South African vs German South Africa Biogas sector: A comparative analysis

• Gracia Munganga

• Project Engineer/Business Development

• Anaergia Africa

• South Africa

Presentation Overview

1. Introduction to Anaergia

2. Overview of German biogas sector

3. Overview of South African biogas sector

4. SA biogas industry challenges

5. Closing remarks

1. Introduction to Anaergia

Mission: To be the global leader in providing sustainable solutions for our clients by converting wastewater and organic wastes into beneficial reuse products such as energy, clean water and fertilizer.

Anaergia (pronounced ana-er-gia) is a

name derived from the core technology

of our company’s solutions to

sustainability – anaerobic digestion.

Established on a solid foundation

• Founder – Dr. Andrew Benedek, Executive Chairman and Chief Technology Officer

• Professor of Chemical and Civil Engineering, specializing in water and wastewater

• Founder of ZENON Environmental Inc. which developed breakthrough technologies. Company sold to General Electric.

• Proven track record of developing and improving technology in environmental sector

• Clear vision that the world requires new solutions to manage challenges created by urbanization and climate change

2007

Acquired UTS Biogastechnik

2007

Opened US Headquarters in

California

2011

Opened Global Head Office in

Ontario, Canada

2011

Approved $40M Plan Research &

Development and Manufacturing

2012

Opened Asian Headquarters in China and Singapore Office

2013

Strategic $47M Capital Raise Completed

2008

Opened Offices in UK, Spain and

Italy

UTS Biogastechnik GMBH • Established 1992 • Market leader • Significant R&D investment • Core anaerobic technology • Equipment manufacturer • Proven German technology

Projects Under Development 2015+: • Maui Resource Recovery Facility • Eastern Ontario Bioenergy Centre • Bridgeport Bioenergy Facility • Rialto Biosolids & Energy Facility • Cape Dairy Project, South Africa

2014

Opened Office in South Africa

2015

Company’s Footprint

• Over 250 global employees

• Over 20 years of experience – Engineering and design

– Equipment and system manufacturing

– Service and operations

• Focus on R&D with dozens of global patents

• Delivered over 220 turn-key facilities, Over 355MW of renewable power in production

• Projects in over 20 countries – South African office established in 2014 (and

daughter company of the Anaergia GmbH)

– Sales office, with technical support from Germany

Key Market Sectors Served

Municipal Wastewater and Water Reuse Converting wastewater treatment plants into resource recovery facilities. • Infrastructure retrofit • Biosolids and digestate

management • Co-digestion • Renewable energy, gas,

and heat for operations

Municipal Solid Waste (MSW) & Source Separated Organics (SSO) Harnessing the full potential of organic waste from municipal solid wastes (MSW) and enabling diversion from landfill. • MSW pre-treatment • Extraction of organics

diversion • Renewable energy, gas, and

heat from organics • High grade fertilizer

Agricultural and Commercial/industrial wastes Secure, long-term solutions for organic waste management and regulatory compliance. • Nutrient management • High grade fertilizer • Renewable energy, gas, and

heat for operations

2. Overview of the German biogas sector

German biogas sector-Snapshot

• Biggest/Most established biogas market in the world • Collective turnover: €7.2 bn, jobs: 39,000 people Wagner, 2015

• No. biogas plants: 9035 • Capacity installed: 4 GW (~3.5-5% of the electricity

generation) Wagner, 2015

• Avg size of plant: ~440 kW • Feedstocks:

– Crop to fuel: corn – Wastes:

• Agricultural e.g. manure • organic fraction of municipal solid wastes (OFMSW/SSO) • Municipal solid wastes (MSW) • Wastewater

German biogas sector: market context

Context Comments

1 Management of municipal solid waste (MSW) and organic wastes

-90% diversion from landfill, Separation at source -Ban of landfilling of organics i.e. <5% Total Carbon; Fischer (2013)

-High gate fees (~€100/ton for MSW), European Environment

Agency (2013)

2 Renewable Energy Resources Act (EEG, 2014) RE targets

40-45% by 2025 electricity production, 55-60% by 2035 & 80% by 2050

3 Environmental compliance process

<500 kW: ~3 months >500 kW: 3-6 months

4 Market for digestate -Regulatory framework which allows the sale of fertilizer -Storage requirement in winter: 4-5 months -€15-30/ton (Barth, 2011)

5 Financing kfW: up to 100% of the funding, term (5, 10 and 20 years), 3 first years repayment free • Standard: R25 mil- (100 kW-2MW) • Premium: R10 mil for heat, biomass (<100 kW) • Storage: R10 mil for PV with battery

German biogas sector: market context (2)

EEG (2014)

≤150 kW 13, 66 cents/kWh

500 kW 11,78 cents/kWh

5 MW 10, 55 cents/kWh

20 MW 5,85 cents/kWh

Bonus

Small manure plants 15,26-23,73 ct/kWh

Waste fermentation plants 15,26 ct/kWh

-Bonus for fermentation plants -Bonus for manure -340 plants/yr

EEG 2012

-Bonus for energy crops -Bonus for heat -450 plants/yr

EEG 2004

-100 MW cap -Reduced tariffs -230 plants/yr

EEG 2014

-Bonus for manure -Technology bonus for innovation -Gas reprocessing bonus -CHP bonus -1000 plants/yr

EEG 2009

-20 years offtake -Grid access priority -250 plants/yr

EEG 2000

Feed-in tariffs (German Energy Blog 2015)

German biogas sector: Challenges

Amendments to the Renewable Energy Resource Act i.e. EEG (2014)

• Removal of some bonuses/incentives – Energy crops and large scale manure

– Biogas upgrading

• Reduced feed-in tariffs – 15 % overall decrease from 2012 tariffs

– Basic tariff degression~ 2% each year, German Energy Blog (2016)

• Capacity allocated to biogas capped at 100 MW per year

Saturated market – No. of new plants reduced from 1000 to ~230

3. Overview of the South African (S.An) Biogas Sector

South African (S.An) biogas sector -Snapshot

• No. biogas plants: ~300 only • Capacity installed:

– Biogas to electricity: ~14 MW (1.1 MW Johannesburg Northern waste water works)

• Avg size: Mostly rural (biogas for cooking/lighting) with ~10 commercial plants (i.e. >~70 kW)

• Feedstocks: – No crops – Waste based i.e.

• Municipal solid wastes (MSW)/Organic fraction of municipal solid wastes (OFMSW)

• commercial/industrial wastes i.e. SSO • agricultural (manure, abattoir) • Wastewater

S. An biogas sector-market context Comments

1 Management of municipal solid wastes (MSW)

-Waste diversion targets (i.e. 25% by 2019, NEM:WA, Act 59 of 2008; No 26 of 2014)-not necessarily enforced outside of metros -Limited pilot separation at source programmes (~90% of waste landfilled) -Low landfill gate fee: R150-450/ton for MSW (~€9-26/ton)

2 Renewable Energy framework

Renewable Energy Independent Power Programme (REIPPP) from the Department of Energy

• Biogas : 60 MW, (90 c/kWh, currently being reviewed-no project awarded to date)

• Biomass: 150 MW (R1.4/kWh) • Landfill gas: 40 MW ( 94 c/kWh)

3 Use/Sale of Digestate -No current regulatory framework -private agreement between developer and farmer -Disposal of digestate: liability/cost

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sweden Denmark Germany France Netherlands UnitedKingdom

Canada South Africa

Landfilled Recycled Waste-to-energy Composted

S. An biogas sector-waste to landfill

S. An biogas sector-market context (2)

Comments

4 Availability of feedstock Municipal solid wastes (MSW) -Governed by the Municipal System’s Act (No 32 of 2000) and Municipal Finance Management Act (No 56 OF 2003). Required public procurement programme for contract > 3 years)

5 Financing -Industrial Development Corporation • 50-70% of the funding -Department of Trade and Industry Grant e.g. MCEP grant -Various of donor funding in grants and/or soft loans

6 Access to the grid/wheeling agreement

No standardized framework from NERSA. Pilot projects at municipal level (e.g. CoCT, City of Tshawne)

7 Environmental Authorisation/compliance

6-18 months (can be longer)

S.An biogas-Municipal procurement example

3-7 years process

GreenCape (2014)

4. South African biogas sector: challenges

South African biogas-challenges

Project development

1. Licensing and regulatory requirements cumbersome and lengthy –conflicting treshholds between different legislation (e.g manure)

2. Mixed organic waste streams as largest feedstock MSW availabilitypre-treatment with cost implications 3. Lengthy process to secure feedstock from municipalities (3-7 years) 4. Connection to the grid outside of REIPPP for private users through wheeling-challenging

Business case

1. Bulk price of electricity in SA historically low (70-90 c/kWh, though changing) 2. Limited appreciation/value adding of multiple benefits of biogas e.g. fertilizer value, carbon mitigation 3. Financial viability challenging due to low returns/long payback periods 4. REIPPP has not boosted industry as expected

-Cost of complying a bid too high -90 c/kWh ceiling too low -Size cap: 1 MW vs avg 400 kW plant in Germany

South African biogas-challenges (2)

• Not enough commercial projects in operation to give confidence to the market

• Some of the projects operating experiencing challenges – Suboptimal operation and underperformance (biogas yield and

electrical output)

– Uncertainty of supply of suitable wastes

• Limited SA experience with commercial biogas (i.e.technical/biological/process) & availability during crisis

South African biogas -challenges (3)

1. Mechanical problems -Adequate design and sizing of equipment: -Feeding system, esp. plants receiving mixed e.g. clogging of substrate line -Mixers to avoid pressure build-up, maintain constant reactor conditions -Quality of equipment & reliable civil works (e.g. tanks that leak)

3. Adequate monitoring to identify red flags -Biological parameters (seeding and adaptation of adequate bacterial population for feedstock; monitoring of inibihition from NH3 & H2S, measuring of VFAs, ) -Other process parameters (Temperature, pH for optimal microbial growth) -Instruments and control

2. Process Adequate calibration and seeding of biological start-up Adequate composition and loading rate of feedstock (C/N ratio) Maintain constant OLR and HRT

4. Training of operators, e.g. -Availability of key staff:

24 h (close to site) -Isolate inadequate feedstocks -Routine check and record keeping Understand mechanical equipment and process parameters

5. Concluding remarks

South African biogas sector outlook

Local support structure for biogas industry

Establishment of an industry association (i.e. Southern Biogas Industry Association, SABIA) in 2012 Support from the German Cooperation Agency (GIZ) Support from other national dpt: Department of Energy (DoE), National Treasury (IPP), Department of Environmental Affairs (DEA), Department of Trade and Industry (dti)

Milestones/Positive development

Awareness at national level of the benefits of biogas for SA Simplification of environmental compliance (GIZ) e.g. Norms and standards for biogas industry Basic Assessment rather full EIA (186 months) Revision of biogas tariffs in REIPPP (to be confirmed) UNIDO (3 year project to support the development of biogas in SA

Anaergia’s positioning in SA/Africa biogas market

• Anaergia has therefore positioned itself as able to provide full Engineering Procurement Construction (EPC) rather than developer

• Over 20 years of combined experience

• Key staff qualities/experience: – Engineering design

– biological/process

– commissioning

– Operation and maintenance

• Key own equipment supply – Waste processing/sorting equipment e.g. organic extrusion press (OREX,

BIOREX, CLEANREX) , wind sifter, roller screen, lamella screen, etc.

– Biogas plant: feeding system, mixers, service boxes, pumps, solid-liquid separators

Anaergia’s RDF production

Municipal solid wastes (MSW) to biogas-PFD example

Many thanks!

Questions?

Anaergia Africa (stand #L2, Hall 4)

• Gracia Munganga

• Tel: 0214181162

• Cell: 0818095637

• E- mail: gracia.munganga@anaergia.com

Reference List

• http://www.endswasteandbioenergy.com/article/1383938/german-biogas-sector-plea-government-action

• http://www.endswasteandbioenergy.com/article/1383938/german-biogas-sector-plea-government-action

• Wagner, L. (2015). Trends from the use of biogas technology in Germany. Available: file:///C:/Users/g.munganga/Downloads/03_FvB_Wagner_Biogas%20in%20Germany%20(1).pdf. Last accessed May 2016.

• Barth, J. . (2011). Markets for compost and digestate in Europe - Situation, requirements, future development. Available: http://compost.it/biblio/2010_beacon_conference_perugia/2nd_day/5.c%20-%20Barth.pdf. Last accessed May 2016.

• http://www.germanenergyblog.de/?page_id=834

• http://www.germanenergyblog.de/?page_id=8617

• http://www.germanenergyblog.de/?page_id=16379

Reference List

Back up slides

Anaergia’s AD related equipment

Anaergia’s AD equipment related

S.An biogas-Municipal procurement example

• Online regulatory tool created by GIZ, GreenCape and the Department of Environmental Affairs , http://biancagalego.wix.com/wastetreatementguide

Anaergia’s Aproach to Waste Management

Integrated Solutions

Food Processing Waste

Municipal Solid Waste

Source Separated Organics

Wastewater Biosolids

Reuse

Water

Fertilizer

Renewable Gas

Renewable Power

Agricultural Waste

• http://www.eea.europa.eu/data-and-maps/figures/typical-charge-gate-fee-and

Biogas tariffs 2014-2009

• EEG (2012) • EEG (2014)

Biogas tariffs 2014-2009 (2)

• EEG (2009)

Biogas tariffs 2014-2009 (3)

• EEG (2009)