In part two of Waste Management Review’s energy series, we look at the feasibility of waste to energy in reducing a business’ power costs.
In the June issue of Waste Management Review, we looked at the impact of rising power prices on the waste industry.
We highlighted the rising cost of natural gas which the major industrial users mainly rely on to power their heating systems, while also pointing out these costs are not going away any time soon.
While there are technologies being leveraged to reduce costs, including solar, waste to energy (WtE) has been used by numerous industries for decades across the globe. Australia hasn’t widely deployed WtE, as the 2014 South Australian Energy Resource Assessment shows bioenergy contributes to 0.9 per cent of Australia’s electricity generation, compared with the Organisation for Economic Co-operation and Development (OECD) average of 2.4 per cent.
But a number of projects have been operating in the background for years. For some industrial users, the solution has been to produce alternative fuels on their own, or in partnership with waste companies, to fulfil their own energy needs and send it to the grid. AgriFutures Australia lists more than 50 case studies which are predominately industrial, which in many cases are driven by a desire to turn their waste into a valuable resource and reduce costs at the same time.
There are numerous alternative fuels which can be used for heating, including biogas from onsite waste, biomass from wood waste or agricultural waste and other sources of fuel such as municipal solid waste and processed engineered fuel. In these cases, operators have considered the range of technologies against their own individual needs and resources, from anaerobic lagoons to biomass boilers, gasifiers and pyrolysis.
While there is no one-size-fits-all approach, Waste Management Review explores the many variables to consider in developing a business case for WtE and what others, such as EnergyAustralia, are learning from their project proposals.
DETERMINING THE BUSINESS CASE
Roger Horwood, Associate at energy consultancy firm Energetics, says the business case for alternative fuels requires consideration of your fuel supply, technical feasibility, potential savings and environmental impacts.
He says that food and paper producers are the main beneficiaries, driven by the rising cost of natural gas. As Roger explained in part one, gas prices are largely preordained by the infrastructure in place to send it overseas. “The moving price of gas has gone from $5 a gigajoule to $15 a gigajoule and you start to ask yourself: what alternatives do you have?
“You might think: someone offered me some woodchips the other day and I want to put a biomass boiler in. Or your neighbour has all this waste he wants to process but can’t afford to do it, so you work with them.”
Roger says biogas and biomass systems are being used to great effect by waste generators and WtE operators.
WHAT ARE THE NECESSARY OUTPUTS?
He says taking advantage of this cost-effective method would require annual energy usage of at least 100,000 gigajoules per year, but it also depends on the waste product available.
“Sometimes, the waste product that’s available to you might be a by-product of your own process, which happens in the sugar industry in the form of bagasse – waste sugar cane after sugar is extracted.”
Roger says the amount and availability of a waste product is also another significant consideration. Common sources of WtE include wastewater processed through anaerobic digestion. It also comprises landfill biogas from municipal tips, crop residue or food waste, as well as sewage and manure from intensive farming activities. These can be used in boilers and power generation systems.
“We’ve done some exploring into woodchips and there seems to be a few sources of that around. It can be a highly valued commodity for sending overseas, where you can get better value there than here however local supply is available in many regional areas.”
FINANCIAL INCENTIVES
Roger says it takes at least three to four years to get a site up and running and that even five years is not unusual due to the need to meet regulations and obtain community buy-in for the WtE project. He says even though financial incentives for WtE are limited, the Australian Renewable Energy Agency (ARENA) does support innovative projects with new technologies or applications with wide-ranging industry implications.
Roger says another key consideration is claiming WtE as a renewable source. The Clean Energy Regulator allows large-scale renewable electricity generation certificates to be bought and sold, and includes eligible biomass, provided users can satisfy its criteria (see https://bit.ly/2x34fVm for more information).
CALCULATING THE PAYBACK
Roger says the return on investment or payback period generally ranges from a minimum of three to seven years.
“You have to treat it as an infrastructure change. Because you’ve built your plant with the infrastructure to suit a boiler fired by gas, all of a sudden you’ve come in with a completely different set of equipment and you have to rearrange everything.”
NETWORK CHARGES
Roger says understanding network connection challenges is the next consideration, including the site tariff, which shows the mix of variable costs versus fixed costs in the final energy bill. This requires you to examine individual line items and evaluate the impact to the bill by producing energy onsite. He says this is a key consideration in the business case.
The next issue is understanding the cost of connection in your area, including metering, high/low voltage transformer ownership transfer and/or local substation upgrades.
LOOKING AT SCALEABILITY
Sizing the new generation equipment is also critical. Roger says there is generally little financial benefit in the value of exporting surplus power. He says energy efficiencies should be sought out first before commencing a business case investigation, as these can have a payback period of less than three years. He estimates businesses could save up to 20 per cent in costs if they looked at energy efficiencies first. Once businesses have worked out a way to reduce costs through energy efficiency improvements, they can reduce the size of their WtE plant – saving further costs.
BARRIERS
A barrier to entering the WtE market can be that materials are low in energy density and cause materials handling issues due to the volumes required to collect and process them. Roger says the costs may start to add up as you travel more than 100 kilometres away from site and needs to be considered in the planning stage.
“I know with some of the coal transport, the cost of transportation can be $3 per tonne and the cost of the coal is actually $3-4 per tonne, so the reality is you don’t want to be too far from the source,” Roger says.
Biomass-fired boilers can be costly due to their small market in Australia. Roger says the consistency in fuel quality from wood waste can also ebb and flow, as crop residues suffer from intermittency with harvests, meaning correct storage is critical. He says rather than seeing these issues as roadblocks, they are instead ones that can be evaluated and considered upfront during the feasibility stage, before turning to detailed assessments or tenders.
Considering the system management challenges associated with waste fuels is another consideration in planning. Biogas, for example, requires a consistency of processing and chemistry within the digester, as the bacteria do not handle operation outside a preferred range. Gas cleaning issues can also have negative repercussions on downstream equipment, such as energy reliability.
CASE STUDY: MT PIPER
EnergyAustralia will become the first coal-fired power station to use WtE if its business case at its Mt Piper Power Station is approved. Based in Lithgow, NSW, EnergyAustralia and Re.Group plan to use non-recyclable plastics, linen and cardboard to produce refuse-derived fuel (RDF) at Mt Piper. This will drive large turbines at its existing power station and provide enough energy to power 40,000 homes without burning any additional coal. A final investment decision will be made by EnergyAustralia and Re.Group in 2019, with first power expected by 2021.
In the process it will recycle about 200,000 tonnes of material a year that would otherwise go to landfill. The plant emulates a successful coal-fired power station in Düsseldorf, Germany, which has used RDF using a similar advanced flue gas treatment to lower emissions.
ARENA provided $400,000 for an initial feasibility study into the project, which concluded in 2017. The project is now undergoing advanced feasibility studies, including definitive technology selection, front end engineering design and environmental impact statement development approval and engineering, procurement and construction contracting.
Julian Turecek, Head of Assets at EnergyAustralia, says the plant was designed to comply with the strict Energy from Waste Policy.
“Our view is that we can’t see a case for new coal-fired power stations in Australia,” Julian says.
“We believe that the modern energy system is a combination of renewables, such as wind and solar and energy recovery, combined with storage technologies like pumped hydro and batteries. We see that as a more economic and sustainable way of meeting the needs of our customers.”
Julian says he sees WtE playing a big role in the underlying renewables mix.
He says the plant will be economically viable by leveraging Mt Piper’s zoned land, existing boiler, turbine system and access to the grid, converting steam energy into electricity. Julian says this is a key advantage over starting fresh on a greenfield site.
“It becomes just like a normal hedge, just as we hedge our electricity from our generators through to our customer base, this will be in a sense another form of fuel hedging,” he says.
“The pricing of that will be just a function of the market as we see it.” He adds there will be minimum standards for calorific value to account for variables, accounting for changes in waste composition over time.
The business case was recently expanded from 200,000 tonnes to 100,000 and Julian says this is relative to what’s been built globally. He estimates that 200,000 tonnes of RDF will also save 200,000 tonnes per year of carbon dioxide equivalent emissions. He says the system will be reliable, secure and cost-effective, as its commercial partner Re.Group supplies the RDF and pays a gate fee and EnergyAustralia provides an energy offtake for the steam produced.
“We see that the security of RDF supply is part of the project. On the energy offtake side, we’ve got a coal fired-power station designed to run for at least 25 years,” he says.
Julian says the critical variable for WtE to be commercially viable in Australia is the gate fee market, security of waste supply and the overall market for energy.
“We’re constrained in what we can send to landfill and that will ultimately translate into gate fees for projects like this,” he says.
“When we put those things together, proponents have to take a view about where those markets are going in order to get comfortable on WtE, but we’re seeing more and more projects being proposed and that is suggesting to us that others are seeing the potential.”
Julian says it’s also underpinned by large-scale certificates issued by the Clean Energy Regulator and sold to the market.
He adds it is encouraging to see WtE projects across Australia, including Australian Paper’s investigation into an WtE facility at Maryvale.
In terms of costs which form part of the business case, Julian says that the project has looked at road and rail for RDF transport and road appears to be the most economically viable option.
He adds that each project is ultimately different and requires an assessment of its own unique set of circumstances.