Landfill gas a valuable resource
Dwayne Kalynchuk, P.Eng.
General Manager of Environmental Services
Capital Regional District
Victoria, British Columbia
APWA Past President
The Capital Regional District (CRD), a local government at the south end of Vancouver Island, British Columbia, Canada, owns and operates the municipal solid waste landfill for the Greater Victoria area. Hartland landfill receives approximately 140,000 tonnes of refuse each year, and currently produces 650 scfm (18 m3/min) of landfill gas (LFG). The LFG is primarily made up of methane and carbon dioxide, both of which are greenhouse gases (GHG). In order to reduce the GHG emissions from the site, as well as to reduce odours and improve occupational health and safety, a LFG collection and flaring system was installed at the site in 1998 as part of the closure of Phase 1 of the landfill. As part of the LFG system, an enclosed ground flare destroyed the methane component of the LFG, thereby greatly reducing GHG emissions from the site. Although the collection and flaring station greatly reduced GHG emissions generated at the site, the energy in the LFG was not being utilized. The obvious next step was to utilize the energy in the collected LFG, if financially viable, rather than continuing to flare.
The creation of green power would offset GHG emissions generated by BC Hydro through their use of traditional fossil fuels to produce power. Furthermore, by utilizing the LFG to produce power, the energy in the LFG is captured rather than wasted to the atmosphere.
The LFG Utilization Facility was commissioned by the CRD and Maxim in February 2004. The LFG, collected from a network of gas wells installed in the refuse and directed to the CRD's flaring station, now bypasses the flare and is directed to Maxim's utilization facility.
First, the LFG passes through a gas conditioning unit which cools the gas and removes moisture and entrained particulate (siloxanes) that would otherwise degrade engine performance over time. No other pretreatment of the LFG is necessary to protect the engine. The methane component of the LFG fuels a 20-cylinder engine to generate electricity, much like a spark engine in a car uses gasoline to create energy. A transformer onsite converts 600 volts into 25 kilovolts, which is fed into the BC Hydro grid. Master controls interconnect the CRD's gas collection system with Maxim's LFG Utilization Facility (Facility).
The Facility generates 1.6 MW of green power, enough power for about 1600 homes. The Facility also operates with an Environmental Management System that is ISO 14001 compliant, demonstrating a commitment to continual improvement. Furthermore, in order to meet the green criteria stipulated by BC Hydro, the emissions from the Facility do not exceed the upper limit (6) of load points as stipulated in the federal Ecologo Renewable Low-Impact Electricity Guidelines.
This project demonstrates ecological sustainability by reducing GHG emissions generated for power production. Collection and subsequent flaring and/or utilization of LFG is an essential component of Canada's strategy to meet Kyoto targets. Landfill gas utilization projects should be considered by all landfill owners as a means to utilize energy available in captured LFG and potentially reduce GHG emissions.
The production of green power from LFG is not a traditional or essential service provided to communities by regional government. This innovative project benefits the community in a number of ways.
At the outset, the performance of the regional landfill is enhanced through the production of green power. A portion of the green power produced at the landfill is being allocated locally, which promotes environmental sustainability. The CRD partnered with British Columbia Buildings Corporation (BCBC), Green Buildings Division, on this project. BCBC pays a green premium for 1.0 MW of the power produced and BC Hydro pays the premium for the remaining 0.6 MW. (The power price is made up of two components: a base price for power and a "green premium.") As a purchaser of the green attribute of the power, BCBC has sold green power to a number of their tenants such as the Vancouver Island Technology Park and the Ministry of Water, Land and Air Protection offices.
In order for the project to be certified as "green" by BC Hydro there are several social aspects that must be demonstrated with the project: the project is in-line with community values; contributes to the local community; makes a commitment to quality health and safety programs; and operates in an ethical manner.
Further social benefits are realized through the enhancement of technology to produce green power from LFG, which could be transferred to other landfills in the province, the country and abroad. The facility has generated much interest and has been toured many times by other landfill owners considering a similar facility and other professionals working in the alternative energy field.
The production of alternative energy is outside the CRD's core business area and therefore does not have direct in-house expertise in relation to power production. As such, the CRD Board endorsed a recommendation to explore opportunities with the private sector to pursue a LFG utilization project. After several proposal calls to the private sector, the CRD entered into agreements with Maxim in 2003 to utilize the collected LFG to produce green power. The CRD chose to partner with the private sector to bring external expertise and business know-how to the project as well as to reduce the risks the CRD may have assumed as sole owner-operator.
The Facility is co-owned 70% by the CRD and 30% by Maxim. Maxim repays the CRD for their contribution through lease payments over the twenty-year project life. The lease payments essentially represent principal and interest on the CRD's contribution to the project. The CRD has funded their portion of the project from reserve funds and has incurred no borrowing expenses in association with the project.
Maxim has an Energy Purchase Agreement (EPA) with BC Hydro that governs the sale of power produced at the Facility. The revenues generated through the sale of power are paid to Maxim as the Facility operator and power producer. Maxim has assumed all operational risks associated with maintaining the facility. Maxim contracts with Finning Canada to operate the facility and to provide 24-hour plant surveillance, onsite routine maintenance, and major overhauls and equipment replacement.
Maxim pays a royalty to the CRD for LFG supplied. The royalty payments are based on a percentage of the revenues generated by Maxim and escalate as power production increases. Currently, the Finning engine-generator installed at the Facility is at full capacity. In order for the CRD to increase their royalty payment through the production of more power, the existing generator must be upgraded or a second unit must be installed. This business decision will be dependent on the performance of the LFG collection system and the quantity and quality of LFG produced. It is very likely that a second generator unit will be installed at the Facility over the twenty-year life of the project, as LFG quantities have been modeled to increase over this period. (The landfill is projected to close in approximately 2048; LFG quantities are anticipated to increase up to this time and then gradually decline over subsequent decades.)
The project is structured such that the CRD manages the collection of the LFG and is responsible for supplying LFG to the fence line of Maxim's Facility. The CRD operates and maintains the collection system, which includes LFG collection wells, laterals, headers and a vacuum system that extracts the LFG from the refuse. The CRD also designs, constructs and finances all expansion of this system as more refuse is deposited at the landfill. The CRD has taken on responsibility for managing and maintaining the gas collection system but does not guarantee uninterrupted supply or forecast future gas production rates.
The CRD also does not provide any guarantee to Maxim regarding the quality or quantity of LFG; however, if production of power drops below a predetermined threshold for a predetermined period of time, Maxim has an option to sell their portion of the Facility to the CRD for fair market value. In this situation, the CRD would own the entire Facility, assume the Energy Purchase Agreement with BC Hydro, operate the Facility (or continue to contract with Finning to operate the Facility) and receive all revenue from the sale of power.
The LFG production rates at the landfill had been in decline for a period of several years immediately preceding the development of the agreements. In addition, the quantity of LFG collected at the time Maxim was selected as the preferred proponent represented a marginal rate of return. Due to this level of risk, the project would not have proceeded if Maxim had pursued traditional sources of financing. By the CRD owning 70% of the Facility and leasing this equipment back to Maxim, Maxim has substantially reduced the amount of up-front capital required to construct the Facility and the project proceeded.
(It is worthwhile to add that during the contract negotiations Maxim agreed to provide the CRD with a four-month window to expand the collection system in order to collect more gas and prove the collection system could be upgraded. The CRD increased LFG production by 20% over this period which provided Maxim the assurance they needed to enter into agreements for the project.)
The generator installed for this project is a new model manufactured by Finning (Caterpillar) designed to operate on low BTU fuel such as LFG. The procurement of this new model represented a financial opportunity to the project. Finning has tested and monitored the first 12 months of operation of this unit to gather detailed performance specifications. In return, Finning offered a one-year deferred payment on this equipment, representing approximately $1.6 million.
With the focus in British Columbia on climate change for which the main issue is the reduction of GHGs, the capture and flaring of the LFG is considered to be part of the GHG reduction process and could be marketed as gas credits and traded under a proposed cap and trade system in British Columbia. GHGs are measured as CO2 (carbon dioxide) equivalents, and the gas credits have been valued between $15 to $25 a tonne. Hartland generates about 84,000 tonnes of CO2 equivalents each year. This has the potential total value between $1.26 and $2.1 million annually.
Other municipalities and regional districts are encouraged to consider a LFG utilization facility to generate revenues to help offset capital and operating costs for installation or expansion of LFG collection systems. This financial model of this project may also be applicable for any local government or landfill owner partnered with a private sector company that may be unable to secure traditional financing due to perceived risk around long-term gas quantity and quality.
Dwayne Kalynchuk, APWA Past President, is Chair of the APWA International Affairs Committee and a former member of the Education, Finance, and Nominating Committees. He can be reached at (250) 360-3092 or firstname.lastname@example.org.