Finding Lost Opportunities By Using Biogas For Electricity
By Water Environment Research Foundation staff
Flaring or otherwise not recovering biogas is a lost opportunity for cost savings and environmental benefit. In 2006, the U.S. Environmental Protection Agency (EPA) issued a report highlighting efforts to expand outreach and education to increase knowledge of the benefits of using combined heat and power (CHP) to recover energy from the biogas produced from the anaerobic digestion of biosolids. The U.S. EPA’s CHP Partnership identified wastewater treatment as one of the primary market sectors to increase CHP use. Findings indicated that only a quarter of wastewater treatment facilities with anaerobic digestion use digester gas for electricity generation. If the majority of facilities with anaerobic digestion are flaring digester gas regardless of the benefits of CHP, then there are perceived and actual barriers to broader use of biogas.
In response to this research need, WERF conducted a study with the New York State Energy Research and Development Authority (NYSERDA), Brown and Caldwell, Black & Veatch, Hemenway, Inc., and the Northeast Biosolids and Residuals Association (NEBRA) to determine what barriers wastewater facilities face in implementing combined heat and power projects. The project team for Barriers to Biogas Use for Renewable Energy (OWSO11C10) found that the largest, most widespread barriers to biogas use are economic, citing inadequate payback and lack of capital. While justifying the investment has stifled advancing applications of CHP use, findings also indicate that there has been considerably more investment in biogas use over the past five years than in prior years.
Other barriers fell predominantly into two main categories: policy factors such as air permitting and human factors such as decision-making. However, a high percentage of small facilities have found the means to justify biogas use projects. These small communities used different financial analyses, such as cash flow and net present value, instead of simple payback, to justify their CHP projects. The WERF researchers found that most utilities are using a basic payback-period method to assess the feasibility of a CHP project — simply calculating how long it takes a project to recoup its costs. However, this method ignores long-term cash flow and the time value of money. What’s more, payback periods being used are often as short as three to five years, when a reasonable timeframe could be 10, 20, or as many as 30 years, given that most assets have a multi-decade life.
Use of calculations focusing on the short term produce incomplete information that can lead to flawed decision making. In an environment of competing demands and limited capital, this can make the difference in a biogas project being approved. The WERF researchers discovered that when evaluating potential projects, it is important to recognize that long-term investments require long-term analysis. In an add-on to the primary research task, several alternative payback methods were studied: net present value (NPV), benefit cost ratio (BCR), internal rate of return (IRR), and equivalent uniform annual net value (NV). Several other critical components were also considered: time value of money, risk analysis, and long-term sustainability.
Recent, greater, interest in enhanced efficiency, operational cost reduction, and sustainability begs further research into overcoming barriers to biogas use. While the economic viability of developing biogas projects is at the forefront of these barriers, the WERF researchers also found that other actions can help, such as developing a repository of grant funding opportunities for CHP and biogas projects. The WERF researchers also found that simultaneously expanding outreach and education to assist policy and decision makers in understanding the benefits of biogas would promote and enhance an understanding of benefits of biogas use. Such outreach and education could be effectively supplemented with a centralized database of case studies on successful CHP projects.
Carrie W. Capuco, JD
Director of Communications
Water Environment Research Foundation
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