of the Resulting Products

1.1.1 The Biogas

  • It is used as a fuel for cooking, especially in schools and commercial institutions. It is a cheaper alternative to LPG and electricity.
  • Biogas is also used in other direct combustion applications, such as domestic water heating.
  • Industries use it to fuel turbines and boilers to generate steam.
  • Biogas is fed into CHP and converted to electricity to substitute or entirely replace grid power.
  • Last but not least, biogas is used with absorption chillers for cooling. To learn more about this process, read the tri-generation article here.

1.1.2 The Digestate

  • Organic farmers use it to fertilize the land. It is rich in nutrients. The disadvantage is that you need more of the digestate as compared to industrial fertilizer. And it requires constant reapplication to maintain the nutritional requirements of the crops.

1.1.3 The Carbon dioxide

  • CO2 is used to enhance crop growth in a controlled environment and to process certain foods and beverages.
  • Water treatment and oil recovery facilities also use CO2.
  • Additionally, gas has unlimited potential for industrial applications.

1.2 Technologies Used

There are four common approaches to biogas conversion:

  • Engines (Gas-Otto and Pilot Injection)
  • CHP (Combined Heat and Power) – the most common
  • Fuel cells
  • Micro gas turbines

These technologies have their advantages and disadvantages. The choice also depends on how the biogas will be utilized. CPH is more common because it results in approximately 85% efficiency.

2. Greencape Biogas Report: Factors Favoring the Biogas Industry in South Africa

South Africa has great potential in the Biogas industry because of the following factors:

  • Economically, the costs of disposing of waste are relatively low. But for certain types like abattoir waste, the government disposal specifications have to be met. Therefore, such organic waste poses a challenge. Additionally, the cost of electricity keeps increasing, pushing industries and large consumers to find alternative sources. Similarly, farmers are hit with fluctuating fertilizer costs. This creates a potential market for digestate slurry.
  • Social problems, such as the need for more jobs, are also propelling the biogas industry. It is estimated that the industry has a potential of over 3,900 direct jobs. From the Green Cape analysis, each MWe installed capacity results in four to ten jobs.
  • The environment is also a key boost. Unmanaged waste decomposition releases significant amounts of methane, which poses a much higher risk of global warming than CO2. The waste also reduces the capacity of landfills and may contaminate the water table as the nutrients leach.
  • The quest for cleaner and more dependable (or secure) energy sources is another factor as biogas can be stored for future use. Similarly, digestate fertilizer is preferred to artificial carbon-intensive fertilizer. Organic fertilizers promote Agriculture in South Africa by growing produce with a low carbon footprint. As a result, they enjoy unlimited demand from regions like the European Union, which has environmentally conscious consumers.
  • Finally, the legal system in South Africa demands that each piece of waste be disposed of at the respective classified landfill. The lack of some classes of landfills in most local municipalities forces them to invest in alternative measures such as biodigesters. Diverting all organic waste from landfills is a planned priority by 2026, and by 2021, organics to landfills will be reduced by 50%.

3. Greencape Biogas Report: Case Studies in the Western Cape

The Western Cape has vast reserves of solid waste from different sources. The highly tapped sources are municipal solid waste, sugar production plants, agriculture, municipal wastewater, and paper industries. Of the 21 existing biogas projects in the Western Cape, nine are already in full operation, and approximately 400MWe are being generated. This is a tiny figure compared to the estimated production potential. Let’s look at five of these projects.

1. Uilenkraal

The dairy farm in Darling supplies around 30% of Western Cape milk. Its biogas facility uses slurry from over 1,500 lactating cows, which generates 500 kWe of energy. This energy is primarily used in animal feed milling and dairy activities. The liquid fertilizer produced enriches the lands, while the fibrous by-products serve as bedding for the livestock.

2. Zandam Cheese (and Piggery)

The company is renowned for cheese production in South Africa. Their digester feeds on slurry from 650 sows to generate 75 kWe converted to heat and electricity used within the cheese facility.  The slurry is fed into maturation dams for future use as pasture fertilizer.

3. Elgin Fruit Juices

Located in Grabouw, this company specializes in fruit juicing operations. Their digester feeds on vegetable waste to produce 527 kWe. They convert all the biogas into heat energy to generate steam used in the juicing facility.

4. New Horizons Energy

The company is home to over 500 tons of general waste daily. It is currently rated the most expensive project for biogas production. They separate the resulting gas into liquefied carbon dioxide and compressed biomethane sold within the country. They also sell recyclables to the respective recycling companies. Finally, they sell organic compost and refuse-derived fuel from the digestate.

5. Bayside Mall

This is an example of a failed biogas project. It was closed in 2016 and is awaiting expansion or renovation due to the high operation costs. The digesters were designed to feed on food waste from consumers and shoppers within the mall.

3.1 Greencape Biogas Report: Conclusions From the Individual Case Studies

3.1.1 Common Success Factors

The quality and quantity of feedstock, as well as its reliability, is a major factor. In addition, the use of resultant energy on-site, economies of scale, and digestate stream management costs play a significant role.

3.1.2 The Common Benefits of the Greencape Biogas Report Projects

  • The major benefit is the use of the energy generated on-site. In agricultural farms, for example, the energy is used for milling, processing and cooling products, and dairy operations. This significantly reduces the client’s electricity bill and that of the surrounding consumers.
  • Another benefit is saving waste management costs. Landfill gate fees and the hustle of transporting solid waste to specific landfills as required by law are avoided. The biogas facilities also become a centralized solid waste management solution for other producers.
  • Both the client and the developer can generate income from multiple sources. For example, revenue is collected from the individual gas components and fertilizer sold to the neighbours. Additionally, they can generate income by managing solid waste from various sources across different regions of the country.
  • Finally, these projects can recycle products within solid waste feedstock. For example, the digestate is used as fertilizer, and the fibres are compacted with other products like sawdust to form animal bedding and refuse-derived fuel.

3.1.3 General Drawbacks

These included odour, lignocellulosic contaminants, grid feed-in, waste separation, digestate management, poor skills and training, and waste collection. Additionally, the cost-benefit ratio becomes a challenge in small-scale projects and projects whose resultant energy is not fully utilized.

4. General Biogas Investment Scenario

Three key factors determine a successful biogas investment: project costs, financing, and regulatory approvals.

4.1 Greencape Biogas Report: Project Costs

A typical South African biogas project has high capital costs on the peripheral equipment (like extra storage tanks,), the digesters, and the CPH (combined heating and power). Other relatively minor capital costs are incurred by the power connections and planning logistics including getting approvals.

To reduce these costs, project developers can consider using a cheaper digester. For example, a lagoon type is cheaper than stirred concrete digesters. This choice should not only be based on capital costs but also on opportunity costs. The engine can also be optimized by considering the end product uses. However, this is tricky considering the potential expansion of the entire biogas project.

4.2 Financing

From the above case studies, it is clear that to get project funding for a biogas project in South Africa, the client and the project developer must develop a cost-revenue sharing agreement. For example, in the case of Zandam, the client is in charge of the entire fixed infrastructure, like the digesters. Ibert, the developer, is in charge of movable components like CHP equipment, stirrers, and control systems.

Regarding revenue, the investor pays the client a rental fee for the fixed property but sells electricity to the client as per an agreed-upon contract. The rent factor ensures that the client earns a minimum income irrespective of the energy units purchased. So it’s a win-win situation.

4.3 Common Binding Agreements for Regulatory Approval

Most contracts follow a similar pattern to the Zandam project except for a few differences. These occur due to factors such as initial capital outlay, rental agreement, and predictable energy cost in favour of the client. The latter is due to the recent rise in electricity prices. It makes no sense to opt for biogas energy as an alternative and still have no control over the price regulations.

The project developer is bound to supply the specific energy units requested by the client. And this is the only amount paid by the client. Consequently, the risk of the client losing money due to energy supply losses is significantly reduced. In return, the developer has a secure market from day one and he can predict possible annual income from the project. He can, however, choose to sell the extra energy to other potential buyers.

5. The Potential of Biogas Investment South Africa

Despite the fact that the biogas industry in South Africa is relatively small, there are approximately 500 digesters already in operation. 200 of these are utilizing wastewater treatment plants feedstock.

It is also important to mention that most of these digesters are small-scale and mostly for domestic production. However, there are a few commercial ones; tentatively, less than 100 digesters. The average annual operating costs are R 1,700 for 1 kWe, which translates to R253 per hour. The cost also depends on the size and design of the digester. The larger the biogas system, the lower the costs!

Furthermore, an analysis was carried out in the region, and it concluded that it is viable to install a medium-scale facility (between 1 MW and 50 kWe) in an abattoir with full on-site energy utilization. However, a small-scale biogas facility (less than 50 kWe) would not be viable in the current economy and waste management regulations. Overall, high waste management costs favour biogas investments instead of increased energy costs. Read the full report for more details on this analysis.

South Africa suffers from general design inexperience, poor construction and operational techniques, and low uptake. The detailed report indicates that these types of projects (biogas) are extremely site-specific. Some sites with favourable conditions, such as reliable feedstock volumes and low waste management costs, do very well. It is even better if the surrounding regions have a high demand for alternative energy.

6. Conclusion

The biogas industry in South Africa is still in its early stages, offering significant potential for interested investors. This venture can be a gold mine in South Africa, but the success is site-specific, and depends on several factors. Generally speaking, reliable solid waste, high waste management costs, high on-site energy demand, and the ability to diversify products and derive maximum income from them are the key contributors to a financially viable biogas project.

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