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Feasibility Study for a Central Anaerobic Digestion Plant in Aberdeenshire PDF

79 Pages·2009·0.81 MB·English
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Feasibility Study for a Central Anaerobic Digestion Plant in Aberdeenshire Prepared by: SAOS Ltd Rural Centre Ingliston Edinburgh, EH28 8NZ Oct 2009 CONFIDENTIAL Confidential Aberdeenshire AD Plant Study Glossary and Acronyms AD Anaerobic Digestion ABP Animal by-product CCL Climate Change Levy CH Methane 4 CO Carbon dioxide 2 DF Discount factor DEFRA Department for Environment, Food and Rural Affairs MWh Megawatt hours Kg Kilogram KW Kilowatt kWh Kilowatt hours M3 Cubic meters Mj Mega Joule REA Renewable Energy Association ROC Renewable Obligation Certificate SRDP Scottish Rural Development Programme t /y Tonnes per year WRAP Waste & Resources Action Programme Confidential Aberdeenshire AD Plant Study Acknowledgements The assistance and support of the following people during the course of the study is gratefully acknowledged. Mike McLaughlin Man Director, EnviTec Biogas UK Russell Mulliner Marches Biogas Paul Saunders SEPA, Elgin Brian Blagden SEPA, Elgin David Brims Vet Officer, Animal Health Rob Broughton Network Dev Planning, Scottish & Southern Energy Nicola Abrams Planning Dept, Aberdeenshire Council Ian Sandison Operations, P&ES Catering, Aberdeenshire Council Jack Clark Waste Manager, Aberdeenshire Council Stuart Gilmore Aeolus Renewables Confidential Aberdeenshire AD Plant Study CONTENTS _______________________________ EXECUTIVE SUMMARY..........................................................................................1 Recommendations.................................................................................................................6 1 INTRODUCTION................................................................................................8 Why the need for the study?..................................................................................................8 The aim of the study..............................................................................................................8 2 OVERVIEW OF TECHNOLOGY........................................................................9 Description of technology.....................................................................................................9 Biogas utilisation.................................................................................................................11 Heat and power production (CHP)......................................................................................11 Facility design and technology............................................................................................12 AD Plant Manufacturers......................................................................................................14 3 WASTE STREAMS IN THE REGION..............................................................15 Potential Biowaste in the North-East..................................................................................15 Local Processor Interest in a Central AD Plant...................................................................16 Existing Competition for biowaste in the region.................................................................18 4 SITE CONSIDERATION..................................................................................20 Electrical Grid connection considerations...........................................................................20 5 LEGISLATIVE FRAMEWORK.........................................................................22 Environmental Considerations............................................................................................22 Pollution Prevention and Control (PPC) legislation............................................................23 Waste Management Licenses (WML).................................................................................23 Duty of care.........................................................................................................................23 Digestate Quality Standard – PAS 110...............................................................................24 Animal By-Products Regulations (Version 8, September 2008).........................................25 HACCP Plan........................................................................................................................26 Plant Location......................................................................................................................26 Importance of records and monitoring................................................................................27 Planning Permission............................................................................................................27 6 POLICY DRIVERS...........................................................................................29 Scottish Climate Change Bill..............................................................................................29 Renewable Energy targets...................................................................................................30 Landfill Tax (LFT)..............................................................................................................30 Recycling Targets................................................................................................................30 Renewables Obligation Certificate (ROC)..........................................................................31 Feed-in Tariffs (FITs)..........................................................................................................32 Renewable Heat Incentive (RHI)........................................................................................33 Climate Change Levy Exemption Certificates....................................................................33 7 GRANT SOURCES..........................................................................................35 Rural Development Contracts - Rural Priorities (RDC - RP).............................................35 Confidential Aberdeenshire AD Plant Study LEADER Programme in Scotland.......................................................................................36 Food Processing, Marketing and Co-operation Scheme (FPMC).......................................36 Increase III Programme (2008 – 2011)...............................................................................37 Scottish Power Green Energy Trust....................................................................................38 Edf Energy Green Energy Fund..........................................................................................38 WRAP Capital Grant Scheme.............................................................................................39 Other forms of support........................................................................................................39 8 ECONOMIC APPRAISAL OF OPTIONS.........................................................41 Description of the three scales of plant examined...............................................................41 Assumption used in the Economic Appraisal for the farm scale plant (140kW).................44 Assumption used in the Economic Appraisal for the medium scale plant (500kW)............44 Summary of investment appraisal analysis.........................................................................46 Sensitivity Analysis.............................................................................................................47 Transport of Waste..............................................................................................................50 9 CONCLUSIONS AND RECOMMENDATIONS................................................53 Summary of advantages and disadvantages of AD Plants...................................................53 Critical success factors – how to make it work...................................................................54 Other Issues for consideration.............................................................................................55 Risks....................................................................................................................................56 Recommendations...............................................................................................................57 REFERENCES........................................................................................................59 Appendix 1 AD Plant Manufacturers Appendix 2 Copy Letter sent to Processors Appendix 3 N-E Scotland Electricity Grid Network Appendix 4 Farm Scale Plant Specification Appendix 5 Medium Scale Plant Specification Appendix 6 Large Scale Plant Specification Appendix 7 Farm Scale 10-Year Budget Appendix 8 Medium Scale 10-Year Budget Appendix 9 Large Scale 10-Year Budget Confidential Aberdeenshire AD Plant Study EXECUTIVE SUMMARY 1. The overall aim of the study is to assess the feasibility of establishing a central AD plant within Aberdeenshire. 2. Anaerobic digestion (AD) is the process where micro-organisms breakdown biodegradable materials in the absence of oxygen in an enclosed tank. The process produces biogas (methane 60%, carbon dioxide 39% and ammonia 1%), which can then be utilised to fuel a generator to produce electricity and heat. The treated liquid (digestate) can be applied to farmland as a fertiliser. 3. AD digestion and biogas production contributes to the fight against climate change through the reduction in greenhouse gas emissions (GHG) and makes an important contribution to the sustainable treatment of biodegradable waste. It also reduces the risk of pollution from waste to the environment. 4. The following table provides a summary of the pros and cons of an AD plant and the technology. Advantages Disadvantages GHG reduction. Helps Scotland meet High capital cost (Med scale 0.5MW Climate Change targets c£3M, Large scale 1MW c£5M) Source of renewable energy – less Plants have high maintenance costs reliance in fossil fuels. Reduces waste going to landfill Heavy regulatory and compliance burdens (especially if using animal by-products) Potential commercial opportunity Carries considerable risks; securing feedstocks, efficient plant operation, biosecurity, the financial return, spillage, the fermentation, etc Some wastes attract gates fees High management requirement Encourages efficient use of livestock Odour can be generated from waste waste when being off-loaded at the plant Reduction in odour problems Increased localised traffic flows compared to untreated slurry With pasteurisation, effective Noise from CHP unit and visual elimination of pathogen and micro- impact of plant organisms N availability of digestate improved ‘Green’ marketing benefit and PR opportunity Water quality improved Considerable Govt policy drivers to support the adoption of the technology 5. Biogas produced from AD plants can be utilised in a number of ways. The most common method is as a fuel to drive a CHP unit, which generates both electricity and heat. The power generated can be used internally within a business or transmitted via the national grid for sale. Biogas can also be cleaned and upgraded to biomethane, which potentially could be used as a vehicle fuel or injected into the natural gas grid. 1 Confidential Aberdeenshire AD Plant Study 6. An AD plant has four potential income streams: (cid:1) Sale of electric to the national grid (cid:1) Additional payment for renewable energy (currently ROCs) (cid:1) Gate fees for imported waste (cid:1) Revenue from surplus heat Waste Streams in Region 7. Previous studies for SEPA have identified that the North-East is a rich source of potential biodegradable waste suitable for anaerobic digestion. The 536,651t of biowaste in the North-East will produce an estimated 105,371 MWh of electricity per annum (using a CHP at 33% efficiency). This means the North-East could potentially support 13 AD plants utilising a CHP engine of 1MWh. This could provide employment for up to 52 direct staff plus additional employment for support services. Biowaste suitable for AD in the North-East Total M3 Biogas Methane 60% Energy Solids (t) (‘000) (‘000) (MWh) Fish 0 0 0 0 Milk 2,542 317,756 191 1,513 Waste Man 225,416 28,117 16.906 134,123 Municipal 172,008 21,500 12,900 102,345 Slaughterhouses 58,169 7,271 4,362 34,611 MSW 78,516 9,814 5,888 46,717 Totals 536,651 67,081 40,248 319,307 8. Letters were sent to processors in the region informing them of the study, inviting interested parties in a central AD plant to make contact for further information. It is clear many processors are concerned about the future disposal of the waste they produce and the cost. In particular, there were five companies who expressed provisional interest in a central AD plant and were visited to explore opportunities further. 9. An important factor in the potential viability of any AD plant is the current (and future) competitors for biowaste in the region. At present there are four commercial waste treatment plants in the region, which increases the need for good planning to ensure any future AD plant has a secure source of biowaste, namely. (cid:1) Gask Biogas Plant, Turriff. (cid:1) Keenan Recycling, New Deer (cid:1) Gray’s Compositing Services, Portsoy (cid:1) Alba Proteins, Kintore Site Considerations 10. A range of factors contributes towards the appropriateness of a site for a biogas plant. They include: (cid:1) Close proximity to waste feedstocks (cid:1) Availability of a grid connection to transmit the electricity generated from the CHP engines (cid:1) Suitable distances away from residential areas to minimise the impact of any smells and emissions that may come from the plant 2 Confidential Aberdeenshire AD Plant Study (cid:1) Close proximity for land to utilize digestate as a fertiliser – ideally arable farmers (cid:1) Suitable distance away from watercourses to avoid the potential for pollution incidents 11. If an AD plant imports any animal by-products then it must be located off-farm on a separate location for biosecurity reasons. This increases the need for additional infrastructure and adds to the overall capital cost. 12. A major consideration for both site selection and the plant’s overall economic viability is ensuring good effective grid connection. Aberdeenshire has a high renewable energy activity and as a result, access to grid connection is very competitive. In many districts, the existing electricity infrastructure is now at a stage that has triggered line upgrades. The actual cost of grid connection will vary considerably depending on the specific site, the distance to a suitable connection point and infrastructure requirements. The best case scenario would be a budgeted cost of £100,000, but this could rise significantly depending on infrastructure and reinforcement costs (could be in excess of £400,000). Legislation Considerations 13. The operation of an AD plant is subject to a wide range of regulations designed to protect the environment, animal and human health. These include: (cid:1) Pollution Prevent Control (PPC) (cid:1) Waste Management Licences (cid:1) Animal By-Products Regulations (ABP) (cid:1) Duty of care (cid:1) Digestate PAS 110 (cid:1) HACCP (cid:1) Local Authority Planning 14. If any animal by-products or food waste is planned to be digested in the plant, then an ABP licence is required. ABP compliance is exacting requiring additional investment for the maceration of material, pasteurisation treatment , segregated storage and regular analyses. 15. At present a major obstacle for the disposal of digestate to agricultural land is its exclusion from the main farm quality assurance schemes. As a result, farmers and landowners are currently reticent about taking digestate from AD plants. A new draft standard for digestate (PAS 110) is currently being tested for approval. This will move digestate from a ‘waste’ to a ‘product’ which will hopefully make it more acceptable to farm assurance schemes. 16. Aberdeenshire Council are supportive of proposals that reduce and re-use waste and also provide a renewable source of energy. Any development would be assessed against the policies in the ‘Aberdeenshire Local Plan 2006’. It would be prudent and good practice for any potential AD developer to engage with the Local Planning Services from the outset. All applicants are encouraged to undertake pre-application discussions with the Planning Service prior to submission of the proposals. 17. It is anticipated that any proposed AD plant would require to undertake an ‘Environmental Impact Assessment’ (EIA). This will increase the time (and 3 Confidential Aberdeenshire AD Plant Study cost) for a decision on the planning application, which realistically will take at least six months. Policy Drivers 18. Government policy is the main driver for the introduction of AD plants in the UK. Without the influence of Government policy, there would be no commercial opportunity for AD plants in the UK. There are a number of policies which affect the AD industry: and incentivise the uptake of the technology, namely: (cid:1) Scottish Climate Change Bill (cid:1) Renewable Energy targets (cid:1) Land Fill Tax (cid:1) Recycling Targets (cid:1) ROCs (cid:1) Feed-in Tariffs (FIT) (cid:1) Renewable Heat Incentives (RHI) 19. Since April 2009, approved AD plants are now eligible for 2 ROCs for every MWh generated (previously it was one), which has significantly improved the economic viability of AD. The Government, however, are proposing to replace ROCs with a new feed-in tariff (FIT) scheme. The significance of FIT is that it provides a long-term (20 year) guarantee price for both the renewable element and wholesale value of the electricity produced. The proposed rate is 9 + 5 = 14p for every unit (kWh) of electricity produced. The proposed FIT scheme is a major boost for potential AD investors and the UK AD industry. 20. In addition to FITs, the Government are also actively looking to encourage the use of renewable heat energy. It is anticipated that by April 2011 an additional payment will be available for those plants that can utilise the renewable heat generated. At present, AD plants generate large quantities of surplus heat from the CHP units, however, currently it is very difficult to find a commercial use for the surplus heat generated. The lack of heat infrastructure is one of the main obstacles. Grant Sources 21. There is a range of grant schemes available to assist the development of AD plants. Each grant scheme has its own individual priorities and assistance is targeted towards a number of activities that are compliant with establishing an AD plant. All of the grant schemes are competitive and only those developments which offer the best value for money, are likely to be successful. 22. In the past, securing grant support usually meant the second ROC for the renewable energy produced had to be foregone to comply with EU state aid rules. At present it is unclear whether an AD plant which received grant support would still be eligible for the new proposed FIT scheme. 23. Although there are plenty of potential sources of assistance available for biogas plants, it should be borne in mind that the merits of a potential application may change with time as each funding body seeks to maximise the delivery and impact of the grant fund they control. For example, a project for a biogas plant attracting funding in 2008 may not do so on 2010 as a potential funding body may consider it has stimulated sufficient activity in this 4 Confidential Aberdeenshire AD Plant Study area. A key issue to determine at an early stage, is the likelihood of a successful application. Economic Appraisal 24. To determine the economic viability of a potential AD plant three scales of plant were considered; farm scale, medium and large scale. Full investment appraisals were carried out for each scenario. The following table shows the key findings. Farm scale Medium Large Electricity scale (kWh) 140kWh 500kWh 1MWh Total feedstock (tonnes) 21,000 28,000 38,000 % Imported waste 0 35% 53% Total Investment £0.6M £2.79M £4.445M Payback (years) No 8 yrs 6 yrs IRR (10-years) -5% 11% 21% Annual Margin £9,210 £321,164 £814,905 25. The conclusion of the economic analysis showed that farm-scale AD plants are uneconomic, medium scale plant marginal, while large scale plants provide a good return (21%) and a respectable payback period of six years. 26. Sensitivity analysis conducted on each scenario, showed there are considerable inherent risks in operating an AD plant. Factors such as gate fee revenue, plant productivity, grant support, finding a market for surplus heat, and revenue from electricity produced all had a major bearing on financial performance. Conclusions 27. Large scale plants have a high capital requirement, but can provide a very good return when a high percentage of the feedstock attracts gate fees. The most critical issue is securing a good single source of waste. The highlights the value of a suitable joint-venture agreement between an AD plant operator and a processor with biodegradable waste. 28. One of the motivations for the pig industry to carry out the study was to determine if a central AD plant would assist local pig producers meet NVZ regulations. The conclusion is, if an AD plant has to import additional non- farm waste, then the central model does not provide a solution for compliance with NVZ regulations. 29. Establishing and operating a successful AD plant carries considerable inherent risks and other factors to take into account, which makes it demanding for management. 30. Experiences from existing AD plants operators indicate the challenge of maintaining high gas outputs and the overall plant productivity. Consistent single source feedstock providing a well-balanced ration for the digestion process is the holy grail. 31. Through the process of completing the study, the following factors have been identified as the critical success factors for operating a successful viable plant. 5

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Anaerobic digestion (AD) is the process where micro-organisms breakdown biodegradable materials in the absence of oxygen in an enclosed tank.
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