HOW TO INCREASE BIOGAS PRODUCTION - SMALLOPS

When operating a biogas plant, it is very important to know what the different variables are that allow increasing biogas production. From Smallops we want to show you some of the existing possibilities. We also want to let you know about the developments we are carrying out so that you can increase your biogas production.

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We are going to start this blog commenting that biogas is a combustible gas formed from the decomposition of organic matter (biomass), through the action of certain microorganisms. Biogas is composed of 50-75% methane (CH4), this being the compound that gives it the highest energy value. In the same way, it is a way to value your waste and also to be able to generate green energy for self-consumption, use it as biofuel by injecting it into the gas network or compressing or liquefying it for use as biofuel in the automotive industry. In addition, the production of biogas helps us to achieve the EU decarbonisation objectives and the National Integrated Energy and Climate Plan. It is for this reason that the administration has already released the biogas roadmap and the PERTE for renewable energies, renewable hydrogen and storage.

Having said this, it is important for anyone who has incorporated biogas as a waste management route that the key is to achieve sufficient gas performance. For this reason, many times the main question is how to increase biogas production. For that, it is necessary to know what are the main factors that help to have a more efficient biogas production.

The factors that help to have a more efficient biogas production are:

• Substrate type (available nutrients);
• Digester temperature;
• The volumetric load;
• Hydraulic retention time;
• Acidity level (pH);
• Carbon Nitrogen Relation;
• Substrate concentration;
• The addition of inoculants;
• Degree of mixing;
• Presence of process-inhibiting compounds;

Learn how to increase biogas production

Currently, there are many companies on the market dedicated to increasing the production of biogas and biomethane. The problem with these companies is that they usually advise buying additional equipment to increase biogas production. These purchases represent a large investment, and if not, they recommend that you modify the substrate so that you are not solely dependent on your own substrates.

At Smallops, knowing that all the problems mentioned above, we developed an additive. This additive is used to increase the production of biogas and is carbon-encapsulated iron nanoparticles, called OPS. The OPS help increase biogas production, acting directly on the biogas digester itself, without altering the current process for obtaining this renewable energy, and without using other substrates. The main advantages are:

• Improve the production of methane (CH4) by 20%.
• Reduce production costs to the same extent as increasing biogas production.
• Elimination of hydrogen sulfide gas by up to 99%, extending the useful life of cogeneration engines.
• Increase the degradation of phytotoxic compounds such as polyphenols by 24%.
• The resulting digestate would be of greater interest and viability when applied to soils due to the higher content of iron and sulfur (essential nutrients for plants) and its lower contaminant load, which is an added value that would otherwise increase the profitability of the process.
• They provide greater stability to the biogas production process, which favors this sector towards the establishment of biogas as a reliable energy source. All this because biogas production would be more constant and homogeneous, as well as being of higher quality and maximizing its production.

All this with the same product!

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If you are looking for a profitable, efficient and sustainable way to improve biogas production, do not hesitate to contact us. We will solve all your doubts and we will provide you with all the information you need!

Introduction:

Investing in the biogas industry can be highly rewarding but requires a clear strategy and a thorough market understanding. As a first-time investor, you must ask yourself key questions that will help shape your approach, manage risks, and clarify your goals. This article outlines the 10 most important questions to consider before investing in biogas projects, plus a bonus question that ensures you’re prepared for the long haul.

1. How do you plan to make money from your investment?

(Do you wish to make money through buying, improving, and selling after a short period or through long-term operations?)

Considerations:

The way you plan to make money shapes your overall strategy. If you focus on short-term gains, you’ll likely be looking for projects you can improve quickly and sell at a higher price. On the other hand, if you’re seeking long-term operational profits, your priorities will shift toward stability, ongoing management, and revenue from energy production.

Short-term (flipping) strategy:

Investors seeking quick returns may focus on finding underperforming or undervalued assets, upgrading them (such as through technological improvements or operational efficiencies), and selling them at a higher value. The goal is to increase the plant’s worth as quickly as possible to capitalize on market opportunities.

Pros:

• Faster returns on investment, often within a few years.
• Less involvement in day-to-day operations.
• You can take advantage of favourable market conditions.

Cons:

• Success relies on your ability to increase value quickly.
• Requires finding buyers in a timely manner.
• You miss out on long-term income from plant operations.

Long-term (operational) strategy:

If you aim to make money from ongoing operations, you’ll be more focused on securing long-term feedstock and energy sales contracts. This approach allows for consistent cash flow from energy production but comes with higher management demands.

Pros:

• Stable revenue streams from energy production and by-product sales.
• Potential for growth as renewable energy markets expand.
• Full ownership of the operational process can lead to higher long-term profits.

Cons:

• Involves managing the plant and handling operational risks.
• Requires a strong understanding of long-term market dynamics.
• Ongoing exposure to changes in feedstock prices or energy demand.

2. Do you focus on developing your own projects, buying partially developed projects, or acquiring existing (brownfield) plants?

Considerations:

Your entry point into the biogas industry will significantly impact the level of control, risk, and time to market. Each approach has its benefits and challenges.

Developing your own projects:

If you choose to develop a project from scratch, you have complete control over the design, technology, and operations. However, this comes with higher risk and longer timelines, as you’ll need to manage everything from permitting and construction to commissioning.

Pros:

• Full control over the entire project, from design to operation.
• Ability to use the latest technology and build for future market needs.
• Potentially higher profit margins if the project is successful.

Cons:

• Higher upfront risk due to the long development timeline.

• Involves significant expertise in project management, construction, and regulatory compliance.
• Takes longer to generate revenue as construction and commissioning are time-consuming.

Buying partially developed projects:

This approach allows you to step into a project already in progress, reducing development time. However, it comes with the challenge of assessing incomplete work and understanding where value can be added.

Pros:

• Faster entry into the market compared to starting from scratch.
• Lower development risk, as some hurdles have already been cleared.
• Allows you to focus on completing the project and addressing any remaining gaps.

Cons:

• Limited ability to influence the early stages of project design.
• Possible risks related to incomplete or flawed development.
• Requires a deep understanding of the project’s current status and potential pitfalls.

Acquiring brownfield projects:

Acquiring an existing, operational biogas plant can provide immediate revenue but may involve significant maintenance or upgrades.

Pros:

• Immediate cash flow from energy production.
• Potential to optimize and improve existing operations for higher profitability.
• Lower risk since the plant is already operational.

Cons:

• Maintenance costs and potential for hidden liabilities.
• May require substantial upgrades to modernize the plant or improve efficiency.
• Less flexibility in terms of design and technology choices.

3. Do you want to build or outsource your own operating organisation?

Considerations:

One key decision investors need to make is whether to manage operations in-house or outsource to a third-party operator. Both options have distinct advantages, and the choice depends on how involved you want to be and how much control you need.

Building your own operating organization:

If you prefer full control over the biogas plant's daily operations, creating your own operational team might be the best option. This approach gives you more influence over how the plant is run but requires hiring specialized staff and dealing with the complexities of plant management.

Pros:

• Full control over operations, maintenance, and decision-making.
• Potential for higher long-term profitability since you won’t pay an external operator.
• Ability to build a team closely aligned with your goals and vision.

Cons:

• Requires hiring and managing specialized staff.
• Involves higher upfront costs for building operational infrastructure.
• Takes time to establish efficient operations.

Outsourcing operations:

If you want to reduce the burden of day-to-day management, outsourcing to an experienced operator can be a good option. This allows you to focus on other aspects of your portfolio while the operator handles the technical side.

Pros:

• Reduces your operational burden and the need for direct involvement.
• Access to experienced operators who can optimize plant performance.
• Less risk of mismanagement as the operator handles technical aspects.

Cons:

• You have less control over day-to-day decisions and plant performance.
• Outsourcing fees may reduce overall profitability.
• Risk of misalignment between your goals and the operator’s priorities.

4. Should you diversify geographically or cluster your investments?

Considerations:

Geographic diversification helps spread risk, while clustering investments in a specific region allows for operational synergies. Your decision will depend on your risk tolerance and operational strategy.

Geographic diversification:

By spreading your investments across different regions or countries, you can protect yourself from local market risks, such as regulatory changes, feedstock shortages, or market saturation. However, this approach comes with greater logistical complexity.

Pros:

• Reduced exposure to local market volatility, such as regulatory changes or feedstock availability.
• Access to different regulatory incentives, subsidies, and markets.
• Greater flexibility in responding to changes in the global biogas market.

Cons:

• Managing projects in different regions can increase logistical and operational complexity.
• Requires navigating multiple regulatory environments.
• Higher costs related to coordinating projects across various regions.

Clustering investments:

Focusing your investments in a specific region can allow you to take advantage of shared resources, such as feedstock supply chains, and reduce logistical complexity. However, this also means concentrating risk in one area.

Pros:

• Easier to share resources, such as feedstock supply and workforce.
• Lower logistical costs and simpler operations since projects are located near each other.
• Potential for developing economies of scale by concentrating operations in a single region.

Cons:

• Greater exposure to regional risks, such as local regulatory changes or market downturns.
• Limited growth potential if the region becomes saturated or if market conditions worsen.
• If the region's feedstock supply or energy market is disrupted, all projects are affected.

5. How will you secure feedstock supply and energy offtake agreements?

Considerations:

To remain profitable, biogas plants depend on reliable access to feedstock (organic waste) and stable energy sales agreements. Securing long-term contracts for both is essential for ensuring consistent revenue and minimizing risk.

Feedstock supply:

A reliable and affordable feedstock supply is crucial for efficiently operating a biogas plant. Competition for organic waste, agricultural production fluctuations, and waste management policy changes can all affect feedstock availability.

Pros of long-term feedstock agreements:

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• Ensures consistent supply, minimizing the risk of production interruptions.
• Protects against price fluctuations in the feedstock market.
• Reduces the need for constant renegotiation and supply sourcing.

Cons:

• Long-term contracts may limit flexibility if better supply opportunities arise.
• Agreements may be expensive, especially in competitive markets.
• A local change in feedstock availability can impact your operations.

Energy offtake agreements:

Biogas plants typically sell the energy they produce to utilities or other customers. Securing long-term offtake agreements guarantees revenue, but energy prices can fluctuate depending on market conditions and government policies.

Pros of energy offtake agreements:

• Guarantees revenue through pre-agreed prices and quantities.
• Reduces exposure to energy market fluctuations.
• Can provide stable, predictable cash flow for the project.

Cons:

• Limits your ability to take advantage of potential price increases in the energy market.
• May involve negotiating complex agreements with utilities or energy buyers.
• Long-term agreements could become less favourable if market prices rise significantly.

6. What level of operational complexity are you comfortable with?

Considerations:

Different biogas plants have varying levels of operational complexity, from simple designs to advanced facilities that require specialized management. Understanding your comfort level with operational complexity will help you choose the right type of plant.

Low-complexity plants:

These plants typically use simpler technology, requiring less maintenance and management. While they are easier to operate, they may offer lower efficiency and lower returns than more advanced systems.

Pros:

• Easier to manage and staff.
• Lower risk of operational failures.
• Lower capital and maintenance costs.

Cons:

• Lower efficiency, which could lead to lower profitability.
• Limited potential for growth or upgrades.
• Less attractive to energy buyers looking for advanced, high-output solutions.

High-complexity plants:

Advanced plants with sophisticated technology can produce more energy and handle a wider range of feedstock, but they require specialized staff and higher maintenance costs.

Pros:

• Higher energy efficiency, which can lead to higher profitability.
• Ability to process a wider variety of feedstocks.
• Greater potential for scaling and future upgrades.

Cons:

• Requires specialized knowledge and highly trained staff.
• Higher maintenance costs and a greater chance of operational downtime.
• More complex regulatory requirements due to the advanced technology involved.

7. How favorable is the regulatory environment where you plan to invest?

Considerations:

Local and national regulations, including permits, environmental standards, and incentives like subsidies or tax breaks heavily influence biogas projects. Understanding the regulatory landscape in your chosen location is critical for assessing risk and potential returns.

Favourable regulatory environments:

Countries or regions with strong government support for renewable energy can offer significant incentives, such as feed-in tariffs, carbon credits, or tax breaks, making biogas projects more attractive.

Pros:

• Access to subsidies, grants, or tax incentives can significantly reduce costs.
• Favourable regulations may simplify permitting and reduce time to market.
• Projects in supportive regulatory environments are often viewed as less risky.

Cons:

• Regulations can change quickly, potentially reducing or eliminating subsidies.
• Compliance with complex regulations can add costs and delays.
• In some regions, environmental restrictions may limit the size or scope of your project.

8. How do you plan to manage risk in your portfolio?

Considerations:

Every investment comes with risk, and biogas projects are no exception. Risk management protects your investment from unforeseen events, including regulatory changes, market shifts, and operational failures.

Risk management strategies:

Diversification, hedging, insurance, and careful project selection are all ways to mitigate risk in your biogas investment portfolio.

Pros of strong risk management:

• Protects against unforeseen disruptions, such as regulatory changes or feedstock shortages.
• Reduces financial exposure in the event of an operational failure.
• Increases investor confidence and may make it easier to secure financing.

Cons:

• Implementing risk management strategies can be costly and time-consuming.
• Over-diversification may dilute returns.
• Some risks, such as political changes, are difficult to manage and may require contingency planning.

9. How much financial leverage are you comfortable with?

Considerations:

Financial leverage refers to the debt you take on to finance your project. While leverage can enhance returns, it also increases your exposure to financial risk, especially if market conditions change or your project doesn’t perform as expected.

Higher leverage:

Taking on more debt can allow you to invest in larger or multiple projects simultaneously, leading to higher returns if market conditions are favourable.

Pros:

• Amplifies returns when project performance and market conditions are favourable.
• Allows for larger-scale investments with less upfront capital.
• May improve cash flow by spreading project costs over time.

Cons:

• Increases financial risk if project returns are lower than expected.
• Higher interest payments can erode profitability, especially if market conditions worsen.
• Debt repayment obligations can limit your flexibility in managing the project.

Lower leverage:

If you choose to minimize debt and rely more on equity, you reduce your exposure to financial risks, which may limit the scale of your investments.

Pros:

• Reduces exposure to interest rate fluctuations and financial market conditions.
• Provides greater financial stability and reduces stress on cash flow.
• Can make your project more attractive to investors looking for lower-risk opportunities.

Cons:

• Limits the size of projects you can take on.
• Reduces potential returns if market conditions are favourable.
• May slow growth if you rely solely on equity for financing.

10. How will you handle the NIMBY syndrome?

(Not In My Backyard syndrome)

Considerations:

The NIMBY syndrome occurs when local communities oppose biogas plants due to concerns about odour, noise, increased traffic, or perceived environmental risks. I think addressing these concerns early and engaging with the community is essential for securing permits and maintaining long-term support.

Proactive NIMBY management:

Engaging with the community early, addressing their concerns, and highlighting the benefits of biogas can help alleviate opposition and smooth the permitting process.

Pros:

• Easier permitting process with fewer delays.
• Builds positive relationships with the local community.
• Reduces the risk of legal battles or protests that could disrupt operations.

Cons:

• Engaging with the community can add time and costs to the development process.
• Failure to address NIMBY concerns can lead to project delays or even rejection.
• Even with engagement, some community members may remain opposed to the project.

Bonus Question: What is your exit strategy and investment horizon?

(Do you plan to exit quickly after improving the project, or do you want long-term operational involvement?)

Considerations:

Your exit strategy will shape how you approach the project from the outset. If you’re looking for a quick sale after improving the plant, you’ll prioritize speed and value-added activities. If you plan to operate the plant long-term, your focus will be on sustainability, efficiency, and stable cash flows.

Short-term exit strategy:

Suppose your goal is to sell the project quickly after making improvements. In that case, you need to focus on adding value in areas buyers will appreciate, such as upgrading technology or securing favourable contracts.

Pros:

• Faster returns with lower long-term risk.
• Allows you to take advantage of favourable market conditions.
• Less need for ongoing operational involvement.

Cons:

• Lower overall returns compared to long-term holding.
• Requires finding a buyer quickly to maximize value.
• May miss out on long-term market growth and revenue.

Long-term investment horizon:

If you plan to operate the plant long-term, you must focus on building efficient operations, securing long-term contracts, and managing operational risks.

Pros:

• Potential for steady revenue over time and compounding returns.
• Greater control over the project and its future direction.
• Ability to capitalize on long-term market trends and growth.

Cons:

• Requires ongoing management and operational involvement.
• Higher exposure to market volatility and operational risks.
• Longer time horizon before realizing returns.

Conclusion:

Investing in biogas requires thoughtful planning and strategic decisions. By asking yourself these 10 key questions—and considering the bonus question about your exit strategy—you’ll have a clearer understanding of your goals and risk tolerance. Whether you’re looking to build a diversified portfolio or focus on operational excellence, these considerations will help set you up for success in the biogas industry.

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