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BIOGAS Long path for Bronkhorstspruit biogas project The 3.3 MW Bronkhorstspruit grid connected biogas project, seen as a ground breaking venture in South Africa, has taken some seven years from conceptualisation to realisation. T he Bronkhorstspruit Biogas Project, the name of the special purpose entity for the project developed by Bio2Watt, and largely driven by founder Sean Thomas, achieved financial closure in the second half of 2013. Construction is expected to take nine months and the facility is set to be operational in the second quarter of 2014. It is understood to be the first grid connected biogas project in South Africa and was granted a licence by the National Energy Regulator of South Africa (Nersa) outside the ambit of the country’s Renewable Energy Independent Power Producer Programme. The significance of the project is twofold. It entails the wheeling of power through Eskom’s grid and through that of the municipality of Tshwane to supply a large industrial private sector off-taker in Pretoria. Though the organisation of the interconnection agreements was a complex and laborious process, seeing that Tshwane had not done it before and had no policy, the project demonstrates that the wheeling of electricity through the national and municipal grids on a reasonable scale is possible, and is allowed by legislation. It is also a big step forward in raising the profile of biogas power generation in South Africa. The Nersa licence obtained allows for the export of 4.2 MW and the project may approach the regulator to upgrade that to 5.0 MW should feedstock resources prove sufficient to support such capacity. The Bronkhorstspruit biogas project will operate for 10 years, with the opportunity to renew agreements for an additional 10 years. Though the lifetime of the plant is a projected 20 years, the duration of the off-take agreement, which will see the sale of 3.3 MW to the private sector off-taker through a power purchase agreement (PPA), is limited by the lease on agricultural land. It was deemed that the process of getting ministerial approval to change the lease duration would have taken too long and would have delayed the project even further. The R135 million Bronkhorstspruit biogas project has been structured as a limited recourse financial transaction and as such an off-take agreement was necessary. Initially the project had looked at the government of South Africa to be the off-taker but that did not materialise. Some 70% of the funding of the project has been supplied by IDC in the form of debt financing. The remaining 30% takes the form of equity finance with participants including Norfund, the engineering procurement construction (EPC) contractor, two impact funds and Bio2Watt itself. 50 Michael Feldner, the project’s finance adviser, says the facility had to be situated near a large reservoir of feedstock, which will be cattle manure primarily with the remainder being made up of food waste. Bronkhorstspruit is near some 20,000 cows and other suppliers of organic waste totalling 150% of what the biogas digester can take. The waste will be supplied to an anaerobic digester and grid tied gas engines will produce the electricity. Danish company ComBigaS is supplying the technology for the project that is expected to create some 30 direct and indirect jobs. Development of the project required perseverance and Feldner says that over its course it saw 56 iterations of its financial model. It saw 1,500 pages of legal documents produced and R6 million spent in legal fees. Thomas began in 2007 with a year-long feasibility study, followed by an environmental impact assessment (EIA) that took two years to be finalised. This was in spite of the fact that not a single outside person showed up at the public consultation meetings. In about mid-2009 Bio2Watt began to negotiate the supply agreements and the PPA. This was a lengthy and difficult process which extended into the latter parts of 2011. It took the same period to negotiate the interconnection agreements with the municipality of Tshwane and Eskom. Obtaining the various other licences and permits took even longer and continued late into 2013, having begun at the same time, in mid-2009. “An issue here is one government department does not know what another is doing, and the application process can seriously be made quicker. Each licence should not take that long to receive and there should be some urgency in providing people with licences,” Feldner says. “It means we approached investors too early and then had to manage them to ensure their patience.” His recommendation to regulators, as lessons from this project, is to simply the licensing process. Perhaps it could be streamlined to have one license for land use, water use and waste management. The Bronkhorstspruit project had to obtain eight permits and licences from different regulators. Feldner also suggests that municipalities be provided with clear directives on waste management and wheeling of power. In terms of the Department of Energy, Nersa and Eskom, he suggests that industry is best supported through a strong policy framework as opposed to fickle subsidy programmes. The Bronkhorstspruit project raises the question as to how a developer could afford to spend five years undertaking what in the context of the power sector, is a small-scale project. The answer is that it could not, and the hope is that the amount of ESI AFRICA ISSUE 4 2013