biogas - ecometrix · 2019-09-10 · 5.1 overview of biogas-for-transport benefits and barriers ......
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environmental affairs Environmental Affairs Department:
REPUBLIC OF SOUTH AFRICA
R E P O R TBiogas FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA – THE CASE FOR BIOGAS
R E P O R TBiogas FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA – THE CASE FOR BIOGAS
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Table of contentsAcronyms and abbreviations ..................................................................3Definitions ................................................................................................ 5Chemical symbols .................................................................................. 6List of tables ............................................................................................ 7List of figures ............................................................................................ 8Executive summary ............................................................................... 10
1. Chapter 1: Introduction ................................................................141.1 Background.....................................................................................................141.2 Study objectives ..............................................................................................141.3 Approach ........................................................................................................15
1.3.1 Feasibility requirements ....................................................................................................151.3.2 Sectors covered ................................................................................................................19
1.4 Guidance to the structure of this report ...........................................................191.5 Conversion between units ...............................................................................20
2. Chapter 2: The biogas-for-transport value chain ..........................212.1 Definition of biogas for transport .....................................................................21
2.1.1 Definitionofrawbiogas ....................................................................................................21
2.2 Value chain analysis ........................................................................................232.2.1 Biogassources .................................................................................................................232.2.2 Upstreamlogistics ............................................................................................................252.2.3 Biogasproduction .............................................................................................................252.2.4 Biogasupgrading..............................................................................................................272.2.5 Downstreamlogistics ........................................................................................................282.2.6 Biogasconsumption .........................................................................................................28
3. Chapter 3: Biogas-for-transport sources in South Africa ................303.1 Status quo of the South African biogas sector .................................................303.2 The Biogas for Transport Sources Inventory ......................................................323.3 Main sectors and potential .............................................................................333.4 Conclusion ......................................................................................................34
4. Chapter 4: Feasibility of transforming to CBG as a transport fuel ..354.1 Cost-benefit analysis: biogas-to-fuel versus biogas-to-electricity .....................35
4.1.1 Biogastofuel ....................................................................................................................374.1.2 Biogastoelectricity ...........................................................................................................414.1.3 Netpricebenefit:biogas-to-fuelversuselectricity ............................................................434.1.4 Benefitanalysisoffuelversuselectricity ..........................................................................444.1.5 Infrastructuralrequirements..............................................................................................47
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4.2 Risks of supply using CBG ................................................................................474.2.1 RiskofsupplyusingCBG .................................................................................................474.2.2 PotentialforintegratingCBGwithCNGinfrastructure .....................................................484.2.3 CBG/CNGintegration .......................................................................................................50
4.3 High-level macro-economic and environmental impact ...............................514.3.1 Macro-economicimpact ...................................................................................................514.3.2 Environmental impact .......................................................................................................56
4.4 Findings on the viability of CBG for use as transport fuel .................................584.4.1 CompetitivenessofCBGasafuel....................................................................................584.4.2 CNGfortransportisaprerequisiteforCBGasatransportfuel .......................................594.4.3 Importanceofhigh-volumerecurringtransportpatterns...................................................594.4.4 Theexclusivepositionofmunicipalities............................................................................604.4.5 Comparativesummaryofbiogasfortransport .................................................................60
5. Policy intervention rationales and options .....................................625.1 Overview of biogas-for-transport benefits and barriers ....................................62
5.1.1 Benefitsforimplementation ..............................................................................................625.1.2 Barriersforimplementation ..............................................................................................63
5.2 Strategic framework for policy development ..................................................655.2.1 SWOT on a national level .................................................................................................655.2.2 AnalysisofthecaseforSouthAfrica ................................................................................665.2.3 Typesofpolicyinstruments ..............................................................................................695.2.4 Positionofinterventionsacrossthevaluechain...............................................................71
5.3 International policy experience .......................................................................725.3.1 Internationalpolicyoverview ............................................................................................725.3.2 Policyeffectivenessexperiences ......................................................................................74
5.4 South African policy conclusions and recommendations ...............................745.4.1 CBGpolicyrationale .........................................................................................................745.4.2 CBGstimulusscenario .....................................................................................................765.4.3 Envisagedpolicyinterventions .........................................................................................77
6. References ................................................................................... 79
Appendix – List of stakeholders ..............................................................82
Disclaimer
ThisreporthasbeenpreparedbyEcoMetrixAfrica(Pty)LtdfortheDepartmentofEnvironmentalAffairsofSouthAfrica.
EcoMetrixAfrica(Pty)Ltdhastakenallreasonablecaretoensurethatthefactsstatedhereinaretrueandaccurateinallmaterialaspects.However,neitherEcoMetrixAfrica(Pty)Ltdnoranyofitsdirectors,officers,employees,advisorsoragentsmakesanyrepresentationorwarranty,orgiveanyundertakingofanykind,expressorimplied,astotheactuality,adequacy,accuracy,reliabilityorcompletenessofanyopinions,forecasts,projections,assumptionsoranyotherinformationcontainedin,orotherwiseinrelationto,thisreport,orassumesanyundertakingtosupplementanysuchinformationasfurtherinformationbecomesavailableorinlightofchangingcircumstances.
NoliabilityofanykindwhatsoeverisassumedbyEcoMetrixAfrica(Pty)Ltd,anyofitsdirectors,officers,employees,advisorsoragentsinrelationtoanysuchopinions,forecasts,projections,assumptionsoranyotherinformationcontainedin,orotherwiseinrelationto,thisreport.
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Acronyms and abbreviationsAD AnaerobicDigestionAFD FrenchDevelopmentAgencyBFP Basic Fuel PriceBRT Bus Rapid Transit SystemCapex CapitalExpenditureCBG CompressedBiogasasaSubstituteforCNGCNG CompressedNaturalGasCDM CleanDevelopmentMechanismCEF CentralEnergyFundCHP CombinedHeatandPower(Electricity)CNG CompressedNaturalGasCOD ChemicalOxygenDemandCOP ConferenceofthePartiesCPI ConsumerPriceIndexDBSA DevelopmentBankofSouthernAfricaDEA DepartmentofEnvironmentalAffairsDFID DepartmentforInternationalDevelopmentDLE DieselLitreEquivalentDSM Demand-sideManagementDSML Demand-sideManagementLevyDM Dry MatterDoE DepartmentofEnergyDoT DepartmentofTransportESSAC EuropeanScience,SupportandAdvisoryCommitteeEU European UnionFOB Free on BoardFTE Full-timeEquivalentGDP GrossDomesticProductGEF GlobalEnvironmentFacilityGGE GasolineGallonEquivalentGHG GreenhouseGasGIZ GesellschaftfürInternationaleZusammenarbeitGJ GigaJouleGLE GasolineLitreEquivalentGSI GlobalSubsidiesInitiativeGtL GastoLiquidGW GigaWattGWh GigaWatthourHCV HeavyCommercialVehicleIDC IndustrialDevelopmentCorporationIEA InternationalEnergyAgencyIISD InternationalInstituteforSustainableDevelopmentIMF International Monetary FundIP IlluminatingParaffinIPPC IntergovernmentalPanelonClimateChange
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KfW KreditanstaltfürWiederaufbauKTBL AssociationforTechnologyandStructuresinAgriculturekW Kilo WattkWh KiloWatthourLCV LightCommercialVehicleLFG LandfillGasLfL GermanBayerischeLandesanstaltfürLandwirtschaftLNG LiquidNaturalGasLPG LiquifiedPetroleumGasMACC MarginalAbatementCostCurveMCV MediumCommercialVehicleMFMA MunicipalFinanceManagementAct2003(ActNo.56of2003)MJ MegaJouleMPA MitigationPotentialAnalysisMSW Municipal Solid WasteMt MillionTonnes(megatonnes)MW MegaWattMWh MegaWatthourMWW MunicipalWastewaterNCCRWP NationalClimateChangeResponseWhitePaperNERSA NationalEnergyRegulatorofSouthAfricaNG NaturalGasNGO Non-governmentalOrganisationNm3 NormalCubicMetre.OECD OrganisationforEconomicCooperationandDevelopmentOpex OperatingExpenseOperationalExpenditurePEG PolyethyleneGlycolPM Particulate MatterPSA PressureSwingAdsorptionREIPPP RenewableEnergyIndependentPowerProducerProcurementSABIA SouthernAfricanBiogasIndustryAssociationSAPIA SouthAfricanPetroleumIndustryAssociationSANEDI SouthAfricanNationalEnergyDevelopmentInstituteSASA SouthAfricanSugarAssociationSCPF StrategicClimatePolicyFundSMME Small,MediumandMicroEnterpriseSUV SuburbanUtilityVehicleSWOT Strengths,Weaknesses,OpportunitiesandThreatsTS Total Solids UASB Up-flowAnaerobicSludgeBlanketUK UnitedKingdomUNFCCC UnitedNationsFrameworkConventiononClimateChangeUNIDO UnitedNationsIndustrialDevelopmentOrganisationVAT Value-addedTaxv/v VolumeperVolumeZAR SouthAfricanRand
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DefinitionsAnaerobic Oxygen-freeBiomethane Biogasupgradedtonaturalgasquality.Mesophilic digestion Digestionat25-40°C.Usuallyaround35-37°C.Methane concentration Amountofmethane(CH4)inthebiogas,normallyexpressedaspercentagebyvolume.Methane yield AmountofCH4produced,expressedine.g.Nm3 per tonne total solids.Normal cubic metre. Volumeatnormalconditionsforwhichtwostandardsarecommonlyused: -DIN1343:273.15K(0°C)and1.013bar(atmosphericpressure) -ISO2533:288.15K(15°C)and1.013bar(atmosphericpressure)Thermophilic digestion Digestionintherangeof50-60°C,butusuallyintherangeof50-55°C.Total solids Theweightofthesubstrateafterdrying,normallyexpressedasapercentageofwet
weight.Alsocalleddrymatter.Wheeling The‘free’movementofelectricityorgasalonginterconnectedtransmission/transport
(pipe-)linesofdifferentownersforacertaintransmissionfee.
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Chemical symbolsC CarbonCH4 MethaneCO CarbonmonoxideCO2 CarbondioxideCO2e CarbondioxideequivalentH HydrogenH2O Water vapourH2S HydrogensulphidektCO2e KilotonnesofcarbondioxideequivalentMtCO2e MillionTonnes(megatonnes)ofcarbondioxideequivalentN2 NitrogenNOX NitrogendioxideO2 OxygenSox Sulphuroxides
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List of tablesTable 1.3.1: Feasibilityrequirementstobeappliedonsectorandprojectlevel .............................................................. 15
Table 1.3.2: Sectorscoveredandfocusonspecificwastestreams ................................................................................ 19
Table 1.5.1: Unitsofmeasureconversiontable .............................................................................................................. 20
Table 2.1.1: Comparisonofthecompositionofbiogas,biomethaneandnaturalgas ..................................................... 22
Table 2.2.1: GenericcomparisonbetweenCNGandLNG.............................................................................................. 28
Table 3.1.1: Digesterspercountry................................................................................................................................... 30
Table 3.1.2: OverviewofexistingbiogasprojectsinSouthAfrica ................................................................................... 31
Table 3.2.1: Biogasinventoryqualitativeandquantitativecriteriadefinitions.................................................................. 32
Table 4.1.1: Pricesofenergyofdifferentcarrierscompared ........................................................................................... 36
Table 4.1.2: SouthAfricanpetrolpricingstructurebreakdown ........................................................................................ 39
Table 4.1.3: DomesticelectricitypricesCityPowerversusEskom(May2015) .............................................................. 42
Table 4.1.4: Comparisonreturnonmitigation:bioelectricityversusbiofuel..................................................................... 45
Table 4.1.5: GHGmitigationoptions:electricityversustransportsector ......................................................................... 46
Table 4.2.1: Biogas-for-transportGHGemissionmitigationpoliciesandregulations...................................................... 49
Table 4.2.2: Numberofminibussesandbussesperprovince ......................................................................................... 50
Table 4.2.3: CurrentandproposedCNGrefuellingstations. ........................................................................................... 51
Table 4.3.1: Biogas-for-transportjobcreationpotentialbyskillscategory ...................................................................... 52
Table 4.3.2: Thegasolinelitreequivalentperfueltype .................................................................................................. 53
Table 4.3.3: Vehiclefueleconomy ................................................................................................................................... 54
Table 4.3.4: Biogas-for-transportsubstitutionpotential ................................................................................................... 55
Table 4.3.5: Biogas-for-transportrelatedreductioninfuelimports .................................................................................. 55
Table 4.3.6: Fuelemissionfactors ................................................................................................................................... 57
Table 4.3.7: Biogas-for-transportGHGemissionmitigation ............................................................................................ 57
Table 4.3.8: Non-GHGemissionreductions(%)ofnewCNGcomparedtoin-usepetrol/dieselvehicles....................... 58
Table 4.4.1: Summaryoffindingsofbiogasfortransportanalysis–fuelversuselectricity............................................. 61
Table 5.2.1: Taxonomyofdifferenttypesofpolicyinstruments ...................................................................................... 70
Table 5.3.1: Measuresaimedatpromotingtheuptakeofbiogasfortransportinselectedcountries ............................ 73
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List of figuresFigure 1.3.1: Costsofbiogasproduction,upgradingandcompressionasashareoftotalcost ...................................... 17
Figure 1.3.2: Costsofbiogasupgradinganditsdependencyoninstallationcapacity ..................................................... 18
Figure 1.4.1: Report structure ........................................................................................................................................... 20
Figure 1.5.1: Unitsusedfortheanalysisofbiogasforthetransportvaluechain ............................................................. 20
Figure 2.1.1: Thebiogas-for-transportvaluechain ........................................................................................................... 23
Figure 2.2.1: Therelativebiogasyieldpersourcepersector(GJ/ton) ............................................................................. 24
Figure 2.2.2: Biogastechnologymaturitystatus ............................................................................................................... 26
Figure 3.2.1: Biogaspotentialpersector(Nm3perday) ................................................................................................... 33
Figure 3.2.2: Biogaspotentialpersource(Nm3perday) .................................................................................................. 33
Figure 3.4.1: Geographicdistributionofpotentialbiogassources .................................................................................... 34
Figure 4.1.1: Theuseofwasteindifferentwaysandmodalities ...................................................................................... 36
Figure 4.1.2: Costbreakdownof95unleadedpetrolpriceperMJ ................................................................................... 39
Figure 4.1.3: Thepriceparitybreakdownof95unleadedpetrolasopposedtoCNG ...................................................... 40
Figure 4.1.4: AverageNERSA-approvedpriceincreaseandCPIsince2000 ................................................................. 41
Figure 4.1.5: The64projectsawardedunderREIPPPRound1–3,accumulatingto3916MWe .................................... 42
Figure 4.1.6: Comparingnetpricebenefitbetweenenergycarrierswhenusingbiogas-basedsubstitutes ..................... 43
Figure 4.1.7: Valuechainofbiogas-to-electricitycomparedwithbiogasfortransport ...................................................... 46
Figure 5.2.1: ASWOTanalysisofthecaseforCBGasatransportfuelinSouthAfrica ................................................. 67
Figure 5.2.2: Variousoptionsforpolicyinterventionwithinthebiogas-for-transportvaluechain .................................... 71
Figure 5.4.1: Biogas-for-transportincentiverationalerange ............................................................................................. 75
Figure 5.4.2: Biogas-for-transportincentiverationalerange ............................................................................................. 77
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Acknowledgements
“Thefacilitationoflarge-scaleuptakeofalternativetransportfuelsinSouthAfrica–thecaseforbiogas”wascommissionedbytheDepartmentofEnvironmentalAffairs(DEA),incollaborationwiththeSouthAfricanNationalEnergyDevelopmentInstitute(SANEDI).ThestudywasfundedbytheDepartmentforInternationalDevelopment(DFID)oftheUnitedKingdom(UK)governmentthroughtheStrategicClimatePolicyFund(SCPF)ProgrammemanagedbyCardnoEmergingMarkets(UK)Ltd.ThestudywasconductedbyEcoMetrixAfrica(Pty)Ltd. Theprojectteamacknowledgesvariousinputsreceivedfromthedifferentstakeholderswhomadeacontributiontowardsthedevelopmentofthisreport.
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Executive summary
• AnassessmentofthefinancialviabilityofthemainCBGproductionprocesses,aswellasthemacro-economiceffectandthenationalgreenhousegas(GHG)mitigationimpact.
• Theidentificationofopportunitiesforpolicyinterventionsbygovernmentincollaborationwithbusiness,withtheaimofstimulatingtheapplicationofCBGasanalternativetransportfuel.
Potential of biogas for transport based on the relevant waste sources in the countryThetotalbiogaspotentialfromsourcescapturedintheinventoryisaroundthreemillionnormalcubicmetres(Nm3)perday,ofwhichthemajoritycanbefoundinthesugarandmunicipalsolidwaste(MSW)sectors.ThemajorityofpotentialbiogassourcesarelocatedintheproximityofSouthAfrica’surbanisedcentres,alongtheKwaZulu-Natalcoast,inGautengandaroundCapeTown.Thefollowingfigureshowsthegeographicdistributionofthepotentialbiogassourcescapturedintheinventory.Eachbubblerepresentsauniquebiogassource.Thesizesofthedifferentbubblesrepresenttherelativebiogasproductionpotentialbetweenthesources.
ThisstudyispartofaprogrammeundertheStrategicClimatePolicyFund(SCPF),establishedbytheDepartmentforInternationalDevelopment(DFID)oftheUnitedKingdom(UK)governmentandmanagedbyCardnoEmergingMarkets(UK)LtdonbehalfoftheDepartmentofEnvironmentalAffairs(DEA).ThepurposeofthefundistotranslatethemitigationplansoutlinedintheNationalClimateChangeResponseWhitePaper(NCCRWP)(RepublicofSouthAfrica,2011)intofeasiblemitigationactions.
Theobjectiveofthisstudyistoestablishanunderstandingoftheeconomicandpracticalpotentialofcompressedbiogas(CBG)asanalternativetransportfuel,therebyprovidinginputstothepotentialfurtherdevelopmentofpoliciesbytheSouthAfricangovernment.Insupportofthismainobjective,thestudytargetedthefollowingresults:
• Thedevelopmentofanationalbiogasinventory,including(asfarasaccessibleandavailable)anindicationofthequantity,qualityandavailabilityofbiogasasapotentialtransportfuel.
Itisworthnotingthat,withashareof38%ofthetotalvolume,theMSWsectoristhelargestcontributortothecountry’sbiogaspotential,andthatthesesources are all located in close proximityofurbanisedareas.Severalofthesourceswithinthissectorareamongthetenlargestpointsourcesidentified.Fromthis,onecanconcludethatlocalgovernmentsinSouthAfricahavethepotentialtocontroland/oroperatealargeshareofthecountry’spotentialbiogas-for-transportsources,makingitideallypositionedtodrivethelarge-scaleuptakeofbiogasasatransportfuel.
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Feasibility of transforming biogas to CBG as a transport fuelCurrently,theapplicationofCBGasatransportfuelinSouthAfricaisinitsinfancy.Biogasismainlyusedtogenerateelectricityandheat(combinedheatandpower),eventhoughtheanalysisshowsthatprocessingbiogasfurtherintoCBG,andusingitasatransportfueliseconomicallythemostattractiveoption.InspiteofcurrentmarketpricesofpetrolanddieselofaroundR11toR14perlitre(ℓ),nomaterialuptakeofCBGasatransportfuelhasmaterialised.Hence,itisevidentthat,undercurrentconditions,marketbarrierspreventsuchuptake.
Toaslightlylesserextent,thesamecanbesaidforcompressednaturalgas(CNG),which,whenappliedasatransportfuel,hasverysimilarpropertiesandtechnicalrequirementsasCBG.Currently,theSouthAfricangovernmentsupportstheuptakeofCNGasatransportfuelviaaninformal(i.e.notregulated)subsidyintheformofanimplicitexemptiononthefuelleviesandtaxesthatareplacedonpetrolanddiesel.Inadditiontothis,theIndustrialDevelopmentCorporation(IDC)providesasubsidyintheformofasoftloanfortheconversionofpetroland/ordieselvehiclestoCNGvehicles.
WhencomparingCNGwithCBGfromaneconomicperspective,CNGwillprobablyremainmorecompetitive,asgasfromMozambiqueisestimatedbytheGasUsers’GrouptobeimportedbySasolatonlyR20/GJandsoldataroundR42/GJonaverage,whileatthepump,petroliscurrentlysoldatapricehigherthanR309/GJ(R10/ℓ).Nevertheless,aspetrolanddieselpricesarelargelygovernedbyinternationalmarkets,whichareonlyinfluencedinaminorwaybylocalalternatives,thiswillnotbeofimportance.Aslongaspetrolanddieselpricesdonotdecreasefurther1,theapplicationofthesameinformalandformalsubsidiesforCBGasarecurrentlybeingappliedforCNGtocountermarket-entrybarriersmaymaketheapplicationofCBGasatransportfuelviableifregulatorycertaintyisprovidedinthisregard.Acknowledgingtheforegoing,theattractivenessforgovernmenttopotentiallystimulatebiogasfortransportwouldneedtolieintheappreciationofthemacro-economiceffect,GHGmitigationimpact
1. http://www.macrotrends.net/1369/crude-oil-price-history-chart
andotherco-benefitstogovernmentthattheapplicationofbiogasasatransportfuelcanmake.
GasinSouthAfricaplaysonlyamarginalroleintheenergymixand,assuch,thereisverylimitedtransportandretailinfrastructureinplace.WhileCBGcanbringinthedesiredgreencontent,CNGasalow-carbonfuel–ifmanagedwell–canprovidethelonger-termsecurityandcontinuityofsupplythatthismarketneedstotakeoff.TheparallelemergenceofCNGandCBGforthetransportmarketthereforeseemsessential.Consideringthelatter,itisthereforecrucialthatgovernment,initsoverallpolicyframework,acknowledgestheimportanceofCNGandCBGfortransport,andfacilitatestheintroductionofpoliciesthatshouldguaranteethesecurityofsupplyandprovideastableenvironmentforbanksandinvestorstoentertheindustry.CNGandCBG,asalternativestodieselandpetrol,canonlyworkifsufficientrefuellingpointsareavailable.Atthemoment,onlyahandfulofCNGfuelstationsareoperational,andasmallnumberareunderdevelopment,predominantlyinGauteng.ConsideringthelimitedrangeofCNGvehiclesversusdiesel-orpetrol-poweredvehicles,itisessentialtofocusonrecurringtransportpatternssoasnottogetintertwinedina‘chicken-and-egg’dilemma.
Thisreportidentifiesthreepotentialactivitycategoriesthatcouldfitthisprofile:minibustaxisinmanyofSouthAfrica’smajorcities,long-haulcargotransportroutesbetweenGautengandDurban,andCBGasafuelforcitybustransportsystemsthatmakeuseoftheabundantwastestreamsofMSWandwastewaterplants,alsoownedbycities.Thesecategoriesoncemoreindicatethatmunicipalitiesareintheuniquepositionofbothcontrollingsubstantialresourcesandoff-take.
Biogas for transport: benefits and barriersInadditiontohigh-levelstrategicbenefitsfortheSouthAfricangovernmentresultingfromtheapplicationofbiogasasatransportfuel,suchasreducedenergydependencyandthediversificationoftheenergymixpotential,benefitsshouldbeconsideredinrelationtothecurrentlyprevailingpracticeofutilisingbiogasforthegenerationofelectricity:
• Economic/financial:Applingbiogasasatransportfuelcreatesatwo-tothree-timeshighervalue,whichwouldresultinanincreaseinincomefromvalue-addedtax(VAT)forgovernment,aswellasreducing
12FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
thecountry’sforeignexchange(forex)requirements.Ontheotherhand,utilisingbiogasforthegenerationofelectricitycouldprovidea240-to320-MWcapacitytothestrainedSouthAfricanelectricitygrid.
• Environmental: Asatransportfuel,biogaswouldreducetheimpactonairqualityinurbanareas,whereastheimpactonairqualitywiththeapplicationofbiogasintheelectricitysectorwouldbefeltinmore remote areas.
• Socioeconomic: Theupgrading/compressionofrawbiogasfortransportcouldresultinonetotwoadditionaljobspersizeablefacility.Whenbiogasisusedforthegenerationofelectricity,rawbiogasisdirectlyconvertedintoelectricityviaacombinedheatandpower(CHP)installation.
• Infrastructure development: SouthAfrica’selectricityinfrastructureiswelldeveloped,whiletheCNB/CBGinfrastructureinSouthAfricaisvirtuallynon-existent.Theskillsthatareavailableintheelectricitysectorarealsomuchbetterdevelopedthanareskillsrelatedtotheapplicationofbiogasinthetransportsector.
Inadditiontothelackofeconomicviability,oneofthemainbarriersbroughtforwardbybiogasprojectdevelopersistheabsenceofademandforCBG,certainlyfortherequiredlongerterm(atermof10to15yearsisessentialtofinancebiogasprojects).Therefore,mostprojectdevelopersstilloptforbiogas-to-electricity,aselectricityforownuse,wheelingagreementsanddeliverytothirdparties,aswellasthedeliveryofelectricitytothemunicipalgrid,seemtoprovidebetteropportunities,regardlessofcertaindifficulties(e.g.lackofwheelingregulations)encounteredinrealisingthis.
Regulationsandrelatedlicencesarealsoregularlymentionedasbarrierstotheimplementationofbiogasprojects.Dependingonthetypeofwasteandsizeoftheproject,thiscanvary.Inthecaseofabattoirwaste,regulationsaremoststrict,asoneisdealingwithpotentiallyhazardouswaste,forexamplepathogens,andthedestructionofthiswasteneedstobeensured.Relatedlicencesneedtobeobtainedonanationallevel.Moreover,thedigestateisnotalwaysacknowledgedasbeingsafe(prion-free)andcanstillbeconsideredwaste,thereforelimitingtheopportunitiestouseandsellit.
Policy recommendationsWithoutgovernmentintervention,apositivebusinesscaseforbiogasinthenationaltransportsectordoesnot
exist.Thedecisiontosupportthebusinesscaseshouldcomefromtheoverallbenefitsforthecountryas,inprinciple,CBGiscurrentlynotcommerciallycompetitiveenoughtoovercomethebarriersofimplementationasatransportfuel.Ifgovernmentdecidesthatthesebenefitsjustifysupport,itcanbeprovidedviathreeprimarymeasures:subsidies,taxationandregulation.
Whenassessingopportunitiesfortheapplicationofthesemeasuresacrossthebiogas-for-transportvaluechain,awide-rangingmixofpolicyinstrumentscanbeconsidered.Whenlookingatinternationalexperiencesofgovernmentsupportfortheuptakeofdifferenttypesofbiofuels,itbecomesapparentthatmostcountriestypicallyrelyonatax-incentivescheme,wherebybiofuelsaretaxedatalowerratethanfossilfuelsorarecompletelyexemptedfromregularconsumption/fueltaxes.
Amandatoryblendingrequirement/quotasystemisthesecond-mostreliedonmeasure.Whenreviewingtheeffectivenessofthesedifferentmeasures,asappliedinternationally,usingfinancialincentives,incombinationwithotherpolicymeasures,topromotebiogasfortransportisconsideredaneffectiveoption.TheredoesnotseemtobeacompellingreasonwhythiswouldbedifferentinSouthAfrica.Asaresult,itseemssafetoconcludethatgovernmentincentivescanplayapivotalroleinpromotingtheuptakeofbiogasfortransportinSouthAfrica.
Inadditiontoidentifyingtheoptimalcombinationofmeasuresandtheirlocationacrossthevaluechain,itisusefultoidentifythesizeofthefinancialincentivethatcouldbeapplied.OnerationaletodeterminethelevelofCBG-specificfinancialsupport(incomparisonwithsupportforCNG,whichisgas-specific)istolookatdomesticandinternationalexamples,aswellasexistinglevelsofsupportinrelationtothedifferentCBG-specificco-benefits,andtoconverttheseintotransport-relatedunitsofmeasuretoallowforacomparisonof‘appleswithapples’.Consideringthreedomesticandthreeinternationalvalues(carbontax,jobcreationandgreenfuelsubsidies)thatalsoapplytothecaseforbiogasasatransportfuel,thelevelofsupportthattheSouthAfricangovernmentcouldprovidetothedevelopmentofthebiogas-for-transportsectorcouldlieintherangeofR1,80/GJtoR282,90/GJwhen‘pegged’withintherangeofexistingdomesticorinternationalmeasures,asillustratedinthisstudy.
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Summary overview of study findings and recommendations
FindingsderivedfromestablishinganunderstandingofCBGasanalternativetransportfuel
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ThetotalbiogaspotentialfromsourcescapturedintheinventoryisaroundthreemillionNm3 per day.
ThemajorityofsourcescanbefoundwithinthesugarandMSWsectors,andmostlargersourcesareintheproximityofurbanisedcentresalongtheKwaZulu-Natalcoast,inGautengandaroundCapeTown.ThedevelopmentofCBGfortransportisdirectlylinkedtoanddependentonthedevelopmentofCNGfortransportbymeansofsharedinfrastructureandsecurityofsupply.CBGasatransportfuelinSouthAfricaiscurrentlynoteconomicallyviable,despitebenefittingfromaninformalsubsidyprovidedbymeansofanexemptionfromfueltaxesandlevies.Nevertheless,severalstrategic,economic,environmental,infrastructuredevelopmentandsocioeconomicbenefitshavebeenidentifiedasbenefitsforthecountry.Mainbarriersstandinginthewayofthedevelopmentofabiogas-for-transportsectorincludetheabsenceofastablemedium-tolong-termdemandforCBG,theregulatoryframeworkandlicences.
RecommendationsforthedevelopmentofCBGasatransportfuelinSouthAfrica
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IfgovernmentconsidersthedevelopmentofCBGasatransportfuelworthwhile,acknowledgingthebenefitsforthecountry,afirststepcouldbetoformalisethecurrentexemptionfromfueltaxesandleviesforbothCNG/CBGandputinplacedirectsupport(i.e.asubsidyforvehicleconversion)andsupportforCBG,asiscurrentlythecaseforCNG,withregardtotransport.ProvideadditionalsupportforCBGasatransportfuelviatheprovisionofsubsidiesorblendingrequirementsinlinewithinternationalpractice.SpecificsupportforCBGasatransportfuelbasedonitsco-benefitscouldliebetweenR1,80/GJandR282,90/GJiflinkedtothedomesticandinternationalvaluationofco-benefits,asillustratedinthisstudy.FocussupporttowardstheimplementationofCBGfortransportonsectorsthatcontrollargebiogassourcesandfleetswithfixedtransportpatterns,suchasmunicipalitiesthatownand/oroperatelargelandfillsandwastewatertreatmentplants,andownand/oroperatepublictransportfacilities.
14FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Chapter 1: Introduction
transportfuelintheformofCBG.ThecombustionofCNG(orCBGforthatmatter)ismuchcleanerthanthecombustionofpetrolordiesel.Becauseofthehigherhydrogen(H):carbon(C)ratioofCH4 versus conventionalheavierfuels(petrolanddiesel),itgenerateslessCO2perenergyequivalentoffuel2.
Becauseofitscleancombustion,CNG/CBGshouldhaveanadditionaladvantagewhenappliedinurbanareaswhereairqualityisgenerallyanissue.Forthisreason,itcanbeagoodfuelalternativeforpublicfleets(i.e.publictransportandwasteremovalservicevehicles).
IntheMitigationPotentialAnalysisstudy(MPA)(DepartmentofEnvironmentalAffairs,2014),CNGwasidentifiedasoneoftheopportunitiestoreduceemissionsinthetransportsectoratalowcost (R1360/ktCO2eby2050).TheuptakeofCNGvehicleshasshownnegativemarginalabatementcostoverallyears.Assuch,itisanattractivemeasuretocutdownroadtransportemissions.However,thelarge-scaleuptakeofCNGvehiclesrequiresthenecessarysupportinginfrastructure,alongwiththenecessarysupplyofgas.Thisstudyaimstoprovideclarityonthepotentialofbiogasasatransportfuel,aswellasthequestiononhowanemergingCBGindustrycouldsupportthelarge-scaleuptakeofCNG-andCBG-poweredvehicles.
1.2 Study objectivesBeneficiationofbiogascantakedifferentforms,fromproducingheat,electricityandCHP,totheproductionoftransportfuel.Thedigestereffluentresultingfrombiogasproductioncanbeusedasafertilizer.AllthesedifferentformscontributetodiversifyingtheSouthAfricanenergymix,whichiscurrentlydominatedbylocalcoaland(predominantly)importedtransportfuels.Apartfroma
2. Chemically,HatomsareconvertedintoH2O(watervapour)andCatomsareconvertedintoCO2.ThehighertheH:Cratio,thelessCO2generatedperenergyequivalentoffuel.
ThisstudyispartofaprogrammeundertheSCPFestablishedbyDFIDSouthAfricaandmanagedbyCardnoEmergingMarkets(UK)LtdonbehalfofDEA.ThepurposeoftheFundistotranslatethemitigationplansoutlinedintheNationalClimateChangeResponseWhitePaper(NCCRWP)tofeasiblemitigationaction.TheprogrammeincludesarangeofstudiescoveringseveralelementsoftheNCCRWP.
ThemainobjectiveofthisparticularstudyistoestablishanunderstandingoftheeconomicandpracticalpotentialforCBGasanalternativetransportfuelandGHGmitigationmeasure.ThiscouldprovidethebasisforthefurtherdevelopmentofpoliciespromotingbiogasfortransportandtheemergenceofanationalCBGindustry.
1.1 BackgroundAsidentifiedintheNationalClimateChangeResponseGreenPaper(DepartmentofEnvironmentalAffairs,2010),transportsystemsformthebackboneofSouthAfrica’ssocioeconomicactivitiesbyenablingthemovementofpeopleandproducts.Inthecontextofclimatechange,thetransportsectoristhefastest-growingsourceofGHGemissionsinSouthAfrica,andthesecond-mostsignificantsourceaftertheenergysector(DepartmentofEnvironmentalAffairs,2013).Thelatterimpliesthatsubstantialmitigationpotentialmaybefoundinthetransportsector.
AsreportedbytheEnergyResearchCentre(Dane,2013),thetransportsectorconsumesaround28%offinalenergyinSouthAfrica,97%ofwhichisinliquidfuels,contributingto13.1%ofSouthAfrica’sGHGemissions.Thesectorisvitalforeconomicdevelopment(Cohen2011;Mervenetal.2012).AccordingtotheInternationalEnergyAgency(IEA)(2010),naturalgascanplayasignificantroleincuttingvehiclecarbondioxide(CO2)emissions.Nevertheless,overthelongterm,therewillneedtobeacommitmenttotransitiontolowCO2gassources,suchasbiogas.
Biogasfromorganicsourcesneedstobecleaned,upgradedtoamethane(CH4)levelsimilartothatofnaturalgas,andcompressedinordertobeusedas
15
positiveenvironmentalimpact,fuelfortransportandnon-transportusecanpresentasubstantialpositivesocioeconomicimpact,andshouldbeassessedasawholeinrespectoftheoverallbiogaspotentialinthecountry.Nevertheless,thespecificfocusofthisstudyistheuseofCBGasatransportfuel,whichisdifferentfromotheruses,asitrequiresextensivecleaning,upgradingtheCH4contenttohighlevelssimilartonaturalgas(NG),andcompression.
Asstatedatthestartofthissection,themainobjectiveofthisstudyistoestablishanunderstandingoftheeconomicandpracticalpotentialofCBGasanalternativetransportfuelandGHGmitigationmeasure,comparedtothemorecommonuseofthegastogenerateelectricity,andtherebyprovideinputstothepotentialfurtherdevelopmentofpoliciespromotingbiogasfortransportandtheemergenceofanationalCBGindustry.
Insupportofthismainobjective,thestudyistargetedatthefollowingresults:
• Thedevelopmentofanationalbiomassinventory,including(asfarasaccessibleandavailable)anindicationofthequantity,qualityandavailabilityofbiogasasapotentialtransportfuel.
• AnassessmentofthefinancialviabilityofthemainCBGproductionprocesses,aswellasthemacro-economiceffectandthenationalGHGmitigationimpact.
• Theidentificationofopportunitiesforpolicyinterventionsbygovernmentincollaborationwithbusiness,withtheaimofstimulatingtheapplicationofCBGasanalternativetransportfuel.
1.3 ApproachToestablishitspracticalpotential,itwasessentialtodetermineafocusbeforebeingabletoeffectivelymapandassessbiomasssourcesrelevanttotheproductionofbiogasasanalternativetransportfuel.Theapproachtakentodeterminethisfocusisthedefinitionandapplicationoffourfeasibilityrequirements,whichwillprovideabasisforidentifyingpotentialbiomasssourcesthatcouldmakeaneconomicallyviableandpracticallyachievablecontributiontorealisingSouthAfrica’spotentialforCBGasanalternativetransportfuel,while:
• realisingalow-costmeasuretocutdownroadtransportemissions;
• makingasignificantcontributiontomitigationobjectives;and
• achievingapositivesocioeconomicimpact.
1.3.1 Feasibility requirements
Thesetoffeasibilityrequirementsdevelopedonthebasisoftheapproachdescribedabovedistinguishesbetweentwoapplicationlevels:asectorlevelandaprojectlevel.
Table 1.3.1: Feasibility requirements to be applied on sector and project level
Level Feasibility requirement Description
Sector
Commerciallyproventechnology
Includeonlyde-risked,proventechnologiesforcommercialbiogasproductionwithclarityoneconomic,environmentalandpracticalperformance.
Avoidnegativesocioeconomicand/orenvironmental impact
Asacountryintransition,itisimportantforSouthAfricathattheBiogasforTransportStrategyisbasedonthepremisethatithaspositiveimpactsfrombothasocioeconomicandenvironmentalperspective.
Project
Criticalmassforeconomiesofscale
Pointsourcesshouldbeofsufficientsizetoconvertandupgradebiomass,takingadvantageofeconomiesofscale.
Avoidsuboptimalusageofbiomassforenergy
Biomasssourcescurrentlyusedforlower-marginenergyalternativesasheatandelectricityhavebeenincluded.Ifcurrentmarketconditionsandtheregulatoryenvironmentbecomeconducivetobiogasfortransport,thesesourceswillbecomerelevantagain.
16FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Severalstudies,includingBauer,etal.(2013)andValorgas(2011),haveassessedthesemostcommonlyappliedtechnologieswithregardtoeconomicperformanceandthescaleatwhichtheyareapplied.
Avoid negative socioeconomic and/or environmental impactPotentialbiomasssourcesforbiogashaveonlybeenconsideredifthisapplicationdoesnothavenegativesocioeconomicorenvironmentalimpacts.Internationally,arangeofstudiesproposessetsofrationalesandguidelinesthataimtoensurethatthesepotentialsourcesarenotinadvertentlyconsidered(oronlyconsideredifcertainmitigationcriteriaaremet)asasourcefortheproductionofbiogas.Themostprominentissuestoemergearethosearoundtheimpactofcrop-to-fuelandtheuseofwasteasfertilizer.
Crop-to-fuelTheNationalAcademyofSciences(2009),initspublication Liquid transportation fuels from coal and biomass,statesthatbiomassproductionforliquidfuelsshouldnotcompeteforlandonwhichanexistingcropisproducedforfood,feedorfibre,orcompeteforpasturelandthatwillbeneededtofeedagrowingandincreasinglyaffluentpopulation.Moregenerically,ithasbeenconcludedthatbiomassfeedstockshouldfirstcomefromwastethatwouldotherwisegotolandfills(Johnsonetal.,2006a;2006b).
Itisimportanttoconsiderthatgrowingcropsforliquidorgas-basedfueldoesnotonlypotentiallycompetewithagriculturallanduse,butalsowithotheragriculturalresources,suchaswater,farmingskills,infrastructureandcapital.Followingthelatterrationale,theprioritythatshouldbegiventowastestreams,aswellasthefactthatfuelcropscan,inprinciple,begrownonanypieceofavailableland,makinganinventoryofcrop-to-fuelsourcesimpractical,thisstudyexcludespotentialsourcesofbiomassforbiogasthatthatarenotwaste-based.
Use of waste as fertilizerWastestreamsaresometimesusedtofertilizetheland,e.g.fibresludgefrompulpmills(Rashidetal.,2006),therebypreventingtheneedforlandfilling.Certainwastestreams,pendingtheircomposition,canhaveadvantageouseffectsbyconditioningthesoil,increasingitswater-andmineral-holdingcapacity,
Thefirsttwofeasibilityrequirementsappliedonasectorlevelresultinaselectionofsectorsandrelevantwastestreamsfortheproductionofbiogasfortransport,asspecifiedinSection1.3.2.Thesecondtwofeasibilityrequirementsrequireproject-specificinformation(e.g.quantityofwasteproducedatsite)andwillthereforebeappliedonaprojectlevel.Thefeasibilityrequirementssummarisedinthetableabovearefurtherdetailedbelow.
Commercially proven technologyThetwomainareaswhereinnovationtakesplaceandwherethecriterionof‘commerciallyproventechnology’isrelevantareproductionandupgradingtechnologies.Thereasonforapplyingthiscriterionistofocusonapracticalpotentialthatcouldbeachievedintheshort-tomedium-term,ratherthanaftercompletionofaresearchanddevelopmenttrajectory,includinguncertainties.Thelattercouldjeopardisethepotentialoftargetedimprovementsasunexpectedtechnicalproblemsandtechnologycostsmaypreventimplementation.
Production technologiesAsshownintheanalysisofthebiogas-for-transportvaluechain(Figure2.1.1inChapter2),inparticular,thetwomainmaturetechnologiesforprocessingbiomassintobiogasare:• mesophilicanaerobicdigestion(AD);and• biogascollectionfromlandfills.
Gasificationofbiomass,althoughpotentiallyapplicabletoalargevarietyofbiomasssources,iscurrentlynotcommon,andisgenerallynoteconomicallyviable(IRENA,2012).Moreover,thetechnologyandrequiredconversionofthesynthesisgas,obtainedthroughgasification,intobiomethaneisrathercomplexandcostly.Thisintroducesfurtherrisksanddoubtswithregardtothelonger-termpotentialforbiogaswhenproducedusingsuchgasificationtechnologies.
Upgrading technologiesAsdescribedunderSection2.2.4,thefollowingtechnologiesaremostcommonlyappliedfortheupgradingofbiogas,andcanbeconsideredcommerciallyproven:• Waterscrubbing• Chemicalandphysicalscrubbing• Pressureswingadsorption(PSA)
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therebydecreasingtheneedformineralfertilizers.Nevertheless,thispracticeneedscarefulmonitoringtopreventcontaminationinthelongerterm,withpotentiallyundesired(trace)componentslikechemicalsusedintheproductionprocessfromwhichthewastestems.
However,ifthewastestreamisusedtogeneratebiogas,thedigestateisgenerallyasuperiorconcentratedmineralfertilizer,whichcanreplacetherawwastestreamasfertilizer.Moreover,theremainingorganicmatterisbiologicallymorestable,whichissuitableforsoilimprovement(Makádietal.,2012).
Critical mass for economies of scaleRecentinternationalstudies(includingValorgas,2011;Baueretal.,2013)provideimportantinsightsintotheappropriatescaleofbiogasproductionandupgrading.Resultsshowthatthecentralconstraintinthebiogasproduction,upgradingandcompressioncycleliesinupgradingbiogastobiomethane.AlthoughmostbiogasproductioninEuropecomesfrommanysmall-scale
digestersthatproducesmallamountsofrawbiogas(50to200Nm3 perhour),thesesitesaregenerallynoteconomicallysuitableforupgradingandcompression.In2013,therewerearound234upgradingplantsinoperationinEurope,withatotalupgradingcapacityof205 716 Nm3perhourofrawbiogasequivalenttoanaveragethroughputofrawbiogasofaround880Nm3 perhour.Mostofthesearelocatedonlarge-scalebiogasproductionsites.
Thefollowingfiguresshowthecostofbiogasproduction,upgradingandcompressionasashareoftotalcostfortwocategorieswaste:organicwasteandsewagesludge(Valorgas,2011).Inbothcases,theupgradingcostcomprisesasubstantialpartofthetotalcost.Fortheupgradingofbiomethanefromorganicwaste,thisis33%,whereasfromsewagesludge,itisasmuchas47%.Thisgivesagoodindicationoftherelativeimportanceofupgradinginthewholeproductioncycle.
Figure 1.3.1: Costs of biogas production, upgrading and compression as a share of total cost
Biomethane from organic waste (share in total cost)
Biomethane from sewage sludge (share in total cost)
Production ProductionUpgrading UpgradingCompression Compression
21% 29%
46%
24%
33%47%
18FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Thecostsofupgradingbiogastobiomethanedependsignificantlyonproductionplantsize.Ingeneral,duetoeconomiesofscale,upgradingcostsdecreasewithanincreaseincapacity.ThenextfiguredemonstratesthedynamicsfordifferentupgradingtechnolgiesintermsofspecificinvestmentcostandtotalcostperkWhofbiogas-basedelectricityproduced,respectively,asafunctionofthebiogas-processingcapacity.
Itshowsthat,withthecurrentstateoftechnology,aninputofrawbiogasofapproximately750Nm3perhouristheminimumforeconomicalinvestmentinupgradingunits.Furthermore,itisnoteworthythatthisresultdoesnotappeartodependmuchontheexactupgradingtechnologyused,asthecostrangebetweenthetechnologiesisrelativelynarrow.
Waterscrubbing PSA
AminescrubbingOrganicscrubbing
6 000
5 000
4 000
3 000
2 000
1 000
00 500 1 000 1 500 2 000
Specificinvestmentcost(Eu
r/Nm
3 /h)
Capacityrawbiogas(Nm3/h)
Comparison upgrading technologies (Baueretal.,2013)
Thre
shol
d
3.00
2.50
2.00
1.50
1.00
0.50
1.000 500 1 000 1 500 2 000
Cost(Eu
rcent/kWh)
Capacityrawbiogas(Nm3/h)
Comparison upgrading technologies (Valorgas,2011;Persson&Wellinger,2006)
Waterscrubbing(Flotech) Waterscrubbing(Malmberg)
Aminescrubbing(MT-Energe)
PSA(Crmac)
Aminescrubbing(Crmac-Cooab)
Thre
shol
d
Figure 1.3.2: Costs of biogas upgrading and its dependency on installation capacity
Economicsandrelatedscaledependenciessuggestfocusingonsinglesourceswithacriticalmassthatcorrespondstoaminimumcapacityofrawbiogasproductionof18000Nm3perday,equivalentto, forexample,around360tonnesperdayofMSW3. Furthermore,aggregatingbiomassfromdifferentsourcestoacentralpointforprocessingissignificantlyconstrainedbytransportationandloading/unloadingcosts,whichcanaccumulatetohaveasubstantialimpactonthecostofbiomassfeedstockinpractice.
Avoid suboptimal usage of biomassOrganicwastemayalreadybeusedtogenerateenergyinsomewayorother.Asimple,straightforwarduseisburningwasteinaboilertoproduceheat.Morevalue-addcanpotentiallybederivedfromwastewhenconvertedintobiogastoproduceelectricity,
3.Basedonanorganicfractionofaround50%(Kigozi,2014)andayieldof100Nm3pertonneoforganicMSW(Frankiewicz,2014).
CHPortoproduceCBG.Althoughoneoptionmay,intheory,generateahighermonetaryvalueperunitofenergythananother,circumstanceslikefamiliaritywiththetechnology,thedemandonsiteforheatandelectricity,nolocaloff-takeofCBG,andincentivesliketheRenewableEnergyIndependentPowerProducerProcurement(REIPPP)ProgrammeforrenewableelectricitymaydirectownersofbiomasssourcesandprojectdeveloperstootherwaysofproducingelectricitythantheproductionofCBG.
Biomasssourcesthatarecurrentlybeingutilisedinanotherformhavebeenincludedintheinventoryofbiogasfortransportsources.Inprinciple,thesesourcescouldbeutilisedforthepossiblymoreattractiveproductionoftransportfuelsinthelongrunifmarketandregulatoryconditionsarechangedtobeconducivetotheproductionofCBG.Section4.1ofthisreportcontainsacomparisonbetweenelectricityandCBGproduction.
19
1.3.2 Sectors covered
Thesectorscoveredinthisstudyandtheinventoryofbiomassfortransportsourcesarepresentedinthetablebelow.Thetableincludesthefocusonspecificwastestreamswithinthesector.ThesectorsmentionedwereconfirmedasbeingthemainsectorsofimportanceduringstakeholderengagementandattheNationalBiogasConferenceinMarch2015.
Table 1.3.2: Sectors covered and focus on specific waste streams
Sectors Sector focus
AbattoirsSlaughterwasteofvarioustypes(bovine,porcine,poultry),consistingofrumen/stomachcontent,manure,condemnedmaterial/trimmingsandblood
AgricultureWastefromlivestockheldincattlefeedlots,chickenandpighouses,i.e.manure,litterandsilagerespectively
BreweryWastewaterresultingfromthebeer-brewingprocessandthesludgederivedfromitinthewastewatertreatmentprocess
FruitprocessingDiscardedwastefruitandpomace;pomaceisthesolidremainsofgrapes,citrus,legumesorotherfruitafterpressingforjuiceoroil
Municipal solid waste
Wastecurrentlydisposedatlandfills,consistingmainlyofhouseholdgarbageand,dependingonthecircumstances,includinggreencitywasteandgardenwaste
Municipalwaste-watertreatment
Sludgeproducedintheprocessofcleaningwastewatercanbeanaerobicallydigested,therebyreducingtheremainingsludgeandproducingbiogas
Pulp and paperSeveraltypesof(woody)solidwastesandsludgearegeneratedinpulpandpaperproduction;themainwastestreamfocusedonisfibresludge,whichisproducedduringthewastewatertreatmentprocess
SugarproductionThemainwastestreamatsugarmillsthatprocesscaneisbagasse;onthegrowers’side,wasteconcernstopsandleaves,whicharegenerallyleftinthefield
1.4 Guidance to the structure of this report
Thisstudyisgearedtowardsprovidingrecommendationsforpoliciesthatcouldfacilitatetheuptakeofbiogasasatransportfuel.Thefollowingchaptersprovideanoverviewofthebiogas-for-transportvaluechain,anassessmentofthenationalpotential,andthefeasibilityofbiogasfortransport.Thisisfollowedbyafinalchapterwithconclusionsandrecommendationsforpotentialpolicyinterventions.
Chapter2providesananalysisofthevaluechainandtheimportantcharacteristicswhenproducingandimplementingbiogasfortransport.
Chapter3givesanoverviewofthestatusofthedevelopmentofbiogasinSouthAfricaandthepotentialofbiogasfortransport,basedontheavailabilityandlocationoftherelevantwastesources.Thelatterdatahasbeenretrievedfromaninventoryofbiomass
sources,whichhasbeendevelopedaspartofthisstudy.ThecustodianofthisinventoryisSANEDI.
Chapter4focusesonthefeasibilityoftransformingbiogastoCBGasatransportfuel.Thischapterinformspolicymakersaboutthefinancialperformanceandhurdleswithregardtobiogasfortransportinthecontextofacompetitivefuels-for-transportmarketplace.Moreover,itincludesananalysisofthepotentialenvironmentalandmacro-economicbenefits,shouldalarge-scaleuptakeofbiogasfortransportberealised.
Chapter5concludesthisstudywithrecommendationsforpolicyinterventionsandprojects,focusingonfinancialincentivesthatcouldbeprovidedtoenhancetheuptakeofbiogasfortransport.Moreover,ahigh-levelperspectiveisprovidedofthebarriersidentifiedduringstakeholderengagement.Thefollowingdiagramprovidesaschematicoverviewofthereportstructure,which,fortheconvenienceofthereader,isreflectedthroughoutthereport.
20FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
1. Introduction
Background(1.1)Objective(1.2)Approach(1.3)Reportstructure(1.4)Unitconversions(1.5)
2. Value chain
Definitions(2.1)Analysis(2.2)
3. Biogas sources
Statusquo(3.1)Inventory(3.2)Mapanalysis(3.3)
4. Feasibility
Cost/benefit(4.1)Supplyrisk(4.2)Economic(4.3)Mitigation(4.3)Viability(4.4)
5. Policy
Benefitsandbarriers(5.1)Strategicframework(5.2)Internationalexperience(5.3)Conclusions(5.4)
Figure 1.4.1: Report structure
1.5 Conversion between unitsAsguidancetothereader,Figure1.5.1andTable1.5.2belowprovideconversionsofimportantunitsofmeasureusedthroughoutthestudy,whichshouldassistininterpretingvaluesandtheirsignificance.ThevaluesinFigure1.5.1arecalculatedfordriedrawbiogaswith65%CH4content,startingwithabiogasvolumeinNm3/hasabasis,whichisconvertedtoMWofinstalledcapacity,assuminga100%(theoretical)conversionrateandsubsequentlyGWhofenergyproducedduringtheyear,basedona100%(theoretical)availability.
0
0
0
0 934 1 868 2 802 3 736 4 670
50 100 150 200 250 300
5 10 15 20 25 30
1 000 2 000 3 000 4 000 5 000
Rawbiogas,Nm3/h 65%CH4 content
GWhperannumat100% conversion and availability
Diesel litre equivalent (DLE)producedperhour
MWat100%conversion
Figure 1.5.1: Units used for the analysis of biogas for the transport value chain
Conversionbetweenseveralunitsanddifferentformsofenergy:
Table 1.5.1: Units of measure conversion table
Energy kWh MJ
1kWh 1.0 3.61MJ 0.28 11 Nm3 ofbiogas(65%CH4) 6.4 231litreofpetrol 9.0 32.41litreofdiesel 35.8 35.81litreofCNG/CBGat250bar 2.5 9.0
ItbecomesapparentfromTable1.5.1above,thattheenergydensityofalitreofCNG/CBG,althoughcompressedto250bars,isonly9MJ,whichissignificantlylowerthanthatofpetrolanddiesel,whichis32.4MJand35.8MJrespectively.Toachievethesamerange,atransportvehiclethereforerequiresalargerCNGtankthantheequivalentpetrolordieselfueltankwould.
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Chapter 2: The biogas for transport value chain
1. Introduction 2. Value chain
3. Biogas sources
4. Feasibility 5. Policy
Thischapterprovidestherequiredtechnicalcontexttothestudybydefiningbiogasfortransportandprovidinginsightsobtainedduringananalysisofthevaluechainfromtherelevantbiomasssourcesviaproductionandupgradingtousebiogasfortransport.
2.1 Definition of biogas for transport
2.1.1 Definition of raw biogas
Biogasisgenerallyreferredtoasagasmixturederivedfromthedecompositionoforganicmatterbyanaerobicbacteriaintheabsenceofoxygen.Biogasistypicallycomposedof65%CH4and35%carbondioxide,togetherwithtracesofcontaminantgasseslikehydrogensulphideandammonia.Theexactcompositiondependsonthetypeoffeedstockandconditionsofthefermentationprocess.Althoughbiogasisthemostvaluableproduct,anotherproduct–thedigestate–isalargelyinertwetproductwithvaluableplantnutrientsandorganichumusthatcanbeusedassoilconditioner(Redman,2010).
Theaforementionedtypicaldefinitionofbiogas(agasderivedfromthebacterialdecompositionoforganicmatter)isalsousedbytheSouthernAfricanBiogas
IndustryAssociation(SABIA)4.Asbiodigestionisthemost commonly applied and most commercially relevant typeofbiogasproduction,thisstudyrestrictsitselftothisdefinition.
Nevertheless,occasionally,biogasisalsoreferredtoasagasmixtureobtainedfromthegasificationofbiomasswithorwithoutfurthermethanisationtoachieveacompositioncomparabletothatofnaturalgas.Thistypeoftechnologyisnotincludedinthisstudyasitisnotcommerciallyavailable,asfurtherdiscussedin Section 2.2.3.
Biogas for transportForuseintransport,rawbiogasneedstobecleanedandupgradedtoahigh-CH4contentgas,alsoreferredtoasbiomethaneandcompressedtoCBG,whichcanbeusedasasubstituteforor–mixedwithCNG–usedasvehiclefuel.Asillustratedinthefollowingtable,thismeanstheremovalofmorethan90%oftheCO2,smallconcentrationsofnitrogen(N2)andoxygen(O2),aswellasimpuritieslikehydrogensulphide(H2S),siloxanesand ammonia.
4. http://biogasassociation.co.za/
22FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Table 2.1.1: Comparison of the composition of biogas, biomethane and natural gas
ComponentBiogas Biomethane Natural gas
Content
Methane 45–70% 94–99.9% 93–98%
Carbondioxide 25–40% 0.1–4% 1%
Nitrogen <3% <3% 1%
Oxygen <2% <1% -
Hydrogen Traces Traces -
Hydrogensulphide <10 ppm <10 ppm -
Ammonia Traces Traces -
Ethane - - <3%
Propane - - <2%
Siloxanes Traces - -
Source:Kuczyńska&Pomykała(2012)
TheCO2removedintheupgradingofbiogastobiomethaneisgenerallyventedtotheatmosphereandresultsinaGHGemission.However,fromacarbonaccountingperspective,itisimportanttorealisethattheseemissionsstemfromshort-cyclerenewablewastesourcesand,moreover,that,incasethewasteisnotprocessedintobiogas,uncontrolledaerobicorevenanaerobicdecomposition(thelatterbeingmosthurtfulfortheclimate)willoccur,resultinginemissiontotheatmosphere.Everyavoided1000Nm3releaseofbiogasintotheatmosphereequatestoapproximately10tCO2e ofGHGemissions.Nevertheless,thisenvironmentalbenefitisnotaccountedforinthisstudy,asthebiomassmaynotdecayanaerobically,oranyCH4 produced may bedestroyed(e.g.flaringoflandfillgas).
Foruseastransportfuel,naturalgasorbiomethane(upgradedbiogas)iscompressedtoCNGandCBGrespectively. In contrast to bottled butane and liquid naturalgas(LNG),thecompressedgasisnotaliquid.
Asillustratedinthetableabove,thecompositionofbiogascanvary.Thecompositiondependsonmultiplefactors,suchastheprocessdesignandoperation,aswellasthetypeofsubstrate.Onaverage,thebiogasproducedbycontrolledADhasa65%CH4content,whichissignificantlyhigherthanthatofbiogascapturedfromlandfills,whichhasanaverage45%CH4 content. Thesetwoaveragepercentagesareusedthroughoutthisstudy.
Biogas-for-transport value chainThevaluechainofbiogasfortransportiscomplex,withvariouspotentialsources,potentialwaysofcollectingtherequiredbiomass(upstreamlogistics),productionandupgradingtechnologies,andultimatelythemodalitiesoftransporttogetCBGtoconsumers.Inlinewiththefocusofthestudy,thevaluechainisillustratedinthefollowingfigure.
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Biogas sources
Upstream logistics
Downstream logistics
Biogas production
Biogas upgrading
Biogas consumption
Abattoirs In process pipeline
Landfillgascollection
Water scrubbing
Compression FleetownersRetail useStorage
In process road transport
Mesophilicanaerobic digestion
Pressure swingadsorption
Transport to theenvisagedoff-taker
Polyethyleneglycol(PEG)Scrubbing(e.g.SelexolTM)
Chemicalscrubbing (e.g.amine-orsodiumhydroxide-based
Dedicated pipeline transport
Dedicated road transport
In process rail transport
Dedicated rail transport
Agriculture
Fruit processingMunicipal solidwaste
Municipal wastewater
Sugarproduction
Pulp and paper
Source:EcoMetrixteamanalysis
Figure 2.1.1: The biogas-for-transport value chain
AuniquestepinthecaseofCBGfortransport,asopposedtotheuseofbiogasforelectricitygenerationandheatwithequipmentdesignedtocopewithalowerMethanecontent,istheupgradingstepinwhichtheMethanecontentisincreasedtolevelscomparablewithnaturalgas.Thisstepandothersaredescribedinthesectionthatfollows.
2.2 Value chain analysis
2.2.1 Biogas sourcesThebiogas-for-transportsupplychainstartswithbiogassources,alsoreferredtoasbiomassorfeedstock.Althoughtherearevarioussubdivisions,theyarecategorisedaccordingtothefollowingkeysectorswithrelevantorganicwastesinlinewiththefocusofthisstudy:abattoirs,agriculture,fruitprocessing,municipalsolidwaste,municipalwastewatertreatment,pulpandpaper,andsugarproduction.Manyofthesewastescanbetreated,usedordisposedofinotherwaysthatmaynotbewithoutvalue.Inthatway,theycanbeindirectorindirectcompetitionwithbiogasproduction.Examplesincludespreadingtoland,compostingorincineration.
Thefollowingkeysectorsandfocusontherelevantmainorganicwastetypesaredefined:
1. Abattoir:Wastesgeneratedincluderumen/stomachcontent,manureandcondemnedmaterial/trimmingandblood.Exceptforblood,thesetypesofwastehaveanattractivehighbiogasyieldwhenanaerobically
digested.Adisadvantageofabattoirsistheapplicablehealthandsafetyregulationswithregardtothemicrobialquality.Slaughterhousewastescanbecontaminatedwithhighnumbersofmicroorganisms,includingbacteria,viruses,prions,fungi,yeastsandassociatedmicrobialtoxins(Urlingsetal.,1992).Suchwastesposeapotentialrisktoanimalandhumanhealth,unlesshandledandtreatedproperly.
2. Agriculture:Wastegeneratedatfarmsincludesanimalmanure(e.g.wetmanureslurries)fromintensivestylesoflivestockfarminganddryanimalmanures(e.g.animalbedding).Althoughithasarelativelylowbiogasyield,largecattlefeedlotsandchickenbroilerfarmscanproducesizabletonnagesofwasteandbiogas.
3. Brewery wastewater:Duringtheproductionprocess,wastewateraccumulatesfromthevariouscomponentprocesses(wortproduction,fermentation,storage,filtration,bottling).Anaerobictreatmentisgenerallychosenforthefirststagebecauseofthehigherchemicaloxygendemand(COD).Thevolumeofgasproducedthroughtheanaerobicdigestionofthesolubleorganicmatterisproportionaltothemassoftheorganicmatter.
4. Fruit processing:Althoughfruitprocessingisaseasonalbusiness,discardedfruitandpomace(solidremainsafterpressing)areaninterestingwastesourcewithahighyield.However,seasonalitycanbeadealbreakerasotherbiomasssourcesmayberequiredtocoveraperiodofuptoeightmonthswithoutproduction.
24FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
5. Municipal solid waste:Thisconsistsofallwastethatisaccumulatedatlandfills.Organicmaterialisoneofthelargestconstituentsofmunicipalsolidwastestreams.Thewasteiseitherdumpedwithoutseparatingorganicfromnon-organicwastestreams,ortheorganicwasteisseparatedfromthenon-organicwaste(e.g.household,kitchenandgardenwaste).Inpractice,mostmunicipalsolidwaste(includingmostfoodwaste)inSouthAfricaisdumpedwithoutseparation,andhasanorganicfractionofaround48%(DepartmentofEnvironmentalAffairs,2012).
6. Municipal wastewater treatment:Sewagesludgeisproducedasaby-product.Theoretically,allsewagesludgecanfunctionasbiomass.However,inpractice,issuesmayarisebecauseoftoxicitylevels(especiallyinthecaseoftheconcentrationofheavymetals).Theremainingbiosolidismorecompressedthantheoriginalsewagesludge.Itcanbedisposedofinalandfill(accordingtotoxicity)orusedasfertilizer/soilconditioner.
7. Pulp and paper:Wastestreamsareusuallyofsubstantialsizeduetothescaleofoperations.Dependingontheprocess(i.e.chemicalormechanicalpulping)andtypeofend-products(i.e.paper,newsprintorlinerboard),thecontentdiffers.Chemicalpulpingprocesses(i.e.Kraftandsulphiteprocesses)arehighlyintegratedandwastesarelargelyburntintheboilers.Thefibresludgethat
remainsinthewastewatercan,however,beaninterestingsourceofbiomasswithahighyield.
8. Sugar production:InSouthAfrica,sugarproductionisbasedonsugarcanegrowninlargequantitiesinKwaZulu-Natal.Althoughtopsandleavesleftinthefieldaretoodistributedandlowinyield,thebagasseproducedafterpressingthecanecanbeausefulfeedstock.Althoughgenerallyburnedintheboilersofthesugarmill,theproductionofbiogasmaybeanattractivealternative.Inthecaseofsugarproduction,seasonalityalsoplaysarole.
Thegraphbelowprovidesanoverviewofthebiogasyieldsforsolidandsemi-solidwastestreamsasusedinthisstudy.Theseyieldsarebasedonanumberofscientificstudies,includingFachagenturNachwachsendeRohstoffe(2010),thefeedstockatlasoftheEuropeanAssociationforTechnologyandStructuresinAgriculture(KTBL)5andresearchonthewebsiteoftheGermanBayerischeLandesanstaltfürLandwirtschaft(LfL)6,aswellastheanalysisoftheEcoMetrixteam,andareexpressedinGJpertonofwetwaste.
5. http://daten.ktbl.de/euagrobiogasbasis/startSeite.do;jsessionid=6673083D64CB29E2EA6734F-35C03F044
6. http://www.lfl.bayern.de/iba/energie/049711/?sel_list=32%2Cb&anker0=substratanker#substratanker
Chickenslaughterwaste
4.25 GJ/ton
3.07 GJ/ton
2.32 GJ/ton 2.21
GJ/ton
1.69 GJ/ton 1.55
GJ/ton1.14 GJ/ton 1.07
GJ/ton0.64 GJ/ton 0.54
GJ/ton
Pork slaughterwaste
Chickenlitter
Fruit effluent
Bagasse
Municipalwaste
Sugarproduction
Fruitprocessing
Agriculture
Abattoir
Solid waste
Waste-water
Cattleslurry
Pig slurry
Beefslaughterwaste
Figure 2.2.1: The relative biogas yield per source per sector (GJ/ton)
25
Thediagramshowstherelativedistributionoftheyieldpersourceacrossandwithinthedifferentsectorscapturedwithinthisreport.Itisimportanttoconsiderthat,whiletheyieldsreflectedinFigure2.2.1arebasedonbothpracticalandtheoreticalin-depthstudies,yieldscanvaryfromprojecttoproject,basedontheuniquecharacteristicsofaspecificproject.Thelattermayincludethedrymattercontent,storageandhandlingoffeedstock,aswellasthespecificdigesteroperation.
2.2.2 Upstream logisticsThesecondstepinthebiogas-for-transportsupplychainisupstreamlogistics.Thisstagecapturesthetransportationsysteminplacetogetbiomassfromthepointsourcetotheprocessingfacilityorproductionplant.Amainconsiderationintheviabilityofbiogasproductioniscost,asignificantpartofwhichisincurredinthecourseoftransportation.Variousgenericmodesoftransportcanbeidentified,whichmayormaynotberelevant,dependingonthetypeofbiomassandtheconfigurationofexistinginfrastructureinaregionorcountry.Onthewhole,thefollowingcategoriesinupstreamlogisticsaredistinguishedinthebiogasvaluechain:in-processpipeline,roadandrailtransport,anddedicatedpipeline,roadandrailtransport.
Inthisregard,akeydistinctionneedstobemadebetweenpointsourcesthatarelargeenoughindependentlytosustainbiogasproductiononaneconomicallyviablescale,andthosethatarenot.Inthefirstcase,thebiomasswillalreadyhavebeenamassedonasufficientlylargescalethroughexistingcommercialprocesses(e.g.landfillsormanureatfeedlots).Otherwise,thecaseforbiogasrestsondevelopinganefficienttransportsystemthatcollectsfeedstockfromanumberofsmallersourcesandcarriesittoacentralisedbiogasproductionplantforprocessing(e.g.small-scalefarming).
Assuch,importantfactorstotakeintoconsiderationincludethefollowing:
• Costsofon-siteandoff-sitecollectionandtransportation(so-calledfirsttransportandprocessing,andtransporttodestination)
• Distance/concentrationofsources
• Relativesizeofbiomasssources• Gatefees• Costofwastestreamhandlingintheabsenceof
alternatives
Obviously,theshareoftransportationinthetotalproductioncostswilldependsubstantiallyoncountry-orregion-specificconditionsandeconomics.Severalinternationalstudiesalreadyexistontheeconomicsofbiomasscollectionandtransportation.Mostofthesestudiesshowarelativelyhighcostoftransportforbiomassfuelandrelatedhandling,evenwithinrelativelydevelopedregionswithadvancedtransportationnetworks(Jungingeretal.,2011;Brechbilletal.,2011;Nielsen&Hjort-Gregersen,2002;Wamishoetal.,2010).
Asageneralrule,confirmedbyprojectdevelopersduringthisstudy,oneshouldnotgobeyondaradiusof10to15kmcollectingbiomass.Onspecificoccasions(e.g.closerange,highyield)sizablesourcescanbecombined.However,theseareexceptionsratherthantherule.
2.2.3 Biogas productionInrespectofbiogasproduction,onegenerallyreferstoanaerobicdigestion,whichcantakedifferentformsandshapes,likeindustrialbiodigesters,cappedandcontrolledlandfillswithbiogascollectionorcappedlagoons.Insomecases,however,onealsoreferstobiogaswhengasifyingbiomassintoasynthesisgas,whichcanbeconvertedintoCH4usingamethanisationtechnology.However,biomassgasificationisnotacommonlyusedoption.Whenlookingatbiomass-to-electricityapplication(biogasburnedtogenerateelectricity),itisstillregardedasatechnologyinthedemonstrationphase.LFGandAD,ontheotherhand,arerecognisedmaturetechnologiesthatareincludedinthescopeofthisstudy.
26FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Anticipatedcostoffull-scaleapplication
Research
Integratedbiomassgasification–fuelcell
Biohydrogen
Biorefineries
Hybridbiomass- solar/geothermal
High-rate co-firing
Torrefiedpelletproduction
Pressurised gasification
Atmospheric biomassgasification
Anaerobicdigestion
Landfillgas
Refuse-derivedand process-engineeredfuels
Pyrolysis
Medium-rateco-firing
Low-rateco-firingStroker/fluidisedbed
stream-electric combustion
Municipalsolidwaste incineration
Combinedheat/power
100%biomassrepoweringoptions
Development Demonstration Deployment Maturetechnology
Source:IRENA(2012),EcoMetrixteamanalysis
Figure 2.2.2: Biogas technology maturity status
Anaerobic digestionAnaerobicdigestionisanaturallyoccurringprocessthatconcernsthedecompositionoforganicmatterbybacteriathrivingunderlow-oxygen(anaerobic)conditions.TheorganicdecompositionunderanaerobicconditionsresultsinthegenerationofCO2andCH4.SeeTable2.1.1fortypicalcompositions.
Threemaincategoriesofanaerobicdigestioncanbeclassifiedbymeansofthetemperatureregimesunderwhichtheprocesstakesplace(Duff,n.d.):1. Psychrophilic:<20°C(68 °F):
a. Coveredlagoonsb. Slowprocessdependentonambienttemperaturesc. Largearearequirements
2. Mesophilic:35°Cto40 °C(95 °Fto105 °F):a. Industrialandfarmdigestersb. Faster processc. Well controllable
3. Thermophilic:50°Cto60 °C(125 °Fto140 °F):a. Industrialandfarmdigestersb. Fastestreactionkineticsandshortestresidencetimec. Sanitisespathogen-bearingfeedstock,butmorecomplextocontrol
Mostcommonismesophilicanaerobicdigestion,astheprocessisrelativelyeasytooperateandcontrol.Althoughthermophilicprocessesoperatedatahighertemperatureproducemorebiogasinashortertime,itrequireshigherinputenergy(morestringentfeedstockrequirements)toobtainthedesiredoperationtemperaturesandmay,moreover,generatefreeammonia,whichcanactasaninhibitor(ISAT/GTZ1999).
27
Anaerobicdigesterreactorsystemscanbedesignedusinganumberofdifferentprocessconfigurations,dependingonthedesiredoperationandfeedstock:
• Continuousorbatch• Mesophilicorthermophilic,determinedby
temperaturerange• Highsolidsorlowsolids(plug-flowormixedreactor)• Single-stageormultistage
Landfill gas collection LFGiscreatedbymicroorganismsthatactontheorganicwastewithinalandfill.Thisprocessiscontinuous,sothatovertime,thepressurewithinthelandfillbuildsupandthegasisreleasedintotheatmosphere.Landfillgastypicallycontainsbetween 40and60%CH4,wheretheexactqualitydependsonthewastecompositionandlandfillgeometry.
LandfillgascanbecapturedthroughanLFGcollectionsystemofverticalwellsorhorizontaltrenches.Inthisway,thegascanbesyphonedofftoacentralcollectionheaderdownstream.Here,itiseitherflaredtopreventtherelativelyharmfulCH4fromenteringtheatmosphere,oritisusedtogenerateenergy.Inthelattercase,thebiogasfromthelandfillisdirectlytransformedintoelectricityandheatthroughCHP,oritcanbeupgradedtobiomethane.
2.2.4 Biogas upgradingBiogasupgradingconsistsofincreasingtheCH4 content toalevelsimilartothatofnaturalgas,removingwatervapourandseveralimpurities.TheCH4 level is increased byremovingCO2fromthegasmixture.Itisimportanttogetthebiomethanecompositionclosetothecompositionofregularnaturalgasinordertorealiseasimilarcalorificvalueandburningcharacteristics.Thisallowsfortheshareduseofequipmentandinfrastructureoriginallydesignedfornaturalgas.Moreover,asbiomethaneneedstobecompressedtoCBG,noenergyiswastedbycompressingnon-burnablecomponents.
BesidessmallamountsofN2andO2,impuritiesgenerallyconcerncontaminantslikesulphurintheformofH2S,ahighlypoisonousgas,andsiloxanes(R-Si-O-Si-R),which,whenburned,areusuallyconvertedintosilicondioxideparticles.Theseparticlesarechemicallyandphysicallysimilartosandandcancausesignificantinternaldamagetoturbinesand/orengines(McCarrick,2012).
Dependingontheupgradingtechnology,impuritiesareremovedfromthebiogasintheprocessofremovingCO2inaseparatepre-treatmentsteporwithinthedigester.Theremovalofwatercanbedoneinseveralways,butthisdoesnotgenerallyposeachallenge.
Severalsourcesinliterature,includingPeterssonandWellinger(2009),confirmthatthemostwidelyusedtechnologiesforbiogasupgradingarePSA,waterscrubbing,organicphysicalscrubbingandchemicalscrubbing.Thesetechnologiesarederivedfromcommonpetrochemicalprocesstechnologiesandhavematuredfortheapplicationtobiogasupgradingovertheyears.Generallyspeaking,thesetechnologiesbenefitsignificantlyfromeconomiesofscale(Baueretal., 2013).Briefdescriptionsofthesemostwidelyusedtechnologies,largelytakenfromNiesneretal.(2013),areasfollows:• Water scrubbing: Thisrepresentsaprocessbased
onphysicalabsorption,employingwaterasasolventfordissolvingCO2.ThesolubilityofCO2inwaterismanytimeshigherthanthesolubilityofCH4inwater,andthereforeselectivelyabsorbsCO2fromtherawbiogasmixture.
• Chemical scrubbing: Likewaterscrubbing,itisbasedonselectivelydissolvingCO2frombiogasinasolvent.However,absorptionisassociatedwithachemicalreaction(betweenCO2andthesolvent).Themostemployedsolventsaremonoethanolamine,diethanolamineordiglycolamine,which,incomparisontowater,candissolveconsiderablymoreCO2 per unit volume.
• Physical scrubbing: Likechemicalscrubbing,itisanabsorptionprocess,howeverwithoutachemicalreaction.Themost-employedcommercialsolventsareSelexolTM,RectisolTMandGenosorbTM.Thetechnologicalarrangementissimilartochemicalscrubbing.However,theenergyrequirementforregenerationatahighertemperatureislowerthanforchemicalscrubbing.PretreatmentofH2S is not required(Beil&Hoffstede,2010).
• Pressure swing adsorption: Thisisbasedonadsorption. Adsorbent materials are able to selectivelyretainspecificcompoundsofamixturebymolecularsize.CO2moleculesaresmallerthanCH4
molecules,andarethereforeselectivelycapturedfromtheCO2/CH4biogasmixtureintheadsorbentmaterial.Processefficiencydependsmainlyontemperature,pressureandadsorbenttype.The
28FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
pressureoftheprocessisvariedtoload/unloadtheadsorbentmaterial.Commercialadsorbentscanincludemolecularsieves,zeolitesandactivatedcarbon(Grande,2011).
2.2.5 Downstream logisticsOnceupgradedtotherequiredspecification,thebiogas,inessence,hasbecomenaturalgas(whichismainlycomposedofCH4).Likenaturalgas,biogascanthenbecompressedtoeitherCNGorLNG.Whilebothareformsofgasreadyforstorageandlong-distancetransportation,thekeydifferenceisthatCNG,albeititshighdensity,isstillagasandisstoredatambienttemperature,whileLNGisaliquidstoredatverylowtemperature.ThetablebelowprovidesagenericcomparisonbetweenLNGandCNG(NationalRenewableEnergyLaboratory,1991).
Table 2.2.1: Generic comparison between CNG and LNG
Comparison CNG LNG
Physicalstate Gas Liquid
Temperaturewhenstored
Ambient -162°C
Typical pressure whenstored
172–248bar 0.7–3.4bar
Typicalenergydensity(lowerheatingvalue)
6500–9500MJ/ℓ
5250–21000MJ/ℓ
Thedownstreamlogisticalstepofthebiogas-for-transportvaluechaincanbeseparatedintothreecomponents:
• Compressionorliquifaction• Storage• Transporttotheenvisagedoff-taker
CNGhasalowercostofproductionandstoragecomparedtoLNG,asitdoesnotrequireanexpensivecoolingprocessorcryogenicstoragetanks.Asaconsequence,LNGisgenerallyonlyusedfortransportingnaturalgasoverlargedistancesbyseawherepipelinesdonotsuffice.Asthisstudyfocusesonthelocalgenerationandutilisationofbiogas,LNGtransportandstorageapplicationisexcluded.
BiogasupgradedtobiomethaneandcompressedtoCBGrequirescompressionequipmentandenergy.Commercialtechnologiesforthecompressionofnaturalgascanbeusedandarereadilyavailable.However,itisimportanttoconsiderthattheinvestmentcostsfortheequipmentandtheongoingcostsofoperatingtheequipment(e.g.energy,maintenance)havetoberecuperatedfromthecommercialisationofthebiogasattheendofthevaluechain.Tocompressbiogastobetween250and270bar,theestimatedcostforcompressionliesataround0.1Eur/Nm3(Valorgas,2011).
Incaseofon-siteuse,CNGstorageisprincipallyusedtomeetloadvariations.Gasisinjectedintostorageduringperiodsoflowdemandandwithdrawnfromstorageduringperiodsofpeakdemand.AsCNGisstoredunderhighpressure,thismostlyhappensincylindricalstoragevesselsthataredesignedtowithstandhighpressures.
InsituationswhereCNGisnotusedonlocation(eitherinternallyorviacommercialisationatthegate),theCNGcanbetransportedfromthestoragefacilitytotheend-userinanumberofways,includingpipeline,railandroadtransport.Theselectionofthetransportmediumisdependentontheexistinginfrastructureinthevicinityofthestoragefacility(e.g.whetherthereisasuitablegaslineorrailroadstationnearby)and/orthecostsofadditionalinfrastructure.Ifvolumesarelimitedandpipelinesandrailroadsarenoteasilyaccessible,whichisoftenthecaseasSouthAfricangasinfrastructureisverylimited,themostpracticalflexiblesolutionistransportbyroadtoanyoff-takerofchoice,pendingdemand.
2.2.6 Biogas consumptionBiogasupgradedandcompressedhasawiderangeofapplications.Withintheconfinesofthisstudy,onlytheapplicationastransportfuelisconsidered.Anexistingpetrolvehiclecanbeconvertedtoadual-fuel(petrol/CNG)vehicle.However,eveninitscompressedstate,CNG’svolumetricenergydensityisonly25%thatofdiesel(Eberhardt,2002).Therefore,therequiredtankinavehicleforCNGislarger,andduetoitspressuredcontainmentrequirement,costlierthanaconventionalfueltank.TheaforementionedbenefitsandcompromisesareillustratedintheexampleoftheHondaCivicprovidedinBox2.2.1.
29
Genericallyspeaking,twomaintypesofdirectoff-takersforCNGcanbedistinguishedinthetransportenvironment:• Fleet owners: Theseareownersofafleetofvehiclesoperatedcollectivelywithfixedroutesand/orstopoverpoints
inmostcases.Fleetscanbeownedand/oroperatedbytheprivatesector(e.g.truckingcompanies)orpublicsector(e.g.citybusservice,publicwastecollectionagencies).
• Retailers: RetailersofferindividualvehicleownerstheservicesofrefillingtheirCNG-convertedvehiclesatcommercialon-demandrefuellingstations,whicharecommonlypartofanexistingfueldistributionsystem(i.e.anadditionalCNGpumpatanexistingpetrolstation).
Inaddition,theremaybedirectoff-takebyindividualuserswithonevehicleoralimitednumberofvehiclesusingCNGinuse.However,investmentinindividualfillingstationsisgenerallymuchlessattractiveeconomically,andindividualoff-takersarethereforerare.
Box 2.2.1 : The Honda Civic on natural gas
Since2008,whenthecarwasintroducedintheUSA,Hondahassoldaround1000to3000CNGvehiclesayear.AnimportantinfluenceonsalesisthecostadvantageofCNGoverpetrolanddiesel.Withfossilfuelpriceshavingdroppedsignificantlyin2014,salescamedownaswell.
Lowerfuelcosts,betterairqualityandlowerGHGemissionsaresubstantialbenefitsthatthenaturalgasoptionbrings.Ontheotherhand,disadvantagesarethelimitedrange,reducedtrunkspaceandlimitedavailability.Anoverviewofprosandcons,asreportedinreviews*arepresentedinthetablebelow.
HondaCivicatapublicnaturalgasfuelstation.
Benefits Compromises
Fuelcost:About30%versus50%lowerfuelcostforcommercialversushomefuelling.
Trunkspace:Roughlyhalfthetrunkcapacityisgivenovertothetank,whilerangeanxietyremains.
Cleanandclimate-friendlyfuel:Whencomparedwithgasoline,90%lessCO2and16to91%lessnitrogendioxide(NOX),fewercarcinogenicpollutants,littleornoparticulatematter,13to18%lessGHGemissions,accordingtoNaturalGasVehiclesforAmerica.
Purchasecost:TheCiviconnaturalgasisabout40%moreexpensivethanagasolineequivalent(beforeincentives).Ahome-fuellingstationcouldaddanother27%,comparedtoagasolineequivalent.
Reducingrelianceonforeignoil:Domesticallysourcednaturalgasreducesrelianceonimportedoil.
Availability:CNGstationsarenotavailableinsomeareas,andsomeareonlyopentofleetowners
*ConsumerReports.org(2014):http://www.consumerreports.org/cro/2012/03/the-natural-gas-alternative/index.htm;USAToday(2011):http://usatoday30.usatoday.com/money/autos/reviews/healey/story/2011-11-10/civic-cng-test-drive/51159408/1;Forbes(2015):http://www.forbes.com/sites/michaelkanellos/2015/01/19/sales-of-hondas-natural-gas-civic-plummet/2/;andNVGAmerica:http://www.ngvamerica.org/natural-gas/environmental-benefits/.
30FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Chapter 3: Biogas-for-transport sources in South Africa
1. Introduction 2. Value chain
3. Biogas sources
4. Feasibility 5. Policy
ThischaptercapturestheresultsoftheInventoryofBiogasforTransportSources,providingaperspectiveonthemostrelevantbiogas-for-transportsources,themaincontributingsectorsandtheirlocations.Beforelookingattheinventoryitself,thecurrentstatusquoofthesectorisprovidedbelow.
3.1 Status quo of the South African biogas sector
ToensurethatanobjectiveviewcanbedevelopedaroundthefeasibilityofCBGfortransport,thissectionprovidesanoverviewofthecurrentstatusquoofthebiogassectorinSouthAfrica.
ItisestimatedthattherearecurrentlyseveralhundredbiogasdigestersscatteredacrossSouthAfrica.Mostoftheseareaccountedforbysmalldomesticunitsandafewinitiativesdrivenbynon-governmentalorganisations(NGOs).Incomparison,thereare12millionbiogasdigestersinIndiaand17millioninChina(Ruffini,2013).AlthoughthesenumbersmightgivetheimpressionthatSouthAfricadoesrelativelywellwhenitcomestothetotaldigesterspercapita,consideringthelargepopulationsinIndiaandChina,thetablebelowprovidessomeadditionalinsightintoSouthAfrica’spositioninrelationtoGermanyandChina.
Table 3.1.1: Digesters per country
Country No digesters Population Number per capita
Germany 6 800 82 000 000 0.000 083
China 17 000 000 1 357 000 000 0.012 528
SouthAfrica 200 52 000 000 0.000 004
31
AnESI-Africaarticleentitled‘SAnotusingitsbiogaspotential’7providesanumberofreasonsforthislimitednumberofbiogasdigesterplantsinSouthAfrica.Theseincludepublicapathy(othersourcesofelectricityaremuchlessofahassle),cheapelectricity,limitedgrantsorgovernmentincentivesandnolocaltechnologyproviders.
AnoverviewofexistingbiogasprojectsinSouthAfricawaspresentedatthefirstSABIABiogasConference(Munganga,2013).Thefollowingthreetypesofbiogasinstallationsaredistinguished:
• Type 1: Domestic and residential digesters: Theseareusedforcooking,lightingorsanitationinruralresidentialareas(e.g.villagesandschools).InSouthAfrica,themostcommonoftheseinstallationsisa
7.http://www.esi-africa.com/sa-not-using-its-biogas-potential/
digestermadeofPVC,concreteandplasticbags(i.e.abiobagdigester).
• Type 2: Small-scale and medium commercial digesters:Thesearedefinedasbiogassystemswithaninstalledcapacityofbetween25and250kWe, wherethegasisuseddirectlyforheatingpurposesorindirectlyforthegenerationofelectricity(e.g.conferenceandcommunitycentres,smallcommercialfacilities,suchasabattoirs,aswellasdairyfactoriesandfarms).
• Type 3: Large-scale installations: Theseareinstallationswherelarge-scaledigesters(withacapacitylargerthan250kWe)utilisethebiogasfromlargesources,suchasabattoirs,farms,MSWandwastewatertreatmentfacilities.
ThetablebelowprovidesanoverviewoftheexistingbiogasprojectsforType2andType3asdefinedabove.
Table 3.1.2: Overview of existing biogas projects in South Africa
Size Name Electrical capacity
Small-scale and medium-scale commercial digesters
HumphriesBoerdery(outsideBela-Bela) 30 kW
JanKemdorpAbattoir(iBERT) 100 kW
Cullinan 190 kW
Robertson 150 kW
Jacobsdal 150 kW
Large-scale installations
Mariannhill(Durban) 1 MW
BisasarRoad(Durban) 6.5 MW
Chloorkoplandfillgasproject(EnviroServ) unknown
Ekhurlenilandfillgasproject unknown
RobinsonDeep(CityofJohannesburg) 19 MWAlrode/up-flowanaerobicsludgeblanket(UASB)(brewery)
unknown
Newlands/UASB(brewery) unknown
Rosslyn(brewery) unknown
Prospection(brewery) unknown
Ibhayi(brewery) unknown
CapeFlatsbiogasdigester-dewateringsludge unknown
Ceresfruitfarm-UASBdigester(Veolia) unknown
PetroSA(Biotherm) 4.2 MWNorthernWastewaterTreatmentWorks–Biogas-to-electricityProject
1.1 MW
32FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Mostofthebiogasprojectslistedaboveusethebiogasforthegenerationofelectricityordirectuse,andinsomecasesforacombinationofheatandpower.NoactiveprojectshavebeenidentifiedthatupgradebiogastoCNGforuse in transport services.
3.2 The Biogas for Transport Sources InventoryTodeterminethenationalpotentialofbiogas-for-transport,thisstudyincludesthedevelopmentofawastebiomassinventoryandmap.Itisimportanttonotethatthebiogasinventoryandmaparedevelopedwithoutapredeterminedpro-biogas-for-transportview,andthereforecoversourcesfromwhichbiogascanbeappliedwithinthetransportsector,butalsoforotherapplications.However,toensurethattheinventoryandmapproviderelevantinformationfromabiogas-for-transportapplication,asperthemandateofthisstudy,theinventoryandmapcontaininformationrelatingtothebiogaspotentialandthequalityoftheunderlyingbiomasssourcefromaqualitativeandquantitativeperspective.Thetablebelowprovidesanoverviewofthequantitativeandqualitativedetailscapturedpersource.
Table 3.2.1: Biogas inventory qualitative and quantitative criteria definitions
Type Characteristic Definition Unit of measure
Quantitative Biogasquantity
Providesanindicationofthebiogaspotentialperbiomasssourceandisexpressesasannualaveragebiogaspotentialincubic
metres per day
Nm3 per day
Qualitative
Yield
Expressesthepotentialtoconvertthebiomassfromaparticularsourceintobiogas
incubicmetresofbiogaspertonneofbiomassatthesource
Nm3pertonoffreshmaterial
RemaininglifetimeCapturestheexpectedlifetimeoverwhichthebiomassfromaspecificsourcewill
remain available in yearsAnnum
Seasonality
Indicatestheavailabilityofthebiomassataspecificsourcewithinayear,andisexpressedinmonths,where12months
indicatesthatthebiomassisavailableatthesource on a continuous basis
Months
Inadditiontothesequantitativeandqualitativecriteriaandthephysicallocationofeachpotentialsource,whichisrequiredtomapthegeographiclocationofthesources,theinventorycapturesadditionalspecificinformationonthebiomasssource.Theadditionalinformationdoesnotonlyallowtheusertobetteridentifythesource(e.g.plantname,plantowner,etc.),butalsoenablestheusertodevelopabetterunderstandingoftheoriginofthebiomasswastestream,forexample,viaadescriptionoftheunderlyingprocessfromwhichthewastestreammaterialises.
Thisadditionaldetailcapturedwithintheinventory,incombinationwiththequantitativeandqualitativecriteriapersource,allowstheusertoidentifyindividualsourcesthatmeetspecificrequirementssetforthedevelopmentofabiogas-for-transportgenerationfacilitywithinaspecificgeographicregion.
33
Thebiogas-for-transportviabilitypersourcedependsheavilyontheindividualrequirementsofabiogas-for-transportprojectdeveloper,whichinpracticemeansthatthislevelofanalysisoftheinventorycannotbedonefromanationalbiogas-for-transportpotentialperspective.Forthisreason,thenextsectionprovidesaholisticanalysisoftheinventoryandmaptoprovideinsightintothebiogas-for-transportpotentialwithinthecountryasawhole,ratherthanonasource-by-sourcebasis.
3.3 Main sectors and potentialTheinventorycapturespotentialbiogasdistributedovereightdifferentsectors,anddistinguishesbetween12differentbiomasstypes.Thefigurebelowprovidesanoverviewofthepotentialbiogasvolumespersector.
Sector
Total
Biogas potential (relative per sector)
0.21%
0.36%
1.27%
6.91%
7.27%
13.77%
32.35%
38.07%
Biogas potential (Nm3/day)
Fruitprocessing
Brewery
Abattoir
Pulp and paper
Municipalwastewater
Agriculture
Sugarproduction
Municipalsolidwater
• 6 360 Nm3/day
• 10 615 Nm3/day
• 38 050 Nm3/day
• 206 400 Nm3/day
• 216 911 Nm3/day
• 410 989 Nm3/day
• 965 736 Nm3/day
• 1 136 450 Nm3/day
• 2 985 150 Nm3/day
Figure 3.2.1: Biogas potential per sector (Nm3 per day)
ItbecomesapparentfromthetableabovethatthetotalbiogaspotentialfromsourcescapturedintheinventoryisaroundthreemillionNm3perday,ofwhichthemajoritycanbefoundinthesugarandMSWsectors.Althoughtheremaininglifetimeofthesourceandtheseasonalityofthesource,amongotherthings,arerelevantconsiderationswhenassessingthebiogas-for-transportpotentialofarangeofsources,thetotalpotentialvolumeofasource,inmostcases,providesafirstindicationofthepotentialofthesourcesfromabiogas-for-transportperspective.Thefigurebelowprovidesanoverviewofthetenlargestbiogas-for-transportsourcescapturedintheinventory.
Sources
Total
Biogas potential (Nm3/day)
175 000 Nm3/day
138 146 Nm3/day
116 008 Nm3/day
108 050 Nm3/day
93 296 Nm3/day
89 600 Nm3/day
88 800 Nm3/day
86 972 Nm3/day
81 872 Nm3/day
79 696 Nm3/day
BisasarRoadlandfill
KaranBeeffeedlot
Komati Mill
Vissershoek(south/north)
Sezele Mill
Sappi Saiccor Mill
Onderstepoortlandfill
Malalane Mill
FlextonMill
Noodsberg
1 057 440 Nm3/day
Figure 3.2.2: Biogas potential per source (Nm3 per day)
Itisinterestingtonotethat,amongthetenlargestsources,awiderangeofsectorsisrepresented,suchasMSW,agriculture,pulpandpaper,andsugarproduction.Inadditiontothat,itisworthconsideringthatthetenlargestpotentialsources(aslistedinthefigureabove)makeupoverone-thirdofthetotalidentifiedpotential.
34FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
3.4 ConclusionEventhoughthebiogasinventoryandmapitselfweredevelopedwithanindependentandopenviewastothetypeofuseofthebiogas,theanalysisoftheinventoryfocusesonthepotentialapplicationwithinthetransportsector.Duetothedownstreamlogisticalcomplexities(e.g.limitedrangeofCBG/CNGvehicles),thegeographiclocationofpotentialbiogassourcesinrelationtopotentialcustomers,andthecurrentandfutureCNGinfrastructureareofimportancewhenassessingthenationalpotentialofCBGfortransportpurposes.Forthisreason,thebiogas-for-transportinventorywasusedtovisuallyrepresentthedifferentpotentialsourcesonamapofSouthAfrica.
Thefigurebelowshowsthegeographicdistributionofthepotentialbiogassourcescapturedintheinventory.Eachbubblehasauniquecolourandrepresentsauniquebiogassource.Thesizesofthedifferentbubblesrepresenttherelativebiogasproductionpotentialbetweenthesources.
Figure 3.4.1: Geographic distribution of potential biogas sources
Ascanbeseenfromthemapabove,themajorityofpotentialbiogassourcesarelocatedintheproximityofSouthAfrica’surbanisedcentres:alongtheKwaZulu-Natalcoast,inGautengandaroundCapeTown.This,incombinationwiththematerialtotalpotential,ascapturedintheBiogasforTransportSourcesInventory,ofaroundthreemillionNm3ofrawbiogasperday,providessufficientgroundstoconcludethat,fromapotentialbiogasavailabilityperspective,amaterialvolumelocatedwithinwell-accessibleareasandclosetoconsumershasbeenidentified.
Itisalsointerestingtoconsiderthat,withashareof38%ofthetotal,theMSWsector,asawhole,isthelargestcontributortothecountry’sbiogaspotential,andthatthesesourcesarealllocatedincloseproximityofurbanisedareas.Severalofthesourcesinthissectorareamongthetenlargestsourcesidentified.Fromthis,onecanconcludethatlocalgovernmentsinSouthAfricahavethepotentialtocontroland/oroperatealargeshareofthecountry’spotentialbiogas-for-transportsources,makingthemideallypositionedtodrivethelarge-scaleuptakeofbiogasasatransportfuel.
35
Chapter 4: Feasibility of transforming to CBG as a transport fuel
1. Introduction 2. Value chain
3. Biogas sources
4. Feasibility 5. Policy
Thischapterprovidesafeasibilityassessmentofthebiogas-for-transportvaluechainanditspotentialtobeintroducedinSouthAfricaasatransportfuel,givenitscompetitiveness,availablelocalinfrastructureandbenefitsforthecountry.
4.1 Cost-benefit analysis: biogas-to-fuel versus biogas-to-electricity
InSouthAfrica,themostcommoncommercialnon-residentialuseofbiogasisforthegenerationofelectricityeitherforownconsumption,tobesourcedtothemunicipal/nationalgrid,orinexceptionalcasesto‘wheel’electricity acrossthegridtoadedicatedoff-taker.Theuseofbiogasasatransportfuelhasbeentestedonafewoccasionsinthecountry.Forexample,NOVOEnergydemonstratedaCBG-dispensingstationatalandfillsitenearORTamboInternationalAirport.Nevertheless,biogasasatransportfuelhasnotemergedasyet.
However,thecompetitionbetweenwastesiswiderthanjustfuelversuselectricity.Heatisalsoanoption,andbeforeanyconversioncantakeplace,thewastemayalreadyhavebeenusedforotherpurposes,likeanimalfeedorasasoilconditioner.Inthissense,wasteoftenalreadyhasapurposeorvaluedivertingitfromlandfilling,thelast-resortalternativeforwhichacostwouldbeincurred.
36FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Bio ‘waste’
Waste sold to others e.g.asafuelforboilers
Internal use
External use
Power Heat FuelHeat/power
Power
Power
Heat
Heat
Heat/power
Heat/power
Fuel
Fuel
Source:EcoMetrixteamanalysis
Figure 4.1.1: The use of waste in different ways and modalities
Althoughthemainsubjectoftheanalysisisthecomparisonbetweenelectricityandtransportfuel,ananalysishasalsobeendoneonthevalueintermsofprimaryenergyinR/GJforthedifferentenergycarriers,i.e.electricity,heat(intermsofcoal)andfuel(intermsofpetrol).Forelectricity,thismeansthatonecalculatestheelectricityenergyvaluebacktotherandvalueoftheamountofenergyintermsoffuelthatwasrequiredtogeneratetheelectricity.Forcoal,onecanusethedirectheatingvaluethat,inthecaseofthermalcoaltradedatRichard’sBay,is6000kcal/kg.Forpetrol,anenergycontentof32.4MJ/ℓhasbeenused.Theresultsarepresentedinthetablebelow.
Table 4.1.1: Prices of energy of different carriers compared
Energy carrier (unit of measure) Regular priceR/unit of measure
Price per unit of energyR/GJ
Low High Low High
Coal–heat(R/kg)1 0.65 0.83 26 33
Electricity(R/kWh)2 0.89 1.54 98 171
Petrol–transport(R/l)3 10 12.89 309 398
1Richard’sBayfreeonboard(FOB)pricesthermalcoallow/highfortheperiodApril2014toAprl2015.Arand-dollar exchangerateof11isassumed.2Thepriceperunitofprimaryenergyforelectricityiscalculatedonthebasisofa40%electricalefficiency8.3ThepetrolpricefromR10/ℓ(low)uptotheaveragepumppriceon21May2015(high).
8. A40%electricalefficiencyisatthetopoftherange(30to40%).However,newgeneratordesignsclaimefficienciesaround40%asanMWMbiogas-optimisedgenerator,forexample,claimedtohaveanefficiencyof42.8%.See:http://www.mwm.net/mwm-chp-gas-engines-gensets-cogeneration/press/press-releases/optimized-tcg-2016-c-genset-with-improved-efficiency-for-biogas-operation/
37
AsbecomesaparentfromTable4.1.1,thelowestvalueperunitofenergy(R/GJ)ispaidforcoal.Afterthiscomeselectricity,whilebyfarthehighestmonetaryvalueperGJisgeneratedbyatransportfuel,whichinthisexampleispetrol.Althoughindicative,thisorderinvalueisnotconclusive,asoneneedstotakeintoaccounttheinvestmentsrequiredtoconvertprimaryenergy,inthiscasebiogas,intotherespectiveenergycarrier.
Inthenextsectionsofthischapter,wefocusonthepricingofbothpetrolandelectricity,assesstheadditionalcostincurredwhengoingforoneenergycarrierortheother(i.e.thecostofconvertingrawbiogasintoelectricityoratransportfuel)andmakeacomparisonbysubtractingtheadditionalcostforconvertingtothespecificenergycarrierfromtherawbiogas.Thisshouldprovidethenetbenefitwhenchoosingoneabovetheother.
Otherindirectfinancial/non-financialbenefitsandbarriersarealsotakenintoaccount.Inthisway,afullcomparisonofbotheconomic/financial,socioeconomicandenvironmentalbenefitsisprovided,whichareallimportantfactorsforgovernmenttotakeaninformeddecisiononwhetherandtowhatextentitmightsupportandpromotetheuptakeofbiogasasatransportfuel.
4.1.1 Biogas to fuelThepotentialforbiogasintheformofCBGasatransportfuelshouldbeconsideredinrelationtothecurrentlyprevailingfuelalternativeswithinthecountry.Asisthecaseglobally,inSouthAfricatheprimaryfuelsusedfortransportarepetrolanddiesel.Insomepartsoftheworld,CNGisalsoamaterialtransportfuel,butasindicated,theCNGforthetransportmarketinSouthAfricaisstillinitsinfancy.
TobeabletomakearealisticcomparisonbetweentheeconomicsofthedifferentfuelsandtodeterminethepotentialcompetitivepositionofCBGinrelationtoothertransportfuels,thisstudycomparesthesalespriceatthepointofoff-take(i.e.attherefuellingstation)oftheenergycontentofthedifferentfuelsinR/GJ.SincethepredominanttransportfuelinSouthAfricaatthemomentispetrol,thesalespricesofdieseland,tosomeextent,CNGarepositionedinsuchawaythattheyarecompetitivetothepriceofpetrol.
WhenlookingatthecompositionofthepetrolpriceinSouthAfrica,itisimportanttoconsiderthatSouthAfricadoesnotholdoildepositswithinitsborders.Asaresult,itimportscrudeoil,aswellaspetrolanddiesel,asneeded.AccordingtotheSouthAfricanPetroleumIndustryAssociation(SAPIA),thepetrolretailpriceisregulatedbygovernmentandchangesmonthly.ThecalculationofthenewpriceisdonebytheCentralEnergyFund(CEF)onbehalfoftheDepartmentofEnergy(DoE).Thepetrolpumppriceiscomposedofanumberofpriceelements,whichcanbedividedintointernationalanddomesticelements.Theinternationalelement,orbasicfuelprice(BFP),isbasedonwhatitwouldcostaSouthAfricanimportertobuypetrolfromaninternationalrefineryandtotransporttheproducttoSouthAfricanshores.TheBFPisinfluencedby9:
• internationalcrudeoilprices;• theinternationalsupplyanddemandbalancesfor
petroleumproducts;and• therand-dollarexchangerate.
TheBFP,quotedinUS$perbarrelorUS$perton,isconvertedtoUScentsperlitrebyapplyingtherelevantinternationalconversionfactors.ItisthenconvertedtoSouthAfricanrandandcentsperlitrebyapplyingtheapplicablerand-dollarexchangerate.Toarriveatthefinalpetrolpumppriceinthedifferentfuel-pricingzones(magisterialdistrictzones),domesticcosts,importcosts,leviesandmarginsareaddedtotheBFP.
AlthoughnoVATisraisedonpetrolordiesel,theDoEspecifiesthefollowingothercomponentsthatmakeupthedomesticportionofthefinalfuelprice:
• Inland transport costs: Refinedpetroleumproductsaretransportedbyroad,rail,pipelineoracombinationofthesefromcoastalrefineriestoinlanddepots.
• Wholesale margin: Themarginisafixedmaximummonetarymargin.Theformulausedtodeterminethewholesalemarginisbasedonasetofguidelines–theMarketingofPetroleumActivitiesReturn.Thelevelofthismarginiscalculatedonanindustryaveragebasisandaimstograntmarketersabenchmarkreturnof15%onthedepreciatedbookvaluesofassets,withallowancesforadditional
9. http://www.energy.gov.za/files/esources/petroleum/petroleum_fuelprices.html
38FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
depreciationbeforetaxandpaymentofinterest.Shouldtheindustry-aggregatedmarginbebetween10and20%,noadjustmentismadetothemargin.Ifitisbelow10%orabove20%,themarginisadjustedtoalevelof15%.
• Retail profit margin: TheretailprofitmarginisfixedbytheDoEandisdeterminedonthebasisoftheactualcostsincurredbytheservicestationoperatorwhensellingpetrol.Inthiscoststructure,accountistakenofallproportionateretail-relatedcosts,suchasrent,interest,labour,overheadsandentrepreneurialcompensation.
• Equalisation Fund: TheEqualisationFundlevyisnormallyafixedmonetarylevy,determinedbytheMinisterofMineralsandEnergyinconcurrencewiththeMinisterofFinance.Thelevyincomeismainlyutilisedtoequalisefuelprices.Thelevyiscurrentlyzero.
• Fuel tax: Afueltaxisleviedonpetrolanddiesel.ThemagnitudeofthislevyisdeterminedbytheMinisterofFinance.
• Customs and excise duty: A levy is collected in terms ofanagreementwiththeSouthernAfricanCustomsUnion.
• Road Accident Fund: A Road Accident Fund levy is applicableonpetrolanddiesel.ThemagnitudeofthislevyisdeterminedbytheMinisterofFinance.Theincomegeneratedfromthislevyisutilisedtocompensatethird-partyvictimsofmotorvehicleaccidents.
• Slate:Aslatelevyisapplicableonfuelstofinancethebalanceinthesocalled‘slateaccount’whentheslateisinanegativebalance.Theslateaccountandhowthebalanceontheslateaccountisdeterminedisdescribedasfollows:TheBFPofpetrol,dieselandilluminatingparaffin(IP)iscalculatedonadailybasis.ThisdailyBFPiseitherhigherorlowerthantheBFPreflectedinthefuelpricestructuresatthattime.IfthedailyBFPishigherthantheBFPreflectedinthefuelprices,aunitunderrecoveryisrealisedonthatday.WhentheBFPislowerthantheBFPreflectedinthepricestructures,anover-recoveryisrealisedonthatday.Anunder-recoverymeansthatfuelconsumersarepayingtoolittlefortheproductonthatday,whileinanover-recoverysituation,consumersarepayingtoomuchfortheproductonthatday.Thesecalculationsaredoneforeachdayinthefuelpricereviewperiod,andan
averageforthefuelpricereviewperiodiscalculated.Thismonthlyunitover-/under-recoveryismultipliedbythevolumessoldlocallyinthatmonth,andthisisrecordedonacumulativeover-/under-recoveryaccount(theslateaccount).
• Demand-side management on 95 unleaded petrol: A demand-sidemanagementlevy(DSML)isapplicableto95unleadedpetrolconsumedintheinlandarea.Thislevywasimplementedinthepricestructureof95unleadedpetrolinJanuary2006when 95unleadedpetrolwasintroducedintotheinlandmarketforthefirsttime.Mostvehiclesintheinlandmarket do not need to run on 95 unleaded petrol anditsunnecessaryuseintheinlandareawouldresultin‘octanewaste’,withnegativeeconomicconsequences.ADSMLwasintroducedtocurtailthedemandof95unleadedpetrolintheinlandarea.
• IP Tracer Dye levy:Tocurtailtheunlawfulmixingofdieselandilluminatingparaffin,atracerdyeisinjectedintoilluminatingparaffin.AnIPTracerDyelevywasintroducedintothepricestructuresofdieseltofinanceexpensesrelatedtothis.
• Petroleum Pipelines levy:TheannualbudgetofthePetroleumPipelinesRegulatorisapprovedbytheMinisterofEnergyandtheMinisterofFinance.IntermsofthePetroleumPipelinesLeviesAct (ActNo28of2004),alevyof0.19c/ℓwasaddedtothepricestructuresofpetrolanddieselon7March2007.
39
ThetablebelowprovidesanindicativepricebreakdownofthepetrolpriceatarefuellingstationofapproximatelyR12,89/ℓ(ason21June2015).
Table 4.1.2: South African petrol pricing structure breakdown
Price components Type Price per litre (R/ℓ)Basicfuelprice International 6,16
Inland transport costs Domestic 0,35Wholesalemargin Domestic 0,34Retailprofitmargin Domestic 1,51Equalisation Fund Domestictaxorlevy -
Fueltax Domestictaxorlevy 2,55CustomsandExciseDuty Domestictaxorlevy 0,04
Road Accident Fund Domestictaxorlevy 1,54Slate account Domestictaxorlevy -
DSMLon95unleadedpetrol Domestictaxorlevy 0,10IP Tracer Dye levy Domestictaxorlevy -
Petroleum Pipelines levy Domestictaxorlevy 0,00Total 12,59
Thetableaboveshowsthat,asiscommoninmanyplacesaroundtheworld,aportionofthepriceofpetrolinSouthAfricaatthepumpismadeupofarangeoftaxesandlevies.Dependingonthetypeoffuelanditsdetailedcomposition,theenergycontentofafuelcanvary.Whencomparingthepricebreakdownofdifferentenergysourcesusedinthetransportenvironment,itisusefultomakeaconversionintoR/GJ,sothatonecancomparecostsonanequalbasis.Inthisstudy,astandardenergycontentof32.4MJ/ℓofpetrolisapplied.Thediagrambelowprovidesaschematicbreakdownoftheinternational,domesticanddomestictaxorlevycomponentsofthepriceof95unleadedpetrolperMJ.
Domestictaxes/levels
Basic fuel price
Retail profitmargin
Inland transport
costs
Fuel tax
Road Accident
Fund
DSM on 95
unleaded petrol
Customsand
ExciseDuty
IP Tracer
Dye levy
Slate levy
Petrol pump price
Equalisation Fund
Petroleum Pipelines
levy
Wholesalemargin
(131)
(190) (48.7%)
(47) (12.0%)
(11) (2.80%)
(10) (2.66%)
(79) (20.26%)
(48) (12.23%)
(3) (0.79%)
(1) (0.32%)
(0.00) (0.01%)
(0.00) (0.0%)
(0.00) (0.0%)
(0.00) (0.0%)
(388) (100%)
(190)
(68)
(388)
(49%)
(17%)
(100%)
(34%)International
Domestic
Total
CUM:
Figure 4.1.2: Cost breakdown of 95 unleaded petrol price per MJ
40FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Asaresultoffluctuationsovertime,forexample,intherand-dollarexchangerate,andchangesintheglobalmarketpriceofcrudeoil,itisimportanttoconsiderthatFigure4.1.2andTable4.1.2abovearebasedonindicativenumbers,andshouldbeseenasanillustrationofthecomponentsanddynamicsthatmakeupthepetrolpriceatarefuellingstationonly.WhenlookingatthetaxesandleviesonCNGfortransportinSouthAfrica,averydifferentpictureemerges,asonlyCNGcarries14%VATatthepump.ThereasonforthisisthatCNGforthetransportsectorinSouthAfricaisstillinitsinfancy,andNationalTreasurystillneedstodeterminehowthetaxingstructureshouldwork10.
Oneoftheobjectivesofthisstudyistomakerecommendationsregardingpotentialfinancialincentivestofacilitatethelarge-scaleuptakeofCBGasatransportfuel.TakingintoconsiderationthefactthatthedevelopmentoftheCNGinfrastructureisofsubstantialimportanceforasuccessfuluptakeofCBGinthetransportenvironment,andthatforCNGtobeaviablealternativetransportfuel,itneedstobeprice-competitivewithpetrolanddiesel.ThecurrentabsenceoffueltaxesandleviesonCNG,butapplicabletopetrolanddiesel,canbeconsideredan‘informaltaxincentive’forCNG.
ThediagrambelowprovidesaschematicoverviewofthepricestructureforCNGinthetransportenvironmentwithoutthis‘informaltaxincentive’.
Basic fuel price
Petrol pump price
Domestic Domestictaxes/ levies
Domestictaxes/ levies
VAT CNGinformaltax
incentive
CNG/petrolpriceparity
CNGPetrol
CNGvehicle
conversionsubsidy
CNGpump price
(190) (48.7%)
(68) (17.5%)
(131) (33.6%)
(388) (100%)
(131) (33.6%)
(48) (14%)
(83) (19.6%)
(388) (100%)
(139) (10%)
(350) (90%)
Domestictaxes/levels
International
Domestic
Total
CNG
Figure 4.1.3: The price parity breakdown of 95 unleaded petrol as opposed to CNG11
Whatbecomesapparentfromthefigureaboveisthatthe‘informaltaxincentive’,whichresultsfromtheabsenceofthetaxesandleviesappliedtopetrolminustheVATof14%thatiscurrentlyleviedonCNGfortransport(butnotonpetrol)iscloseto20%ofthepriceparitybetweenpetrolandCNG.ThefigurealsoincludesadifferentdiscountembeddedintheconversionofapetrolvehicletoaCNGvehicle,sinceanadditionalinvestmentisrequiredtofitaCNGsystemintoapetrolvehicle.
10.http://citizen.co.za/148482/cng-filling-stations-arrive-in-south-africa/
11.InlinewithFigure4.1.2,thedomesticcomponentofthepetrolcostbreakdownconsistsoftheretailprofitmargin,inlandtransportcostsandwholesalemargin,asdeterminedbytheSouthAfricangovernment.
41
Duetotheearly-stagematurityofCNGforthetransportmarket,thissavingontheCNGpumppricethatisrequiredtorepaytheinvestmentontheconversionkitisdifficulttoassess.However,assumingthataconversionkitcosts R20000forastandardminibustaxiandthatavehicledrives20 000kmayearatapetrolpriceofR12,59/ℓ,theadditionalinvestmentcanberecoveredwithin12 monthsatadiscountedCNGpriceof10%,includingpayback,interestandpotentiallossofincome/useofthevehicleduringtheperioditisbeingconverted.Thistranslatestoa‘vehicleconversionsubsidy’ofR0,039/GJ.
Aspartoftheroll-outbyCNGHoldings,CNGrefuellingstationsprovideanincentivefortaxidrivers(supportedbytheIDC)intheformofareductionintheCNGpumpprice.Althoughtheincentiveisstructuredslightlydifferenttotheexampleabove,inessenceitindicatesthatsuchasubsidyisrequiredtodevelopacompetitivemarketforCNGasatransportfuel.Thiskindofincentive,togetherwiththe‘informaltaxincentive’,shouldalsobeconsideredwhenlookingatpotentialpolicymeasuresbygovernmenttokick-startthelarge-scaleuptakeofCBGasatransportfuel.
4.1.2 Biogas to electricityElectricityratesinSouthAfricavarysubstantially,withdifferentrateschemesforurban,residentialandruralareas.Eskom,asthenationalutilitycompany,proposesannualpriceincreasesforblocksofthreeyears,whichneedtobeapprovedbytheNationalEnergyRegulatorofSouthAfrica(NERSA).Thelast10yearswerecharacterisedbyperiodsofashortageinsupplyandsubstantialpriceincreases,whichdonotappearlikelytosubside.Asillustratedinthetablebelow,since2009,averageelectricitypriceincreasesaccumulatedtoover100%.
35
30
25
20
15
10
5
0
2000
2002
2004
2006
2008
2010
2012
CPIAveragetariffincrease%
Figure 4.1.4: Average NERSA-approved price increase and consumer price index (CPI) since 200012
Notsurprisingly,managingsecurityofsupplyandbecominglessexposedtofurtherelectricitypriceincreaseshasbeenastrongdriverforprojectdeveloperstodevelopelectricityfortheirownuse.Therelevantpricesinthisregardmostlyconcernpricesinurbanisedareas,asthesearetheareaswherewasteisavailableforconversionintobiogas(seeSection3.3).
Pricesthathavebeentakenintoaccountinouranalysisstemfromlargeuserdomesticrates,whicharethehighestpotentiallyachievableratesinurbanareaslikeJohannesburg,regardlessofwhethertheuserisconnectedtothenationalorthemunicipalgrid.
12EskomTariffHistory:http://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariff_History.aspx
42FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Table 4.1.3: Domestic electricity prices of City Power versus Eskom (May 2015)
City Power City Power City Power Eskom Eskom Eskom Eskom
Monthly kWh
60A prepaid
60A credit
80A credit
20A prepaid
60A prepaid
60A credit
80A credit
1 000 1 148 1 532 1 563 1 016 1 379 1 379 1 506
1 500 1 803 2 168 2 200 1 558 2 295 2 295 2 425
2 000 2 459 2 805 2 836 3 210 3 210 3 337
3 000 3 939 4 148 4 179 5 042 5 042 5 168
4 000 5 544 5 557 5 594 6 873 6 873 7 000
OtherpreferentialratescanbeobtainedwhenparticipatingintheREIPPPProgramme.However,thenumberofbiogasprojectsparticipatinginREIPPPProgrammehasbeenclosetozero,withonlyonequalifyingproject,theJohannesburgLandfillGas-to-energyProject,whichisanticipatedtodeliver18 MWofelectricity.
Figure 4.1.5: The 64 projects awarded under REIPPP Round 1–3, accumulating to 3 916 MWe
ThepricethatthebiogasprojectsparticipatingintheREIPPPProgrammeobtainedinthiscasewasR1108/MWh partiallyindexed(Rycroft,2013),andislowerthanwhatwouldbepotentiallyachievablewhensellingtocustomerswithinurbanisedareas.AnotherobservationisthatthelocationofthemajorityofsolarandwindprojectsintheREIPPPProgrammeareoutsideurbanisedareas.Inthatsense,electricityprojectsrunningonbiogascouldcomplementthecurrentREIPPPProgramme’srenewableenergyprojectsbygeographicallybalancing(remoteversusurban)therenewablefeedintothegridtosomeextent.
43
4.1.3 Net price benefit: biogas-to-fuel versus electricity Althoughfuelasaproductseemstobemoreattractive,oneneedstotakeintoaccounttheadditionaleffortthatisrequiredtoproducefueloverelectricity.Inordertocompare‘appleswithapples’,oneneedstodistinguishbetweenhowtherawbiogasisconvertedintotheenergycarrierofpreference,whetheritisbeingaCHPgeneratorincaseofelectricityoranupgrading,compression,storageanddispensingsystemincaseofCBG.
Onthebasisofinputsfromlocalandinternationalstakeholders,aswellasdatafrombiogasstudies,anindicativecostrangehasbeenderivedforaCHPunit,andforupgradingandcompression.Thesecostsareindicativeforsizableprojectsofaround2MWeor18000Nm3perhourofrawbiogasandlarger.Thenetpricebenefitiscalculatedbysubtractingthe‘additionalcost’fromthepriceonecanobtainbysellingtheenergyeitheraselectricityorasafuelrespectively.InlinewithSection4.1.1,wehavechosen95unleadedpetrolasafueland,inlinewithSection4.1.2,theelectricitydomesticpricerangeaschargedinurbanareaslikeJohannesburg.Forpurposesofcomparison,CBGasasubstituteforCNGhasbeenadded,showingpriceswhenfinaluse(heatorfuel)isstilltobedetermined.
Electricity from biogas
CBG as a substitute for CNG
CBG as a substitute for petrol
MA
RG
INC
OST
PRIC
E
R98–171/GJBasedonelectricityrate:R0.89–1.54/kWh-e
R238–249/GJBasedonratesknownfromEgoli/CNGlicense
R309–398/GJBasedonpetrolpriceof:R10–12.6/ℓ
R71–79/GJBasedonCHPcost:R900–1,100/kWe
R91–116/GJUpgrading+compressioncostofbiogas
R91–116/GJUpgrading+compressioncostofbiogas
R19–100/GJAvailableforproductionofrawcleanedbiogasandadditional cost
R122–158/GJAvailableforproductionofrawcleanedbiogasandadditional cost
R193–307/GJAvailableforproductionofrawcleanedbiogasandadditional cost
Figure 4.1.6: Comparing net price benefit between energy carriers when using biogas-based substitutes
Thefigureaboveshowsthatproducingafuelisthemostattractiveoption,sincethehighercostforupgradingandcompressionismorethancompensatedforbythehigherpriceofenergy.Itisacknowledgedthattheassessmentincludessomesimplificationsasitdoesnotincludealldetailed(oftenproject-specific)costsrelatedtotheestablishmentofagasorelectricitygridconnection,forexample,neitherdoesitincludethecostsrelatedtoupstreamlogistics.Nevertheless,consideringthesubstantialdifferenceinnetpricebenefitofoneenergycarrierversusanother,thiswillnotchangetheperspectivethat,inmonetaryterms,thevalueofbiogasasafuelisafactortwotothreehigherthanwhenitisconvertedtoelectricity,whileatthisstageitistaxedequallybyVATatarateof14%.
Inthefollowingsection,themonetaryadvantages,othersocioeconomicandenvironmentalbenefits,aswellasinfrastructuralrequirementsregardingbiogas-basedelectricityversusbiogas-basedfuelareassessed.
44FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
4.1.4 Benefit analysis of fuel versus electricity
Inthissection,wediscussthemainbenefitsandrequirementsofbiogas-to-fuelversusbiogas-to-electricitypermainbenefitcategory:economic/financial,environmental,socioeconomicandinfrastructural.
Economic/financialBiogas-to-fuelhasanumberofadvantagesoverbiogas-to-electricityineconomic/financialterms.Beingsuperiorinmonetarytermsbyafactortwotothreewithrespecttomarketvalue,aswasdemonstratedinTable4.1.1,thiswillreflectequallyintaxrevenueforthecountryasbothelectricityandCBG/CNGarecurrentlysubjecttoVAT(nofuelleviesarechargedonCBG).
Electricityisalocalcommodity,whilefortheprovisionoftransportfuels,SouthAfricaishighlyreliantontheimportofcrudeoil.Thebenefitsrelatedtotheimprovementofthetradebalanceanddecreaseofforexexpenditurewillthereforeonlymaterialisewhenbiogasisconvertedintoatransportfuel,whichreducesthereliance on crude imports.
Fromastrategiceconomicperspective,onecouldarguethatbiogas-to-electricityhasthestrongestbenefitsasSouthAfricaisstrugglingwithitssecurityofelectricitysupply.Biogasgeneratorsmayprovidereliefforownuse,aswellasfeedsomeadditionalcapacityintothegrid.Whilebeingreliantoncrudeoilimportsandtheconversionofcoalintoliquidfuels,nosupplyconstraintsareexperiencedinthecaseoffuels.Forobviousreasons,itisdifficulttoforecasthowboththelocalelectricitymarketandinternationaloilandgasmarketsaregoingtodevelopinthefuture.
Withregardtosecurityofsupply,onehastotakeintoaccountthattherelevantbiogas-for-transportsources,asidentifiedinthebiogassourcesinventory,arefocusedatsourcesof18000Nm3 per day or larger.Theremaybemanysmallersources,whichdonotqualifyforbiogasfor-transport,butmightmakeameaningfulaggregatedcontribution,similartobiogas-for-transportintermsofelectricity.
EnvironmentalWhetherbiogasisusedtodisplacepetrolordiesel,ortoproducebioelectricity,displacingcoal-basedgridelectricity,bothresultinareductionofnetGHGemissions.Althoughonemightthinkthatreplacingdirtycoal-basedelectricityfromthegridhasbyfarthelargestmitigationeffect,thisislargelydependentontheefficiencywithwhichthebiogasisconvertedintoelectricity.Theefficiencyofgeneratorsgenerallylieswithintherangeof30to40%.
Table4.1.4illustratestheassessmentofthenetmitigationeffectforthesubstitutionofpetrolwithCBG,andcoal-basedelectricitywithbiogas-basedelectricity,takingintoaccountthedifferentenergycontentsandemissionfactors.TheassessmentshowsthatthenetmitigationeffectperNm3ofrawbiogas(65%CH4 content)issignificantlyhigherinthecaseofagenerator-efficiencyof40%electrical(i.e.0.002504/0.001702=47%),whileinthecaseofageneratorefficiencyof30%electrical,thenetmitigationeffectbecomescomparablewithonlya10%netmitigationadvantage (i.e.0.001878/0.001702)ofbioelectricityversus biofuel.
45
Table 4.1.4: Comparison return on mitigation: bioelectricity versus biofuel
Substitution of petrol Value Unit of measurement
1litreofpetrol-Nm3ofbiogasequivalent 1.41 Nm3
Gasolineemissionsfactor 0.000074 tCO2e/MJ
GHGavoidedperlitreofpetrolreplaced 0.002398 tCO2e/ℓ
Net mitigation effect per Nm3 raw biogas2 0.001702 tCO2e/Nm3 biogas
Substitution of coal-based electricity Value Unit of measurement
1000kWh-egridelectricity,CO2e emissions 0.98 tCO2e1
1000kWh-egridelectricity,energycontent 3,600 MJ
1000kWh-e,Nm3ofbiogasequivalent(at40%efficiency) 391 Nm3
1000kWh-e,Nm3ofbiogasequivalent(at30%efficiency) 522 Nm3
Net mitigation effect per Nm3 raw biogas2 0.002504 tCO2e/Nm3 biogas
Net mitigation effect per Nm3 raw biogas2 0.001878 tCO2e/Nm3 biogas
1GridemissionfactorderivedfromEskom’sinputsinits2013annualreport.2RawbiogaswithaCH4contentof65%hasbeenassumed.3GasolineemissionfactorasstatedintheMitigationPotentialAnalysis(DepartmentofEnvironmentalAffairs,2014).
Whileonthebasisofthenetmitigationbenefit,onemightfavourbioelectricityoverbiofuelasanoptionforbiogas,thiswilltoalargeextentdependonthechoiceofgeneratorbytheprojectdeveloper.Itisimportanttonoteinthisrespectthat,asmaybeexpected,lower-efficiencygeneratorsaregenerallylessexpensive.
Althoughimportant,climatechangemitigationisnottheonlyenvironmentalbenefittotakeintoaccount.Airqualityandtheeffectsonrespiratoryhealthareofimportanceaswell,andareparticularlyanissueinurbansettingswithhighpopulationdensities.SouthAfricahashadnewairqualitylegislationsince2004,withnewnationalstandardsforthemonitoringofambientairpollutants.Itacknowledgesthefactthattheeffectsoffossilfuelburnedbyelectricityplantsandcarsisamajorfactorthatinfluencesairqualityoutdoors.Asgasburnscleanercomparedtodiesel,petrolorcoal,withlittlesootandverylowsulphuroxides(SOx),nitrogendioxide(NOx)andCO2emissions,itcanmakea contribution to improve air quality.
Atpointsourceslikelarge-scalecoal-firedelectricityplants,itisinprinciplepossibletotreatfluegassessothatlowemissionlevels(similartothecombustionofgas)arereached.ThisistosomeextentplannedtohappenatthenewelectricityplantsofKusileandMedupi(currentlyunderconstruction),whichincludeNOXburnersandwetfluegasdesulphurisationprocesses.Withinthetransportsector,thecleaningoffluegassesismuchharderbecauseofitsdistributednature,withmillionsofvehiclesofdifferentmakesandmodels,whiletheareaswherealargenumberofvehiclescometogetherarethehighlypopulatedareaswherepeopleareaffectedbydeterioratingairquality.Inthissense,thebenefitsofairqualityimprovementmayberegardedassubstantiallymoresignificantinthecaseofbiogasasatransportfuel.
Athird,morestrategicconsiderationisthevalueoftheindividualGHGmitigationmeasureofbiogasfortransportorelectricity,aspartofaportfolioofGHGmitigationmeasures.Ofimportanceistorealisewhatoptionsthedifferentsectorsofapplicationhave.
46FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Table 4.1.5: GHG mitigation options: electricity versus transport sector
Electricity sector Transport sector
Electricityplantefficiency Fuelefficiency
Consumerefficiency Passengertransportefficiency
Demand-sidemanagement Passengerdemandreduction
Solarheating Shifttopublictransport
Gasheating Hybridvehicles
Solar electricity Biofuelsfortransport
Wind Biogasfortransport
Hydro-electricity
Biomass-to-electricity
Biogas-to-electricity
Asthetableaboveillustrates,thenumberofmitigationmeasuresthatcanbeappliedtoachieveGHGmitigationislargestintheelectricitysector.Moreover,theimprovementintheenergyefficiencyofvehiclesmaybehardtoachieveasmostvehiclesaredesignedandmanufacturedoutsideSouthAfrica.However,moreimportantmaybethatseveralpoliciesalreadysuccessfullydrivemitigationmeasuresintheelectricitysector.MostprominentinthisregardistheREIPPPProgramme,whichisdesignedtocontributetowardsatargetof3725MWofrenewableelectricity,theEnergyEfficiencyDemand-sideManagement(DSM)Policyandthe12ℓEnergyEfficiencyTaxIncentive.
Withregardtobiofuelsinthetransportsector,theMandatoryBlendingRegulationsareonlyenvisagedtocommenceon1October2015attheearliest(ifnodelaysoccur).Theblendingregulationwillrequirealllicensedpetroleummanufacturerstopurchaseablendofbiofuelsfromlicensedbiofuelsmanufacturerswithaminimumof5%volumepervolume(v/v)ofbiodiesel(ablendwithdiesel),andbetween2and10%v/vofbioethanoltopetrol.Biogasand‘blending’intoCNGasatransportfueliscurrentlynotincludedinthislegislation.
SocioeconomicJobcreationisthefirstandforemostdesiredsocioeconomicimpactinadevelopingcountrylikeSouthAfrica.Inthisregard,wehavetoconsider,asillustratedinthefigurebelow,thatthevaluechainofbiogas-to-electricityisshorterthanthevaluechainofbiogasfortransport.Moreover,consideringthefactthattheelectricitygridisexistinginfrastructureandthatgasinfrastructure(transport,fuelstationsandvehicles)isnewinfrastructure,investmentinthisnewinfrastructurewastriggeredasaresultofanemerginggasmarket,whichmayincludeanadditionalindirectjobcreation potential.
Rawbiogas
Raw biogasCHP
generator Power grid
Upgrading Fuel stationCompression TransportVehicle
conversion
Figure 4.1.7: Value chain of biogas-to-electricity compared with biogas for transport
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TheupgradingandcompressionofbiogasmayrequiretwoadditionalpersonscomparedtotheoperationofaCHPunitpersizableinstallation(say2to4MWeequivalent).Thefurtherindirectemploymentbenefitwillemergefromtheinvestmentinthenewinfrastructurethatisrequiredforgas,whilethedirectjobsintransportandretail(fuelstations)willprobablylargelyreplacejobsinthetransportindustryandthedistributionofregularfossilfuels.Afurtheranalysisofthejobcreationpotentialofbiogasfortransportisprovidedlateroninthisreport.
4.1.5 Infrastructural requirementsAlthoughinfrastructuralrequirementsforbiogas-to-electricityorbiofuelare–inessence–similar,therearedifferencesastheexistingelectricitytransmissioninfrastructureissubstantial,whilethegastransportationgridonlyexistsincertainpartsofthecountry.Moreover,biogasfortransportwill,inadditiontoanaerobicdigestionfacilities,requireexpertiseandskillsregardingtheupgradingandcompressionofbiogas.Whencomparingbiogas-to-electricitywithbiogasto-fuel,oneshouldalsotakeintoaccountinfrastructuralrequirementsanddifferencesinthisregard.
Electricity versus gas gridAlthoughthereisanalmostnationalcoveragebytheelectricitygrid,‘wheeling’ofelectricityisnotcommonpractice.Projectdevelopersingeneralexpresstheirconcernaboutthelongandcomplexregulatoryprocessesoneneedstogothroughinordertoarrangeforwheelingagreementsincollaborationwiththemunicipalityand/orEskom.Thereare,however,afewexamplesofprojectdeveloperswhohavesucceededindoingso.OnesuchdevelopmentistheBronkhorstspruitBiogasPlant,whichhasanallowancetoconnecttotheEskomgridandawheelingagreementwiththeCityofTshwane.OneofthemainhurdlesindicatedistheMunicipalFinanceManagementAct(ActNo.56of2003),whichlimitsthefreedomofmunicipalitiestoenterintolong-termcommercialagreements.
Atthispointintime,therearenoexamplesofbiogasprojectsthathaveconnectedtothegasgrid.AlthoughNERSAhasbeenmandatedwiththistask,nospecificregulationshavebeendevelopedasyettofacilitatetheopeningupofthefewlong-distancepipelinesandurbanfinegridsinGauteng.However,asanalternativetoagasgrid,CBGcanbetransportedbytrucktofuel
stationsdispensingCNG.FuelstationsdispensingCNGarecurrentlystilllimited(seeSection4.2).
Supporting skills and the service industryThebiogasindustryinSouthAfricaisonlyemerging.However,thereareseveralfirst-moverbiogassystemvendorsandprojectdeveloperswithregionaland/orinternationalexperience(seethewebsiteofSABIA13forexamples),whoareabletodeliverprojects,whetheritisbiogas-to-electricityorbiogas-to-fuel.Nevertheless,ithastobesaidthatalthoughseverallocalbiogas-to-electricityprojectsareupandrunning,nobiogas-tofuelprojectsarecurrentlyoperational.
ExperiencesinEuropeshowthatfarmers,forexample,areabletooperatebiogasprojectsattheirfarmswiththesupportofexpertserviceproviders.On-farmworkersarerequiredtofocusoncollectingwasteandfeedingthedigester,whiletheremainderoftheprocesscanbehandledbysemi-skilledoperatorsworkingwiththesupportofexpertserviceproviders.
4.2 Risks of supply using CBGThissectionassessestheriskofsupplyusingCBGandthepotentialofintegrationbetweenthecurrentCNGsupplynetworkandCBGproductionfacilities.ThefirstpartofthissectionlooksatthedifferentcomponentsofCBGriskofsupply,andprovidesanoverviewofthepotentialsolutionstoaddressthissupplyrisk.Thisisfollowedbyamorein-depthanalysisofhowalignmentofCBGwiththecurrentandfutureCNGinfrastructureinSouthAfricacouldworkandhowthiscanbestructured.TheconcludingpartofthissectionlooksatthedevelopmentofthepotentialCBGcustomerbaseandtheimportanceofintegratingCNGandCBGfortransportinfrastructureforthesuccessfullarge-scaleuptakeofCBGasatransportfuel.
4.2.1 Risk of supply using CBGAsopposedtofirst-generationbiogasproductionusingcropsasfeedstock,second-generationbiogasproduction,bydefinition,isdependentonthesupplyoforganicwaste,which–withinthescopeofthisstudy–isconvertedintobiogasusingananaerobicdigesterorlandfilling.Theorganicnatureoftheproductionof
13.http://biogasassociation.co.za/membership/members/
48FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
biogascreatesaCBGsupplyriskinthatthevolumeofbiogasproducedcanvaryovertime.Holistically,thisvariationcanbecontributedtothefollowingcomponents:
• Variation in the volume of biomass supplied: Variationsinthebiomassvolumesuppliedcanbecausedbyarangeofnaturalphenomena,suchasdrought,butcanalsobetheresultofoperationalconsiderations,suchasharvestingcycles.
• Variations in the biogas volume generated:Theanaerobicdigestionprocessinbothadigesterandalandfillcanslowdownoracceleratethegenerationofbiogas,dependingonanumberofvariables,suchastemperatureandthedetailedcompositionofthebiomass,whichcausesthebacteriatoincreaseordecreasethenaturalprocessofanaerobicdecay.
• Variations in the CH4 concentration:Duringthebiogasupgradingprocess,oneoftheactivitiesthattakesplaceistheseparationoftheCH4usedfortheproductionofCBGfromtheothercomponentsinthebiogas.Variationsintemperatureandhumidity,forexample,canincreaseordecreasetheCH4
concentrationwithinthebiogassupply,which,inturn,increasesordecreasestheproducedvolumeofCBG.
AlthoughtheabovelistofCBGsupplyriskcomponentsisnotexhaustive,suchriskscanmaterialiseindependentlyorincombination.ThismakesmanagingthesupplyriskfromwithintheCBGproductionprocessverycomplex.TomanagetheCBGsupplyrisk,astudyentitled‘Acceleratingthetransitiontogreenmunicipalfleets’(LinkdEnvironmentalServices,2015)looksoutsidetheCBGproductionprocessitselfandidentifiestwolayersofsecuritythatcanserveasback-uptothesupplyofCBG:
• First-generation agricultural biogas:IncountrieswherethereisexistingproductioncapacityofCBGfromfirst-generationagriculturalbiogas,thisservesasaback-upandfirstlevelofsupplysecurityincasetheCBGsupplyriskfromsecond-generationbiogasproduction capacity materialises.
• Compressed natural gas:Inthiscase,theexistingCNGproductioncapacityandinfrastructureservesasaback-upandsecondlevelofsupplysecuritytoCBGproductionfromsecond-generationbiogasfacilitiesintheeventthattheexistingfirst-generationagriculturalbiogascapacitycannotsubstitutetheshortfallinsupply.
Whenlookingatthesecondpoint,itisapparentthatthisback-upwould,inessence,substitutefossilfuelforbiofuel(CBGwithCNG)insituationswheresecond-andfirst-generationbiogasproductionisunabletosustainastablesupply.However,afuelswitchfrompetroltoCNGalwaysresultsinsubstantialGHGemissionreductions(25%) (KreditanstaltfürWiederaufbau,2012).Inpracticalterms,thismeansthat,intheeventthattheCBGsecurityofsupplyisprovidedbyCNG,thiswouldstillresultinasubstantialreductionofGHGemissionsincomparisontopetrol,eventhoughCNGisafossilfuel.
4.2.2 Potential for integrating CBG with the CNG infrastructure
BeforebeingabletoassessthepossibilityofintegratingthecurrentandfutureCBGandCNGinfrastructure,itisimportanttogetagoodunderstandingofthecurrentCNGinfrastructureinthecountry.SouthAfricapresentlyimportsnaturalgasfromitsneighbouringcountry,Mozambique,viaan865km-longpipeline.Thegasispredominatelyusedinindustrialprocessesandconversionintodieselfuel,foramongothers,transportapplicationsviathegas-to-liquids(GtL)process.SomeofthenaturalgasisredirectedintotheGautengdistributiongrid,whichsuppliespartsofthegreaterJohannesburgarea.
ThelimitedCNGinfrastructureisaconcernwhenitcomestothelarge-scaleroll-outofCNGandCBGfortransportacrossthecountry.Globally,CNGinfrastructurebuild-upisconsideredaconcernwheneverCNGvehiclesareintroducedintoamarketfromscratch,andmustgohandinhandwithnaturalgasdemandtoavoidsunkencosts.Adifferentmannerinwhichthisshortcomingcanbeaddressedisbytheapplicationoftheso-called‘virtualpipeline’concept(truckinginCNG),whereexpansionofthenaturalgasgridmaynotbeeconomicallyjustifiable(KreditanstaltfürWiederaufbau,2012).
Internationally,andtosomeextentdomestically,theconceptof‘blending’biofuelswithfossilfuelsattheupstreamsectionofthesupplychainisimplementedeitherviatheprovisionofgovernmentsubsidiestodosoorbecausegovernmentshavesetaminimumbiofuelblendinglevelforbiofuels.Duringthisstudy,nolegislationwasidentified(neitherinternationallynordomestically)regardingCBGblendingrequirementsforCNG.Table4.2.1thereforeonlyprovidesasnapshotoftheregulationsforotherbiofuelsinthisregard.
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Table 4.2.1: Biogas-for-transport GHG emission mitigation policies and regulations
Jurisdiction Fuel type Status Summary of legislation
South Africa Liquidfuels(petrolanddiesel)
Scheduledforimplementation from1October2015
Regulationsregardingthemandatoryblendingofbiofuelswithpetrolanddiesel,promulgatedintermsofthePetroleumProductsAct(ActNo.120of1997)(MandatoryBlendingRegulations)willrequirethatalllicensedpetroleummanufacturerspurchasebiofuelsexclusivelyfromlicensedbiofuelmanufacturers,solongasthevolumescanbeblendedwiththepetroleummanufacturer’spetroleumwithintheminimumconcentrationof5%v/vbiodieseladdedtodiesel,andbetween2and10%v/vbioethanoladdedtopetrol.
European Union (EU)
Liquidfuels(petrolanddiesel)
Implemented ViaitsRenewableEnergyDirectiveof2009,theEUcurrentlyhasa5.75%mandatedirectiveinplace,whichwasscheduledtoincreaseto10%by2020.However,inSeptember2013,theEuropeanParliamentvotedtocapfirst-generationethanolconsumptionat6%offueldemandby2020,ratherthanthe10%originallymandatedbytheRenewableEnergyDirective
Brazil Petrol Implemented Aminimumethanolcontentof25%iscurrentlymandatedbygovernment,whichwasincreasedto27.5%inSeptember 2014.
Diesel Implemented Ablendingrequirementforbiodieselof5%isinplace.TheBraziliansenatevotedtoraisethebiodiesellimitfrom5%to6%,butPresidentRoussefhadyettoapprovethelegislation.
WhenlookingattheexistingnaturalgasinfrastructureandwhereintheSouthAfricaneconomynaturalgasisutilised,itbecomesclearthatCBGblendedintothenaturalgasinfrastructurewouldcurrentlyalmostneverendupasatransportfuel,exceptmaybeviatheGtLprocessasdieselorpetrol.Fromthisperspective,itisalsoimportanttoconsiderthat,asbecameclearfromoneoftheinterviewswithstakeholdersatSasol,includingadditionalsupplytotheexistingnaturalgasnetworkmightnotbepossibleintheshorttermduetocapacityconstraintsonmostofthepipelinesystem(excludingsomeofthecapacityaroundGauteng),aswellasconcernsaroundtheabilitytomaintainsafetystandardsforrelativelysmallsourcesaddedtothepipeline system.
WhenconsideringCNGsupplyasaback-uptoaddresspotentialCBGsupplyrisks,anumberofpossible
combinationsfromarefuelling-stationperspectivecanbederivedfromtheaboveunderstandingoftheCNGinfrastructure:
• Refuelling station at CBG source and CNG pipeline:AnexampleofthiskindofsetupwouldbearefuellingstationthatislocatedatalandfillfromwhichitextractsbiogasandupgradesittoCBGfortransportapplication,whileconnectedtotheCNGgridtoprovideanincreasedsecurityofsupply.AlthoughthiscombinationwouldbethemosteconomicalwiththecurrentlimitedCNGinfrastructure,thechancesofabiogassourcebeinglocatednexttoanexistingCNGpipelineareverylimited.ItisconceptuallyfeasibletoextendtheCNGnetworktothelocationofbiogassourcesorviceversa,butthiswoulddependoneconomiccomparisonwithavirtualCBGorCNGsupply.
50FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
• Refuelling station at CBG source with virtual CNG back-up:Inthissetup,therefuellingstationislocatedatthebiogassource,andCNGistruckedinandstoredattherefuellingstationforback-uppurposes.Thissetupwouldbethemost‘pure’formofCBGfortransportapplicationinthesensethattheCNGprovidedtotherefuellingstationservestoprovidesecurityofsupplybyaddressingtheCBGsupply risks.
• Refuelling station at CNG pipeline with virtual CBG pipeline:Inthissituation,therefuellingstationislocatednearaCNGpipelinetoprovideitwithareliablesourceofCNG.CBGistruckedinandstoredonsite.IntheearlystagesofthedevelopmentoftheupstreamCBGinfrastructure,itisreasonabletoassumethatthemajorityofsupplywillinitiallycomefromCNGandthat,overtime,theCBGshareofsupplytotherefuellingstationwillincrease.
• Refuelling station with virtual CBG pipeline and virtual source and CNG pipeline:Inthissetup,therefuellingstationissuppliedvirtuallywithbothCNGandCBGbeingtruckedin.Althoughthisincreasesthelogisticalcomplexityandpotentiallyalsothetransportcosts,italsoincreasestheflexibilityofwheretherefuellingstationcanbelocated.Inpractice,thismeansthattherefuellingstationcanbepositioned closer to its potential customer base.
Consideringtherangeofoptionsabove,itisapparentthatseveraloptionsexistwhereCNGsupplyasaback-uptoaddresspotentialCBGsupplyriskscanbeutilised.ThenextsectionconsidershowthepotentialCBGforatransportcustomerbasecanbedefinedanddevelopedover time.
4.2.3 CBG/CNG integration
InadditiontoCNGprovidingasecurity-of-supplybackstopforCBG,makingthealignmentofthedevelopmentofaCBGdownstreaminfrastructuretothatofCNGareasonableassumption,itisalsoimportanttoconsiderthat,duetothelimitedrangeofaCNGvehicle,ahigherdensityofCNGrefuellingstationswouldberequiredthanwouldbethecasefordieselorpetrolrefuellingstations.
Inessence,CBGdoesnotdifferfromCNGwhenitcomestodownstreamstorage,treatmentandtransportuse.Hence,thevolumetricenergydensity,similarto
CNG,isonly25%ofthatofdiesel(fordetailsseetheinceptionreportsectiononthecustomerbase),makingtherequiredtankinavehicleforCBGlargerandcostlierthanaconventionalfueltank.Thissmallerrange/largertankrationaleneedstobetakenintoaccountwhenassessingtheuptakeofCBG(andCNGforthatmatter)as it develops over time.
Initially,alimitednumberofrefuellingstationswillbeavailabletocustomers.ThisimpliesthattheconversionfrompetrolordieseltoCNGorCBGisonlypracticalinsituationswheretherefuellingstationislocatedalongaroutethatisfrequentlyusedbythecustomerbase.Althoughthiskindofroutingpatternexistsinadomesticenvironmentwhere,forexample,amemberofthehouseholdcommutesbackandforthtoworkalongthesamerouteonadailybasis,itisthestandardpatternwithinpublictransportwherebusesandminibustaxistravelthesamerouteonanongoingbasis.
Anadditionaladvantageofinitiallyfocusingonthepublictransportsectoristhatpublictransportinacertainregionisoftencollectivelyownedorcontrolledbyoneoralimitednumberofentities.These‘fleetowners’canconvertanumberoftaxisand/orbussesinonego,therebykickstartingthedevelopmentofarefuellingstation’scustomerbase.Incontrasttoconvertingfrompassengercars,minibustaxisandcitybussescanaccommodateanadditionalfueltankwithoutmateriallyreducingtheloadingcapacityofthevehicle.ThetablebelowprovidesanoverviewofthenumberofminibustaxisandcitybussesinSouthAfrica(eNATIS,2012).
Table 4.2.2: Number of minibusses and busses per province
Province Minibusses Busses, bus-train, midi-busses
Gauteng 110 765 16 779 KwaZulu-Natal 46 320 6 753 WesternCape 33 887 5 329 EasternCape 20 688 3 700 Free State 11 933 2 267 Mpumalanga 20 732 5 320 NorthWest 16 618 3 260 Limpopo 19 280 4 533 NorthernCape 3 966 1 313 Total 284 189 49 254
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Ascanbeexpected,themajorityofbothminibustaxisandcitybussesoperatewithinSouthAfrica’smainmetropolitanareas.WhenlookingatthegeographicdistributionofpotentialsourcesofbiogasasoutlinedinSection3.3ofthisreport,itbecomesapparentthatthemajorityofthesesourcesarealsolocatedinandaroundthecountry’surbanisedareas.
Asindicated,thereisalimitedCNGinfrastructurewithinSouthAfrica,ofwhichonlyaverysmallportionisdedicatedtotransportapplications.Aspartofthisstudy,asitevisitwasconductedtooneofthefront-runnerswithintheCNGforthetransportsectorinSouthAfrica,CNGHoldings.WithassistancefromtheIDC,CNGHoldingshasdevelopedtwoCNGrefuellingstationsinJohannesburgwiththeintentionofdevelopingadditionalrefuellingstationsinotherpartsofthecountry.Thetablebelowprovidesanindicationofidentifiedcurrentandproposedrefuellingstationsacrossthecountryatpresent.
Table 4.2.3: Current and proposed CNG refuelling stations
Area Address
Johannesburg72MainReefToad,Langlaagte
Johannesburg1162SteveKganeStreet,Dobsonville
CityofTshwane N/A
Vereeniging N/A
CapeTown N/A
Insummary,thissectionshowsthat,asaresultofthedownstreamsimilaritiesbetweenbothCNGandCBGfortransportapplications,bydevelopingtheCNGdownstreaminfrastructure,thepotentialfordevelopingCBGfortransportincreasessubstantially.
4.3 High-level macro-economic and environmental impact
Aspartoftheanalysis,thestudyalsoaskedforahigh-levelassessmentofthemacro-economicandGHGmitigationimpactofthelarge-scaleuptakeofbiogasfortransport.Thebiogaspotentialidentifiedinthisstudywillhaveanumberofimportantconsequencesonan
economy-widelevel.Inadditionaltothis,therearesignificantenvironmentalbenefits(i.e.GHGemissionreductionandreducedairpollution)associatedwiththeuptakeofbiogas.Inordertogaugetheseeffects,thestudyprovidesananalysisofanumberofkeyareasthathavebeenidentified,wheretheimpactisexpectedtobethelargest.Tostructurethingslogically,theanalysisbelowfirstfocusesonthemacro-economicimpact,andthenprovidesadetailedanalysisoftheGHGmitigationimpact.
4.3.1 Macro-economic impactTheprojectteam,togetherwiththeProjectSteeringCommittee,hasidentifiedthreekeyareaswherethesocioeconomicimpactofbiogasfortransportislikelytobelargest,andwhichthereforerequirefurtheranalysis.Theseincludethefollowing:
• Jobcreationintherenewableenergysector,whichwillresultfromtheproductionofbiogas
• Thesubstitutionofbiogasforforeigncrudeoilimports,andhenceareductioninthedependenceonforeignenergy,animprovementinthecountry’stradebalanceandadecreaseinforeign-currencyexpenditure
Thesetwofactors,inconjunctionwiththeestimatedproductionpotentialofroughlythreemillionNm3ofrawbiogasperdayinSouthAfrica(seeSection3.3),couldimplysignificantsocioeconomicbenefitsfromtheuptakeintransport.Assuch,ithasthepotentialtounlocksignificantprivate-sectorinvestmentandcreateacompletelynewgreenindustryinthecountry.Thiswouldspureconomicgrowthandsustainabledevelopment,inadditiontocreatingsignificantenvironmentalbenefits.
Job creationStakeholderswhowereconsultedduringthisstudyindicatedsignificantpotentialforbiogastocreatepermanentjobsthroughouttheSouthAfricaneconomy.Thesefindingsareconfirmedbyinternationalexperiences.Forobviousreasons,forecasting(macro-economic)variableslikethenumberofjobsaddedthatresultfromprivate-sectorinvestmentaresurroundedbysignificantuncertainties.Thereareseveralcross-sectoraldynamicsatwork.Jobsaddedcanbecomparedtojobcreationthroughinvestmentsinalternativesourcesofrenewableenergy,suchassolarandwindenergy(somesourcesindicateajobcreationpotentialofbiogasoversolarandwindof10to
52FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
one).However,whenitcomestobiogasfortransport,onewouldalsohavetotakeintoaccountemploymentloss,forexample,incrudeoilrefining.Investmentsaretypicallyalsolong-term,addingfurtheruncertainty/risk.
Thebelowassessmentofthelarge-scaleuptakeofbiogasintransportisbasedonstakeholderconsultationsandinputs.Thenumbershavebeenconfirmedbyinternationalexperiencesandresearch.Thelatteris,ofcourse,notstrictlycomparabletotheSouthAfricansituation,butcanbeusedtocheckwhetherdomesticallygeneratednumbersareapproximatelyinline.
Thereareseveralstagesatwhichbiogasproductionaddstojobcreationpotentialasaresultofinvestmentinbiogasproductioncapacity.Forexample,employmentisgeneratedintheproductionphaseofbiogas,and,whenusedfortransport,intheupgradingandcompressionphase,aswellasinthedistributionphase.
Whatismore,forjobcreationtobe‘true’jobcreationinaneconomicsense,anecessaryconditionhastobethatthebiogascanbeproducedandsoldatpricesthatareroughlycompetitivewithitsalternativesintheformofpetrolanddieselonanequivalentlitrebasis(seenextsectionforanelaborationofthe‘gasolinelitreequivalent’concept).ThesubsidiesrequiredtojumpstartthebiogasindustryinSouthAfricacannotbeconsideredexcessivelyhighcomparedtointernationalexperiences,andcanbeseenasnecessarypreciselyforthatreason.This,moreover,comesatatimeofrelativelylowinternationaloilandgasprices14.
Inlinewiththepurposeofthestudy,Table4.3.1providesanindicationofthejobcreationpotentialassociatedwiththelarge-scaleuptakeofbiogasfortransport.ThenumbersarebasedonanassumedrawbiogasproductionpotentialofaboutthreemillionNm3 perday,thetotalpotentialasindicatedintheBiogasforTransportSourcesInventory.Thisindicatesajobcreationpotentialwithalowerrangeof2324andanupperrangeof14248jobscreatedonafull-timeequivalent(FTE)basis.Thejobpotentialhasbeensubdividedintothreecategoriesofskills,accordingto
14.www.macrotrends.net/1369/crude-oil-price-history-chart
thedefinitionprovidedbyStatisticsSouthAfrica:low-skilled(elementaryanddomesticworkers),semi-skilled(clerks,salesandservicesstaff,skilledagriculture,craftandmachineoperators)andskilled(managers,professionalsandtechnicians)15.
Table 4.3.1: Biogas-for-transport job creation potential by skills category
Lower range (full-time jobs
added)
Upper range (full-time jobs added, FTE)
Low-skilled 697 4 274
Semi-skilled 1,395 8 549
Skilled 232 1 425
Source:Stakeholdermeetings,IDCandEcoMetrixteamanalysis
Itcanbeseenthattheresultingrangeisratherwide.Thelowerrangeisbasedonaperprojectbasisasobtainedfromvariousstakeholderinputs.TheupperrangeisbasedonworkbytheIDC(IndustrialDevelopmentCorporation,2013).Inthefirstcase,itconcernsonlydirectjobscreatedbytheproductionofbiogas.However,dependingonwhetheronechoosestoincludeindirectjobsaswell,thisnumberincreases.Anexampleisjobsatrefuellingstations,forwhichoneneedstobemindfulofdoublecounting(whethertheconsumptionofCBGcreatesanextrajobattheservicestation,ordoesitsimplydisplacelabourthatwouldotherwisehavebeenusedtorefuelpetrol-ordiesel-poweredvehicles).Moreover,acertainamountofexpertisewillalwaysberequiredfortheproductionofCBG,butthismaynotbesignificantlymorethan,forexample,isthecasewiththeproductionofsolarorwindenergy.
Reduction of crude oil importsAsidefromtheeconomicbenefitsrelatedtojobcreation,thequestionhasbeenraisedwhethertheuptakeofbiogascanhaveasignificantimpactonfuelimportsandthusonthetradebalance(aspartofthecurrentaccount)ofthecountry.Currently,SouthAfricareliessubstantiallyonoil/fuelimportstomeetitsenergydemandfortransport.Amongotherthings,thishasa
15.http://www.statssa.gov.za/presentation/Stats%20SA%20presentation%20on%20skills%20and%20unemployment_16%20September.pdf
53
considerableimpactonthebalanceoftrade,whichisalreadysignificantlynegative(lastyearthecurrentaccountdeficitstoodat5.4%ofgrossdomesticprofit(GDP)accordingtotheInternationalMonetaryFund(IMF)).Italsoimpliesasubstantialrelianceonforeigncrudeoilimports,withimplicationsforenergysecurityandexposuretointernationalcrudeoilpricefluctuations.Aspartofthismacro-economicimpactassessment,thissectionthereforeincludesahigh-levelanalysisofthepotentialofbiogastoreducethecountry’simportoffuels.
Theimportoftransportfuelscomesinanumberofforms,butmostnotablyascrudeoil,whichisprocessedatvariouspetroleumrefineriesinthecountry.Amongotherplaces,oilisproducedinAngola,theMiddleEastandNigeria,andthentransportedtoDurbanbyship.Here,theoilistransformedintoend-productssuchasnaphtha,liquifiedpetroleumgas(LPG),kerosene,bitumenandheavyoil,aswellaspetrolanddiesel.Locally,fuelsarealsoproducedthroughcoal-andgas-liquifactionprocesses.Theassessmentassumesthelatteroutputtoholdconstant.Tokeepthingsstrictlycomparable,andtobeabletoputamoreexactmonetarynumbertoit,thestudyfocusesonthedirectsubstitutionofbiogasforpetrolanddiesel,themainfuelsusedintransport,andnotonoilastheimportedproduct,which–asindicated–hasseveralotherend-productsassociatedwithit,makingsuchananalysisunnecessarilycomplex.
Incalculatingthepotentialofbiogastoreplacepetrolanddiesel‘imports’,anumberoffactorsaretakenintoaccount.Firstly,alternativefuelseachhaveadifferentenergycontent,soinordertomakeavalidcomparison,anadjustmentneedstobemade.Secondly,thefueleconomiesofvehiclesusingvariousfuelsdiffer.Generallyspeaking,adieselengineismoreefficientthanapetrolengineinconvertingenergytokilometrestravelled.Thisfactoralsoinfluencestheoutcome,sinceless-economicalfuelenginetypesrequiremoreofthesubstitutefueltogetthesameresult.Finally,weneedtoputapriceonthistoestimatetheoverallimpactonthetradebalanceinrand.
Duetodifferentchemicalcompositions,thefuelsunderconsiderationvaryinenergycontent.Inanefforttocompare‘appleswithapples’,acorrectionhastobeenmade.Inpractice,theenergycontentofvariousfuelsiscomparedusingagasolinelitreequivalent(GLE)ordiesellitreequivalent(DLE)16.Forexample,dieselfuelhasahigherenergycontentthanpetrol.ItsGLEisabout0.88.Inotherwords,onelitreofdieselcontainsabout113%oftheenergycontainedinonelitreofpetrol.ThetablebelowprovidestheGLEofanumberofalternativefuels.TheoriginaltableisfromtheUSDepartmentofEnergyandprovidesthevaluesingasolinegallonequivalent(GGE).
Table 4.3.2: The gasoline litre equivalent per fuel type
Fuel type Chemical structure Gasoline litre equivalent
Gasoline/E10 C4toC12 andethanol≤10% 97to100%.
Low-sulphurdiesel C8toC25 Onelitreofdieselhas113%oftheenergycontentofonelitreofgasoline.
Biodiesel MethylestersofC12toC22fattyacids B100has103%oftheenergyofonelitreofgasolineor93%oftheenergyofonelitreofdiesel.B20has109%oftheenergyofonelitreofgasolineor99%oftheenergyofonelitreofdiesel.
Propane(LPG) C3H8(majority)andC4H10(minority) Onelitreofpropanehas73%oftheenergyofonelitreofgasoline.
16.Sincethisisaninternationalconcept,theterm‘gasoline’isusedinsteadoftheterm‘petrol’commoninSouthAfrica.
54FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Fuel type Chemical structure Gasoline litre equivalent
CNG CH4(majority)C2H6andinertgasses 0.68kgor0.95m3ofCNGhas100%oftheenergyofonelitreofgasoline;0.76kgor1.04 m3ofCNGhas100%oftheenergyofonelitreofdiesel.
LNG CH4–sameasCNGwithinertgasses<0.5%
0.64kgofLNGhas100%oftheenergyofonelitreofgasolineand0.73kgofLNGhas100%oftheenergyofonelitreofdiesel.
Ethanol/E100 CH3CH2OH OnelitreofE85has73to83%oftheenergyofonelitreofgasoline(variationduetoethanolcontentinE85).OnelitreofE10has96.7%oftheenergyofonelitreofgasoline.
Methanol CH3OH Onelitreofmethanolhas49%oftheenergyofonelitreofgasoline.
Source:USDepartmentofEnergy–AlternativeFuelsDataCenter17. EcoMetrixteamanalysis.
Itiswellknownthatdifferentengineshavedifferentefficienciesintransformingenergy.Ingeneral,dieselenginesareabletogetrelativelymore‘work’outofanequivalentlitreoffuelinput(i.e.acertainamountofenergycontent)thanpetrolenginesare.Inotherwords,dieselenginesarebetterattransformingagivenamountofenergyintokilometresontheroad.Thisgivesrisetoaneffectoverandabovetheonethatcantheoreticallybeexpectedfromthevaryingenergycontentsofvariousfuels(asdiscussedabove).Asaruleofthumb,modernpetrolengines,inpractice,haveamaximumaveragethermalefficiencyof35to40%,whilethismaybeupto40to45%fordiesel-poweredengines18.
Tocapturethedifferencesinfueleconomy,anaveragehasbeenapplied,whichisassumedtoholdconstantover time. Numerous international studies and sources areavailableonfueleconomies.Forthepurposeofthisassessment,werelyontheresultofastudyforSouthAfricaspecifically,conductedbytheEnergyResearchCentreoftheUniversityofCapeTownincooperationwithSANEDI(EnergyResearchCentre,2012). Table4.3.3summarisesthemostimportantcategories.WhilethistabledoesnotcontainCNG-poweredvehicles
17.http://www.afdc.energy.gov/fuels/fuel_comparison_chart.pdf
18.http://large.stanford.edu/courses/2011/ph240/goldenstein2/
asacategory,internationalsourcesindicatethat,onaverage,thefueleconomyofCNG-poweredvehiclesisapproximatelyequaltothatofaconventionalpetrolvehicleonaGLEbasis19.
Table 4.3.3: Vehicle fuel economy
Type of vehicleVehicle fuel economy (ℓ/100 km)
Diesel car 7.5
Gasolinecar 8.3
Dieselsuburbanutilityvehicle(SUV) 11.5
GasolineSUV 13.0
Diesellightcommercialvehicle(LCV) 11.5
GasolineLCV 13.0
Dieselmediumcommercialvehicle(MCV)
28.1
GasolineMCV 33.3
Dieselheavycommercialvehicle(HCV)
37.5
Dieselmainbattletank(MBT) 11.4
GasolineMBT 13.5
Diesel bus 31.2
Source:EnergyResearchCentre(2012)
19.http://www.afdc.energy.gov/fuels/natural_gas_basics.html
55
Inpractice,LFGhassignificantlylowerCH4contentthanbiogasproducedthroughAD.Internationalresearchonthistopicshowsthat65%CH4 content is a reasonable assumptionwithregardtobiogasfromAD,whilethisisonaverage45%forLFG.Fromatheoreticalperspective,itispossibletoproducebiogasfromMSWusingbothmethods(ADorLFG).ForthepurposeoftheGHGmitigationimpactassessment,thestudydistinguishesbetweentwoscenarios.Thesescenariosfunctionasso-called‘boundaries’,orcasesbetweenwhichaninfinitenumberofpossibilitiescanoccur.
Inthefirstscenario,allMSWistreatedasbeingprocessedentirelythroughAD,sothat,ineffect,allwastetypesareassumedtoproducethesameconstantCH4contentof65%.Inthesecondscenario,thebiogasproductionattributedtotheMSWpartoftheinventoryisproducedentirelyasLFG,whichhasanaverageCH4contentof45%,whiletheremainderisassumedtocomefromAD/LFG.
Moreover,withregardtotheuseoftheBiogasforTransportSourcesInventory’stodeterminethepotentialofbiogasasatransportfuel,biogascanbesubstitutedforeithertheconsumptionofpetrolortheconsumptionofdieselfuel.Asindicated,thetwofuelshavedifferentenergycontentsandfueleconomies.Thisprovidesafurthertwoscenariosthatcanfunctionas‘boundaries’withregardtotheoverallimportreductionpotential.
Thisgivesarangeofpossibilitiestoconsider.Thematrixbelowprovidestheresultsofthepotentialofthelarge-scaleuptakeofbiogasfortransportasasubstituteforfuelsthatarecurrentlyimportedforthedifferentscenarios.Dependingonthespecificscenario,biogasproductioninSouthAfricahasthepotentialtoreplacebetweenapproximately500millionlitresofdieselfueland700millionlitresofpetrolonanannualbasis.TheresultsarebasedonanestimatedbiogasproductionpotentialinSouthAfricaofaroundthreemillionNm3 per
day,ascurrentlyprojectedbytheBiogasforTransportSourcesInventory.Mervenetal.(2012)indicateafueldemandfortheSouthAfricaneconomyofapproximatelyeightand12billionlitresofpetrolanddieselfuel,respectively.Thisimpliesasubstitutionpotentialinthefuelmixofbetween4and9%,dependingonthefueltype.Toputthisintoperspective,inGermany,theshareofbiofuelsinprimaryfuelconsumptioniscurrently5.8%20.
Table 4.3.4: Biogas-for-transport substitution potential
Substitution potential for diesel
fuel (ℓ per annum)
Substitution potential for petrol
(ℓper annum)
AD/LFG 496 708 335 643 685 574
AD 546 546 691 708 271 224
Source:EcoMetrixteamanalysis
Earlierinthestudy,abreakdownwasalsoprovidedoftheretailpriceofpetrolanddieselfuel.Thispriceissubjecttomonthlyorevenweeklyfluctuations.TocalculatetheoverallimpactofbiogasproductioninSouthAfricaonthetradebalance,pricesreportedforMay2005(excludinglevies)havebeenassumedandapplied.Thisyieldsthefollowingimportsubstitutionpotentialwithregardtopetrolanddieselfuelsinrand(seetablebelow).ThelowerrangeofthecalculationindicatesapotentialofaroundR3billion.AmaximumpotentialexistsatR4.4billion.
Table 4.3.5: Biogas-for-transport-related reduction in fuel imports
Reduction in fuel Imports
(rand per annum)
Reduction in fuel imports
(rand per annum)
AD/LFG 2 960 530 691 3 962 850 234
AD 3 257 582 224 4 360 471 788
Source:EcoMetrixteamanalysis
20.http://www.biodeutschland.org/tl_files/content/dokumente/biothek/Bioenergy_in-Germany_2012_fnr.pdf
56FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
4.3.2 Environmental impactAnimportantcontributionofbiogasincreatingsustainabletransportliesinitsGHGmitigationpotential.TheGHGmitigationimpactofthelarge-scaleuptakeofbiogasfortransportentailsseveralaspects.Thereareanumberofeffects,bothdirectandindirect,thatworktowardsthisend.Forthereasonsdiscussedbelow,thestudywillprovidethedirectGHGmitigationeffectsrelatedtotheuptakeofbiogasfortransportbyprovidingadetailedimpactanalysis,butwillbrieflyhighlighttheindirecteffectsaswell.
ThedirectimpactonGHGemissionscomesfromthesubstitutionoffossilfuelswithbiomethaneasatransportfuelandtheassociatedreductioninemissions.WhilethecombustionofbiogasproducesCO2,justlikethecombustionofotherfuels,includingnaturalgas,thecarboncontentinbiogascomesfromorganicmatterthathaspreviouslyabsorbedthiscarbonfromatmosphericCO2.Forthisreason,theburningofbiogasisconsideredcarbon-neutralanddoesnotaddtotheoverallGHGemissionsofacountryorregion.
Thus,netcarbonemissionsarezero,orclosetozero(astheproductionofbiogasitselfwouldleadtosomeemissions,whicharenotaccountedforatthispoint–inthesamewaythatupstreamemissionsassociatedwiththeproductionoffossil-basedfuelsarenotaccountedforatthispoint).Thisisinlinewithcommoninternationalapproaches,whichexplicitlyexcludeCO2 emissions resultingfromthecombustionofbiomassorbiofuelsfromnationalGHGemissioninventories(WorldBiogasAssociation,2012).Therefore,whenbiogasisusedasasubstituteforfossilfuels,overallGHGemissionsandthenationalcarbonfootprintwillbereduced.
TheindirectGHGmitigationimpactofalarge-scaleuptakeofbiogascomesfromreducedGHGemissions(mainlyCH4andCO2)occurringnaturallyfrombiomasssources,orfromreducedemissionsresultingfromtheproductionoffossilfuelsfortransportthatarenowavoided(asnotedabove,suchindirectemissionsalsooccurwiththeproductionofbiogas,especiallyfortransport,forexampleemissionsresultingfromelectricityusedforupgradingandcompressingbiogasandrelatedCH4losses).Theseemissionsarenotpartoftheassessment,asthescopeofthisstudyisspecificallygearedtowardstransport.Moreover,internationalpracticeinGHGinventoriesaccountsfor
theseemissionsatsourceasopposedtoacradle-to-graveapproach.
DEA’sGHGMPAforSouthAfricaconsidersseveralsector-specificmarginalabatementcostcurves(MACCs)withmitigationoptionsforthreeyears:2020,2030and2050.TheseMACCseffectivelysummarisethetechnicalmitigationpotentialofmeasurestoreduceGHGemissionsandtheassociatedcostsacrosstheSouthAfricaneconomyoverthedifferenttimehorizons.
ThereportincludesestimatesoftheGHGemissionabatementpotentialofmeasuresinfivesectorsrelevanttothisstudyonthelarge-scaleuptakeofbiogasfortransport:• MSWforelectricitygenerationthroughLFG
(AppendixF)• ADof(food)wastes(AppendixF)• Municipalwastewater(MWW)(AppendixF)• Thetreatmentoflivestockwaste(AppendixG)• Thepulpandpaperindustry(AppendixD)
AnyonewishingtogainmoreelaborateinsightsintotheextentofGHGemissionsavoidedinthesesectorsasaresultofmitigationmeasuresrelatedtobiogasproductioncanconsulttheMPAReport(DepartmentofEnvironmentalAffairs,2014).ThereportoftheKreditanstaltfürWiederaufbau(KfW)(2012)alsocontainsinformationonthistopic.
CBG versus petrol and diesel, and the contribution towards reducing the national carbon footprintTheBiogasforTransportSourcesInventorycurrentlyindicatesatotalbiogasproductionpotentialofaroundthreemillionNm3 ofrawbiogasperdayfromlarge-scalesourcesinSouthAfrica.Afterupgradingandcompression,CBGcanbeusedasasubstituteforpetrolanddieselfuelconsumptionintransport.ItcanalsobeusedasasubstituteforCNGinthosecaseswherethisisalreadyusedasatransportfuel.Aspreviouslynoted,netGHGemissionsassociatedwiththecombustionofbiogasarezeroorclosetozero,sosubstitutionshouldleadtoanoverallimprovementofthecountry’scarbonfootprint.Below,thereportfirstsetsoutthetheoreticalframeworkforestimatingthedirectGHGmitigationeffectandthengoesintothespecificcalculation.
TherelativemeritsofCBG-poweredvehiclesneedtobecomparedtoalternativesintermsoftheoverall
57
GHGmitigationpotential.Inpractice,CBGservesasanalternativefueltoanumberoffuelsusedintransport.Themostimportantonesarepetrol,dieselandCNG.Forthisreason,whencalculatingtheoverallGHGmitigationimpactfromswitchingtoCBG,itisnecessarytoknowthedirectcarbonemissionlevels(onaCO2 equivalentbasis)associatedwiththeconsumptionofthesefuels.The2006IntergovernmentalPanelonClimateChange(IPCC)Guidelinesprovideastandardemissionfactorforeachoftheserespectivefuels,whichisusedforthepurposesofmakingthecalculationsinthisstudy.Theyarecapturedinthetablebelow.
Table 4.3.6: Fuel emission factors
Direct emission factors Kg CO2e/GJ
Gasoline 74
Diesel 69
CNG 56
Source:AsreportedinAppendixEofSouthAfrica’sGHGMitigationPotential Analysis.
WhiledirectGHGemissionsperunitoffuelconsumedwilldifferevenwithintherelevantfuel-typecategories,theseareinternationallyacceptedaverages.Theyarecommonlyusedinthesetypesofassessmentsand,assuch,aredeemedappropriateforthepurposeofthishigh-levelassessmentaswell.BecauseCNGasatransportfueliscurrentlyonlyscarcelyusedinSouthAfrica,thereisverylimitedpotentialforsubstitutingCBGforCNG.Consequently,thisfueltypeisomittedfromtheoverallGHGmitigationcalculation.
AsecondfactoraffectingthedirectGHGemissionmitigationimpactfromswitchingtobiogasintransportistheamountofenergycontainedineachofthealternativefuels(alsoreferredtoasthecalorificvalue).Theenergycontentsofdifferentfuelscanbecomparedbycalculatingtheamountofthealternativefuelneededtoequalthecalorificvalueofonelitreofpetrolordieselfuel.ThislattermeasureisreferredtoasGLEorDLE,respectively.Generally,dieselwillhaveahigherenergycontentthanpetrolonaGLEbasis.Becauseofthis,agivenamountofenergyfrombiogasproductionwillbeabletosubstitutefewerlitresofdieselthanpetrol.
Thiseffectisamplifiedbyavaryingenginefuelefficiency.Asdiscussedabove,whichrepeatedtheresultsfroma
studybytheEnergyResearchCentreattheUniversityofCapeTownonfueleconomyfordifferenttypesofvehiclesinSouthAfrica,dieselenginesareabletoget15%more‘work’outofalitreoffuelonaveragethanpetrolenginesare.Inotherwords,thefueleconomyofdieselenginesishigher.TheassessmentoftheGHGemissionmitigationpotentialwhenswitchingtobiogasasatransportfuelmakesanadditionalcorrectionforthisfact.
Takingthesefactorsintoaccount,whatdoesthisimplyfortheGHGmitigationpotentialofswitchingtobiogasasatransportfuel?AboutthreemillionNm3 ofrawbiogasperdaycouldpotentiallybeproducedfromlarge-scalesourcesinSouthAfrica.ThisamountstoapotentialofoveronebillionNm3ofrawbiogasperannum.Ofthisproductionpotential,alittleover300 million Nm3isproducedfromMSW.BiogasfromMSWcanbeproducedasLFGbydrillingwellsintolandfills,orthroughADofthewaste.Thestudythereforedistinguishesbetweenanumberofscenarios,whicharerepresentedinthematrixbelow.
Table 4.3.7: Biogas-for-transport GHG emission mitigation
GHG emission mitigation potential
when used to substitute for diesel (tCO2e per annum)
GHG emissions mitigation potential
when used to substitute for
gasoline (tCO2e per annum)
AD/LFG 1 226 969 1 543 301
AD 1 350 080 1 698 151
Source:EcoMetrixteamanalysis
Dependingonhowbiogasisproducedandwhetheritsubstitutespetrolordiesel,theGHGmitigationimpactoftheuptakeofbiogasfortransportrangesbetween 1.2and1.7milliontonnesofCO2e emissions avoided peryear.Hence,thehighestmitigationpotentialisachievedthroughAD,usingthebiogasproducedtosubstitutefullyforpetrol.Thelatterisduetotwoseparateeffects.Firstly,aswehaveseen,petrolhasahigherCO2emissionfactorperMJburntthandiesel,soreplacingitcontributesmoretomitigatingclimatechange.Secondly,petrolhasalowercalorificvalueandfueleconomy.Thisalsomeansthatreplacingitcontributesrelativelymoretoreducingemissionsthanreplacingdiesel.FromaGHGmitigationperspective,therefore,thereisadoubleeffectatworkinfavourofsubstitutingbiogasforpetrol.
CBG as a vehicle fuel and urban air pollution WhilethereislimitedlocalexperienceinSouthAfrica
58FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
withtheuseofCNGorCBGintransport,thereissubstantialinternationalexperiencewhenitcomestoadecreaseinurbanpollutionbyswitchingtoCNG-orCBG-poweredvehicles.CountrieslikeArgentina,Brazil,China,India,IranandPakistanhavesizableCNG-poweredvehiclefleets21.ExperiencesintheseplacesshowthatCNGisveryefficientasavehiclefuelandcancontributesignificantlytoareductioninlocalurbanairpollution,especiallywhenusedasasubstitutefordieselfuel,whichisusedbymostcitybussesandotherheavycommercialvehicles(seeNarainandKrupnick,2007).
Table 4.3.8: Non-GHG emission reductions (%) of new CNG compared to in-use petrol/diesel vehicles
LDV (car) LDV (truck) School bus Heavy duty truck
CNGvsgasoline CNGvsdiesel CNGvsdiesel2002 2007 2002 2007 2002 2007 2002 2007
NOX 91 34 97 91 92 76 95 88PM10 50 0 98 12 98 21 98 22
Source:ArgonneNationalLabscompletefullfuelcycleanalysisusingthelatestUSEnvironmentalProtectionAgencyfigures22
Asillustratedinthetableabove,CNG(orCBGforthatmatter)emitsfarfewerpollutantsthanconventionalfossilfuels,includingsignificantlylessparticulatematter(PM),i.e.upto50to98%reductioninPMversusolderlightpetroltoheavydieselvehicles.ThelatterisaconsiderablesourceofairpollutioninmajorurbanareaslikeJohannesburg,DurbanandCapeTown(CNGalsohasrelativelylesscarbonemissionsassociatedwithitcomparedtopetrolanddieselper100kmdriven).ThegeneralfindingsincountrieslikeIndiaandPakistanarethatswitchingtoCHG-orCBG-poweredvehiclescanimproveurbanairqualitysignificantly.CNG-orCBG-poweredvehiclesgenerallyalsohavelowermaintenancecoststhanpetrol-ordiesel-poweredvehicles.
4.4 Findings on the viability of CBG for use as transport fuelThemajorfindingsregardingtotheviabilityofCBGasatransportfuelaresummarised.Basedonthesefindings,theoptionsforpolicyinterventionsarefurtherdefinedinChapter5.
4.4.1 Competitiveness of CBG as a fuelAtthemoment,biogasismainlyusedtogenerateelectricity,eventhoughthemonetarybenefits,asanalysedinSection4.1.3,arebetterwhenprocessingbiogasfurthertoCBGasatransportfuel.WithcurrentmarketpricesofpetrolanddieselaroundR11toR14perlitre,therehasnotbeenastrongmomentumintheemergenceofabiogas-for-transportorCNG-for-transportmarket.Hence,itisevidentthat,undercurrentconditions,themarketbarriersidentifiedfurtheroninthisstudyprevail.Nevertheless,therearebiogas-for-transportprojectsnearfinancialclosure,andCNGHoldingsandNOVOEnergyhaveopenedupalimitednumberofCNGfuelstationsinGauteng,focusedonthetaxiindustry.
TheimplicitsubsidyonCBGasatransportfuel(orCNGasatransportfuelforthatmatter),wherethereisalackofanyfuelleviesortaxes,thereforeseemstobeessential.Inaddition,thecurrentincentiveprovidedbytheIDCseemstobethefinalpushrequiredtogetnewCNGfuelstationsofftheground.Ifpetrolanddieselpricesincreaseinthefuture,thecaseforCBGandCNGwillstrengthenfurtherandbecomemoreattractive.
21.http://www.iangv.org/current-ngv-stats/
22.See:http://www.ngvamerica.org/natural-gas/environmental-benefits/
59
WhencomparingCNGwithCBGfromaneconomicperspective,CNGwillprobablyremainmorecompetitive,astheGasUsers’GroupestimatesgasfromMozambiquetobeimportedbySasolatonlyR20/GJ,buttobesoldataroundR42/GJonaverage.Nevertheless,aspetrolanddieselpricesarelargelygovernedbyinternationalmarkets,whichareonlyinfluencedinaminorwaybylocalalternatives,thiswillnotbeofimportance.Aslongaspetrolanddieselpricesdonotdecreasefurther23,CBGmayonlybeviableincombinationwithcurrentinformalsubsidies,andfurtherincentivestocountermarket-entrybarriersmaybeviable.
Acknowledgingtheforegoing,theattractivenessforgovernmenttopotentiallystimulatebiogasfortransportwouldneedtolieintheappreciationofthemacro-economic,aswellastheenvironmentalimpactbiogasfortransportcanmake.
4.4.2 CNG for transport is a prerequisite for CBG as a transport fuel
AmainbarrierexperiencedbybiogasprojectdevelopersissecuringdemandforCBGforthelongerterm (10to15yearsisessentialtofinancebiogasprojects).Therefore,mostprojectdevelopersstilloptforbiogas-to-electricityaselectricityforownuse,wheelingagreementsanddeliverytothirdparties,aswellasthedeliveryofelectricitytothemunicipalgrid,seemtoprovidebetteropportunities,regardlessofcertaindifficultiesencounteredinrealisingthis.
TheparallelemergenceofatransportmarketforCNGandCBGthereforeseemsessential.WhileCBGcanbringinthedesiredgreencontent,ifmanagedwell,CNG–asalow-carbonfuel–canprovidethelonger-termsecurityandcontinuityofsupplythatthismarketneedstotakeoff.Onacriticalnote,onehastoacknowledgethattheCityofJohannesburgischoosingdual-fuelbuses(CNG/diesel)tomanagetheriskofasecurityofsupplyofCBG/CNG24.
23.http://www.macrotrends.net/1369/crude-oil-price-history-chart
24.Metrobussettogogreen,April2014:http://joburg.org.za/index.php?option=com_content&view=article&id=9049:metrobus-set-to-go-green&catid=88:news-update&Itemid=266
Consideringthelatter,itseemsessentialthatgovernment,initsoverallpolicyframework,acknowledgestheimportanceofacombinationofCNGandCBGfortransport,andfacilitatestheintroductionofpoliciesthatshouldguaranteesecurityofsupply.
4.4.3 Importance of high-volume recurring transport patterns
CNG/CBGasanalternativetodieselandpetrolcanonlyworkifsufficientfuelstationsareprovided.Atthemoment,onlyahandfulofCNGfuelstationsareoperational,andasmallnumberareunderdevelopmentinGauteng.ConsideringthelimitedrangeofCNGvehiclesversusdiesel-orpetrol-poweredvehicles,itisessentialtofocusonrecurringtransportpatternssoasnottogetmixedupina‘chickenandegg’-typedilemma.Thefollowingoptionsthereforeseemtobemostattractive:
• ThemapofbiogasfortransportsourcesinSection3.3 ofthisreportshowsthatsourcesmainlyliewithinurbanareas.MinibustaxisinmanyofSouthAfrica’smajorcitiesformasubstantialpartofurbantransportand,withapreferenceforpetrol,arerelativelyeasytoconverttobiogasorbi-fueloperation.FollowingexamplesinJohannesburgandTshwane,theselocalised transport operations can be serviced by a minimumofwell-locatedCNG/CBGservicestations.
• Long-haulcargotransportusingCNG/CBGcanpotentially be economically attractive due to a loweroverallfuelcost.Currently,themostfrequentlong-haulroutesliebetweenGauteng(Tshwane/Johannesburg)andeThekwini,aswellasGautengandCapeTown.However,trucksdrivingonCNG/CBGwillhaveamaximumradiusofaround 300to400km,andsincetheGauteng-to-CapeTownrouteisapproximately1400kmandtheGauteng-to-eThekwiniorRichardsBayrouteisapproximately570to650km.ThisliesbeyondthedistancethataCNG/CBGtruckcouldcoverwithoutrefuelling.ThisinterestingalternativeshouldthereforebeinvestigatedinconjunctionwithdevelopingCNG/CBGfuelstationsalongtheseroutes,supplied,forexample,byavirtualCNGand/orCBGpipeline.
• Publiccitytransportincludesprogrammedrecurringtransport patterns related to city bus routes and schedules.TheBiogasforTransportSourcesInventorymakesitclearthatmunicipalitiesownandoperateseverallargebiogassources,suchaslandfillsitesandwastewatertreatmentplants.These
60FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
couldpotentiallybeusedtoprovidethefuelforcitybustransportsystemsthatareownedandoperatedbythesamemunicipalities. Thenextsectionofthisreportlooksatthispotentialinmoredepth.
4.4.4 The exclusive position of municipalitiesMunicipalitiesareintheuniquepositionofbeingmostdominantinthetopfourownersofbiogas-for-transportsourcesintermsofmunicipalsolidwasteandwastewaterplants.Theyalsohaveinterestingmarketsofgeneralpublictransportandminibustaxis.Despitethisextraordinaryposition,theytendtooptforbiogas-to-electricity,whilelargermonetaryandenvironmentalbenefits(includingurbanairquality)couldbeachievedwhenusingtheseresourcesforpublictransport.
Inpractice,theuseofCBG/CNGforbussesisbeingquestionedinthecaseofdual-fuelengines(diesel/CNG).Severalstakeholdersindicatethatstop-startoperations,aswiththeJohannesburgBusRapidTransitSystem(BRT)–calledReaVaya,donotperformwellusingthedual-fueloption.Incaseofdual-fuel(diesel/CNG),oneapparentlystillrunsondieselabout20to30%ofthetimeduetothetypeofstart-stopoperation.Moreover,acitybussupposedlydrivesonly100to200kmaday,whereasaminibustaxidrivesamultipleofthisdistance.Thelatterthereforeseemstobethefirstoptionofchoice.Giventheextraordinarypositionofthelargestmunicipalities,inparticular,thereseemstobeanopportunityforJohannesburgandeThekwinitodevelopCNG-/CBG-fuelledminibustaxiandlong-haulcargofreightindustries,fuelledbyCNG/CBG
betweenJohannesburgandTshwane,andbetweenJohannesburgandeThekwini.Forthelatter,atleasttwointermediateCNG/CBGfuelstationswouldberequired.Ifthisweretoberealised,abusinesscaseforcommercialcargocouldbecreated.ThisspecificroutemightbestrengthenedbythefactthatCNGinthepipelinebetweenJohannesburgandeThekwiniwouldhaveasidebranchgoingtoPietRetief,whichcouldbeextendedtofacilitateaCNG/CBGfuelstation.
4.4.5 Comparative summary of biogas for transport
TheprevioussectionsofChapter4discussedthecostbenefits,aswellasotherelementsdeterminingthefeasibilityofconvertingtoCBGasatransportfuel.Allthesearerelevanttogovernmenttoconsiderwhenformulatinganypolicyaimedatsupportingbiogasfortransport.Themainfindingsaresummarisedinthefollowingtable,whichmakesacomparisonbetweenbiogas-to-fuelandbiogas-to-electricity,asthisisthemainalternativeagainstwhichbiogasfortransportiscompeting.
Thecomparativeanalysishasbeensubdividedintothefollowingcategories:• Economic/financial• Environmental• Socioeconomic• Infrastructural
61
Table 4.4.1: Summary of findings of biogas for transport analysis – fuel versus electricity
Biogas to fuel Biogas to electricityEconomic/financial
Taxrevenue(14%VAT)
Atwo-tothree-timeshighermonetaryvalue,meaningmoreVATincomefor
government
LowervalueperGJofenergy,resultinginlowerVATincomefor
government
R675 to R743 million per annum R225 to R248 million per annum
Forex1 R3.0 to 4.4 billion per annum Mainly domestic market
SecurityofsupplyNoissue,assupplyislargelysatisfied
byworldmarkets
Potentialof240to320MWegeneratedbybiogassourcesabovetransportthresholdof750Nm3
perhour2
Environmental
GHGmitigationpotential 1.2 to 1.7 Mt per annum3About10to47%foraCHPgenerator
efficiencyof30to40%
Air qualityPotentiallyconcentratedinurbanareas,whereairqualityhasadirecteffecton
humanhealth
Generallyconcentratedinmoreremoteareaswherelarge-scale
electricity plants are located
Valueofmitigationmeasureinportfolioofmeasures
UseofbiogasasbiofuelwouldbeoneofthefewGHGmitigationmeasures
implementedinthesector
Theelectricitysectorhasseveraloptionsformitigationandseveral
activepolicies;biogas-to-electricityisjustoneofthem
Socioeconomic
Jobcreation
Thestepstoupgradeorcompressrawbiogascouldcreateoneortwoextrajobspersizablefacility;indirectjobcreationisenvisagedthroughinvestmentsinnew
gasinfrastructure
RawbiogasisdirectlyusedinCHPandelectricityiffedtothegridorlocal
network
Infrastructural
Distribution
Thegasgridislimited,withnoexamplesofaccessforbiogas;thereisonlya
handfuloffuelstationswithCNG/CBGdispensers
Gridisavailable;accessisachievedbysomeprojects;regulatoryhurdles
can be substantive
Skills NoprojectsoperationalinSouthAfrica;theserviceindustrydeveloping
Severalprojectsareoperational; theserviceindustryisdeveloping
1 See Section 4.3.1 and Table 4.4.52. 2BasedonanapproximatepotentialofthreemillionNm3perdayofbiogas(65%CH4)andanefficiencyof30to40%forconversiontoelectricity(CHPgenerator).3 See Section 4.3.2.
62FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Chapter 5: Policy intervention rationales and options
benefitsforthegovernmentandcountryasawhole,aswellasthebarriers–bothfinancialandnon-financial–thatgovernmentcouldalleviateifitfeelsthattheenvisagedbenefitsjustifydoingso.
5.1.1 Benefits for implementationFromtheanalysisinChapter4,itisclearthat,atthemoment,theeconomicsofbiogas-for-transportissuchthatnocommercialbusinesscasefortheimplementationofbiogassolutionswithintheSouthAfricantransportsectorexists.Ontheotherhand,Chapter4alsoindicatesthattherearesubstantialbenefitsforthecountrytodevelopabiogas-for-transportinfrastructure,evenwhencomparedtothebenefitsforthecountryfromabiogas-for-electricityperspective.Table4.4.1(Biogas-for-transportanalysis–fuelversuselectricity)providesanoverviewoftheco-benefitsincomparisontothebenefitsofuseforelectricity,butalsogivesinsightintoanumberofpracticalco-benefitsthatcouldberealisedasaresultofthedevelopmentofabiogas-for-transportsector,aswellasinfrastructuralrequirements.
However,whenlookingatthepotentialbenefitsfromamorestrategiclevel,someadditionalco-benefitscanbeidentifiedthatmightapplytotheuseofbiogasinthetransportand/orelectricitysector.Theseincludethefollowing:
1. Introduction 2. Value chain
3. Biogas sources
4. Feasibility 5. Policy
Previouschaptersofthisreportdemonstratethatwithoutgovernmentintervention,apositivebusinesscaseforbiogasinthenationaltransportsectorcurrentlydoesnotexist.Thischapterlooksatthepotentialpolicyinterventionsthatgovernmentcouldconsiderifitdecidesthattheadditionalbenefitsforthecountryasawholewouldjustifysuchanintervention.
Withoutbeingprescriptiveastowhatthepolicyinterventionstowardsthelarge-scaleuptakeforbiogasinthetransportsectorshouldbe,thischapterprovidesasummaryoverviewofthefollowing:
• Thepotentialbenefitsofimplementingsupportingpolicy interventions
• Thefinancialquantumofsuchinterventionswithinexistinggovernmentinterventions
• Basedoninternationalexperiences,wheresuchinterventionswithinthebiogas-for-transportvaluechainwouldbemoreandlesseffectiveandefficient
5.1 Overview of biogas-for-transport benefits and barriers
Beforeinvestigatingthepotentialquantumofgovernmentinterventionandtheeffectivenessandefficiencyofthedifferenttypesofinterventions,itisimportanttoobtainacoherentoverviewofthepotential
63
• Reduction of energy dependency:Withaconstantlyincreasingglobalisationoftheenergysector,thecontrolofenergyresourcesbecomesmoreandmorerelevantfromageopoliticalperspective.Bydevelopingdomesticenergyresources,suchasbiogas,acountrycanincreaseitsnationalenergysecuritybyreducingitsdependencyonforeignimportsoffossilfuels.
• Diversification of the energy mix:Byupscalingthegenerationandutilisationofbiogasasanenergysource,thecountry’sfuelmixfurtherdiversifies.InpracticaltermsforSouthAfrica,thismeansthatitsvastreservesofcoalbecomeasmallercomponentofthefuelmix,andasaresultthereof,willlastlonger,eventhough–bydefinition–sucharesourceisfinite.
• Early-mover advantage:Although–globally–biogasisusedintransportapplicationsinonlyafewisolatedcases,itispotentiallyamaterialcomponentofthetransportfuelmix.Bydevelopingsuchasectorintherealisationofthelarge-scaleapplicationofbiogasintransport,thecountrycouldoccupyauniquepositionasahubforbiogas-for-transporttechnologies,fundingmodelsandpoliciesinasimilarwayasKenyahasdoneintheareaofgeothermalenergy,andDenmarkhasdoneinthedevelopmentofwindenergy.
WhentheSouthAfricangovernmentdecideswhetherornotitisinthebestinterestofthecountrytodeveloppolicyinterventionstowardsthelarge-scaleuptakeofbiogaswithinthetransportsector,itshoulddosoagainstthebackdropofthesemorestrategicbenefits,andthemorepracticalbenefitsoutlinedinSection4.4.5,takingintoconsiderationthefinancialandnon-financialbarriersasoutlinedinthenextsectionofthisreport.
5.1.2 Barriers for implementationDuringengagementswithbothindividualstakeholdersandstakeholdergroups,severalbarrierswerepointedoutthatcouldhamperthepromotionofbiogasfortransport.ManyofthesebarriersarenotuniquetoSouthAfrica,andresembleexperiencesinothercountries.Thesectionsbelowdetailthedifferentbarriersthatwereidentified,makingadistinctionbetweenfinancial,regulatoryandotherbarriers.
Financial barriersSeveralpartieshaveindicatedthatin-principlefinancingisavailable,butthataccessingsuchfinancinginareasonableperiodoftimecanbedifficult.Someexperiencesshowthatthisisnotonlyrelatedtotherigorousfinancialprocess,whichinprincipleisgoodfinancialpractice.Thecurrentcomplexityofdevelopingprojectsinanewandemergingmarketcanprolongthejourneyofreachingabankableprojectextensively.
Whatseemstoplayaroleisthefactthat,becauseofthelargevarietyofwastestreamsandtypesoffacilitiesgeneratingthosewastestreams,projectstendtobeverydifferentinnature,requiringpartiesto(partially)embarkonanewlearningcurveforeachproject,anddealingwithrelateduncertaintiesthataffectthebusinesscase.Thiscomplexitymaterialisesbothonthesideofprojectdevelopersinrealisingbankablefeasibilitystudies,aswellasfinanciershavingtoassessthesefeasibilitystudies.
Currentfinancialandfundinginstrumentsarenotbiogas-specificor–forthatmatter–biogas-for-transport-specific.Therefore,oneneedstotargetvariouspotentialfundingandfinancingsources,andmeetavarietyoffinanciersandfunders,whoarelessfamiliarwiththespecificbiogassubjectathand.Inadditiontothis,projectdevelopersindicatethatfundingandfinancingoptionsforfeasibilitystudiesthatcanassistprojectdevelopersovercometherelativelylonglead time are scarce.
Insummary,thefollowingbarriershavebeenidentifiedwithregardtofinancing:
• Complexityanddurationofthefunding/financingprocess
• Lackofknowledgeandlowriskappetiteoffinanciers/funders
• Nodedicatedfundingforbiogasorbiogas-for-transportprojects
• Lackoffunding/financingforfeasibilitystudies
ItisinterestingtonotethattheFrenchDevelopmentAgency(AFD)issupportinganinitiativetoestablishadatabaseoffundingoptionsforbiogasprojectsbothlocally and internationally.
64FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Non-financial barriersRegulationsandrelatedlicencesareoftenmentionedasbarriersfortheimplementationofbiogasprojects.Dependingonthetypeofwasteandsizeoftheproject,thiscanvary.Inthecaseofabattoirwaste,regulationsaremoststrict,asoneisdealingwithpotentiallyhazardouswaste,andthedestructionofpathogens,forexample,needstobeensured.Relatedlicencesneedtobeobtainedonanationallevel.Moreover,thedigestateisnotalwaysacknowledgedasbeingsafe(prion-free)andcanstillbeconsideredaswaste,limitingtheopportunities to use and sell it.
AttheNationalBiogasPlatformheldinApril2015,SABIAestimatedthatonlyaround400biodigestersarecurrentlyinstalledinSouthAfrica.Theunfamiliaritywithbiodigestionresultsinseveralbenefitsnotbeingfullyacknowledged.Thesebenefitsincludeenergysecurity,jobcreation,fertilizerproductionanddiversionfromlandfillingrelatedtobiogasproduction.Moreover,biogas-to-transportisnotfullyacknowledged.Thisplaysanimportantroleindelayingtheuptakeofbiogas.Currentoperationalprojectsdonotprovidesufficientconfidenceinthetechnicalandeconomicviabilityofbiogasprojects.SABIAhasaninformationhub/webportalunderdevelopmentwiththeaimtopartiallyaddressthis.
Variousprojectdevelopersexperienceaccesstomunicipalwastestreamsasbeingextremelydifficult.Somedevelopershavetargetedthesewastestreamsforseveralyears,andatacertainpointdecidedtogiveup.AnimportantstumblingblockformunicipalitiesistheMunicipalFinanceManagementAct(ActNo.56of2003)(MFMA)anditsamendmentsin2005,whichincludealimitationtocontractingperiods(maximumofthreeyears).Itisgearedtowardsprudentprocurementandnotsales.ThesolutionsthatmunicipalitieshaveappliedindealingwiththeMFMAinrespectofwaste-to-energyprojectsvaryfromalternativeprojectstructures,requestinganexemptionontheMFMA,orfocusingonbeingcompliantwiththeobjective(s)oftheMFMAratherthanonthedetailedproceduresandrequirements(EcoMetrix/SACN,2014).Nevertheless,thisoftenresultsinlongdelays.
Abiogas-for-transport-specificbarrieristhatmunicipalities(whentheysucceedindevelopingwaste-to-energyprojects)seemtodedicatetheirwastesources
towaste-to-electricityinparticular.Partofthispreferenceforelectricitystemsfromthefactthatsomeinitiativeswerelaunchedyearsbeforethebiogas-for-transportoptioncameontheagenda.Threelargerbiogas-to-electricityinitiativescanbementionedinparticular:
• CityofCapeTown:Plansareunderwaytodevelopseverallandfillgas-to-electricityprojects(includingtwotothreesites)underacarboncreditprogrammeoftheCity
• CityofJohannesburg:- TheJohannesburgLandfillGas-to-electricity
Programme,incorporatinguptofivelandfills- JohannesburgWaterisimplementingCHP
facilitiesatNorthernWaterWorks,Bushkoppie,Goudkoppie,OlifantsvleiandDriefontein
• eThekwini:AnLFG-to-electricityprogrammehasbeeninitiated,whichencompassestheextractionofCH4fromthreeCouncil-ownedlandfillsites(Mariannhill,LaMercyandBisasarRoad)forelectricitygenerationandsale.TheBisasarRoadlandfillisthelargestontheAfricancontinent.
GasinSouthAfricaonlyplaysamarginalroleintheenergymixand–assuch–thereisverylimitedtransportandretailinfrastructureinplace.AsdetailedinSection4.2,itwillbeimportantthatnaturalgasandbiogas-for-transportgohandinhandtocircumventissuesaroundriskofsupplyandforcingabreakthroughina‘chicken-and-egg’,supply-and-demandsituation,therebyunlockingdemand.Inthisregard,itcouldbeofimportancetorequestNERSAtoarrangeaccesstothegasgridanddevelopstandardsandlegislationtoalsomakethispracticallypossible.
Last,butnotleast,thecurrentregulatoryuncertaintyaroundthecontinuationofCNGasatransportfuelnotbeingclassifiedasafuellevygood(inotherwords,beingimplicitlyexemptfromfuel-relatedleviesandtaxes)limitspossibilitiestofullybankontherelatedfinancialadvantagesoverconventionalfuels.
Insummary,thefollowingnon-financialbarriershavebeenidentified:
• Licensingandregulationsarecomplexandonerous• Unfamiliaritywithbiogasanditsadvantages• AccesstomunicipalwasteandtheMFMAhampering
longer-termcommitments• Thecurrentpreferenceofmunicipalitiesforwaste-to-
electricityprojects
65
• Lackofgasinfrastructure,skillsandmarket• Lackofregulatorycertaintyregardingfuel-relatedleviesandtaxes
5.2 Strategic framework for policy developmentThehigh-levelframeworksetoutinthissectiononpolicydevelopmentdealswiththeperspectiveofSouthAfricaasasociety,andhowSouthAfrica–consideringitsstrengths,weaknessesanditsneedsasacountry–couldbenefitfromthedevelopmentofbiogasasatransportfuel.Settingthestage,usingastrengths,weaknesses,opportunitiesandthreats (SWOT)assessment,policyoptions,effectivenessandinternationalexperiencesarecovered,concludingwithspecificrecommendationsforSouthAfrica.
5.2.1 SWOT on a national levelAlthoughthemostcommonuseofaSWOTanalysisisincorporatestrategydevelopment,theuseofSWOTanalysesinthecontextofnationalpolicy(orclimatechangepolicyforthatmatter)iscertainlynotunique.AninterestingexampleistheScottishGovernmentusingaSWOTanalysistodeveloppoliciesaimedatreducingGHGemissionsresultingfromenergyconsumption(seeboxbelow).
Box 5.2.1: Scottish Energy Study – SWOT on CO2 Reduction Strategy for the Transport Sector
AspartoftheScottishEnergyStudy(ScottishGovernment,2009),athoroughSWOTanalysishasbeenappliedtothedifferentsectorsinthecontextoftheobjectiveofreducingenergyconsumptionandrelatedCO2 emissions. Thisincludedthetransportsectorbeingclosetothesubjectathandinthisstudy.
ThedefinitionofthefourfactorsintheSWOTanalysisare:
• Strengths:attributesoftheorganisation,whicharehelpfultoachievingtheobjective• Weaknesses:attributesoftheorganisation,whichareharmfultoachievingtheobjective• Opportunities:externalconditions,whicharehelpfultoachievingtheobjective• Threats:externalconditions,whichcoulddodamagetothebusiness’sperformance
CentraltotheuseofaSWOTanalysisisthedefinitionoftheobjectivetobeaccomplished.Withoutthis,itishardtojudgeifaspecificfactorofinfluenceishelpfulorharmful.
Objective - Scottish Strategy to reduce energy and CO2 emissions from transport
Helpful to meeting the objective Harmful to meeting the objective
Internalfactors
Strengths• ESSACNetworktoinfluencetravelchoicesforhouseholds
• Existingprogrammessupportmodeshift• ClimateChangeActtargetsrequirechange• Carbonbudgetingwillinformfuturetransportprojectdecisions
• Planningcaninfluencetheneedforandmodeoffuturetravel
Weaknesses• Limitstofundingavailable• Limiteddevolvedpowers(e.g.planningdevolved,butnotvehicleandfuelduty)
• Pressuretoprovidekeyroadinfrastructureprojects
Externalfactors
Opportunities• ESSACNetworktoinfluencetravelchoicesforhouseholds.
• Existingprogammessupportmodeshift• ClimateChangeActtargetsrequiredchange.• Carbonbudgetingwillinformfuturetransportprojectdecisions
• Planningcaninfluencetheneedforandmodeoffuturetravel
Threats• Carownershipandusecontinuetogrow• Air travel is predicted to double by 2020• Difficulty/costinfluencingtwomilliondrivers• Drivingembeddedasmostpractical/convenient• Congestioncreatesnewroaddemand• Publictransportinruralareasisexpensive• Access to competitive transport options is essentialforbusiness
66FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
CentraltousingtheSWOTanalysisisthedefinitionofaclearobjectivetobeaccomplished.Thestrengthsandopportunitiesareattributesorconditionsintheinternalandexternalenvironment,whicharehelpfulinachievingtheobjective.Incontrast,theweaknessesandthreatsareattributesorconditionsintheinternalandexternalenvironmentthatareharmfultomeetingtheobjective.
AlthoughtheSWOTanalysis,asatool,inprincipleprovidesasimplemethodofanalysis,oneneedstoadheretotheframeworksetinordertogetusefulresults.Besidesaclearobjective,itisimportanttoclearlydistinguishbetweenco-benefitsandstrengths.Whileastrengthisanattributethatishelpfultomeetingtheobjective,aco-benefitcanbepartofwhatoneaimstoachieve,whileinessenceitdoesnotcontributetorealisingtheobjective.
Forexample,inthecaseoftheScottishTransportStrategy,withafocusonpublictransport,aco-benefitiseasingcongestionintheregion.Nevertheless,thisco-benefitisnotmentionedasastrength(seeBox5.2.1),asitdoesnotassistintheprocessofhouseholdersmakingthemodalshiftfromcartobusortrain.Rather,theEuropeanScience,SupportandAdvisoryCommittee(ESSAC)Networkismentionedasastrength.Thisnetworkdeliversenergyadvicetoandcaninfluencethedecision-makingofhouseholders,communitiesandbusinessesintermsofhowtosavemoney,reduceenergyusageandmakeanimpactontheenvironment.
ThefollowingsectionofthisreportappliestheSWOTframeworktothecaseathandinthewaydescribedabove.
5.2.2 Analysis of the case for South AfricaTheSWOTanalysisinthecontextofthisstudyisappliedonanationalleveldealingwithpublic-andprivate-sectororganisationsandhowthesecanworktogethertoachievetheobjectiveof‘transformingtoCBGasatransportfuel’.Externalfactorsinthissensearefactorsoutsidethecontrolofpublic-andprivate-sectororganisations,whileinternalfactorsdealwiththestrengthsandweaknessesofthepublicandprivatesector.
InlinewiththeSWOTframeworkassetoutinthepreviousparagraph,theco-benefitsareconsideredpartofthewiderobjectiveand,assuch,arenotrepeatedasstrengths.ThebarrierssummarisedunderweaknesseshavealreadybeenidentifiedanddiscussedunderSection5.1.3and,assuch,arenotfurtherdetailed.
Anoverallsummarybasedonananalysisoftheinternalandexternalenvironment,aswellastheengagementwithstakeholders,ispresentedinthefigurebelow.Subsequently,theresultsoftheSWOTanalysisarediscussedinmoredetail.InordertomakethelinkwiththeSWOTresultssummarisedinFigure5.2.1clearer,themainkeywordsarehighlightedinthetext.
67
Helpfulinmeetingtheobjective
WEAKNESSES• Regulatoryuncertainty• Limitedgasinfrastructure
and demand• Competitionpower/heat• Insufficientlocalskills• Licencesandstandards
STRENGTHS• NoleviesonCNG/CBG• Carbontaxoffsets• R/GJhigherthanpower/heat• Nationalgreenfunds/financing• Feedstockfor0.5-0.7billion
litresoffuel• Supportivenetworks/
associations
OPPORTUNITIES• Newglobalclimatedeal• Transport sector second in
GHGs• Technologyadvancements• Globaloil/gasprices↑• Internationalskills/standards
THREATS• Powercrunchcontinuing• Competitionliquidbiofuels• Globaloil/gasprices↓Ex
tern
alno
con
trol
Inte
rnal
withincontrol
Harmfulinmeetingtheobjective
Case for South Africa – CBG as a transport fuel
Figure 5.2.1: A SWOT analysis of the case for CBG as a transport fuel in South Africa
Strengths and weaknesses – financial perspectiveAcurrentkeystrength,whichhasassistedintheemergenceofthefirstCNG/CBGfortransportinitiativesinthecountry,isthefactthatno fuel-related taxes and levies are charged on CNG/CBG,whichprovidesacompetitiveadvantageoverregulardieselandpetrol.Thenagain,thisadvantageisrequiredinordertocompensateforthefactthat,generallyspeaking,CBGismorecostlytoproducethanCNG.Theregulatoryuncertaintyaroundwhethertheexemptionfromthevariousfuel-relatedtaxesandlevieswillbecontinuedis,however,hamperingCBGbusinesscasestobecomebankableandtakethefullbenefitofthisexemption.Longer-termcertaintyonthecontributionoffuel-relatedtaxesandleviestoprofitabilityisrequired(say10to 15years)inordertotakethisexemptionfullyintoaccount,andtherebystrengthenthebusinesscaseandenhancecapabilitytopaybackacommercialloan.
Thecarbon taxthatisenvisagedtobeimplementedin2016anditscarbonoffsetcomponentcouldalsoprovideafinancialstimulus.AlthoughexposedindirectlythroughrefinerieswithinthebordersofSouthAfricathatarebeingtaxed,thetransportsectorisnotdirectlyincludedinthetaxnet(NationalTreasury,2013;2014)and,assuch,canprovideoffsetsonaprojectbasiswhendevelopingandimplementinginitiativesunderoneofthecarbonstandardseligibleforcarbontax.Any
remaininguncertaintyaboutthisinstrumentwilllargelydisappearuponimplementationofthetaxanditsoffsetcomponents.
Althoughbiogas-for-transportisin competition with the conversion to biogas-for-electricity and heat,thereiscurrentlyastrongfinancialupsidewhenconvertingandsellingitasafuel,ashasbeenillustratedinSection4.1ofthisreport.
Opportunities and threats – financial perspectiveHowfuelandelectricitypriceswilldevelopinthefutureremains uncertain. Continuation of the electricity crunch maydriveelectricitypricesupand,accordingly,drivebusinessestogeneratetheirownelectricityusingbiogastoavoidfurtherelectricitypriceincreases,andtomakethemselvesmoreself-sufficient.Howlongtheelectricitycrunchwillcontinueandhowthepriceofelectricitywilldevelopremainsuncertainandhardtobankon.Thesameuncertaintycomesintoplayregardingthedevelopmentofinternational oil/gas prices incombinationwithrand-dollar exchange rates,whichintheendwilldeterminethecostoffuel.
Technological advancementsmaylowerthecostofproducingbiogasfortransport.However,oneneedstotakeintoaccountthattheADofbiomassisarelativelymaturetechnologyandhasbeenaroundforalong
68FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
time.Generallyspeaking,breakthroughschangingthegamearenotlikelyinthatcase.However,iftherearebreakthroughswithasubstantialpositiveimpactonproductioncost,thequestioniswhatthetimetomarketofthesetechnologieswillbe.Forthesereasons,technologicaladvancementshavebeenleftoutofthescopeofthisstudy.Asglobalbiogasmarketsdevelop,optimisationsmaybeexpected.However,itremainstobeseentowhatextentthiswillhappen.
WhatwedoknowisthatthebiogasindustryinSouthAfrica,althoughsmall,isatthestartofitsdevelopment,withenvironmental,aswellasco-benefitsmobilisingbothlocalandinternationalsupport,whetherintermsoffunding/financingortechnicalassistance.Anew climate dealduringthenextUnitedNationsClimateChangeConferenceoftheParties(COP)inParison21December2015couldprovidefurtherstimulus.Asthetransport sector is the second-largest source of emissionsintheGHGInventoryforSouthAfrica2000–2010,itiscertainlyasectorthatwillreceivefurtherattentionwhenimplementingplanstoreducethenationalcarbonfootprint,asdefinedintheNationalClimateChangeResponseWhitePaperanditstransportflagshipprogramme(RepublicofSouthAfrica,2011).
Strengths and weaknesses – non-financial perspectiveSeveralorganisationsandprojectshaveemergedinsupportofthedevelopmentofthebiogassectoringeneral.Althoughnotspecificallysupportingbiogasfortransport,theyarebeneficialinsupportingthebiogasindustryoverall.Gainingmoremomentumwiththedevelopmentofbiogasfortransportprojects,itislikelythatitwillalsobepossibletoobtainsupportfromtheseorganisationsinthecasefortransport.
Currentmaininitiativessupportingbiogasarethefollowing:
• National Biogas Platform25:Establishedin2013,theNationalBiogasPlatformcomprisesrepresentativesfromdonoragencies,industry,local/nationalgovernment,academiaandresearchinstitutions.TheGermanGesellschaftfürInternationale
25.http://www.energy.gov.za/files/biogas/nationalBiogasPlatform.html
Zusammenarbeit(GIZ)isthefacilitatoroftheplatformonbehalfofDoEandSABIA.Theplatformfocusesonregulatory requirements, information gathering and financing optionsforbiogasprojects.
• The South African Biogas Association26:Thisassociationwasformedin2013/14byacoregroupofinterestedandaffectedpartiesoutofacommonneedforactiverepresentationofthebiogasindustryinSouthAfrica.SABIAisfocusedonindustrialparties,andincludedaround35officialmembersin2014.Theassociationsupportsthebiogasindustryoverall,irrespectiveofthefinalapplicationintheformofheat,electricityand/orfuel.
• The United Nations Industrial Development Organisation (UNIDO)-Global Environment Facility (GEF) Project – Promoting organic waste-to-energy in small, medium and micro enterprises (SMMEs): Accelerating biogas market development (UNIDO-GEF, 2015):Thisisafour-yearUS$36millionprojectrunninguntil2018,whichisfocusedonpromotingthemarket-basedadoptionofintegratedbiogastechnologyinSMMEsinSouthAfrica.Itincludesthecomponentsofcapacity building, regulatory framework and demonstration.Thelattercomponentinvolvesco-fundingandsupporttofivetonineselectedbiogasprojects.Currently,onlyfivebiogas-to-electricityprojectshavebeenselected.
Theseinitiativesshowthatalotofattentionisalreadygoingtowardsaddressingimplementationhurdlesrelatedtoregulations.GIZiscurrentlysupportingastudyregardingregulationsandlicenseswhendevelopingbiogasprojects.IthasalsobeensuggestedwithintheNationalBiogasPlatformthatalistoflicencesshouldbedefinedagainstwhichfundersandfinancierscanassesstheregulatorycomplianceofbiogasprojectsthatareseekingfunding/financing.TheregulatoryframeworkisalsopartoftheUNIDO-GEFproject,whichaddressesthisissueinapracticalmanneraspartofselecteddemonstrationprojects.
Theaforementionedinitiativesalsoaddresscapacitybuilding,supportingthedevelopmentoflocalskillsthroughdemonstrationprojects,educationalcurricula,informationsharingandworkinggroupsoncertaintopics.Inthatsense,theweaknessesidentified
26.http://biogasassociation.co.za/
69
regardinglicences/standardsandlocalskillsalreadyseemtobewellmitigated.
Opportunities and threats – non-financial perspectiveApartfromanenvisagedincreaseinfundingandfinancingopportunitiesasaresultofpositivedevelopmentsintheglobalclimatechangenegotiationsinthecontextoftheUnitedNationsFrameworkConventiononClimateChange(UNFCCC),astrongerinfluxofinternationalskillsandtechnicalassistancecanalsobeexpected.SeveralcountriesinEuropehaveextensiveexperienceinrelationtoAD,processingdifferenttypesoffeedstockandusingbiogasindifferentways(forexample,electricity,heatandtransportfuel).Uponanewglobalclimatedeal,includingenvisagedcommitmentsfromindustrialisedcountriestoassistdevelopingcountriesintermoftechnicalassistanceandfunding/financing,currentsupportcouldincreaseifthisgoestogetherwithgoodprogrammingandplanningwithintheSouthAfricanpublicandprivatesector.
5.2.3 Types of policy instrumentsTheprevioussectionprovidedinsightsintothestrengths,weaknesses,opportunitiesandthreatsofthecaseforthelarge-scaleuptakeofbiogasinSouthAfrica.ASWOTanalysis,assuch,isausefultoolforstrategydevelopmenttowardsthefuture.Havinganalysedthebiogas-for-transportvaluechain,identifiedsignificantsourcesinthecountryandexaminedthefeasibilityofbiogasfortransportinthepreviouschapters,thenextstepinvolvesdesigningaconceptualpolicyframeworkinsupportofthelarge-scaleuptakeofbiogasfortransport.
Wehaveseenthatacertainlevelofsupportislikelytobenecessaryatleastinthenearfuture.Inthisregard,animportantquestionbecomeshowbesttoimplementsuchsupportthroughanappropriategovernmentpolicy.
Generallyspeaking,themaineconomicfunctionsofmoderngovernmentarethreefold:• Allocation functionofprovidingpublicgoods
andpreventingharm,forexampleinthecaseofenvironmentaldegradationwhencertaincostshavenotbeeninternalised(aso-calledexternality).
• Distribution functiontoaffectincomeandwealthdistribution,andensureamoredesirableandfairoutcome.
• Stabilisation functionofreducingbusiness-cyclefluctuationsthroughappropriatemonetaryandfiscalpolicies.
Designingasuitableenvironmentaland/orenergypolicylieswellwithintheconfinesofthefirstofthethreeobjectivesofgovernmentasdefinedabove.Toaffectoutcomesinthisregard,the(international)publicfinanceliteratureidentifiesanumberofpolicyoptionsatthedisposalofgovernment.Thesecanbecategorisedintothreeprimarytypesofmeasures:• Subsidies• Taxation• Regulation
Intheenvironmentalrealm,thisgivesrisetoawiderangeofpossiblepolicyalternatives.Someofthesearemarket-basedinstrumentsinthattheyusemarkets,pricesandothereconomicvariablestoaffectbehaviourthroughincentives.Moreover,someofthesearetransparent,likeadirectsubsidyintheformofacashtransfer.Othersareindirect,likeataxincentive.Asecondsetofpolicymeasurescanbecategorisedasso-calledcommand-and-controlstrategies,whichaimtosteerbehaviourthroughdirectregulationandmandatorystandardsthatdictatecertainrules.Thefollowingtableprovidesanindicativeoverviewofpotentialpolicymeasures.
70FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Table 5.2.1: Taxonomy of different types of policy instruments
Subsidies Taxation Regulation
Cashtransferstoproducersorconsumers
Preferentialtaxrates (incometaxorVAT)
Pricecontrols(pricefloors/ceilingsorfeed-intariffs)
Low-interest,preferentialloansorgovernmentguarantees
Tax-baseexemptionsordeductionsforcertainactivitiesortransactions(accelerateddepreciation,carryback/forward,orexemptionfrom
incometaxorVAT)
Demandguarantees
Governmentservicesprovidedatlessthanfullmarket-basedcosts(e.g.publicinvestmentininfrastructureorresearchand
development)
Taxcredits(percentagereductionofincometaxpayable)
Mandated deployment rates (blendingrequirements)
Pigoviantaxes(acarbonorfueltax) Limitsonmarketaccess
Traderestrictions(intheformoftariffsattheborder)
Controlsoveraccesstoresources/planningconsent
GatefeesTraderestrictions(quotaand
technicalrestrictions)
continuetopolluteandpaythetax.Overall,thesameamountofemissionreductionswouldbeachieved,butatarelativelylowercost,inthelattercase,thanintheformer.
Thesamegoesforrulesandregulationsversusmarket-basedfinancialincentivesinthetransportsector.Rulesthatapplyequallytoeveryone,likeafueleconomystandardforcars,arelikelytoyieldalessefficientoutcome,whilelettingthemarketdoitsworkthroughasystemof(fuel)taxesorsubsidiesshould,intheory,generateanefficientresult.
Furthermore,allotherthingsbeingequal,on-budgetpolicyinstrumentslikeadirectsubsidyshould(theoretically)havepreferenceoverindirect,off-budgetmeasureslikeataxbenefit.Off-budgetincentivesdonotappearonnationalaccountsasgovernmentexpenditure.Typically,thismeansthattransparencyandaccountabilitysuffer.Althoughsomecountrieshaveso-calledtaxexpenditurebudgetstoreigninfinanceministersandkeepbudgetsundercontrol,thisisnotcommon practice.
Ontheotherhand,politicalrealitiesoftenpromptgovernmentstofavouroff-budgetinstrumentsexactlyforthisreason.Thepracticabilityofgrantinganindirecttaxbenefitisgenerallyhigherthanaccountingforanexplicitdirectsubsidy.Moreover,subsidyallocationoftencostsalotoftimeandresources.Evenifpeoplearewellintended,theallocationmaynotgoasdesired.
Asonecansee,thelistofpotentialpolicyoptionsisextensiveandwide-ranging.Itincludesbothpositiveandnegativefinancialincentivesthroughsubsidiesandtaxes,aswellasregulatorymeasures.Forobviousreasons,thereisunlikelytobea‘one-size-fits-all’policyinstrumentthatisbestusedinallsituations.Differentcircumstancesandscenarioswillrequiredifferentsolutions.However,anumberofthingscanbesaidinfavourofmarket-basedfinancialincentivesingeneral.
Incontrasttoamarket-basedincentivelikeataxorsubsidy,acommand-and-controlstrategysimplymandatesaruleorstandard.Thereisanentirerangeofeconomicliteraturethatcomparesbothtypesofpolicies.Thegeneralconsensusamongeconomistsisthatmarket-basedfinancialinstrumentsaremoreefficient(partlybecauseprivatepartiesgenerallyhavemoredetailedinformationthanregulatorybodiesandarebetterabletomakedecisionsprovidedtheincentivesaresetright)andcarrylessriskofregulatorycapture(wheretheregulatorcolludeswiththeregulatedandthepublicinterestisdisregarded).
Astothefirstpoint,forexample,becausedifferentproductionplantshavedifferentmarginalabatementcosts,acommand-and-controltypeofrulemandatingeveryplanttoreducecarbonemissionsequallywouldbeinefficient.Ontheotherhand,auniformcarbontaxorcap-and-tradesystemwouldincentivisemodernplantswithlowabatementcoststocutrelativelymorewhileolderplantswithhigherabatementcostswould
71
Ataxincentiveiseasiertoimplement.Inadditiontothis,itisimportanttotakeconsiderationofthelevelofinstitutionalcapacity.Hence,whethertochooseasubsidyortaxisultimatelyapoliticalchoice.Thenextsectionwillthereforefocusonbothon-andoff-budgetfinancialincentives.
5.2.4 Position of interventions across the value chainThetheoreticalframeworkprovidedabovegivesrisetoanumberofpolicyinterventionoptionswithinthebiogas-for-transportvaluechaintoincentiviseproduction.Notallpolicyinstruments(subsidies,taxesorregulation)willbeequallyapplicableateachstageinthevaluechain.Thiswill,amongotherthings,dependonthespecificactivitiesatthatstageinthevaluechain,andfactorssuchaswhethertheactivityiscapital-intensiveorlabour-intensive,orwhetherthestageisalreadysubjecttoanexistingregulatoryframework.
Intheanalysisbelow,wewillapplythetheoreticalframeworkofpolicyinterventionoptionstothebiogas-for-transportvaluechain,asdepictedinFigure5.2.2.Foreachstage,themainoptionsforpolicyinterventionarehighlightedwiththeaimofstimulatingbiogas-for-transportproduction.
1. Biogas sources
2. Upstream logistics
5. Downstream logistics
3. Biogas production
4. Biogas upgrading
6. Biogas consumption
Figure 5.2.2: Various options for policy intervention within the biogas-for-transport value chain
1. Thefirststageinvolvesthecollectionorproductionofbiomass(sincewearenotconsideringcrop-to-fuelhere,thelatterisnotrelevantatthispoint).Themainpolicyinstrumentonecouldconsideratthisstagecomesintheformofhighergatefeesthatshould,allthingsbeingequal,provideanincentivetofindalternativeusesforwaste,forexample,intheformofbiogasproduction.Regulationcanalsocomeintoplay,forinstance,inthecaseofabattoirsorchickenfarmswherethereisstrictgovernmentoversightofon-sitewastehandling.Biogasinthesesectorscanbepromotedbyadaptingtheregulatoryenvironmentinawaythatstilladequatelyguaranteespublichealthandsafety,butisneverthelessmoreconducivetotheproductionofbiogasfromwastes.
2. Upstreamlogisticsdealswithgettingthebiomassfromthesourcetothebiogasproductionplant.Thelattercanbeon-siteoroff-site.Thisstageisrathercapital-intensiveandcostsofon-siteandoff-sitecollectionandtransport(so-calledfirsttransportandprocessing,andtransporttodestination)areimportantfactors.Varioustaxincentives,likeaccelerateddepreciationfortrucksandmachineryusedatthisstage,canreducecosts.Lowerfueltaxesforoperatingvehiclesisanotherexample.
3. Thebiogasproductionstageismostlyaboutcapitalexpenditure(capex)andoperationalexpenditure(opex)foroperatingthedigesterandrelatedequipmenttoprocessthebiomass.
Low-interestloansorguaranteesforbuildingthecapitalequipmentcanbeused,aswellasvariouscapitaltaxincentives.Inthelattercase,oneshouldkeepinmindthat,especiallyinthestart-upphase,theremightnotyetbe(sufficient)taxableincomeagainstwhichtooffsetthetaxincentive,althoughtherearewaystoworkaroundthis,forexamplebygrantingarefundabletaxcredit.Insuchacase,thetaxtreatmentshouldallowforsufficientlylenientrulesforcarrybackandcarryforward.Theoretically,lowerlabourtaxesforworkersemployedinthissectorcouldreducecostsandstimulatehiring.SincelabourcostsandtaxesarerelativelylowinSouthAfrica,itisnotclearwhethertheeffectfromthelattermeasurewouldbesignificant.
4. Therawbiogasproductionstageisfollowedbythehighlycapital-intensiveupgradingstage.Again,low-interestloansorguarantees,andcapitaltaxincentivescouldplayanimportantroleinstimulatingbiogasproduction.Sincetheupgradingphaseisthecrucialstepinthesupplychainwhenitcomestousingbiogasfortransport(andthusnotgeneratingheatandelectricitythroughCHP),measuresatthisstagemightbeespeciallyeffectiveinpromotingbiogasfortransport.Otherthanthat,notmuchlabourisusedatthisstage,makingmeasurestargetingtheworkforcelikelytobelesseffectiveatprovidinganoverallincentivefortheproductionofbiogas.
72FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
5. Downstreamlogisticsisaboutcompression,storageandtransporttotheenvisagedoff-taker(e.g.throughtheactualorvirtualpipeline).Again,thisphaseishighlycapital-intensive,makingallthefactorsmentionedintheabovepointapplicable.Inaddition,government-providedservicesandpublicinvestmentcouldprovideasignificantboostatthisstage.Aswehaveseen,thepresentnetworkofnaturalgaspipelinesinSouthAfricaisrelativelyunder-developed.Directinfrastructureinvestmentwouldmakenaturalgasmorewidelyavailablethroughoutthecountry,andwouldencouragetheuptakeofbiogasfortransportsignificantly(providedbiogasproducerscantapintothenetwork).
6. Thelaststageofthesupplychainiswheretheoff-takeofthebiomethaneactuallytakesplace.Thatis,wheretheCBGisconsumedbyfleetownersorretailusers.Here,severalmeasurescanbecontemplated.Firstoffall,thisstageiswheretheactualtaxburdenoffuel-relatedleviesandtaxes,aswellasVAT,falls.Exemptionfromoneormoreoftheseconsumptiontaxesisarealisticoption.Guaranteedoff-takeagreementsintheformofdemandguaranteesisasecondcategoryofmeasuresthatareworthlookingat.Inthatcase,fleetownersand/orgovernmentguaranteesacertainoff-takeandtherebyreducesriskfortheproducerofbiogas.Thirdly,governmentisinthepositiontograntlicencestobuildservicestationsthatareequippedtodistributebiomethaneatstrategiclocationsthroughoutthecountry.Lastly,mandatory-blendingrequirements/regulationscanbeusedtostimulatetheoff-takeofbiomethaneatthepump.
Fromatheoreticalperspective,thisgivesawide-rangingmixofpolicyinstrumentsthatcanbeconsideredwhenpromotingbiogasfortransport.Furthermore,severaloftheseoptionscanbeappliedatmultiplestagesthroughoutthevaluechain.Thatbeingsaid,someinstrumentsarelikelytobemoreeffectiveorpracticaltoimplementthanothers.Togetageneralideaofwhatisandwhatisnotpracticable,thenextsectionlooksatsomeofthemaininternationalexperiencesinthisregard.
5.3 International policy experience
Thissectionofthereporthighlightsanumberofinternationalexperienceswithregardtogovernmentintervention,withtheaimofstimulatingtheuptakeofbiogasanditseffectiveness,asaprecursortoconclusionsandrecommendationsregardingpotentialSouthAfricansupportmeasures.
5.3.1 International policy overviewWhilethereisalotofinternationalexperiencewhenitcomestopoliciespromotingbiofuelslikebioethanolandbiodiesel,policyinterventionswithregardtobiogasarelesscommon.ThemaincountriesthatprovideusefullessonsareAustria,Denmark,Germany,Sweden,TheNetherlandsandtheUnitedKingdom.Ofthesecountries,Germany,SwedenandTheNetherlandsfeatureinthetopthreeoftheEuropeanBiogasAssociation,intermsofthetotalnumberofbiomethaneplants27.Thegovernmentsofallcountriesmentionedabovehavearelativelylonghistoryofpromotingbiogasproduction.Moreover,andpartlybecauseofthis,theyhaverelativelylargeanddevelopedbiogasmarkets.
Inpractice,itisoftenthecasethatpolicymeasuresaimedatpromotingbiogasgohandinhandwithpoliciesorlegislationpromotingbiofuelsorrenewableenergymoregenerally.Theanalysisisthereforenecessarilybroad.However,itiseasytoimaginethatmeasuresaimedatbiofuelsorrenewableenergyingeneralcouldalsobeappliedmorespecificallytothecaseofbiogas.Thefollowingtableprovidesanoverviewofthelegislationaimedattheuptakeofbiofuelsfortransportintherelevant countries.
27.http://european-biogas.eu/wp-content/uploads/2014/12/Biomethane-graph-20131.png
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Table 5.3.1: Measures aimed at promoting the uptake of biogas for transport in selected countries
Country Measure Measure
AustriaTax-incentivemechanism
Fuelsfromaminimumcontentof4.6to6.6%(dependingonthetype)ofbiogenicmaterial
aresubjecttoalowerfueltax.Mineraloilsolelyfrombiogenicmaterialisfullyexempt.
Biofuelquota/blendingrequirementBiofuelshavetomakeupadefinedpercentageofproducers’/importers’totalannualfuelsales.
Denmark
Tax-incentivemechanismEnergyproductsaretaxedacertainamount.Thisamountisreducedforfuelsblendedwith
biofuels.
Biofuelquota/blendingrequirementBiofuelshavetomakeupadefinedpercentageofproducers’/importers’totalannualfuelsales.
PromotionofRenewableEnergyActDetailedfeed-intariffsforbiomass/biogasand
otherrenewableenergysources.
Germany
Biofuelquota/GHGreductionquotaBiofuelshavetomakeupadefinedpercentageofproducers’/importers’totalannualfuelsales.
Tax-incentivemechanism
TheEnergyTaxActobligesproducers/importersofenergyproductstopayadefinedamountoftax.Taxreliefforbiofuelsexists
dependingonthetypeofbiofuel.
KfWRenewableEnergiesProgrammeProgrammethat,amongotherthings,
comprisesreduced-interestloansforupto100%oftheinvestmentcosts.
The Netherlands
Tax-incentivemechanism(EnvironmentalInvestmentRebate(MIA)/andArbitrary
DepreciationofEnvironmentalInvestments(Vamil)schemes)
Extradeductionofinvestmentcostfromthetaxableprofitforinvestmentsinbiofuels.
Tax-incentivemechanism(EnergyInvestmentAllowance(EIA)scheme)
Taxbenefitenablescompaniestowriteoffinvestmentsaimedattheeffectiveuseof
energy.
BiofuelquotaBiofuelshavetomakeupadefinedpercentageofproducers’/importers’totalannualfuelsales.
Sweden Tax-incentivemechanismFossilfuelsaretaxedwithenergyandcarbonlevies.Biofuelsareexemptfromthesetaxes.
The United Kingdom
RenewableTransportFuelsObligationLong-termmechanismrequiringtransportfuelsupplierstoensurethatasetpercentageoftheirsalesarefromarenewablesource.
Source:RESLegalandEcoMetrixAfricateamanalysis
74FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
Thetableaboveshowsthatmostcountriestypicallyrelyonataxincentivescheme,wherebybiofuelsaretaxedatalowerratethanfossilfuels,orarecompletelyexemptedfromregularconsumption/fueltaxes.TheUKistheonlyexception,inthatitdoesnotusethetaxsystemtopromotebiogas.Amandatoryblendingrequirement/quotasystemisthesecond-mostreliedonmeasure.Inaddition,Germanyhasapolicyinplacethatprovideslow-costloansforbiogasinvestmentsthroughtheKfWRenewableEnergiesProgramme.Ofthesixcountries,TheNetherlandsistheonlyonethatdoessomethingwithaninvestmenttaxbenefitinitsincometaxsystem.
5.3.2 Policy effectiveness experiencesToevaluatewhetherthesemeasureshavebeeneffectiveinstimulatingtheuptakeofbiogasfortransport,onewouldnotonlyneedtolookatthespecificpolicymeasuretoseewhethertherehasbeenanincreaseintheproductionandconsumptionofCBG.Onewouldalsohavetoestablishacausalrelationshipbetweenthetwovariables.Whilethisisinteresting,itisveryhardtodo,andonlyafewdedicatedstudieshavebeenidentifiedthathavedonethissuccessfully.
Therearemanydynamicsatwork.Itwouldrequiresubstantialdatatoestablishvalidandrobustresults.Thisisespeciallytrueinthecaseofbiogas,where,inpractice,manydifferentfeedstocksareused,withvariousyieldsunderdifferentcircumstances.Baselineemissionfactorsdifferperwaste-relatedfeedstock,aswellasthespecificenergysourcedisplacedandthetypeofbiomassandupgradingtechnologyapplied.Itisgenerallyacknowledgedthat,evenforcountrieswherelotsofdataiscollectedandtransparencyishighontheagenda,suchasincaseofGermany,TheNetherlandsandtheUnitedKingdom,itishardtocomebythenecessaryinformation.
However,internationalstudiesareavailableontheeffectsofsupportmeasuresforrenewableenergies,including,forexample,reductionsandexemptionsinenergytaxesandlevies(seeBeatonandMoerenhout,2012;Rosenbergetal.,2011;Varadarajanetal.,2012).Generally,thesestudiesfindpositiveresultswithregardtotheuseofgovernmentpolicytopromoterenewableenergyandthepotentialtomobiliseprivateinvestmentandsubstantiallyexpandtherenewableenergyindustry.Forexample,aninterestingstudyassessesthecost-
effectivenessofrenewableenergydeploymentsubsidiesforbiomasspowerintheUnitedKingdomandGermany.AnotherstudylooksmoregenerallyattheeffectofpolicyonrenewablesinrelevantEuropeanUnioncountriesandtheUSA.Athirdstudyontheimpactoftaxexemptionsandlevyreductionsontheproductionofenergyfrombiomassfindsthattheeffectissignificant.
Overall,theseresultsaresupportiveofusingfinancialincentivesincombinationwithotherpolicymeasurestopromotebiogasfortransport.TheredoesnotseemtobeanycompellingreasonwhythisshouldbedifferentinthecaseofSouthAfrica.Asaresult,itseemssafetoconcludethatgovernmentincentivescanplayapivotalroleinpromotingtheuptakeofbiogasfortransportinSouthAfricaaswell.
5.4 South African policy conclusions and recommendations
FromSection5.1.1andearlierchaptersinthisreport,itbecomesclearthatthedirecteconomicbenefitsdonotoutweighthedirecteconomiccostsinthecaseofbiogasfortransport.However,iftheSouthAfricangovernmentfeelsthattheco-benefits,assummarisedinSection5.2andelaboratedoninpreviouschapters,justifysupportingthedevelopmentoftheSouthAfricanbiogas-for-transportsector,thenitshouldfirstsupporttheeconomicviabilityofthecase.Secondly,itcandosobystructurallyalleviatingthebarriersforimplementationas outlined in Section 5.1.3.
5.4.1 CBG policy rationaleWhenlookingpurelyattheeconomiccaseforbiogas,itbecomesclearthatoneorseveralincentivepoliciesshouldbeimplementedtomakeitsuccessful,buildingoninternationalexperiencesasto(theeffectivenessof)differenttypesofincentives.Beforeidentifyingtheoptimalincentivemodel,itisusefultoidentifythesizeofthefinancialincentivethatcouldbeapplied.Onerationaletodeterminethe‘level’offinancialsupportisbylookingatdomesticandinternationalexamplesandexistinglevelsofsupportinrelationtothedifferentco-benefits.
Figure5.4.1providesagraphicrepresentationofhowthedifferentlevelsofsupportcompare,ifconvertedtorandperGJofbiogasatthepump.Thisfigureisfollowedbyanelaborationofthedifferentsupportlevels.
75
283ZAR/GJ
1.8ZAR/GJ
115ZAR/GJ
South African cost of
transport mitigation
Climate change mitigation
Domestic Domestic Domestic
Employment Market Combined
The South African carbon
tax
The cost of climate change, the Stern Review
Job creation EU green-field subsidy programmes
US green-fuel subsidy programmes
Spread across rationales
69.3ZAR/GJ3.6ZAR/GJ
94.6ZAR/GJ
29.4ZAR/GJ 46.1ZAR/GJ
166ZAR/GJ
87.2ZAR/GJ
137ZAR/GJ
198ZAR/GJ
283 ZAR/GJ
1.8 ZAR/GJ
International International International
Figure 5.4.1: Biogas-for-transport incentive rationale range
Asisapparentfromtheabovefigure,thedifferentdomesticandinternationalrationalesareeitherdrivenbyclimatechangemitigation,employmentormarket-basedfactors.Thefollowingsixrationaleswereapplied:
• South African cost of transport mitigation (climate change mitigation):TheGHGMPA(DepartmentofEnvironmentalAffairs,2014)estimatesthatthemitigationcostsforsecond-generation(organicwaste-based)biofuelswithinthecountry’stransportsectorliesintherangeofR936toR1554/tCO2e between2020and2050.Atacarbonintensityofpetrolat74kgCO2e/GJ,thiswouldequatetoR69,30toR115,00/GJ.
• The South African carbon tax (climate change mitigation): InMay2013,NationalTreasuryreleasedtheCarbonTaxPolicyPaper(NationalTreasury,2013)forpubliccomment.Atthetimeofwritingthisreport,thedraftcarbontaxlegislationbasedonthepolicypaperwasbeingreviewedbyCabinet.Inessence,theproposedcarbontaxappliesa R120/tCO2eonanumberofcarbon-intensivesectors.Thetaxisproposedtobeimplementedin2016andappliesanumberofdiscountsdependingon,amongotherthings,theprofileofthetaxedentity.Assuch,itresultsinaneffective‘costofemission’thatliesintherangeofR24/tCO2etoR48/
tCO2e.Althoughthetransportsectoriscurrentlyexcludedfromcarbontaxandthetaxconstitutesacostandnotanincentive,itcouldprovidearationaleforthepotentialbiogas-for-transportsubsidy.ConvertedintorandperGJ,thissubsidywouldlieintherangeofR1,80toR3,60/GJ.
• Job creation (employment): UndertheGro-EScheme(theIDC’sfundaimedatdrivingjobcreation28),abenchmarkofaroundR500000investedshouldresultinonejobcreatedasaresultoftheinvestment.AsdetailedinSection4.3.1,alongthebiogas-for-transportvaluechain,therealisationofthefullbiogaspotentialwithinthecountrycouldresultinbetweenalowerrangeof2 324 and an upperrangeof14248additionalfull-timejobs.Atanenergycontentof23MJ/Nm3,thisrelatestoanincentiveintherangeofR46,10toR282,90/GJ.
• The cost of climate change, the Stern Review (climate change mitigation): In2006,theBritishgovernmentpublishedtheSternReviewontheEconomicsofClimateChange(Stern,2006).Thereport,statesthatthecostsofstabilisingtheclimatearesignificant,butmanageable,andthat
28.http://www.capricornfm.co.za/ads_html/idc/Creating%20jobs%20through%20efficiency.html
76FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
delaywouldbedangerousandmuchcostlier.Viaanumberofiterations,thereportindicatesthatthecostofmitigationformeaningfulactionshouldliesomewhereintherangeofUS$32/tCO2e to US$103/tCO2e.Applyingarand-dollarexchange rateof12.41andacarbonintensityofpetrolof 74kgCO2e/GJ,arangeofR29,40toR94,60/GJiscalculated.
• EU Green Fuel subsidy programmes (market): AcrosstheEuropeanUnion,thereisawiderangeofsubsidiesfordifferenttypesof‘greenfuels,’suchasbioethanolandbiodiesel.Accordingtothe2010updateofastudyonbiofuelsubsidiesintheEuropeanUnionfortheGlobalSubsidiesInitiative(GSI)oftheInternationalInstituteforSustainableDevelopment(IISD)(Jung,2010),governmentsupportfromtheEUanditsmemberstatesequatedtoapproximately€0,24and€0,22perlitreconsumedin2008.Convertedtoarand-per-GJequivalent,thiswouldindicatesupportintherangeofR137/GJtoR189/GJ.
• US Green Fuel subsidy programmes (market):Atastateand/orfederallevel,theUSAhasimplementedarangeofGreenFuelsubsidyprogrammes,predominatelyforethanolandbiodiesel.Oneofthestudies,partofaseriesofreportsaddressingsubsidiesforbiofuelsinselectedOrganisationforEconomicCooperationandDevelopment(OECD)countries(Koplow,2007),indicatesthatthesubsidiesperunitofenergyforthedifferenttypesofgreenfuelsfluctuatebetweenUS$11/GJandUS$14.50/GJ,dependingonwhatbenchmarkyear
between2006and2012isreviewed.Atarand-dollarexchangerateof12.41,thiswouldequatetoasetofsubsidiesintherangeofR136,50/GJtoR198,40/GJ.
Whenlookingattheabove,thelevelofsupportthattheSouthAfricangovernmentcouldprovidetowardsthedevelopmentofbiogasforthetransportsectorcouldlieintherangeofR1,80/GJtoR282,90/GJwhen‘pegged’withintherangeofdomesticorinternationalrationalesthatexist.IfthisrandperunitofenergybasisweretobetranslatedintoarandperGHGemissionrange,thiswouldequatetobetweenR24/tCO2eandR3800/tCO2e. However,inunderstandingthesefigures,itisimportanttoconsiderthattheyincludeseveralnon-GHGmitigationco-benefits,nowexpressedasGHGmitigationbenefits.
5.4.2 CBG stimulus scenarioAsindicated,thedirecteconomicbenefitsdonotoutweighthedirecteconomiccostsinthecaseofbiogasfortransport.If,consideringtheco-benefitsasdescribedinSection5.1.2,theSouthAfricangovernmentdecidesthatthereissufficientcausetoincentiviseandsupportthedevelopmentofthebiogas-for-transportsector,thenCBGshouldbemadecompetitiveatthepumpincomparisontopetrolandCNG.ThiscanberealisedbyapplyingthesameincentivesthatarecurrentlyinplaceforCNG,inwhichCNGismadecompetitiveincomparisontopetrol.Theseincentivescanbeextendedwithoneorseveralincentivesthatpurelytargetthedevelopmentofthebiogas-for-transportsector.Thefollowingfigureprovidesaschematicoverviewofthesestaggeredincentives.
77
CNGincentives
Totals
CBGincentives
(471) (83)
(39)(350) (1.8) (348) (142) (283)
(207)
(67)
Application of CNG incentives to CBG Low incentive Medium incentive High incentive
CNG gross price
CNG informaltax
incentive
CNG vehicle
conversion subsidy
CNG pump price
equivalent
CBGlowrationale incentive
Low incentive
CBG pump price
equivalent
CBGmedium rationale incentive
Medium incentive
CBG pump price
equivalent
CBGhighrationale incentive
High incentive
CBG pump price
equivalent
Figure 5.4.2: Biogas-for-transport incentive rationale range
Itisoutsidethemandateofthisstudytodescribethemagnitudeofthepotentialstimulusmeasuresthatarespecificforbiomass-for-transportutilisation.However,thefigureaboveappliestherangeastakenfromSection5.4.1toprovideanindicationofwhattheminimumandmaximumlevelsofstimuluscouldbeiftheSouthAfricangovernmentdecidestoapplyanincentivethatlieswiththedomesticandinternationalrationale.
5.4.3 Envisaged policy interventionsGivenalloftheabove,acompellingcasecanbemadeforgovernmentinterventiontopromotetheuptakeofbiogasfortransportanddevelopasustainableandthrivingbiogasindustryinSouthAfrica.Thereareanumberofelementstothis.Firstofall,theeconomicandsocialupsideofapolicytothisendneedstobesufficientlylargetojustifyanypolicyintervention.Aswehaveseen,therearesubstantialco-benefitstotheSouthAfricaneconomyregardingtheuptakeofbiogasfortransport.Theseneednotonlyrelatetotheoverallmitigationpotential,additionaljobscreatedandfuelimportssubstituted,andhencerelianceonforexreduced.Theycanalsoincludeenhancedenergysecurity,diversificationoftheenergymixandaclearfirst-moveradvantage.Moreover,atalocallevel,considerableimprovementsinurbanairqualitycouldbeachieved.
Asecondaspectinvolvesthetypeofpolicyinstrumentused.Here,onecanbuildforwardonthehigh-leveltheoreticalframeworkforpolicyinstrumentsdevelopedinthisstudy.Itisimportanttotakeintoaccounttherelevantinternationalexperienceinthisregard.Governmentsrelyondirectsubsidies,taxmeasuresand/orregulationtoaffect(market)outcomes.Theaboveanalysisindicatesthatfuel/consumptiontaxreductionsorexemptionsarethemostcommonlyusedmeasuresinternationally.Theyarealsoeffectiveintermsoftheultimateresult.Moreover,animportantfeatureofpositivetaxincentivesisperhapsthatthesearemorepracticaltoimplement.InternationalexperiencedemonstratesthatitisoftenpoliticallyeasiertogetpositivetaxincentivesthroughParliamentthandirectsubsidies,thelatterbeingonbudgetwithahighervisibilityvis-à-visothergovernmentexpenditures.Theseinstrumentsarealsomarket-basedandtherefore,inmanycases,preferredtoregulationintermsoftheoveralleconomicefficiencyofthepolicy.
Thethirdconsiderationrevolvesaroundthesizeofthestimulusprovided.HeretheanalysisshowswhatisnecessarytoplaceCBGonacompetitivefootingcomparedtopetrolanddieselatthepump.AnexemptionforCBGfromroadtaxandotherfuellevies,
78FACILITATION OF LARGE-SCALE UPTAKE OF ALTERNATIVE TRANSPORT FUELS IN SOUTH AFRICA
butincludingVAT,asiscurrentlythecaseforCNG,anda10%subsidyforvehicleconversion,ascurrentlyprovidedbytheIDC,couldbesufficienttoachievethatgoal.Inadditiontothis,theanalysisindicatesthat(further)incentivisationofuptoR283/GJwouldbeinlinewithdomesticandinternationaloutlaysforsustainabledevelopmentinthetransportsector(seeFigure5.4.1).
Importanttonoteinthisregardisthatexemptionfromfuel-relatedtaxesandlevieswillnotbesufficientintheabsenceofregulatoryuncertaintyarounditscontinuation.Becauseitconcernslong-terminvestments,boththesizeoftheincentive,aswellasforhowlongtheincentivewillbeinplace,mustbeclearfromtheonset.Thisisanotherreasonwhyataxincentiveispreferableoverasubsidy.Thelatterismorefrequentlysubjecttochangewhenbudgetschange,forexamplewhenanewgovernmentcomestopower.Hence,whilebothpolicyinstrumentsshouldbeabletoprovidethesamekindofstimulus,ataxincentivewillgenerallydosowithlessregulatoryuncertaintyfortheinvestor.
Allthingsconsidered,thecaseforbiogasfortransportaprioricouldbeviewedasastrongone.Theinternationalevidenceissupportiveofmeasurespromotingbiogasanditseffectiveness.ThebenefitstotheSouthAfricaneconomyanditssociety,asanalysed,aresubstantial.Thisleavesuswithafinalpoint,whichconcernsthebroaderenvironmentandconditionssurroundingthecreationofasuccessfulbiogasindustryandmarketinSouthAfrica.
Toseizetheopportunityandfullyreapthebenefits,ahands-onapproachiscalledforfromallstakeholdersinvolved.Thebiogasmarketislikelytotakeoffandevolvequicklywiththecompletionofafewsuccessfulprojects.Forthis,interactionandconstructivecollaborationbetweentheprivateandpublicsectoris essential. Forums like SABIA are ideally suited to providethenecessaryinputsandconsultationstocometoasensibleandworkableapproach.Thetechnologyisthere.Variousstakeholderengagementsshowthatthewillisalsothere.ThisshouldallbutguaranteeunlockingthefullpotentialofbiogasfortransportinSouthAfrica.
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Appendix – List of stakeholdersDuringthecourseofthisstudy,severalstakeholderswerecontactedfromboththeprivateandpublicsector,includingthefollowing:
• BronkhorstspruitBiogasPlant• BiogasPlatform• BiogasPower• BiogasSA• CapeAdvancedEngineering• CityofCapeTown• CityofeThekwini• CityofJohannesburg• CityofTshwane• ClarkeEnergySouthAfrica• CNGHoldings• DepartmentofEnergy• DepartmentofEnvironmentalAffairs• DepartmentofTransport• DeutscheGesellschaftfürInternationale
Zusammenarbeit(GIZ)• EBFGroupofCompanies• ElginFruitJuices• Ener-GSystems• Gas2Power• IndustrialDevelopmentCooperation• JohannesburgWater
• Mondi• NationalBiogasPlatform• NOVOEnergy• OceanaGroup• PaperManufacturersAssociationofSouthAfrica• Pikitup• ProvincialVeterinaryServices• Re-energiseAfrica• SAPPI• SASOL• Selectra• SouthAfricanBiogasIndustryAssociation• SouthAfricanCaneGrowersAssociation• SouthAfricanCitiesNetwork(SACN)• SouthAfricanFruitJuiceAssociation(SAFJA)• SouthAfricanLocalGovernmentAssociation• SouthAfricanNationalEnergyDevelopmentInstitute• SouthAfricanSugarAssociation• Trade plus Aid• UhuruEnergy• UNIDO/GEFWaste-to-EnergyBiogasProject• Xergi
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