Phase 4 Project realization
This project development step comprises all activities from getting permits for building and operation, organising the financing and funding for the bioenergy project till the fundamental planning of the plant construction and bringing it into service. The farmer has to get into contact with different authorities and institutions, as e.g. consultancy firms for detailed planning, banks, local communities or companies which will be needed for building the biogas plant. Additionally, the farmer has to provide all the data and plans relevant for successful project realization.
The complexity and time frame of this step among others is depending on type and size of the biogas plant and especially in which country the plant will be erected. Also the proceedings and effort for e.g. getting permits may also differ for each country and also within the various provinces.
Apart from the technical parts, aspects of acceptance are also very important for realizing a bioenergy project. It must be considered to involve the public in an early stage to avoid unpleasant delays later in the project realization.
Figure: Tasks within the step “project realization” [Castillo et al 2012, modified]
Agricultural biogas plants are often built close to agricultural sites (farms) and are often, depending on national legal framework, seen as a ”building structure” and therefore needs at least a building permission by national construction law.
Some plants need approval according to Emission Control Regulations, also depending on national legal framework. These approval processes are normally more complex as well as more demanding and requires higher efforts in terms of time, organization and finances than the permission by construction law.
In principle (in many countries), there is a right to a plant authorization, if public regulations and concerns of occupational health and safety are not indicating otherwise. The regulations relating to the construction and operation include, for example [Eder 2012]:
- constructionplanning act
- occupational health and safety law
- water protection legislation
- nature conservation law
- waste legislation
- fertilizer act
- hygiene legislation.
The farmer has to get the required permits for building and operating the biogas plant from the local authorities and maybe other relevant institutions. It may be necessary to realize a detailed technical plan of the plant location and construction to receive those permits.
Some requirements to be considered by the manufacturer and/or farmer for construction of a biogas plant:
- noise and odour report for operation near residential areas, if necessary
- sufficient storage capacity for digestate (no land-spreading during winter time)
- landscape conservation plans
- fire protection design
- structural engineering (statics) for tank construction
- observe the requirements for concrete quality
- technical and operational safety acceptance of the facilities for starting operation
The applicant should contact the responsible approval authorities early in the process. The first discussion, in which the designer of the plant should be present, is to introduce the project to the authority. It is not only to make personal contact with the authorised person, but it will illustrate the framework of the project clarifies what conditions are imposed and what documents are required.
For producing and injecting of biomethane (biogas upgraded to natural gas quality) into the gas grid, special regulations have to be observed.
The approval of planning should be done in close contact with the plant manufacturer or delegated plant planner themselves and the agricultural advisor. Depending on the type of the required permit and the approval authority the amount of documents that have to be handed in may vary strongly [FNR 2013]. A Checklist for the compilation of the approval documents can be found in Annex 2 of the report.
Project financing and funding
Bioenergy projects are generally financed through own funds and / or borrowings or loans. Under certain circumstances, the project can be financially supported through funding from promotion programs (public funds).
An essential prerequisite for a project financing is basically the appraisal in a feasibility study (see chapter 0). The content and results of the feasibility study can, among other things, convince potential lenders and investors from the technical feasibility, economic viability and creditworthiness of the project.
Basically a credit institution and / or a qualified financial advisor should be involved early in the preparation of a financial plan to get the feedback on affordability in an early stage of the project (e.g. at the end of the feasibility study). The requirements of the bank concerning project information, documentation and collateral should also be clarified in time, which then form the basis for the comprehensive appraisal. The funding can be tightly coupled to the operator model and the legal form of the company.
The provision of equity capital is usually essential for lending by banks. Normally, a minimum ratio of equity capital in form of a self-financing or a quasi-equity loan has to be provided to receive state financial assistance or standard bank loans. The equity capital includes also cash assets and contributions in kind (e.g. operationally necessary goods). The capital requirement depends on the ownership structure (existing or newly established companies), the specific investment costs and the economics of the project [Eltrop et al 2014].
In the case of partial financing through a credit, the early contact with a credit institution is important for a successful financing. The bank is the first and crucial point in this way. It offers free consultations to be informed about various financing and funding opportunities, ranging requests for financial assistance to the relevant institutions. For borrowing the provision of adequate guarantees is absolutely necessary. The presence of sufficient collateral is thus a crucial part of project financing. The protection of the loans by the bank might be guaranteed e.g. by:
- mortgages (charge on the land)
- collateral assignments (e.g. the entire plant or individual machinery)
- guarantees or
- purchase guarantees for produced power and heat.
Form and scope of standard collateral should be agreed as part of the loan negotiations between the borrower and the bank [Eltrop et al 2014].
The framework of project funding differs from country to country and is also regional in its nature, scope and objectives. Basically, the promotion can be distinguished in subsidies in investment and development loans (interest-subsidized loans). A comprehensive overview and information on county specific current programs and grants can be found in the Annex 2 of the report.
The biogas technology has so many positive aspects. It is a e.g. a renewable energy source, has versatile utilisation forms (electricity, heat and fuel), can be used flexible (bioenergy which is storable and allows energy production on demand) and generates additional income for agriculture and rural areas. Despite all this, in some countries the biogas technology is treated negatively in the media and biogas investors have to deal increasingly with citizens’ groups and neighbours who are against the biogas plant (NIMBY-Effect – not in my backyard).
Social barriers or poor acceptance are often related to the increasing traffic for transporting and harvesting energy crops (too many vehicles, too noisy and too many exhaust emissions). In addition, there is often the opinion in public that biogas plants are smelly and also dangerous (danger of explosions) so that the plants are not tolerated near residential areas. Also, in some regions the cultivation of energy crop is seen problematically. Opponents claim that intensive energy crop cultivation has negative effects on the beauty of the landscape, decreases biodiversity and causes over-fertilisation of soils plus excessive use of pesticides and herbicides.
Therefore the farmer should get into contact with his neighbours to present them the biogas project and discuss it together (visiting existing biogas plants would be an idea). Experience proves that it is always better to involve the public in an early stage to make them understand the benefits of the project, so they don’t feel disregarded and complain at the end.
Apart from the technical planning a number of aspects of acceptance are relevant, which must be considered in advance of the plant building, if necessary. This is in the first place the early information of the public or neighbours. Essential criteria of a good acceptance are e.g. [Ehrenstein et al 2012]:
- creating an open communication atmosphere and the responsiveness for insecure neighbours,
- name potential impact of the biogas plant, such e.g. odour development, increasing transport traffic, in a realistic way – don’t whitewash the issues (e.g. it “never stinks”)
- involve (local) proponents of the project in the public relations
- clarify the question of plant location early and if possible amicably
- appoint benefits of the project for the community
- offer opportunities for participation
- where appropriate involve mediators for conflict prevention and resolution
- residents should be given the possibility to get to know the biogas plant, for example by arranging an “open day” presentation
- a good and responsible plant management is indispensable and requires expertise.
Events for interested citizens for presenting information and allow discussions about the project are an essential part of the planning procedure. External experts may be invited to discuss certain issues (e.g. legal framework, health, etc.) and thus to increase the level of information and understanding to the local people [Ehrenstein et al 2012].
For realising and operating a biogas plant it may be necessary to clarify certain trade relations in bilateral treaties. The number and legal nature vary depending on the business model.
Essential for every project is usually a plant construction contract. Also the substrate supply and digestate delivery must often be contractually regulated. In addition, a plant management contract can also be completed, if necessary. By selling surplus heat of the own CHP or (raw)biogas to external customers, delivery contracts may be required. Also concession agreements with private landowners and easement agreements with the municipality might be of importance for the plant operator.
All contracts should be tailored to the individual needs of the contractors to offset their own best interests. The contracts with energy customers (e.g. for heat delivery) have to be updated regularly.
In chapter Annex 1 of the report (General information on contracts) different types of contract are presented and essential aspects are described in detail.
The farmer should do a tendering process to choose the best plant manufacturers for building the biogas plant. Therefore the future plant operators must inquire the manufacturer, which will be considered to build the plant, to create and submit offers which are comparable and allow a thorough evaluation. For a good comparison some offers should be sought.
When comparing the offers it is important to look beyond the mere price. Equally important is the quality and expected/guaranteed output offered, the experience of the manufacturer and the services they propose when it comes to support, repair or maintenance of the biogas plant. It is also from importance to decide, whether it should be a turnkey construction by plant manufacturer (low work load and project planning time required) or if it should be plant and realized by an engineering company (larger share of own work on construction possible).
As mentioned before (see 3.6) it’s always beneficial to visit existing plants of the manufacturers or engineering company and get in contact with the plant operators in order to benefit from their experiences.
Building the plant and start of operation
A good project management needs a good organization. Therefore it is important that the farmer has a good overview on the plant building phase. Unexpected events and costs must be avoided to ensure that the project will be finished successfully.
The farmer has to make a detailed schedule with the plant builder / manufacturer to have an overview on the whole process of plant building and installation. It enables the various parties to deal with bottlenecks and avoid interruptions at an early stage. Each step must be presented in terms of resource requirements, budget and duration and they must follow a logical order. Regular reports on construction process help to keep this schedule updated.
During the construction, farmer and expert have to check scrupulously three points:
- Quality: Is the job under control and professionally executed? Does the farmer really receive what he expected/ordered? Do plant parts have failures? The security of a biogas plant is a very important aspect.
- Financial aspects: are there any unexpected expenditures? If yes, why weren’t they anticipated?
- Deadline: is the building operation on time regarding the time-schedule (sometimes, start of operation has an effect on amount of feeding-in tariffs)?
After building and installation of the biogas plant has been finished, the facility starts operation. For that, it will be tested and approved (failures will be reported) by the plant manufacturer and/or authorised experts. After successful testing and commissioning the biogas plant is ready to produce biogas.