Developing Landfill Gas Projects without Getting Credit

Tom Kerr

You don't have to be an alchemist to turn landfill gas into gold, but you may have to change your formula after June 30. That is the magic date when Section 29's tax credits will disappear for landfill gas-to-energy projects (LFGTE), an event that has many landfill owners and project developers worried. However, incentives to start new projects may be reappearing.

For example, global warming issues are heating up (no pun intended), and this could be good news for LFGTE. International representatives agreed last December at the Kyoto Climate Change Conference to measures that would reduce greenhouse gas (GHG) emissions significantly in developed countries, and landfill methane is a potent GHG that can be reduced cost-effectively through LFGTE projects.

Further, "emissions credit trading" is expected to be one of the cornerstones of the nation's GHG reduction policy, both domestically and internationally. While no formal market is yet in place, investors such as Centre Financial, Chicago, and Trexler & Associates, Portland, Ore., see LFGTE projects offering significant GHG reduction potential and are investigating the market for trading credits based on reductions in landfill methane emissions.

In addition, the Solid Waste Association of North America (SWANA), Silver Spring, Md., has quantified the amount of potential projects that are undeveloped and has contacts with key LFG developers.

In fact, two organizations already are working on an emissions reduction credit trade that involves landfill gas (LFG): Northeast Utilities (NU), Hartford, Conn., and Canada's Greenhouse Emissions Management Consortium (GEMCo), a group of nine Canadian utility and energy companies.

In a sale that may be the first of its kind in the world, NU intends to sell GHG emission reduction credits generated by its LFGTE project in Connecticut to GEMCo. GEMCo is interested in investing in GHG mitigation projects as a way to get "insurance" against future GHG reduction requirements.

Among other things, this potential deal illustrates a new way to add value to LFGTE projects by creating a monetary value for methane emission reductions generated by LFG combustion.

To find out if your landfill can take advantage of these opportunities, contact David Tubman at SWANA at (301) 585-2898.

Green Power Another viable alternative for LFG will come in an old, familiar form: energy sales. Soon, customers will be able to choose their electricity or gas provider from one of many energy companies, and LFG will be among the "green power" options.

The good news is that a significant segment of this new "retail market" for energy is willing to pay a premium for green power, which is generated by non-polluting or renewable sources.

Early retail access pilot projects, existing green power programs and consumer surveys suggest that LFG-generated power will fare well in this type of market since it offers double benefits:

* it is the only renewable energy source that addresses air quality concerns by removing pollutants from the atmosphere and

* it allows communities to capitalize on a local resource that would otherwise go to waste.

The Pacific Northwest Generating Cooperative (PNGC), Portland, Ore., was one of the early adopters of green power marketing, allowing it and its eleven member cooperatives to gain experience in competing and developing strategies to meet consumer demands.

Although PNGC has been operating the Coffin Butte Resource Project, a 2.5 megawatt LFGTE facility, since 1995, the energy costs were higher than the low market prices in the Pacific Northwest.

Working with the EPA's Landfill Methane Outreach Program (LMOP), PNGC realized that green power marketing would enable it to make up the cost differential by enlarging its customer base, meet other business objectives, such as being recognized as a good corporate citizen, and even allow it to expand the project's capacity.

In a workshop in fall, 1997, the cooperative's members learned how to establish a green power marketing program and about its potential benefits. Since then, two cooperatives have launched green marketing programs, with as many as four to follow this summer.

"Our green power marketing program allows us and our members to develop a community-based renewable resource, [be] responsive to our customer's demands for renewable energy choices, and gain important marketing experience," says Kevin Watkins, PNGC's vice president of engineering.

Is Green Power for Your Landfill? What can green power offer economically to your LFG marketing program? Following are some steps for determining the price of the LFG product and an example of how to apply it to a 3-million-metric-ton landfill:

1. Decide the megawatt (MW) generation capacity of your LFGTE project. Based on an 80 percent capacity factor, a 3-million-metric-ton landfill, which can generate 2.4 MW of capacity, can generate about 16,820 kilowatts (kWh) annually.

2. Through market research, determine the price premium target customers are willing to pay (usually expressed in dollars per month). Most residential customers are willing to pay a monthly premium between $3 and $5 for "green" power, according to recent surveys.

3. Determine the incremental cost using avoided cost and LFGTE costs (less potential incentives and tax credits). If a utility's avoided cost is 2.5 cents/kWh, and a LFGTE project developer needs 3.5 cents/kWh (including incentives), the incremental cost is 1 cent/kWh.

4. Using the incremental cost information (cents/kWh), identify the total annual incremental cost the green pricing program should cover. For our model, the green marketing program for LFGTE must recover $168,200 per year.

5. Determine green pricing premium and number of participants necessary. A $5 monthly premium would require participation from about 2,803 residential customers.

6. Investigate other pricing options if necessary. You may wish to solicit donations from commercial and industrial sources/customers. The donors will benefit from the public recognition associated with their contributions to enhance the environment.

In our landfill example, if four commercial sources contribute $5,000 each and residential customers are charged a $5 premium, 2,470 residential customers must participate.

Although the evaporation of Section 29 tax credits present challenges to LFGTE development, other opportunities for capturing the economic value of these projects are coming online.

Are there opportunities for your community to cash in on your landfill gas? A total of 170 U.S. landfills already are economically converting their methane into a marketable energy source.

In addition, the U.S. Environmental Protection Agency (EPA) estimates that 500 additional landfills are large enough to support a LFGTE project.

EPA can help you assess whether landfill gas-to-energy (LFGTE) is right for your facility and what opportunities are available through its Landfill Methane Outreach Program (LMOP).

For more information on a specific project opportunity, contact the LMOP territory manager responsible for your state:

Territory 1 (Conn., Del., Mass., Md., Maine, N.C., N.H., N.J., N.Y., Pa., R.I., S.C., Tenn., Va., Vt., W.V.): Shelley Cohen, (202) 564-9797. E-mail: [email protected]

Territory 2 (Ill., Ind., Ky., Mich., Ohio, Wis.): Ed Coe, (202) 564-8994. E-mail: [email protected]

Territory 3 (Ariz., Calif., Colo., Hawaii, Kan., La., N.M., Nev., Okla., Texas, Utah): Mary Schoen, (202) 564-9058. E-mail: schoen. [email protected]

Territory 4 (Alaska, Ala., Ark., Fla., Ga., Iowa, Idaho, Minn., Mo., Miss., Mont., N.D., Neb., Ore., S.D., Wash., Wyo.): E-mail: Nabilah Haque, (202) 564-9758. haque.nablah@ epa.gov

For general information and document requests, call 1-888-STAR-YES (782-7937) toll-free or log onto the LMOP's website at http://www.epa.gov/lmop/

Once the landfill gas is out of the ground, where do you find the customers?

Several types of facilities became users of the medium British thermal unit (BTU) landfill gas (LFG) generated at the Fred Weber Inc. Landfill in St. Louis County, Mo.:

Hot Oil Boiler. Since 1983, a 4-million BTU per hour gas boiler has used LFG to heat oil for two on-site asphalt plants. The hot oil boiler operates year-round, 24 hours a day.

Aggregate Dryer. Since 1988, LFG has been used to supply a portion of the fuel to fire the 90-million BTU per hour aggregate dryer. The unit, which dries sand and rock for an asphalt plant, has dual burners for using both LFG and natural gas.

In 1996, a larger, multi-stage centrifugal blower was installed to deliver approximately 2,000 standard cubic feet per minute (SCFM) of LFG to the dryer.

The supplemental natural gas volume supplied to the dryer, which is determined by the moisture in the aggregate, is regulated by the asphalt plant operator to maintain the necessary temperature.

The LFG supply of 2,000 SCFM at approximately 500 BTU per cubic foot will supply two-thirds of the dryer maximum heat capacity.

The plant generally operates 12 hours a day, five days a week for approximately nine months a year.

Ready-Mix Plant. Since 1988, an on-site concrete ready-mix plant has been using LFG to heat the process water and portions of the plant structure during winter - allowing the plant to operate from November through March. The hot water boiler burner is rated at 6.5 million BTU per hour.

Greenhouses. Since 1981, LFG has been supplied to greenhouses adjacent to the landfill. Eight space heaters, rated at 350,000 BTU per hour, are supplied with LFG.

Pattonville High School. In January 1997, the Weber landfill began donating LFG to nearby Pattonville High School to use with its heating system, which includes two 65 horsepower hot water boilers.

A 3,600-foot pipeline and a multi-stage centrifugal blower delivers the LFG to the boilers. The same blower system supplies LFG to the greenhouses and the hot oil boiler.

For safety, the LFG is odorized, similar to natural gas, prior to delivery.

The school expects to save $40,000 annually by using the free LFG for heating in lieu of natural gas.