The market
The global biogas market barely reached €2 billion in 2006, but it is expected to reach €25 billion by 2020. Selected countries will experience growth rates of 20% to 30% per year. Europe and China are the market leaders. European biogas production could reach some 500 billion cubic meters (m3) per year by 2020, exceeding current levels of natural gas imports from Russia. Investments in biogas plants in the EU are expected to reach €7.5 billion, with up to several thousand new plants being built each year. The German industry is expected to generate some 85,000 full-time jobs, where it is considered the technical leader with over 400 companies active in the field and around 100 offering the complete value chain. Eastern Europe, often supplied by German experts, already had 5,900 biogas plants in 2010, with 3,000 more expected over the next three years, bringing the total biogas energy capacity in this part of Europe to 4.0 gigawatts of electricity (GWel). China had some 5,000 industrial units in operation in 2010, capable of producing a cumulative 13 billion cubic meters of gas. China has a long tradition of small-scale biogas plants. However, with an identified potential of around 100 GWel, the government is pushing to reach 40 GWel by 2020. Only about half of the 300 million tons of municipal solid waste (MSW) generated annually in China is collected and sent to landfills. Part of this untapped resource, which contaminates the environment and endangers public health, has enabled the number of rural households with access to biogas as their primary energy source to increase from 22 million in 2006 to 40 million in 2007. Growth in the sector is expected to remain strong at 10% per year. It is estimated that biogas in China is already replacing 30 million tons of raw coal, representing significant carbon emission savings. The biogas produced is not a commercial product intended for immediate use. It contains approximately two-thirds methane, nearly 30% CO2, a few percent H2S, and water vapor. Methane purification and CO2 separation are prerequisites for commercial success. The advantage of biogas is that it can be used within the existing infrastructure for natural gas, a finite energy source, whereas biogas is continuously renewable.
Innovation
Biogas is still largely associated with the small-scale conversion of animal waste into energy and mineralized sludge through an anaerobic process. This is illustrated by the commendable initiative in Bagepelli, India, sponsored by Bangalore Women for Sustainable Development, which invested €1.1 million in the construction of 5,500 biogas plants that convert cow dung into gas. While this initiative generates 19,800 Certified Emission Reduction (CER) certificates annually, its small-scale applications make it particularly useful in rural areas. The potential for energy recovery from biological waste lies in the intelligent use of existing industrial facilities and urban wastewater, as well as a thorough understanding of the chemical reactions that enable significantly higher biogas production, utilizing existing infrastructure and waste streams. Erik Danielsson, who was CEO of Pharmacia AB, a major Swedish pharmaceutical company before its merger with Pfizer, pursued an entrepreneurial career after retiring from his traditional role. He observed how sewage sludge disposal represented a significant cost at wastewater treatment plants and how, conversely, several waste streams, such as energy crop residues, animal manure, and food waste from industrial processing, were all treated separately at considerable expense. He envisioned that existing wastewater treatment plants, which lacked sufficient organic matter to make biogas production commercially viable, could adapt their business model and infrastructure to incorporate readily available organic waste. Mr. Danielsson then founded Scandinavian Biogas, capitalizing on the fact that liquefied gas can be transported long distances in standard shipping containers. The combination of food waste from either municipal solid waste or industrial food processing with sludge has created the right chemical mix to scale up biogas production to an industrial level. A professional yield management approach enables the production of liquid CO2 as a valuable byproduct in the production of automotive-grade compressed gas, directly replacing gasoline with a renewable resource while reducing pressure on landfill sites and increasing revenue for wastewater treatment plants. This combination of benefits and revenue through integration within existing infrastructure is a typical feature of emerging Blue Economy business models.
The first cash flow
The first operational plant is located near Busan, South Korea. Scandinavian Biogas decided to design, build, operate, and transfer a 14,000 m³ digester adjacent to the Ulsan Municipal Wastewater Treatment Plant (MWTP). Through the mixing of food waste, sludge pretreatment, and gas purification, biogas production increased from 3 million m³ per year to 12 million m³, a fourfold improvement. The entire purified methane production is sold to SK Chemical. The return on investment (ROI) exceeds 20%, transforming a plant that previously relied solely on tax revenue into a revenue-generating business. The positive result is achieved through the generation of multiple cash flows: entry fees for food waste, gas revenues, a significant price increase due to increased supply, improved fuel quality for vehicles, revenue from liquid CO2, and even additional revenue generated by heat sales. Traditional waste-to-energy plants have never looked so profitable.
The opportunity
The case of Korea offers a glimpse into the vast global potential of biogas. While the Ulsan plant is one of the smallest industrial facilities in Korea, it already produces 30,000 tons of biogas per day. If the same technology were installed in all of Seoul's wastewater treatment plants, daily biogas production could reach nearly one million tons, or 360 million tons per year. It is not surprising that once Scandinavian Biogas has proven its business model, investors are ready to embrace this commercial concept. As the Korean government pursues a clear strategy in favor of renewable energy with all the necessary incentives, it is clear that several hundred wastewater treatment plants will need to be upgraded. While the return on investment remains attractive, the advantage lies with countries that have not yet developed their own wastewater treatment plants. If biogas can be made competitive in Germany and Sweden, and if such operations are financially viable on a large scale in Asia, then the time has come to reach out to municipalities where the wastewater treatment system fails to guarantee quality water for the local population, and where raw sewage makes beaches unsafe, as is the case in major tourist centers like Cape Town (South Africa) and Rio de Janeiro (Brazil) for extended periods of the year. The proposal initiated by Mr. Danielsson, and now actively pursued by a team of nearly 50 professionals, demonstrates that while water treatment costs money, and waste disposal undertaken separately costs money, the two combined generate revenue. This is yet another indication that the traditional "core business based on key competencies" management model is reaching the limits of its viability. It is this original idea of grouping activities that mimic natural systems that could make the global economy sustainable, powered by renewable energy sources where even the digestate at the end of production helps to create new surface soils.
