Capacity-cost and location-cost analyses for biogas plants in Africa

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Abstract

Many rural African communities are characterised by low population densities and are remotely situated, making centralised energy generation and transmission prohibitively costly and inefficient due to greater transmission and distribution losses. Beyond certain breakeven distances from the grid, implementation of decentralised energy generation, e.g. from biogas could be more cost effective. Biogas plant serves the dual purposes of reducing environmental pollution and generating energy. This paper investigates the significance of scale economies with increasing plant capacity and the effect of location on the capital investment cost of African biogas plants. Whilst the conventional financial wisdom in the process industry is that larger installations have advantages resulting from economies of scale, the regression analysis of the investigated 38 biogas installations from twelve African countries indicates that such economies of scale do not exist in the small to institutional scale biogas sector, as the cost capacity factor obtained exceeds unity (n = 1.20), and is significantly different from the conventionally used “six-tenths” rule. The estimated value of scale exponent in community—large-scale biogas systems were less than unity (n = 0.80) but t-tests could not reject the hypothesis of constant returns to scale at the 95% confidence level. Inferential statistics, F- and t-tests statistical analysis carried out on the coastal and landlocked biogas plants further conclude that the cost of biogas technology is largely independent of geographical location of the plant.

Introduction

Biogas technology represents one of a number of village-scale technologies that offer the technical possibility of more decentralised approaches to development (it is a vital component of the alternative rural energy program in Africa). In addition, this technology offers a very attractive route to utilise certain categories of biomass for partially meeting energy needs. This technology can therefore serve as a means to overcome energy poverty which poses a constant barrier to economic development in Africa. Biogas technology has multiple beneficial effects. The use of biogas technology can improve human well-being (improved sanitation, reduced indoor smoke, better lighting, reduced drudgery for women, and employment generation) and the environment (improved water quality, conservation of resources—particularly trees, reduced greenhouse gas emissions) and produce wider macroeconomic benefits to the nation (Amigun and von Blottnitz, 2007, Amigun et al., 2008). Of the eight Millennium Development goals, domestic biogas has a very direct relation with four: MDG 1 (target 1), MDG 3 (target 4), MDG 6 (target 8) and MDG 7 (targets 9 and 10). This technology can be built on a wide range of scales, and conventional financial wisdom is that larger installations have advantages resulting from economies of scale. One important feature of biogas technology is that virtually the entire cost is expended for installation with very low running costs, about 4–7.5% of the capital cost for a farm scale plant (Murphy, 2004), as the feedstock is usually a waste and there are no moving parts and little operating labour.

The future cost of biomass energy, biogas inclusive will not only depend on factors such as the extent of technological advances in biomass-energy conversion but also on the accuracy of its cost estimate (Singh and Sooch, 2002, Singh et al., 1998). Good understanding of the relation between capital costs and plant size can provide useful information in assessing economic viability of biogas plants, and providing means whereby decisions are taken on developmental of a new project. In a developing economy, local market opportunities frequently restrict the size of a process plants. Scale effects influence costs per unit of capacity (specific cost). The scale economies concept is therefore of key concern because it can help in determining the optimal size of a biogas digester. The extent to which economies of scale exist varies greatly according to the industry. In some industries, it might be insignificant, and thus, such industries would likely be characterised by numerous small firms (Norman, 1979). For most industries, economies of scale usually do not necessarily exist over the entire possible range of outputs. Rather it occurs only to a certain level of output, or plant size, and then diseconomies of scale or decreasing return to scale can set in. Economies of scale arise from the advantages of operating at a higher scale than at lower scale. Therefore, the decision to build either small/medium scale-decentralised or large-scale centralised biogas plant should be carefully considered.

This paper therefore presents an investigation of the scale economics of biogas technology as built on the African continent (i.e. it studies capital investment costs as a function of plant size, from the homestead unit via community/institutional to large biogas plants). This is aimed at determining what form of scale economies characterises the African biogas experience to date. In addition, the effect of geographical location (coastal and landlocked) of biogas technology on the capital cost are analysed and discussed. This is critical to investors, financiers and economic analysts in their assessments of the financial viability, requirements for biogas plant siting and scale of processing investment in the biogas industry.

Some of the first biogas digesters were set up in Africa in the 1950s in South Africa and Kenya. In other countries such as in Tanzania, biogas digesters were first introduced in 1975 and in others even more recently South Sudan in 2001. The interest in biogas technology in Africa has been further stimulated by the promotional efforts of various international organizations and foreign aid agencies (SParawira, 2009). To date, biogas digesters have been installed in several sub-Saharan countries including Burundi, Botswana, Burkina Faso, Cote d’Ivoire, Ethiopia, Ghana, Guinea, Lesotho, Namibia, Nigeria, Rwanda, Zimbabwe, South Africa and Uganda (Winrock International, 2007, Amigun and von Blottnitz, 2007). Biogas digesters have utilized a variety of inputs such as waste from slaughterhouses, waste in urban landfill sites, industrial waste (such as bagasse from sugar factories), water hyacinth plants, animal dung and human excreta. Biogas digesters have been installed in various places including commercial farms (such as in chicken and dairy farms in Burundi), a public latrine block (in Kibera, Kenya), prisons in Rwanda, and health clinics and mission hospitals (in Tanzania) (Winrock International, 2007). There are three different size types of biogas in Africa; the household/family-type unit (a household digester unit or family size biogas plant normally has the gas production capacity to meet all the cooking and 2–4 h of lighting needs of a family. For these units, organic wastes of three or more equivalent animal units plus the human waste and kitchen waste of an eight person family can be fed); the institutional/community type unit. (These units are to be shared by neighbor, usually relatives. These units will be fed by combined feedstock of human and animal wastes. These units can be used in public latrines in schools, factories and hospitals.); large-scale systems (these units make use of principally large quantity of organic wastes such as agricultural wastes—where many farms cooperate to feed a single larger digestion plant, biogenic waste materials from industry, industrial and municipal solid wastes. There are significant benefits from using these cooperative arrangements in terms of nutrient management and economics, but this does require that barriers of confidence in quality control and sanitation are overcome). However, by far the most widely attempted biogas model in Africa is the household biogas digester—largely using human and domestic animal excreta. It is pertinent to note that institutional digesters are more successful than domestic units in most African countries. This could be attributed to better project design and management. Chinese fixed-dome digester and the Indian floating-cover biogas digester are also widely used (Omer and Fadalla, 2003). A table consisting of level of technology development, scale characteristics and number of biogas producing units in some African countries has been reported by Amigun and von Blottnitz (2009) and illustrated in Table 1. The biogas produced from these household-level systems has been used mostly for cooking, with some use for lighting.

Global experience shows that biogas technology is a simple and readily usable technology that does not require overtly sophisticated capacity to construct and manage. It has also been recognised as a simple, adaptable and locally acceptable technology for Africa (Gunnerson and Stuckey, 1986, Taleghani and Kia, 2005). There are some cases of successful biogas intervention in Africa, which demonstrate the effectiveness of the technology and its relevance for the region. The lessons learned from biogas experiences in Africa suggest that having a realistic and modest initial introductory phase for Biogas intervention; taking into account the convenience factors in terms of plant operation and functionality; identifying the optimum plant size and subsidy level and; having provision for design adaptation are key factors for successful biogas implementation in Africa (Winrock International, 2007).

Despite the recognized technical viability and acceptability of biogas technology in sub-Saharan Africa; the multiple benefits recognised by users, governments and NGOs; and the estimates of large potential markets, the technology has not been widely adopted by sub-Saharan African households. An examination of the literature on constraints to household biogas promotion reveals many site-specific issues that have limited the scope of biogas in sub-Saharan Africa—particularly availability of water and organic materials for effective biodigester operation. Limited water availability poses a constraint for biogas operation because plants typically require water and manure to be mixed in an equal ratio; a household typically would need about four buckets of water per day for a biogas plant. In some cases animal urine has been used as an effective replacement. Small-scale farmers frequently lack sufficient domestic animals to obtain enough manure for the biodigester to produce sufficient gas for lighting and cooking. Even where households keep sufficient numbers of animals, nomadic, semi-nomadic or the free grazing system of many communities in sub-Saharan Africa makes it difficult to collect dung to feed digesters.

Other reasons identified for lack of widespread use of biogas systems at the rural households were, urbanisation and socio-cultural constraints, poor ownership responsibility by users, immature technical properties of plants themselves and on the other hand, a dissemination strategy which was only minimally developed and which did not recognise the importance of user training and follow-up services (Aklaku, 2005), high initial investment costs (for example, the cost of a family size floating drum plant in most African countries is US$ 1667). This is beyond the means of most households given that more than half the African population is living below US$ 2/day. This is compounded with lacking credit schemes, negative image caused by failed biogas plants and limited private sector involvement (Akinbami et al., 2001, Njoroge, 2002) and failure by government to support biogas technology through a focused energy policy (subsidy). A survey of 25 existing biogas plants in 1986 in Kenya found only 8 of the 25 functional and 13 of the 25 not functional or never finished (Day et al., 1990).

Biogas initiatives in Africa could benefit from the success story of biogas technology in countries like Nepal, India and Vietnam. India has placed far more emphasis on the survival of small-scale farmers than ensuring their efficiency and growth in a competitive environment through various policy instruments like the biogas programme (Njoroge, 2002). The Nepal biogas experience is a good example of how a national program can, through linked subsidy and quality control mechanisms create conditions that stimulate demand for biogas digesters, encourage entry of commercial companies to produce them, and provide incentives for high quality installations. Free market conditions, particularly when regulations are weak and the customer does not have full information regarding the product, often result in competition between suppliers based on price alone, at the expense of quality. For a national program like Nepal's Biogas Support Program (BSP) to succeed, a major prerequisite is that it be independent and free from political interference. A second lesson learned from the Nepal experience is that standardization of technology to a single approved design makes quality control easier. At the same time it allows a large number of competing companies to enter the market, with everyone working towards the same quality standards. Nepal's BSP can be described as subsidy-led while being demand-driven and market-oriented. A simple, transparent, and sustained subsidy policy has been instrumental in increasing the adoption of biogas plants. Subsidies have been justified to make up for the difference between ability to pay and the higher societal benefits (maintenance of forest cover, prevention of land degradation, and reduction in emissions of greenhouse gases) and private benefits (reduction in expenditure for firewood and kerosene, savings in time for cooking, cleaning, and firewood collection, increase in availability of fertilizer, and reduction in expenditure to treat respiratory diseases) accruing to users. A progressive subsidy structure, which provides larger subsidies to smaller plants, has made smaller household plants more affordable to poorer households. Over the years, many companies have devised credit programs for households wishing to install biogas plants. BSP encouraged the number of participating companies to grow from a single semi-government entity in 1991 to 40 today. In the past 10 years, the real price of installations has decreased by 30%, demonstrating fierce supply-side market competition. In order to reduce initial investment costs, households are encouraged to contribute their own labour and provide local construction materials. In some instances, simultaneous construction of a number of biogas units in the same vicinity (e.g. bulk construction) has reduced costs further, particularly material transportation costs. Productive end use of biogas has also been promoted to enable households to generate additional income, further increasing the affordability of biogas to poorer households (Winrock International, 2007).

Section snippets

Biogas production

Biomass may be converted to a variety of energy forms including heat (via burning), steam, electricity, hydrogen, ethanol, methanol, biodiesel, and methane. Selection of a product for conversion is dependent upon a number of factors, including need for direct heat or steam, conversion efficiencies, energy transport, conversion and use of hardware, economies of scale, and environmental impact of conversion process steams and product use (Chynoweth et al., 2001). Under most circumstances, methane

Biogas economics

The construction, design and economics of biogas plants are well documented (Biswas, 1977, McGarry and Stainforth, 1978, Singh and Sooch, 2002, Wilkie et al., 2004, Widodo et al., 2009). A central feature of biogas technology (as for many other renewable energy technologies (RETs), and other than for conventional energy sources) is that almost all expenses need to be financed upfront, with very low operating expenses (operation and maintenance costs) thereafter. The economy of an anaerobic

Scale factor for total capital investment

Three figures summarise the results of the present analysis. In each figure, the resulting fitting equations are included. Fig. 3 presents the variation of escalation adjusted capital investment with plant capacity for the biogas installations represented in Table 4 for plant size ranging from 4 m3 to 124 m3 (32 data sets). The cost capacity factor, n for biogas installations from Fig. 3 is 1.20 which indicates diseconomies of scale.

This is similar to the report of Amigun and von Blottnitz (2007)

Conclusion

Biogas technology represents one of a number of village-scale technologies that could offer the technical possibility of more decentralised approaches to development in African. It provides significant benefits to human and ecosystem health. Most current biogas programmes in Africa however, are based on family-sized plants and their dissemination have experienced a number of set backs as a large proportion of the plant erected were not used or only used to an insufficient extent.

A cost capacity

Acknowledgements

The authors are grateful to Greg Austin of AGAMA Energy, Will Cawood (Solar Engineering), the Kigali Institute of Science and Technology (Rwanda), the Ministry of Energy (Ghana), and Mavunganidze Kennedy (Zimbabwe) for providing the installations cost data.

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