Greencape Biogas Report – EPCM -Biogas investment in South Africa is still largely unexploited. However, the recent rise in biogas investment projects in GreenCape has been an eye-opener for other interested investors. In this report EPCM analyses the business feasibility based on individual projects ongoing in the Western Cape region. It aims at informing any interested biogas developer on the project logistics in this region and South Africa at large.
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
Table of Contents
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 occurs to break down fats, proteins, and carbohydrates into fatty acids, amino, and sugars respectively. 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 – what is now called biogas. And a by-product referred to as 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 in 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 for fueling 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, the gas has unlimited potential in 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.
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 which is pushing industries and large consumers to find alternative sources. Similarly, farmers are hit with fluctuating costs of fertilizer. As a result, a potential market for the digestate slurry is created.
Social problems such as the need for more jobs is also propelling the biogas industry. It is estimated that the industry has a potential of over 3900 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. This poses a much higher risk of global warming as compared to 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 yet another factor since biogas can be stored for future use. Similarly, the digestate fertilizer is more preferred to the artificial carbon-intensive fertilizer. Organic fertilizers promote Agriculture in South Africa by growing produce with a low carbon footprint. As a result, they get to enjoy unlimited demand from regions like the European Unions which have environmentally conscious consumers.
Finally, the legal system in South Africa demands that each waste is disposed of at the respectively classified landfill. The lack of some classes of landfills in most local municipalities forces them to invest in alternative measures such as biodigesters. In fact, diverting all organic waste from landfills is a planned priority by 2026. And by 2021, organics to landfill will be reduced by 50%.
3Greencape 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 the municipal solid waste, sugar production plants, agriculture, municipal wastewater, and the paper industries. Out of the 21 existing biogas projects in Western Cape, 9 are already in full operation. And out of these, approximately 400MWe are being generated. This is a tiny figure compared to the estimated production potential. Let’s look at five of these projects.
This dairy farm located in Darling supplies around 30% of Western Cape milk. Their biogas facility uses slurry from over 1,500 lactating cows which generate 500 kWe which is largely used in their animal feed milling and dairy activities. The liquid fertilizer is used to enrich their lands and fibres make bedding for the livestock.
2. Zandam Cheese (and Piggery)
The company is renowned for cheese production within 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 operation. Their digester feeds on vegetable waste to produce 527 kWe. They convert all the biogas into heat energy for generating steam which is used within 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 awaiting expansion, or renovation due to the high costs of operation. The digesters were designed to feed on food waste from consumers and shoppers within the mall.
3.1 Greencape Biogas Report: From the individual case studies, we can conclude the following:
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 as well as that of the surrounding consumers.
Saving waste management costs is yet another benefit. Landfill gate fees and the hustle of transporting solid waste to specific landfills as per the 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 collected from the individual gas components and fertilizer sold to the neighbours. And also the revenue collected by managing solid waste from other sources in different regions of the country.
Finally, these projects have the ability to 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 beddings 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
For a successful biogas investment, three key things come to play: the 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 the stirred concrete digesters. This choice should not be based on capital costs only but also the opportunity cost. The engine can also be optimized by considering the end product uses. However, this is tricky considering any potential future expansion of the entire biogas project.
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 need to come up with 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 the control systems.
With regards to the revenue, the investor pays the client rental fee for the fixed property but he sells electricity to the client as per an agreed contract. The rent factor comes in to ensure 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 like 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. This translates to R253 per hour. And it 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 to 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 as opposed to increased energy costs. Read the full report for more details on this analysis.
South Africa suffers general designing inexperience as well as poor construction and operational techniques. The uptake is equally low. The detailed report indicates that these types of projects (biogas) are extremely site-specific. Some sites with favourable conditions such as reliable feedstock volumes vis-a-vis high waste management costs do very well. It is even better if the surrounding regions have a high demand for alternative energy.
6 In Conclusion
The biogas industry in South Africa is still in a nascent state. There is a lot of potential for interested investors. This venture can be a gold mine in South Africa but the success is site-specific and it also 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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