Financial Analyses of Biogas to Bio CNG projects in India; Projections based case study analyses

Dhawal Parate

Green Brick Eco Solutions, New Delhi

Introduction

India is the fourth largest energy consumer[1] in the world, after the United States, China, and Russia. Despite a slowing global economy, India’s energy demand continues to rise. As vehicle ownership expands, petroleum demand in the transport sector is expected to grow in the coming years. While India’s domestic energy resource base is substantial, the country relies on imports for a considerable amount of its energy use.

According to the International Energy Agency (IEA), hydrocarbons account for the majority of India’s energy use. Together, coal and oil represent about two-thirds of total energy use. Natural gas now accounts for a seven percent share, which is expected to grow with the discovery of new gas deposits.

Fig 1: Total Energy consumption of India[2]

According to Oil and Gas Journal, India had approximately 38 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2011. EIA estimates that India produced approximately 1.8 Tcf of natural gas in 2010, a 63 percent increase over 2008 production levels. The bulk of India’s natural gas production comes from the western offshore regions, especially the Mumbai High complex, though fields in the Krishna-Godavari (KG) are increasingly important.

Despite the steady increase in India’s natural gas production, demand has outstripped supply and the country has been a net importer of natural gas since 2004. India’s net imports reached an estimated 429 billion cubic feet (Bcf) in 2010.

Potential of Biogas/Bio CNG

As per MNRE data, the total biogas potential, in terms of electrical Power, is estimated at 1281 MWe. The major industries generating biogas are Distillery, Sugar, and Starch. These three, together, account for 3/4^th of the total biogas potential of India.  The other major industries are Pulp and paper, Milk processing, Slaughter house, and Poultry.

Bio CNG is the purified form of Biogas where all the unwanted gases are removed to produce >95% pure methane gas. Bio CNG is exactly similar to the commercially available natural gas (CV: ~52000 KJ/Kg) in its composition and energy potential. As it is generated from biomass, it is considered a renewable source of energy and thus, attracts all the commercial benefits applicable to other renewable sources of energy.

Bio CNG can directly replace every utility of LPG and CNG in India. It has the potential to be the future of renewable fuel because of the abundance of biomass in India. Bio CNG production will also ease the burden of NG/LPG import for India. It is estimated that Bio CNG can replace 2/3^rd of India’s NG import which is currently pegged at 429 billion cubic feet.

Table 1: Cost of Energy of Fuels in India

Fuel	Calorific Value (KJ/Kg)	Tariff/ Rate/ Cost	Cost of Energy (KJ/Rs.)
CNG	52000	Rs. 42/Kg	1238
Bio CNG	52000	Rs. 35*/Kg	1485
LPG (Commercial)	46000	Rs. 65.7/Kg	700
Petrol	48000	Rs. 65.5/Ltr	550
Diesel	44800	Rs. 41.3/Ltr	900

* Based on Cost of Production estimation

Bio CNG production is very cost effective making it one of the cheapest fuels in India. Commercial LPG is the costliest fuel and thus, replacement of commercial LPG with Bio CNG makes for a profitable business model.

Biogas to Energy projects alternatives

Biogas is a mixture of primarily 2 gases with the composition of 55-60% CH4 and remaining CO2 with traces of H2S and moisture. Biogas is a fuel gas with a calorific value of ~ 22,000 KJ/Kg. The biogas projects can be broadly classified into 2 categories:

-          Biogas to Electric Power

-          Biogas to Bio CNG

In the power project, biogas is first cleaned of H2S and moisture and is then fed into a power generating unit for conversion to electricity. There is no need to remove CO2, but removal of H2S becomes important due to the corrosive nature of the gas. In the case of Bio CNG production, biogas is cleaned of H2S and CO2 to produce 95% methane gas. The bio CNG produced is then compressed and bottled for transportation to the utility site.

Biogas based power generation projects have existed in India for a long time. Most of the biogas generating industries in India are using this gas for power generation only. The concept of Bio CNG is fairly new in India. It has started to gain momentum and it is expected to become a formidable alternative to power generation.

Financial Analyses

Global studies have conclusively proved the financial superiority of bio CNG projects over the power generation projects. In some cases, the profitability of Bio CNG has been shown to be 5 times more. As a matter of convenience, we can do a simple back of the envelope calculation and validate the same (refer table 2)

Table 2: Biogas equivalency with Power and Bio CNG

	Power	Bio CNG
1 cum of Biogas equivalent	2.1 KWh	0.45 kgs
Rate of Sale (Net)	Rs 5 / KWh	Rs 50/Kg
Value	Rs 10.5	Rs. 22.5

* Based on best known industry data

The value of the product generated from 1 cum of biogas is more than twice for Bio CNG. The revenue realization in this case is more than double. Even with a slightly higher operating cost and comparable capital cost, Bio CNG is clearly a more profitable alternative.

For the sake of this report, we shall further limit the financial analyses to the case of a Bio CNG project only.

Project Assumptions

Currently, there are no large scale bio CNG projects in regular operation in India. A few plants are under commissioning but it will take a few months before reliable data can be generated. The unavailability of actual data limits this study to a projections case. The base case estimations and values have been taken for the financial analyses in this report.

The sample project is for an industrial scale plant.  It is assumed that the biogas digesters already exist in the industry. Biogas is being directly purchased from the industry and hence, the only output from the project is Bio CNG. Thus, in this assumption, the biogas generation cost is not included. The capital cost only includes H2S and CO2 scrubber along with HP compressor (250 bar) and cylinder cascades.

Table 3: Project Assumptions

Details	Value	Unit
Plant Capacity	500	Cum/hr
Project Cost	7.64	Cr
Equity Contribution	30	%
Debt	70	%
Interest	12	%
Net Bio CNG Sale cost	40	Rs/Kg
Cost of Biogas	4.8	Rs/Cum
IDC capitalized	Yes
PLF (stabilization period)	80	%
PLF (Stable)	90	%
Biogas methane content	60	%
Bio CNG methane content	95	%
Power Consumption per hour	300	KWh
Cost of Power	5.5	Rs/KWh
Avg. Transportation distance	15	Kms
Cost of transportation	20	Rs/Km
CER certificates	Applicable*

* Refer section Emission Reductions

Appropriate assumptions have been taken to account for the Administrative, Personnel, contingency, working capital, provision periods, escalations etc.

No Central Finance Assistance (CFA) has been considered in this financial projection. With the 12^th five year plan yet to be notified, no reliable subsidy value is available for calculation.

Depreciation

As per Income Tax Act, 1961, Specified Air Pollution Control Equipments and Water Pollution Control Equipment are eligible for 100% depreciation on the cost of equipment in the 1^st year itself.

Specified Air Pollution Control Equipment are:

-          Electrostatic Precipitation Systems

-          Felt – filter systems

-          Dust Collector systems;

-          Scrubber counter current/venture/packed bed/cyclonic scrubbers

-          Ash handling system and evacuation system

 Under the IT act, CNG conversion kits and the scrubber units for gas purification are eligible for 100% depreciation benefit. The classification of these equipments as air pollution units has to be scrutinized on case to case basis.

Return on Investment

The bio CNG project shows a very optimistic financial viability. The investor payback is around 2-3 years. This is understandable as the sale price of Bio CNG can be matched to commercial LPG prices. The interest on term loan has been taken at 12% which can be further decreased by taking debt from organizations such as IREDA. Furthermore, the terms of interest payment are further relaxed on the loan taken from IREDA making the project viability better. For eg: IREDA offers a better moratorium period compared to a private banking institution.

Table 4: Investment IRR values at different exit

Investment IRR		Value
IRR Exit in Year 5 @ Forward EBITDA 2x		81.0%
IRR Exit in Year 6 @ Forward EBITDA 1.5x		76.5%
IRR Exit in Year 9 @ Forward EBITDA 1x		74.6%

The project shows high cash flows resulting into faster payback. From table 5, the investor NPV is high. This has resulted from the 70:30 debt /equity ratio for the project. Higher debt will result in higher investor returns.

Table 5: NPV and payback values

	for project	for investor
Year of Payback	4.0	2.0
NPV (Lakh)	334.5	643.81
WACC (compounded)	15.00%

Sensitivity Analyses

A sensitivity analysis has been conducted to understand the implications of cost fluctuations on the overall project profitability. This will also provide an insight into the future bargaining power of different stakeholders of the project.

The highest sensitivity is for the price of Bio CNG sale and the cost of raw material. Slight fluctuations in these parameters will have large impact on project profitability as compared to any other parameter. This essentially means that these costs have to be effectively controlled in the future. For a Bio CNG project developer, one of the biggest risks is the cost of raw material which is controlled by the biogas/biomass producer. The seller can escalate the cost at will. To mitigate this, the developer should consider involving the seller as an important stakeholder in the project. The other big risk is at the buyer end, where the prices of other fuels will govern the sale price of bio CNG. Conventional wisdom dictates that the cost of other non-renewable fuels will be on the rise in future and bio CNG will remain profitable. Thus, only some form of policy intervention, in terms of subsidies on fuel, can put pressure on pricing for Bio CNG. Investor should also lay emphasis on fixing long term contract for power purchase for the project, with periodic review, to mitigate arbitrary fluctuations in power cost

Fig 2: Sensitivity Analysis of Key parameters

Emission Reductions

Bio CNG project is eligible for CDM and will get CERs for reducing carbon emission. CDM calculation methodology for Bio CNG project is available on the website of UNFCCC. The baseline emissions of gasoline or LPG are considered to calculate the CER for Bio CNG project. Depending on the utility of Bio CNG, the CER calculation will vary. Value of CER generated has not been considered in the financial analyses of this report. Any CER benefit will further enhance the profitability of a Bio CNG project. REC is not applicable for Bio CNG bottling and sale project. It is only applicable for power generation.

Conclusion

Bio CNG projects are more financially attractive compared to biogas to power. It is expected that Bio CNG will become the more preferred alternative in the years to come. Despite being ineligible for RECs, Bio CNG projects have better viability. Sensitivity analyses show the critical price points for making this project viable. Any developer with a sufficient control over the gas and raw material prices will make substantial profits.Globally as well there is a lot of interest being shown in Indian Bio CNG projects. Various global investment firms are looking for strategic tie-ups with the India project developers and industries. This will lead to lot of fund infusion in this sector and accelerate the growth rate.

Note: The analysis has been done for a sample base case and as per the best available industry data. Independent financial analyses still needs to be done for each project

Dhawal Parate

Green Brick Eco Solutions Pvt. Ltd.

dhawalparate@gbes.in,   www.gbes.in

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[1] Annual Energy Outlook 2011 - EIA

[2] Source: The International Energy Agency 

The greenest and the most sustainable technology for waste water treatment

Soil Bio technology

 IIT Bombay Technology

Covered by US patent 6890438 B2 and 2 other Indian patents

1.     What is Sewage/Waste Water

Sewage/ Wastewater – is essentially the water supply of the community after it has been fouled by a variety of uses.  From the standpoint of sources of generation, waste water may be defined as a combination of the liquid (or water) carrying wastes removed from residences, institutions, and commercial and industrial establishments, together with such groundwater, surface water, and storm water as may be present. 

 

Generally, the wastewater discharged from domestic premises like residences, institutions, and commercial establishments is termed as “Sewage / Community wastewater”. It comprises of 99.9% water and 0.1% solids and is organic because it consists of carbon compounds like human waste, paper, vegetable matter etc. Besides community wastewater / sewage, there is industrial wastewater in the region. Many industrial wastes are also organic in composition and can be treated physico-chemically and/or by micro-organisms in the same way as sewage.

2.     Basic philosophy of Waste water treatment

The waste water treatment process involves breakdown of complex organic compounds by the means of oxidation. In a typical STP, effluent quality is primarily dependent on effectiveness of aeration. Conventional waste water treatment processes use aerators (blowers) to fulfill the oxygen demand. As air contains only 20% of oxygen and the rest is nitrogen, this process is highly inefficient. Further, diffusion coefficient of oxygen in water is lower (~10^-9 m²/s) than that in soil (~10^-4 m²/s). This implies that oxidation of pollutants is much easier if done in soil than that in water.

3.     What is Soil Bio-Technology

3.1  Introduction

Human and animal habitations generate large quantities of organic wastes. In modern urban environment these wastes accumulate in our neighborhood and endanger the health of our lifeline – the land, water and air. Traditionally organics have always been returned to soil. However, the urbanization phenomenon of the last 50 years these practices have fallen in to disuse.

Water is a scarce resource. Water treatment provides usable water for domestic agricultural & industrial purposes; helps to conserve & enhance water in quality & quantity; in addition prevents degeneration of our water sources of surface & ground. Therefore, a total water purification solution is the need of the hour. Green technologies today provide impressive water quality at competitive costs without contributing to global warming. This technical specification presents a green biological purification engine using a natural novel high efficiency oxidation process variably known as SBT (Soil Biotechnology) developed at IIT Bombay by Prof H. S. Shankar & his students. Soil Biotechnology (or SBT) is covered by one US patent (Patent no 6890438 B2) and 2 other Indian patents all assigned to IIT Bombay.

3.2  Process

The technology is based on a bio-conversion process where fundamental reactions of nature, namely respiration, photosynthesis & mineral weathering take place in a media housing micro & macro organisms which bring about the desired purification. SBT is an oxygen supplying biological engine and so the process can treat all types of waste water – domestic, municipal & industrial. SBT is suitable for treating water with salinity <2500mg/L.

The process requires mesophyllic temperatures; so where the ambient temperatures very low (< -5°C) a greenhouse infrastructure appropriate for the local conditions houses the SBT plant. However the process can work at high ambient temperatures.

The facilities of a treatment process for water & waste water consists of a raw water tank, bioreactor containment, treated water tank and where appropriate  a greenhouse and associated piping, pumps & electrical.

The waste water is collected in a collection tank where primary settling takes place. After this the water is pumped over the bioreactor where it trickles into the bed and treated water gets collected in the filtrate tank. Recirculation pumps are provided to obtain desired hydraulic retention times; in general purification to desired quality is achieved in one pass and so these recirculation pumps are not used.

The scheme for drinking quality raw water, swimming pool water, rain water & storm water & waste water treatment are identical to description above

The layout of media on the bioreactor is shown in Fig 3.2 .The specific layout engaged depends on site conditions.

Fig 3.2: Layout of SBT Media for waste water treatment

3.3  Building & equipment

SBT plant is essentially a civil structure. However the civil structure can be also all steel, if required; for small capacities this may be ideal.  It comprises of containment, bioreactor containment & a pump room and piping & pumping arrangements.

Water treatment: Raw water tank, treated water tank & bioreactor containment, pump cum store room constitute the civil structure of the SBT plant. Fig 3.2 shows the types of layout of media; several other alternative layouts are also available but not shown here. The choice of media layout depends on process requirements. The civil structure of the SBT plant is typically of stone rubble or RCC, steel and sometimes soil embankment.

In addition a green house infrastructure for very cold climates also forms a part of the SBT plant; the green house infrastructure is typically a bought out item. The piping system for the SBT plant is typically of 8 kg/cm2 HDPE pipes; but PVC & GI or other materials as per site conditions. All valves compatible with high pressure corrosion free service is fine for SBT plant.

Pumps are typically self priming & submersible type as per site conditions. All electrical cables switches alarms monitors & displays are as per design & safety requirements of the process on hand.

The details above also apply for primary purification of raw water from surface sources for drinking purposes; also for rain water, storm water, swimming pool water treatments. For these applications the SBT treated water is subjected to disinfection as per norms prior to delivery to end user.

3.4  Construction of SBT plant

Water purification Process Specification: The specifications for containment & bioreactor required to treat water & waste water, solid & hospital waste are obtained from process models & laboratory investigations.

The construction of the SBT plant involves essentially civil works; design follows standard civil engineering procedures. 

3.5  Safety

The SBT process involves no moving parts excepting feed & discharge pumps. So safety needs are minimal. However gloves & gum boots are required while handling solids and during movements in the plant area so that accidental fall into tanks are avoided. Accordingly all tanks are provided closures and ladders.

3.6  Personnel training

Personnel training required are i) routine pump operation & maintenance ii) routine O&M of plantations. These instructions are imparted during commissioning and trial run period.

3.7  O&M of SBT Plant

The water purification plant works on the principle of Soil Biotechnology that applies the biochemistry of nature in a concentrated manner. It aims at enriching soil & extracting excellent water for use in drinking, irrigation, fisheries, industries & construction & fire- fighting.

O&M of pumps & pipes: All pumps should be run daily to ascertain maintenance requirements. All monitors & alarms should be checked daily. All pipe ports should be maintained daily to ensure that water flows out of all the ports. All valves & fittings should be checked and where faulty should be restored.

Plantation: The plantation on the bioreactor and surroundings should be regularly watered pruned, replaced and provided with manure as required.

Tanks: All tanks should be cleaned thoroughly as per norms (once in a year).

3.8  Advantages of SBT

SBT is an oxygenation engine that outperforms conventional technologies like Activated Sludge Process (ASP), Sequential Batch Reactor (SBR), Membrane Bio Reactor (MBR) and Moving Bed Bio reactor (MBBR). Our technology harnesses a special set of biochemical reactions to deliver the oxygenation required for effluent treatment. 

In conventional technologies, aeration is achieved mechanically, which is very energy intensive. At higher ambient temperatures (like in India) the solubility of oxygen in water is low, therefore energy requirements of mechanical aeration used by conventional technology increases. Moreover, air contains only 20% oxygen, the rest being nitrogen that is passed into water wastefully, further adding to process inefficiency.

SBT resolves this problem using a biochemical method of oxygenation, which not only uses the atmospheric oxygen, but also uses the nitrogen from the atmosphere in a specially engineered natural ecology to achieve the desired level of purity. In addition conventional technologies generate large amount of sludge for which additional disposal facilities have to be created. SBT does not face any such problems.

Advantages of SBT:

-    Complete water recycling resulting in reduced water intake

-    Oxygen rich and completely odour free treated water

-    Capable of delivering drinking water quality

-    Low/negligible operation and maintenance cost

o   No moving parts

o   No skilled workers required

o   Significantly reduced energy consumption

-    Highest rate of Return On Investment (ROI)

-    Forms a part of green cover in the layout

o   It is installable on any available land area irrespective of the shape

3.9  Disadvantages of SBT

-          Marginally higher capital requirement (~1.3 times)

o   Compensated by highest ROI among all technologies

-          Bigger land area requirement

o   The installation site will form a part of the green cover

3.10   Conclusion

SBT is a novel green technology for purification of air & water & for processing of organic solids.

4.     List of SBT plants in India

SBT has been successfully implemented across industries and housing societies. The capacity of installations ranges from 1 kLD to 3 MLD.

Following are some selected implementations:

Railways

-          Mumbai Rail Vikas Corporation, Mumbai (2011)

Industries

-          Naval Dockyard, Bombay (2000)

-          Vazir Sultan Tobacco, Hyderabad (2004)

-          Godrej, Pondicherry (2009)

-          Navneet Publications, Silvassa (2011)

Housing societies

-          Naval Housing Colony, Bombay (2001)

-          Shamik Builders, Lonavala (2009

Resorts

-          Bombay Presidency Golf Club (1996,2003)

-          Shilim Resort, Lonavala (2008)

-          Nature Trail, Lavasa, Pune (2009)

Schools/Universities/Ashrams

-          Beru Ashram Badlapur (2003)

-          University of Hyderabad, Hyderabad (2005)

-          IIT Bombay, Mumbai (2006)

-          Vanvasi Kalyan Ashram, Mangoan (2008)

Hotels

-          Taj Kiran, Gwalior (2003)

Municipal Corporations

-          Bombay Municipal Corp., Mumbai (2006)

-          Kalyan Dombivli Municipal Corp.(2009)

Airports

-          Maharana Pratap Air Port, Udaipur (2007)

Hospitals

-          Foundation for Revitalisation of Local Health Traditions, FRLHT Bangaluru (2010)

-          Command Hospital Air Force, CHAF Bangaluru (in progress)

5.     FAQs

Q.1. Why Soil Biotechnology?

All existing technologies are aquatic and require intense aeration and hence have high energy consumption. In contrast in SBT uses lithospheric environment with diverse microbiology. Very low energy consumption & internal oxygen generation are some prominent features of this green technology.

Q. 2. What are the economic features of SBT (typically for 1 MLD)?

Land:  800 to 900 m²

Investment: Rs. 120 to 130 lakh

O&M cost:  Rs. 3 - 3.5 per cum

Power: 0.03 to 0.05 kWh/cum

Q. 3. What is meant by media, culture & additives in SBT?

SBT houses an engineered ecology of formulated media containing selected micro- and macro-organisms such as the geophagus worm, ammonia oxidizers, nitrifiers,  enitrifiers, proteolytic bacteria, actinomycetes protozoa, naked amoebae, flagellates, and ciliates etc. which are cultured to maintain the required soil microbial ecology. Refer US patent (Shankar, 2005) for details.

Q. 4. What is the scope for Carbon credit in SBT (for 1 MLD)? 

There is scope for Carbon credit of 100 tonnes of CO₂ currently selling U $ 12 per ton CO₂

Q. 5. What is the effluent quality of SBT?

	Influent	Effluent Water Parameters for different technologies						Drinking Water Source Standard
		ASP	SAFF	MBBR	SBR	MBR	SBT
COD	500-600	50-100	50-100	50-100	50-100	<20	<10	10
BOD	300-400	30	20	20	30	<3	<5	3
DO	~0	~2	~2	~2	~2	~2-3	~5	>4
TSS	200-250	10	10	10	10	<2	10	NA

*All values are in mg/ltr

Q. 6. What is retention time in SBT?

Typical Retention time in SBT is 3- 5 hrs for 99 % COD removal. 

Q. 7. What is the minimum size or capacity we go for SBT?

Any capacity can be built. It is applicable for as small as 0.5 KLD to hundreds of MLD. Other technologies are not viable at less than 10 MLD. So for small scale SBT is particularly suitable.

Q. 10. Is it fit for industrial wastewater or not?

SBT can be used for removing organics from industrial or domestic sewage.

Q. 11. What is the capital and maintenance costs associated with SBT? Is return of investment (ROI) possible in case of SBT?

Actually compared to other available technologies like ASP, SBR, MBR, CW, the cost is very low (practically nil).

Comparative technology commercials are as follows:

	ASP	SAFF	MBBR	SBR	MBR	SBT
Capital Cost  (per 100kld treatment plant) in Lakhs	8-9	12-13	17-18	11-13	Depends on membrane	18-20
Operational Cost (includes manpower, chemical & electrical expenses) in Rs/kl	~12	~12	~10	~12	~22	~3

ROI calculation for different technologies has been carried out and is presented below. The cost of treated water (sellable) is assumed to be INR 15.

	ASP	SAFF	MBBR	SBR	MBR	SBT
Projected yearly revenue for 100 KLD (in Rs.)	1,09,500	1,09,500	1,82,500	1,09,500	-2,55,500	4,38,000
Payback Period (in yrs)	7.3	11.0	9.3	10.0	-5.9 (no ROI)	4.1

Q. 12. Does SBT works in high salinity?

Yes, but only up to 2500 ppm. Beyond that with special measures and salinity control system is required.

Q. 13. What is the function of plantations? Is some particular type of plants or any depending upon the region?

Plantations are the bio-indicator of health of SBT; whether system is working well or not. If plants show signs of wilting mean low pH so additive, flow control management is required   

Q. 14. Can we use SBT for groundwater recharge?

Yes, we can use SBT for GW recharge. Treated wastewater as per norms of GWR and

send it to ground which recharge the GW level and replenish the wells.

6.     Contact Details

Green Brick Eco Solutions Pvt. Ltd.

Website: www.gbes.in

Sandeep Garg (B.Tech, IIT Delhi)

+91-9911189892

sandeepgarg@gbes.in

Dhawal Parate (B.Tech IIT Delhi)

+91-9818787067

dhawalparate@gbes.in