Development of a cost-benefit model for a landfill gas infrastructure development

Abstract

Landfilling solid urban waste is the prevailing method of solid waste disposal worldwide. Biodegradable waste is disposed of in landfills which then decompose often over many decades releasing landfill gas. This gas, is mainly composed of methane and carbon dioxide, both are greenhouse gases which actively contribute to global warming. Indeed, methane has a global warming potential 21 times more than CO2. These environmental problems associated with landfill gas demand for current energy needs highlights the potential of the recovery of landfill gas as a significant alternative to fossil fuels. This study sets out to determine the extent to which the economic value of power generation from landfill gas differs from the market value of the CO2 equivalent landfill gas. To achieve this purpose, a cost-benefit model has been created in order to identify the different capital, power generation and operational costs associated with a landfill operational site. In the same manner, the main sources of revenue have been determined: sales of electricity to the grid and carbon credits. Three different scenarios have been analyzed: small, medium and large landfill sites, all of them placed in the UK. The analysis had two different appraisals: economic and environmental. In the first one, the feasibility and profitability of the three scenarios have been evaluated. In the latter, the amount of tonnes of CO2 equivalent avoided to be pumped into the atmosphere has been calculated. The economic analysis indicates that the average capital costs for all the sites are notably higher. Particularly, for small sites, i.e. a capacity of 1MW, where landfill gas-to-energy projects were not profitable. On average, the Net Present Value (NPV) of small sites was less than 0. This factor indicated that the initial investment would not be recovered in a long period and therefore, the revenues achieved from the implementation of LFG Collection Systems were not enough for the operators to invest in these infrastructures. Not only from an economic point of view, but also considering an environmental appraisal, it can be stated that the price of selling electricity to the grid is below the real price of avoiding methane emissions (shadow price of the carbon). THE ANALYSIS DONE SUGGESTED THAT LARGE AND MEDIUM SITES PROJECTS WERE VIABLE (NPV>0) WITH REDUCED ROC SUPPORT. HOWEVER, FOR SMALLER PROJECTS MORE OPTIMISTIC REVENUES AND COST OF CAPITAL WERE REQUIRED IN ORDER TO ACHIEVE VIABILITY.

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