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That Was Then, This Is NOW! or The New Economics of Biogas Projects

Submitted by on February 8, 2018 – 9:15 amNo Comment

by Scott Warfield (CERES Project Services/Lee Enterprises Consulting/Biofuels Digest)  … The big game changer for financing, profitability and financial returns of anaerobic digester (AD) projects regardless of feedstock is carbon offset credits and specifically California’s low carbon fuel standard (LCFS) which provides a premium for carbon offset credits based on the carbon intensity of a project relative with the greenhouse gas emissions that would be result without the project to produce biogas.

Just ten years ago, biogas from anaerobic digesters on a large-scale basis would have an average construction (CapEx) cost of about $33.50 per MMBtu of RNG produced.   The revenue source would be RNG sales at about $9.50 per MMBtu and perhaps sales of some or all of the digestate for compost material or fertilizer value at $20 to $30 per ton. The expected return om investment was rarely more than 15% and usually in the range of 7% to 12% for a good project. What this meant for developers was a difficult path for financing the projects if the project was financeable at all. Most of the projects that were built as a result were farm-based projects on a smaller scale where the dairy or farm could use the offtake of either the biogas or electricity and thermal energy from an engine generator to offset utility costs and lower the farm operating expenses.

This is now, and the new reality is a huge potential for the development of anaerobic digester projects to meet the needs for cellulosic biofuels (advance biofuels) qualifying for category D3 Renewable Identification Number (RINS) or category D5 if mixed wastes from other than cellulosic feedstocks are used. Animal manures have been classified as cellulosic and therefore – if used exclusively or in conjunction with other cellulosic feedstocks such as corn stover, corn cobs, energy crops, etc. – qualifies for category D3 RINS. As a cellulosic biofuel, the RNG also qualifies for certification under California’s LCFS program if the RNG is sold into the California market and used as compressed natural gas (CNG) transportation fuel.  READ MORE

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