Gas into Cash

LANDFILL OWNERS INCREASINGLY are converting their facilities' landfill gas (LFG) into electricity and reaping both environmental and economic rewards. But to take advantage of power-generating opportunities, some landfill owners first find a qualified landfill-gas-to-energy (LFGE) project developer to help them navigate a potentially daunting process.

A developer will organize most of the LFGE project details, such as LFG rights, power sale negotiations, environmental compliance, construction, operations. However, this does not mean a landfill owner should not participate in the project. Instead, both parties should work together to ensure the landfill's needs are being met and the project's potential is optimized.

To begin a power station project, a developer first will assess the landfill's electrical generation capability by answering specific questions, which include all of the following:

  • Does the landfill have more than 3 million tons of waste?

  • Does the landfill have an active LFG collection system?

  • Does the local utility company participate in green power programs?

  • Is the landfill reasonably close to major power lines or have easy access to the local utility's grid system?

  • After these questions have been answered, developers use several measuring devices to determine a potential project's size, such as gas flow, and current and projected waste capacities. Based on these measurements and a thorough site review, the developer can determine the size and viability of the facility as a LFGE project.

    Other factors an owner and developer should consider include whether there is a community interest in renewable power. Most owners are active in their communities and aware of various environmental and job sustainability concerns. To promote a landfill's commitment to the area's residents, it may be necessary to further educate the public about a potential LFGE project.

    When it is time for business negotiations between the owner and developer, every landfill has unique needs that should be addressed. For example, LFG and development rights negotiations may vary based on the landfill's size, LFG-flow quantity, LFG quality, electricity sales conditions and tax credits.

    Initially, the developer will secure the LFG rights from the landfill owner. The gas rights agreement (GRA) is a contract that gives the developer exclusive rights to the LFG during an allotted time period. The developer and the power buyer also should obtain a power purchase agreement (PPA) obligating the power purchaser to buy the power generated from the LFG at a negotiated price for a specific amount of time. This transaction can be between the developer and the local utility company, a power marketer, an end-user or a combination. Based on the agreements, the landfill either will receive a royalty payment from electricity sales or a gas purchase payment. Ideally, the agreements' life spans should coincide for 10 years to 15 years. The LFGE project's success is based on conditions determined during negotiations.

    Contracts must be structured so that the LFG purchase price allows for a competitive power price. The capital cost per megawatt (MW) is greater for a renewable energy facility. For example, a big power plant using nonrenewable fossil fuels costs $400,000 per MW to $600,000 per MW to build, whereas a small power plant running on renewable fuel such as LFG can cost $1 million per MW to build. Therefore, the electricity generated commands a higher price than electricity created from fossil fuels. Additionally, the renewable energy credits generated by the renewable energy facility have considerable market value. To ensure commercial viability, a LFG-fueled renewable power station also must have a significantly lower gas purchase price per million per British thermal unit (MMBtu) than a fossil-fuel fired power station, even with the higher power price and renewable energy credit income.

    Once purchase and sale negotiations are finalized, the developer determines the best technology for the project. For a typical landfill, reciprocating engines, turbines, boilers with steam turbines and/or microturbines may be used to combust the LFG to generate electricity. These technologies are matched to the landfill's characteristics based on the amount and quality of available LFG, the landfill's growth potential, the development's budget, and the surrounding area's environmental and aesthetic requirements.

    After the proper technology has been selected, project permitting begins. By law, LFGE projects must meet requirements for regional air quality, state and federal solid waste handling, and local building, zoning and land-use standards. The time line for the permitting process depends on the particular project, but it can last from a few months to more than a year.

    Finally, power station construction begins once all the permits have been issued. The developer and the construction crew work with the owner to ensure construction does not interfere with the landfill's daily operations. For example, the project's development cannot obstruct trucks from entering or exiting the landfill. Typically, construction is a four-to-eight-week process in addition to a two-week period when the facility gear-up for full operation.

    Once the power station is operable, the developer's operations and maintenance (O&M) team ensures that the facility is using the maximum amount of LFG to run generators, while preserving the landfill's ability to effectively produce LFG in the long term. Therefore, O&M must have an efficient and balanced collection system. Also, the team monitors daily environmental compliance and services the engines to alleviate unnecessary downtime.

    Ultimately, the landfill owner has many incentives to host a LFG power station. By taking advantage of an LFGE project's financial and environmental benefits, owners can turn their gas into cash.