Landfill-Gas-to-Energy Projects: Analysis of Net ... - ACS Publications

Policy Analysis Landfill-Gas-to-Energy Projects: Analysis of Net Private and Social Benefits PAULINA JARAMILLO* AND H. SCOTT MATTHEWS Department of Civil and Environmental Engineering. Carnegie Mellon University, Pittsburgh, Pennsylvania 15213

Methane emissions from municipal landfills represent 3% of the total United States greenhouse gas emissions that contribute to climate change. These methane emissions can be released to the air or collected and flared. This landfill gas also has the potential to be used to generate electricity. In 1994, the Environmental Protection Agency (EPA) created the Landfill Methane Outreach Program, with the objective of promoting the development of landfill-gasto-energy projects around the country. There are currently 2,300 active landfills in the United States. Although there are already 382 operational projects, there are many more landfills with the potential to use the gas. EPA has identified at least 630 candidate landfills for energy projects, and many more have still not been identified. The objective of this paper is to evaluate total private and social benefits of landfill-gas-to-energy projects, taking into consideration not only the costs of installing and maintaining the necessary equipment and the revenues obtained from selling the electricity but also a valuation of the greenhouse gas emissions that would be prevented and the emissions of criteria pollutants created by the electricity generating equipment. It also evaluates the breakeven government subsidies that would be required to make such projects economically viable from private and social perspectives in comparison to current subsidies. It was found that the private breakeven price of electricity for these projects is lower than $0.04/kWh. Moreover, the optimum social subsidy was found to be less than $0.0085/ kWh, which is about 40% lower than the currently available federal tax break of $0.015/kWh. The method developed for this paper can be applied to other renewable energy technologies, to show their relative social costs and benefits.

Introduction Over the past decade, climate change has become one of the most important and controversial scientific and political issues in the international community. As the adverse effects of climate change become more widely accepted, the importance of reducing greenhouse gas emissions that cause this change will increase. The United States currently produces more than 20% of the world’s greenhouse emissions, making it the largest emitter in the world (1). In 2002, * Corresponding author phone: (412) 268-2940; fax: (412) 2687813; e-mail: [email protected]. 10.1021/es050633j CCC: $30.25 Published on Web 08/27/2005

 2005 American Chemical Society

the United States emitted about 7644 million tons of CO2 equivalents, of which 659 million were methane (CH4) emissions. Landfills contributed approximately 32% of these methane emissions, or 3% of the total greenhouse gas emissions of the country (2). Under the requirements of the Kyoto Protocol (which the United States has not ratified), the U.S would commit to a 7% reduction below 1990 levels of greenhouse gas emissions in the commitment period between 2008 and 2012. Thus, programs to reduce landfill methane emissions could contribute significantly to the Kyoto targets (the Kyoto Protocol is now on course to be in effect in 2005, without participation from the United States). In 1996 the Environmental Protection Agency (EPA) established the New Source Performance Standards and Emission Guidelines for Municipal Solid Waste Landfills. Under these standards, large landfills (that is, those with the potential to emit more than 50 Mg/year of nonmethane volatile organic compounds) have to collect and combust the landfill gas. Traditionally these landfills have flared the gas to comply with the standards. A flare is a device that burns the landfill gas to reduce odors, safety concerns, and methane emissions. An alternative to flaring is using the landfill gas to generate electricity instead of just burning it off. In addition to having the same benefits of flaring, landfill gas-to-energy projects could indirectly reduce air pollution from fossil fuel combustion by offsetting the use of these fuels to generate electricity. In 2002, these fuels (coal, petroleum, and natural gas) accounted for 70% of the electricity generated in the United States (3). The objective of this paper is to evaluate total private and social benefits of landfill-gas-to-energy projects. A net present value approach will be used to analyze and compare the economic implications of installing and maintaining the different types of electricity-generating equipment. Environmental valuations of emissions will be performed in order to obtain relative environmental costs and benefits that can be included in this economic analysis to show the social value of the project.

Background on Landfill-Gas-to-Energy Projects Landfill gas is generated through the anaerobic decomposition of organic waste present in municipal solid waste. Landfill design and operation contributes to the decomposition process. Generation starts shortly after a landfill begins receiving waste and can last for up to 30 years after the landfill closes. The average composition of this landfill gas is about 50% methane (CH4), 45% carbon dioxide (CO2), and 5% nitrogen (N2) and other gases (4). There are also trace amounts of nonmethane organic compounds (NMOC). In 1994 the EPA created the Landfill Methane Outreach Program (LMOP) with the goal of reducing landfill greenhouse gas emissions by promoting the development of landfillgas-to-energy projects. In these projects the landfill gas is used as a direct fuel in industrial processes or as the fuel that runs electricity-generating equipment. Since the 1996 enactment of the New Source Performance Standard and Emission Guidelines for Municipal Solid Waste Landfills, the Landfill Methane Outreach Program has become a tool to help landfills meet the new regulations. As a result of all these efforts, methane emissions from landfill have decreased each passing year. In 1995 methane emissions from landfills were estimated to be 216.1 Tg of CO2 equivalents. In 1997 these emissions were 207.5 Tg of CO2 equivalents, and by 2001 they had been reduced to 202.9 Tg of CO2 equivalents. EPA VOL. 39, NO. 19, 2005 / ENVIRONMENTAL SCIENCE & TECHNOLOGY

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TABLE 1. Collection System Costs (6) gas flow (cf/day)

initial capital costs (1996 $)

annual O&M costs (1996 $/yr)

642 000 2 988 000 5 266 000

628 000 2 088 000 3 599 000

89 000 152 000 218 000

estimated that, between 1995 and 2001, 253 Tg of CO2 equivalents was used in landfill-gas-to-energy projects, while 350.3 Tg of CO2 equivalents was flared (2). As of 2004 there are approximately 2300 active landfills in the United States. Of these, 382 have operational landfillgas-to-energy projects: 100 for direct-use as medium-BTU fuel for boiler or industrial processes and 282 for electricity generation. The total capacity of the landfill-gas-to energy projects is currently 1089 MW, with the average landfill generating approximately 4 MW. In addition to these operational landfills, there are currently 25 projects under construction with estimated capacity of 36 MW. Moreover, EPA estimates suggest that there are an additional 630 candidate landfills (5). Candidate landfills are those that are currently operating or closed after 1993 and have more than 1 000 000 tons of waste-in-place. In short, only a small amount of the potential to divert greenhouse gases is being realized. This could be explained by the lower power generation potential landfills have compared to other largescale sources. According to the Department of Energy, in 2002 there were 1556 coal-fired generators, each producing an average of 215 MW, for an approximate total capacity of 338 200 MW (3). We suggest that the number of operational and candidate landfill-gas-to-energy projects could increase if a complete economic and social analysis was used in the decision process.

Technology Description As previously mentioned, landfill gas can be used in landfillgas-to-energy projects as fuel to power electricity-generating equipment. This landfill gas is collected by a system of wells and pipes installed throughout the landfill. The costs of a collection system depend on different site factors, such as landfill depth, number of wells required, etc. Table 1 provides average collection system costs for landfills of three different sizes. These costs include flaring costs, since excess gas may be flared even when an energy recovery system is in place. Reciprocating internal combustion engines (IC engines) are the most widely used technology for generating electricity at landfills. More than two-thirds of the operational landfills where electricity is generated use this type of equipment (5).

IC engines burn landfill gas in the presence of oxygen to run an engine. This engine is connected to a crankshaft that turns a generator and produces electricity. Table 2 shows U.S. EPA information about performance and costs of five different commercially available gas-powered IC engines. These engines have a lifetime between 25 and 50 years when properly managed. Gas turbines and steam turbines can also be used in landfill-gas-to-energy projects. Gas turbines combust landfill gas to heat compressed air, making it expand to power a turbine, which in turn drives a generator. Like IC engines, gas turbines have a lifetime of over 25 years. Table 3 shows performance and cost information for five different commercially available gas turbines. In steam turbines, landfill gas is used to heat up water and produce steam that spins the generator. Steam turbines have a lifetime of up to 50 years. Typical characteristics of three different commercially available steam turbines are shown in Table 4. Note that the costs given for the steam turbines do not include the costs for the boiler that produces the steam. The capital cost of a boiler is approximately $15 per the required steam flow in pounds per hour (8). Moreover, it was assumed that the annual operation and maintenance (O&M) cost for these boilers is 4% of the capital cost, which is the industry’s standard.

Landfill-Gas-to-Energy Project Design Issues When a landfill-gas-to-energy project is designed, one of the most important factors to be considered is the amount of gas available to generate the electricity. As previously mentioned, landfill gas starts being generated shortly after the landfill begins accepting waste and it can last for up to 30 years after the landfill closes. The production of landfill gas generated in year T given previous disposal of waste at time x (in millions of cubic feet per year (mmcf/yr)) can be estimated from a basic first-order decay model (9):

LFGT,x ) 2kRxL0e-k(T-x)

(1)

where 2 is the ratio of landfill gas to methane; k is the rate of methane generation (1/year); Rx is the amount of waste disposed in year x (pounds); L0 is the total methane generation potential of the waste, usually 2.565 cf/lb (6); and x is the year of waste input. The total landfill gas generated (LFGT) in a year by all the waste in the landfill is the sum of LFGT,x across all values of Rx. k depends on the climate of the area where the landfill is located. EPA recommended value for wet climate is 0.225/ yr. For medium moisture and dry climates, EPA recommend

TABLE 2. Typical IC Engine Performance and Costs (7) nominal capacity (kW) electric efficiency (%) heat rate (BTU/kWh) typical capital costs ($/kW) typical O&M costs ($/kWh)

system 1

system 2

system 3

system 4

system 5

100 30.6 11147 1515 0.0184

300 31.1 10967 1197 0.0128

800 33.3 10246 1001 0.0097

3000 36.0 9492 919 0.0093

5000 39.0 8758 919 0.0093

system 1

system 2

system 3

system 4

system 5

1000 21.9 15580 1781 0.0096

5000 27.1 12590 1010 0.0059

10000 29.0 11765 969 0.0055

25000 34.3 9945 859 0.0049

40000 37.0 9220 785 0.0042

TABLE 3. Typical Gas Turbine Performance and Costs (7) nominal capacity (kW) electric efficiency (%) heat rate (BTU/kWh) typical capital costs ($/kW) typical O&M costs ($/kWh) 7366

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TABLE 4. Typical Capital Costs for Steam Turbines (7) nominal capacity (kW) electric efficiency (%) heat rate (BTU/kWh) steam flow (lb/h) typical capital costs ($/kW) typical O&M costs ($/kWh)

TABLE 6. Financial Assumptions (10)

system 1

system 2

system 3

500 15-25 13000 21500 918 0.004

3000 15-25 13000 126000 385 0.004

15000 15-25 13000 450000 349 0.004

project life (years) project start year down payment loan rate loan period depreciation corporate tax renewable energy tax credit discount rate

30 1999 20% 9% 15 years straight line 35% 0 $/kWh 12%

TABLE 5. St. Louis Missouri Landfill Characteristics (10) landfill name

West Lake

West County

year landfill opened year landfill closing current WIP (1999, tons) acceptance rate (tons/yr) design landfill depth (ft) design area of landfill

1976 2003 10615857 950000 300 52

1975 2008 6000000 264000 100 110

Modern 1958 1997 8750000 187500 120 128

values of k are 0.1/yr and 0.06/yr, respectively (6). Note that this equation is valid for landfills that are currently in operation and have been designed with leachate collection and removal. In the future, landfills could be designed and managed to use the leachate in order to increase moisture content of the solid waste and thus increase decomposition rates and methane generation. After the annual gas generation is calculated, the gross power generation potential (GPGP) in a given year (in kilowatts) can be calculated (6):

GPGPT )

LFGTηcolEc (365)(24)Hr

(2)

where ηcol is the collection system efficiency, typically 85%; Ec is the energy content of landfill gas, typically 500 BTU/cf; and Hr is the heat rate of equipment, as given in Tables 2-4. The net power generation potential (NPGP) is then estimated by subtracting the parasitic loads. This is energy lost by auxiliary equipment and is usually 2% of the gross power generation potential for IC engines and 6% for gas/ steam turbines, so that NPGP is 94-98% of GPGP. The annual electricity generated (in kilowatt hours) is then estimated (6):

AEG ) NPGP(24)(365)90%

(3)

where 24 is hours per day, 365 is days per year, and 90% represents the assumed average percentage of the time in a year that the equipment is producing electricity at its rated capacity (net of maintenance, downtime, etc).

Economic Analysis The U.S. EPA’s Landfill Methane Outreach Program developed the Energy Project Landfill Gas Utilization Software (E-PLUS) with the goal of assisting in the analysis of “opportunities for installation of gas recovery systems” in landfills (9). The software includes estimates of gas production, a simple economic cost-benefit analysis, and estimates of CO2 and SO2 emissions offset from electricity generation from coal. Morgan and Yang (10) performed a cost-benefit analysis case study using E-Plus for three different landfills in St. Louis, MO. Table 5 shows general information about these landfills. Using the financial assumptions shown in Table 6 and the waste-in-place (WIP) method (described later), Morgan and Yang (10) found that an electricity price around $0.04/ kWh would make these landfill-gas-to-energy projects profitable. Larger landfills would require lower electricity prices

to be profitable because they have larger landfill gas generation potential. However, results from Morgan and Yang (10) are only applicable to IC engines, since E-PLUS only analyzes this type of equipment. The analysis does not include economic valuation of environmental benefits or discussion about relevant tax subsidies for these projects. For the present work, a comparison of the costs and benefits observed at landfill-gas-to-energy projects using the three different types of equipment (IC engines, gas turbines, and steam turbines) is performed. The average net power generation potential during the lifetime of the equipment is divided by the nominal capacity of each system type (as given in Tables 2-4) in order to determine how many engines/ turbines are required and the associated capital costs. The system in each equipment category with the lowest capital costs is chosen for the analysis (O&M costs are not compared because all systems have similar O&M costs and they are all relatively small compared to capital costs). This system setup can be recalculated at the end of life of the equipment in order to manage the then-current average landfill gas flow and power generation potential. After the system to be used is determined (on the basis of lowest capital costs), total operation and maintenance costs are calculated by multiplying electricity generation in kilowatt hours by the average O&M costs of the chosen system (from Tables 2-4). For those years where the landfill gas flow can produce more electricity than the design capacity of the equipment, production at equipment capacity (calculated by replacing the NPGP in eq 3 by the equipment nominal capacity, as given in Tables 2-4) is used for cost calculation. This method is also used to calculate the revenues from selling the electricity (at any given price) and the benefits obtained from a tax credit, if available. Other financial factors considered include collection system costs as described in Table 1 (if collection system is already present, capital costs for a collection system were not included, as they are sunk costs) and those listed in Table 6.

Air Emissions As previously mentioned, municipal landfills have the potential to emit large quantities of methane and carbon dioxide, as well as some nonmethane organic compounds. Under the 1996 New Performance Standards for Municipal Landfills, large landfills have to control these emissions. Flaring has been traditionally used as the control method. Methane emission control can also be achieved by using electricity-generating equipment. It is important to note that both flaring and electricity-generating equipment create emissions of criteria pollutants such as NOx, CO, SO2, and particulate matter (PM). To perform a more socially relevant analysis, valuation of emissions (greenhouse gases and criteria pollutants) was included for this project. Equations 4-8 were used to calculate these emissions and were developed by use of the AP-42 emission factors for municipal solid waste landfills (4). For any given landfill, the costs of net emissions from a landfill gas-to-energy project were compared to the current net emission costs at the landfill. For a landfill where a collection/flaring system is not present, VOL. 39, NO. 19, 2005 / ENVIRONMENTAL SCIENCE & TECHNOLOGY

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TABLE 7. NOx, CO, and PM Emission Factors (4) control technology

NOx (lb/106 cf of methane)

CO (lb/106 cf of methane)

PM (lb/106 cf of methane)

flare IC engines gas turbines steam turbine

40 250 87 33

750 470 230 5.7

17 48 22 8.2

TABLE 8. Emission Valuation (12) pollutant global warming potential (CO2 equiv) SO2 NOx CO PM

cost cost (1992 $/ton) (1999 $/ton) 13 2000 2800 520 4300

15 2400 3300 600 5100

current emissions are uncontrolled (U) methane and CO2 emissions, calculated by

UCO2 ) (0.5)(0.112)(LFGT)

(4)

where 0.5 is the assumed percentage of landfill gas that is CO2, 0.112 is the amount of CO2 (pounds per cubic foot of landfill gas), and LFGT is the total amount of landfill gas generated in year T (cubic feet); and

UCH4 ) (0.5)(0.041)(LFGT)

(5)

where 0.5 is the assumed percentage of landfill gas that is CH4 and 0.041 is the amountof CH4 (pounds per cubic foot of landfill gas). In landfills where a collection and flaring system is in place, emissions are those from a flaring system. In this case, the uncontrolled methane is converted into emissions of CO2 (combustion efficiency was assumed to be 100%) and criteria pollutants. Equations 6-8 are used to calculate controlled (C) emissions of CO2, CH4, and SO2. Collection efficiency (ηcol) is assumed to be 85%.

CCH4 ) (1 - ηcol)(UCH4)

(6)

CCO2 ) UCO2 + (ηcol)(UCH4)(2.75)

(7)

where 2.75 is the ratio of the molecular weight of CO2 to the molecular weight of CH4, and

CSO2 ) 2(7.65 × 10-8)(LFGT)(ηcol)

(8)

where 2 is the ratio of the molecular weight of SO2 to the molecular weight of S, and 7.65 × 10-8 is the amount of reduced sulfur compounds (as sulfur) (pounds per cubic foot, assuming 1 atm pressure at 25 °C). Equations 4-8 are also valid for CH4, CO2, and SO2 emissions from internal combustion engines, gas turbines, and steam turbines, where methane combustion is also assumed to be 100% efficient. Further NOx, CO, and PM emissions factors from the different control technologies (flaring and electricity-generating equipment) can be seen in Table 7. To estimate social costs of net pollutant releases, emissions were converted into dollar values. Table 8 shows valuation of emissions used; 1992 dollars were converted to 1999 dollars 7368

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by use of the consumer price index values given by the Federal Reserve and rounded to two significant figures. The CPI in 1992 was 140.3, while in 1999 it was 166.6 (11).

Case Studies As previously mentioned, EPA provides E-PLUS to help evaluate the profitability of potential landfill-gas-to-energy projects. Morgan and Yang (10) used this software to perform an economic analysis of three St. Louis, MO area landfillgas-to-energy projects, as described in previous sections. In their analysis a waste-in-place (WIP) method of calculating landfill gas generation was assumed. This WIP method uses the total amount of waste present in the landfill in the last 30 years to approximate the amount of landfill gas generated each year. The first-order decay method used in our model (and also available in E-PLUS) uses the waste in place at the landfill as well as other factors that affect methane emissions, making it a more accurate approximation. Moreover, the use of this first-order decay model is required under the 1996 New Source Performance Standards and Emission Guidelines for Municipal Solid Waste Landfills to calculate whether the NMOC emission rate at a landfill is greater than 50 Mg/yr. To compare E-PLUS to the model designed in this paper, the landfill information and financial assumptions used by Morgan and Yang (10) were again input in E-PLUS, but this time the first-order decay model was chosen. Table 9 shows the methane generation numbers obtained by Morgan and Yang (10) using the E-PLUS WIP method, and the numbers obtained for this paper using the first-order decay method (also from E-PLUS). Note that first-order decay consistently gives lower estimates than WIP, ranging from 5% to 20% in the three case studies. This leads to similar reductions in electricity generation. The results of the analysis performed by E-PLUS (using the first-order decay model and an assumed electricity price of $0.045/kWh) for the installation of internal combustion engines (E-PLUS only considers this type of equipment) at the three landfills are also shown. In addition, emission valuation was done by multiplying the CO2 and SO2 emission offsets provided by E-PLUS by the values from Table 8. Emission offsets are emission prevented from other power plants by producing electricity from the landfill gas. It is important to note that the purely financial results were obtained directly from E-PLUS, but the emission reduction results were obtained from the yearly values of landfill gas generation instead of the average value reported by E-PLUS. Emission offsets were calculated with the offset emission factors provided by E-PLUS: 758 lb/MWh for CO2 and 22.2 lb/MWh for SO2 (9). Landfill gas can be produced for up to 30 years after a landfill stops accepting waste. However, to compare E-PLUS with the model developed for the present work, modifications were made in our model so that the project has a total lifetime of 30 years, from 1999 to 2029 regardless of when it closes. Modern landfill was the exception since it closed in 1997, so the analysis was done from 1999 to 2027. The default values for k (0.04/yr) and L0 (2 cf/lb) used by E-PLUS and Morgan and Yang (10) were also retained, even though they differ from the recommended EPA values. Moreover, our model includes an analysis for the three types of equipment instead of only for IC engines. The corporate tax rate, depreciation method, and discount rate presented in Table 6 were used, as well as a price of electricity of $0.045/kWh, which is the default value used by E-PLUS. All the assumptions previously described about equipment costs and electricity generation were also used. Costs related to permitting or other environmental management activities have not been included. Table 10 summarizes the results from our model for the West Lake landfill. The private net present value (NPV) was calculated from the costs of the system and the revenues

TABLE 9. Comparative E-PLUS Results with Those from First-Order Decay Model landfill name

Mndfill gas generation, 1999-2029 (mmcf/yr) avg, a from ref 10 avg, from first-order decay max, from first-order decay min, from first-order decay avg generation, 1999-2029 (MWh/yr) capital costs (thousand $) O&M costs (thousand $/yr) net present value (thousand 1999 $) avg annual methane emission reduction (tons) avg annual CO2 emission offsets from coal generation (tons) avg annual SO2 emission offsets from coal generation (tons) net present value of emission savings (thousand 1999 $)

West Lake

West County

Modern

2085 1838 2956 1003 45335 9255 2020 2010 16935 16957 497 78930

1293 1049 1470 607 25790 4625 1080 1430 9613 9597 281 41970

719 691 1232 371 17310 3885 828 470 6457 6465 189 31530

TABLE 10. Model Results for West Lake Landfill IC engine

gas turbine

steam turbine

1888 69925 60665 3 3 8270 0.009 5695

1888 57440 56495 1 10 9690 0.006 6300

1888 52225 51235 3 3 9135 0.005 5360

avg landfill gas generation (mmcf/yr) avg generation potential (MWh/yr) avg generation (MWh/yr) no. of units unit capacity (MW) capital costs (thousand $) O&M costs ($/kWh) private net present value (thousand 1999 $)

TABLE 11. Emissions and Valuations from West Lake Landfill uncontrolled avg annual emissions (tons) methane CO2 SO2 NOx CO PM net present value of emission costs (thousand 1999 $) emission savings compared to uncontrolled emissions (thousand 1999 $) emission savings compared to flare emissions (thousand 1999 $)

obtained from selling the electricity. Note that even though only the average generation values were reported in these tables, actual yearly values were used to obtain the results. Tables A2 and A3 in the Supporting Information show the same information for West County and Modern landfills. These tables show slightly different values for average landfill gas generation than what was obtained from E-PLUS (Table 9). This difference is mainly caused by rounding differences between E-PLUS and our model, but the results are close enough to validate our model. It is also shown that IC engines and gas turbines have similar economic performance. However, gas turbines have slightly higher private NPVs than IC engines in landfills that generate the largest gas quantities (like West Lake). Even though steam turbines are shown to have positive net present values for all the landfills, the other equipment outperforms them in landfills with larger gas generation. In Modern landfill, which has lower gas generation than the other two landfills, the steam turbine gives similar results to the gas turbine, and both have lower NPV than the IC engine. E-PLUS lacks the ability to perform this comparison between available technologies. Emission valuation, which is not performed by E-PLUS, was also included in our model. Table 11 shows emission costs

flare

IC engine

gas turbine

steam turbine

19284 53031 0 0 0 0 80500

2893 98108 0.12 16.05 300.94 6.82 31045

2893 98108 0.12 100.31 188.59 19.26 34170

2893 98108 0.12 34.91 92.29 8.83 30410

2893 98108 0.12 13.24 2.29 3.29 28635

0

49460

46335

50095

51870

-49460

0

-3120

635

2410

for West Lake landfill obtained from the AP-42 emission factors and the emission valuation from Table 8 (values may not add up due to rounding). Tables A5 and A6 in the Supporting Information show emission costs for West County and Modern Landfills. As previously mentioned, E-PLUS calculates CO2 and SO2 emission offsets from generating electricity through coal. There currently is no proof that the electricity generated at landfill-gas-to-energy projects (or other renewable energy projects) really offsets generation at other power plants. Rather, it is just extra electricity added into the grid system. However, as generation capacity in landfill-gas-to-energy projects increases, offsets may actually occur. In our model emission offsets were calculated by using the average emission factors (based on all energy sources) for the region of St. Louis, MO, where the three landfills are located, as given by the EPA’s E-GRID program. These numbers are as follows: 1237 lb/MWh for CO2, 5.2 lb/MWh for SO2, and 2.7 lb/MWh for NOx (13) and again are multiplied by values in Table 8. Table 12 presents emission offsets and valuation for West Lake landfill. Tables A8 and A9 in the Supporting Information show these data for West County and Modern landfills. VOL. 39, NO. 19, 2005 / ENVIRONMENTAL SCIENCE & TECHNOLOGY

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TABLE 12. Emission Offsets from Electricity Production at West Lake Landfill IC engine

gas turbine

steam turbine

37521 157.73 81.90 11005

34941 146.88 76.27 11240

31688 133.21 69.17 10170

avg annual emission offsets (tons) CO2 SO2 NOx net present value of emission offsets (thousand 1999 $)

TABLE 13. Total Net Present Value for West Lake Projecta

a

IC engine

gas turbine

steam turbine

private net present value of project emission savings compared to flare emissions

5695 -3120

6300 635

5360 2410

net present value without emission offsets net present value of emission offsets

2575 11005

6935 11240

7770 10170

total social net present value

13580

18175

17940

IC engine

gas turbine

steam turbine


3190 -1665

2735 340

1250 1285


1525 7200

3075 5965

2535 5620


8725

9040

8155

IC engine

gas turbine

steam turbine


1210 -1245

815 255

1250 960


-35 4700

1070 4620

1800 3520


4665

5690

5320

All values are given in thousand 1999 dollars.

TABLE 14. Total Net Present Value for West County Projecta

a


TABLE 15. Total Net Present Value for Modern Projecta

a


Discussion of Results As shown in Tables 10 and 11 above, and Tables A2 and A3 in the Supporting Information, E-PLUS gives a significantly lower net present value to the three landfill-gas-to-energy projects than what is obtained from our model. This difference is caused by higher capital costs and operation and maintenance costs used by E-PLUS. Moreover, E-PLUS calculates lower revenues from electricity sales than our model because its electricity generation numbers are lower. It is not clear how the program calculates these numbers, and investigation into this issue has not yielded an answer. Including emission valuation in the economic analysis shows that the environmental benefits from a landfill-gasto-energy project can be higher than any costs and revenues from the project. As previously discussed, the price of electricity was assumed to be $0.045/kWh. In reality, the price offered to the landfill for its electricity may be lower. With a lower electricity price, the importance of including emission valuation in the analysis increases, since the private net present value would be lower and would seem to make the project less attractive. The private and social breakeven electricity prices for these projects were calculated by varying the price of electricity until the private and social NPVs were each found to be zero. For all types of equipment the private price is between $0.03/kWh and $0.04/kWh [Morgan and 7370

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Yang (10) had calculated this price to be around $0.04/kWh]. The social breakeven price not including grid emission offsets is approximately $0.05/kWh, $0.04/kWh, and $0.03/kWh for IC engines, gas turbines, and steam turbines, respectively. If grid emission offsets are included, the social breakeven price of electricity for these projects decreases to less than $0.02/kWh. Any control equipment used in a landfill has much lower net emissions than an uncontrolled landfill (for West County landfill, for example, emission costs for control equipment are between 30% and 45% of the emission costs of an uncontrolled landfill). Steam turbines have the lowest emission costs, followed by gas turbines. IC engines have higher emission costs than flaring the landfill gas. Tables 13-15 show a net social present value of each project, obtained by adding the private net present value (from Table 10 for West Lake), the emission savings compared to flaring (from Table 11 for West Lake), and the net present value of grid emission offsets (from Table 12 for West Lake). These tables show that IC engines tend to have a higher private net present value than the other types of equipment, which explains why most existing landfill-gas-to-energy projects choose them over the gas and steam turbines. It can be seen, however, that in landfills with higher gas generation (e.g., West Lake) the private NPVs of gas and steam turbines

could be higher than those for the IC engines. Moreover, when emission valuation is included in the analysis, gas and steam turbines generally have better NPVs than the IC engines in all landfills. Tables 13-15 also show that, as previously mentioned, the biggest benefits of these projects come from the emission valuation. These social benefits are generally 2-6 times higher than the private benefits, but these dollar values are not “money in the bank” for the companies that manage these projects. Rather, they are benefits to society as a whole. For this reason and to ensure that these social benefits are realized, a government subsidy would be appropriate for this kind of project. This socially optimal subsidy can be calculated by dividing the NPV of emission valuation (emission savings compared to flaring and emission offsets) by the electricity generated during the operating life of the project (average generation in kilowatt hours per year times 30 years, or 28 for Modern landfill). This socially optimal subsidy is found to be between $0.0045/kWh and $0.0085/ kWh. If the emission offsets are not included, the socially optimal subsidy would be less than $0.002/kWh. Another method to calculate the optimal subsidy would be to subtract the private net benefit from the emission valuation NPV and divide by the electricity generated during the operating life of the project. This method would be more adequate in cases where the private costs are larger than the private benefits. By this method, the optimum subsidy would be less than $0.007/kWh when emission offsets are included, and no subsidy would be required if emission offsets are not included. There currently exist two federal financial incentives to renewable energy projects for which landfill-gas-to-energyproject may qualify: a $0.015/kWh production tax credit, or a $0.015/kWh renewable energy production incentive (REPI). These incentives clearly surpass the socially optimal subsidy for landfill-gas-to-energy projects, suggesting that they provide far more incentive than needed from society’s perspective. This subsidy money could instead be used to promote other technologies with lower economic advantages than landfill-gas-to-energy projects, for example, wind farms. It is important to note that for the analysis presented above, emission offsets were classified as social benefits. This may not be the case for landfills operating in areas that are in nonattainment of National Ambient Air Quality Standards, where the emission offsets may become real income to landfill operators, and thus they become part of the private net present value. This change in classification of emission offsets would not change the total NPV of these projects but would reduce the private breakeven price of electricity and the optimum subsidies.

Market Barriers to Landfill-Gas-to-Energy Projects In order for these landfill-gas-to energy projects to sell their electricity, a connection to the grid system would be required. PJM interconnection has recently grown to coordinate wholesale electricity movements in 13 states: Delaware, the District of Columbia, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia. PJM makes available on the Internet records for all interconnection requests submitted to them since 1999 (14). These records provided an estimate of the costs landfillgas-to-energy and other similar projects must incur in order to obtain a grid connection. Connection costs include the direct cost of connection and/or network upgrades. Direct cost of connection refers to the costs of constructing or installing the required infrastructure to perform the connection. Network upgrades refer to any modifications that must be performed so that the existing local grid infrastructure can handle the new load that will result from the connection. A search of the mentioned records gave us cost estimates for 21 projects with generation capacity less than

FIGURE 1. Frequency histogram for cost per megawatt. 20 MW (i.e., the typical capacity range for renewable projects and distributed generation). Nine of these projects used methane, six used wind, and another six used natural gas. Only two of these projects incurred network upgrade costs; all others were only liable for direct costs of interconnection. The average cost per megawatt capacity for these projects is $77 560. Figure 1 shows the frequency histogram of the cost per megawatt for these projects. Such costs could significantly affect the private net present value of landfill-gas-to-energy projects, increasing the private breakeven price of electricity and changing the optimum subsidy required. In short, these interconnection costs could wipe out private NPVs for smaller landfills, reinforcing the need to consider social NPVs for these projects. It is important to note that the costs found could vary in other regions of the country that do not fall under the management of PJM. Different costs could have different effects on landfill-gasto-energy projects. In addition to interconnection costs, interconnection rules, buy-back rates, access to capital, and absence of markets for key pollutants represent barriers to the development of landfill-gas-to-energy projects. Due to scope and time limitations, these barriers were not studied in detail for this paper but are worth mentioning.

Sensitivity Analysis As previously discussed, a discount rate of 12% was used for the analysis of the landfill-gas-to-energy projects. To verify how sensitive the results presented above are to this discount rate, the internal rate of return was found. The private internal rate of return (IRR) for these projects varies between 15% and 24%, while the total social IRR varies between 35% and 55%. Straight-line depreciation was used in the analysis in order to be able to perform the comparison between the results obtained with the model developed for this paper and those obtained by Morgan and Yang (10). In reality, companies may choose to use double declining balance in order to obtain the tax benefits during the earlier years. Table 16 shows the private NPVs of the project with this depreciation method. Note that the private NPVs increase between 5% and 20% compared to use of straight-line depreciation. Even though the AP-42 emission factors are considered to be representative of emissions at landfill-gas-to-energy projects, these numbers can vary according to the specific combustion characteristics observed at each project. For this reason, obtaining a range of potential emissions could be more representative of reality. Moreover, using a different set of emission factors can give us some insight into where the sensitivity of the model lies. For this purpose, the emission factors for criteria pollutants at Municipal Solid Waste Landfills given by the Michigan Department of Environmental Quality were used (15). The emission factors for flaring the gas are the same in the AP-42 as in the Michigan DEQ documents. Emission factors for steam turbines could not VOL. 39, NO. 19, 2005 / ENVIRONMENTAL SCIENCE & TECHNOLOGY

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TABLE 16. Private Net Present Values by Use of Double Declining Balancea

a

landfill

IC engine (thousand 1999 $)

gas turbine (thousand 1999 $)

steam turbine (thousand 1999 $)

West County West Lake Modern

3380 5980 1350

2905 6630 990

1460 5675 950

All values given in thousand 1999 dollars.

TABLE 17. Michigan DEQ Emission Factors for LFG IC Engines and Turbines (15) pollutant

IC engine (lb/mmcf of landfill gas)

gas turbine (lb/mmcf of landfill gas)

SO2 NOx CO PM

0.6 2840 399 10

0.6 462 115 44

Methane Outreach Program. As important as this is, we hope that the effort to develop landfill-gas-to-energy projects will not be concentrated in developing countries while the U.S continues to ignore its potential and maintains its dependence on traditional energy sources, especially when there are at least 630 candidate landfills in the United States, where these privately and socially cost-effective projects could and should be developed.

Acknowledgments be found in these last documents. Table 17 gives the Michigan emission factors for IC engines and gas turbines that use landfill gas. The AP-42 emission factors assume that low NOx burners are used in landfill-gas-to-energy projects. This assumption was not used in the Michigan DEQ emission factors. Since the low NOx technology exists and is widely available, it was assumed that it will be used in the projects and replace the NOx emission factors given in Table 17 by the AP-42 ones given in Table 7. The potential emissions and emission valuation for the previously described projects, calculated with these new emission factors, can be seen in Tables A10A15 in the Supporting Information. For IC engines the AP-42 SO2 and CO emissions are lower than the Michigan DEQ emissions, but the AP-42 PM emissions are higher than the Michigan DEQ Emissions. For gas turbines the AP-42 SO2 and PM emissions are lower than the Michigan DEQ emissions, while the CO emissions for both emission factors are basically the same. In terms of emission savings, both technologies have lower emission savings with the Michigan DEQ emission factors than the AP-42. This however, does not seem to significantly affect the total financial results when emission offsets are included. As when the AP-42 emission factors were used, the social total net present value is approximately double the private net present value. Moreover, gas turbines still do better than IC engines. The optimum subsidy for these projects, obtained by dividing emission costs by total electricity produced, varies between $0.0045/ kWh and $0.0078/kWh. If the subsidy is calculated by subtracting the private NPV from the emission valuation NPV, then the subsidy would be less than $0.006/kWh. If emission offsets were not included (in either method), then no subsidy would be required, which again sets up the argument that subsidies for these projects are not really necessary. Instead, government efforts should promote the development of landfill-gas-to-energy projects by providing incentives during the early phases of the project (i.e., construction). Examples of this type of incentives are low-interest loans. These loans not only would provide the financial resources for landfill management companies to build the projects but also would be a safe investment by the government. In the summer of 2004, the EPA and the Department of Energy established the Methane to Markets Partnership. The goal of this international partnership is to reduce methane emissions and promote economic growth and energy security (in developed and developing countries) by using methane from landfills, natural gas/oil systems, and underground coal mines. Through this partnership, the effort to control greenhouse gas emissions from landfills will proliferate to other countries and complement the efforts of the Landfill 7372

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We thank the AT&T Industrial Ecology Faculty Fellowship Program and the Teresa Heinz Fellows for Environmental Research Program for their financial support. We also thank the five anonymous reviewers for their helpful comments.

Supporting Information Available Model results, emissions and valuations, and emission offsets from the West Lake, West County, and Modern landfills and the results of the analysis for IC engines and gas turbines using the Michigan DEQ emission factors instead of the AP42 emission factors. This material is available free of charge via the Internet at http://pubs.acs.org.

Literature Cited (1) Global Climate Change; United Nations Framework Convention on Climate Change; United Nations Publications: Geneva, Switzerland, 2004. (2) Inventory of U.S. Greenhouse Gas Emissions and Sinks: 19902002; Office of Atmospheric Programs, U.S. Environmental Protection Agency, Government Printing Office: Washington, DC, 2004. (3) Electric Power Annual 2002; Energy Information Administration, Office of Coal, Nuclear, Electric, and Alternate Fuels, U.S. Department of Energy, Government Printing Office: Washington, DC, 2003. (4) AP 42 Emission Factors: Municipal Solid Waste Landfills; Technology Transfer Network, Clearinghouse for Inventories and Emission Factors; U.S. Environmental Protection Agency, Government Printing Office: Washington, DC, 1998. (5) LMOP Landfill and Project Data Base; Landfill Methane Outreach Program, U.S. Environmental Protection Agency, Government Printing Office: Washington, DC, 2004. (6) Turning a Liability into an Asset; Landfill Methane Outreach Program, U.S. Environmental Protection Agency, Government Printing Office: Washington, DC, 1996. (7) Technology Characterization: Reciprocating Engines, Steam Turbines, Gas Turbines; Climate Protection Partnership Division, U.S. Environmental Protection Agency, Government Printing Office: Washington, DC, 2002. (8) Simbeck, D.; McDonald M. Existing Coal Power Plant Retrofit CO2 Control Options Analysis. Greenhouse Gas Control Technol., Proc. Int. Conf., 6th, 2000. (9) Energy Project Landfill Gas Utilization Software (E-PLUS) User’s Handbook; Landfill Methane Outreach Program, U.S. Environmental Protection Agency, Government Printing Office: Washington, DC, 1997. (10) Morgan, S. M.; Yang, Q. Use of Landfill Gas for Electricity Generation. Pract. Period. Hazard., Toxic, Radioact. Waste Manage. 2001, 5, 14-24.

(11) Consumer Price Index, 1913-2004; Bureau of Labor Statistics, U.S. Department of Labor, Government Printing Office: Washington, DC, 2004. (12) Matthews, H. S.; Lave, L. B. Application of Environmental Valuation for Determining Externality Costs. Environ. Sci. Technol. 2000, 34, 1390-1395. (13) Power Profiler: How Clean is the Electricity I Use?; Clean Energy Office, U.S. Environmental Protection Agency, Government Printing Office: Washington, DC, 2004. (14) Generation Interconnection Request Queues and Summaries; PJM Interconnect, 2000.

(15) Emission Calculation Fact Sheet: Municipal Solid Waste Landfills; Environmental Science and Services Division, Michigan Department of Environmental Protection: Lansing, MI, 2003.

Received for review April 3, 2005. Revised manuscript received July 5, 2005. Accepted July 25, 2005. ES050633J

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Landfill-Gas-to-Energy Projects: Analysis of Net ... - ACS Publications

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