Profitable and safe operation of a biogas plant involves the interaction of many factors. Providing 360°screening, technical due diligence ensures clarity regarding safety and cost-effectiveness throughout all phases of the project.
Due diligence for financial security and technical safety
Matthias Herold and Dr Rolf M. Zöllner | TÜV SÜD Industrie Service
Almost no two biogas plants are the same. Owners, but also lenders and investors seek reliable information concerning the key issue of the risks and opportunities involved in long-term, profitable plant operation.
When it comes to avoiding risks in the financing of a biogas project, the quality of systematic SWOT (strength, weaknesses, opportunities, threats) analysis is critical. The best possible plant design must be realised in an environment characterised by conflicting technological requirements, business framework conditions and legal regulations. To achieve this, a substantiated due diligence review ensures early identification of both risks and opportunities for biogas plants still under planning and construction as well as existing biogas plants. Due diligence supplies owners with reliable and bankable reports that verify the safety and security of future use and investments right from the planning phase.
Almost no two biogas plants are the same. Sites, climate, the availability and the prices of raw materials, the applicable legal requirements, the further processing of digestate, but also the financing plans must all be assessed individually. Within the scope of technical due diligence (TDD), TÜV SÜD's experts assess the process of biogas production, the technical design of the plant and the condition of the parts of the plant that already exist – from the primary tank, where the organic material is collected, and the digester tank, the gas lines and gas tanks to the CHP unit, the gas flare and the final digestate storage. The experts further verify the safety of chemical and biogas production processes, safety requirements and environmental and health protection, also taking air and water pollution control into account. They also evaluate the business plan, which includes a forecast profit and loss account, the financial model, the statement of assets and raw material supply and disposal. Based on these data, the experts can then carry out a detailed review of the biogas project, keeping investment risks to a minimum and pointing out opportunities for plant improvement
To assess both planned and existing technical plants, the experts first review the available documentation. In the case of existing plants this includes the planning and design documentation, such as licences or documents related to the technical design of a plant, and information about the intended use of biogas, as well as an asset overview. The asset overview supplies information about the age of the plant, its acquisition costs, location and current asset value. Information about the plant's hours of operation, capacity utilisation, maintenance, repair and down times, results of periodic inspections and maintenance measures are further indicators of the plant's technical condition.
Based on the reviewed documentation, TÜV SÜD's experts first analyse the current situation, including classification and initial assessment of the plant. In the case of existing plants, the experts carry out qualitative assessment of the plant condition and, in particular, the mode of operation and the individual process steps in the course of on-site inspection. The biogas produced in the digester tank, for example, includes aggressive substances such as ammonium and hydrogen sulphide that are constantly in contact with the tank walls, pipes and valves. Given this, the materials used for these components need to be highly resistant to chemicals and maintain this resistance over long periods. Downtime for unscheduled maintenance can jeopardize the profitability of a plant. Apart from the above, issues related to the gas, electrical and pressure systems must be taken into consideration, as must organisational issues including the continual supply of raw materials. Given this, weaknesses can be identified and remedied at an early stage. Subsequently the results of analyses and on-site inspections are consolidated within the scope of a systematic assessment of the whole system and the technical condition and the value of the biogas plant evaluated.
Assessment of the financial model
Biogas plants also require a sound financial model. Benchmarks are completeness, appropriateness, traceability and plausibility. To ensure cost-efficient operation of a biogas facility, owners must assess the actual technical parameters and the design assumptions. This includes plant availability, the calculated costs of maintenance, the spare parts and energy and raw materials. To ensure a secure supply of raw materials, the type of biomass, the availability and the price level must be taken into consideration. Further factors that must be considered include the calculated revenue from the sale of gas or energy and digestate disposal. Digestate residues, for example, can be used as organic fertilizer or fuel. The result is an assessment of the technical parameters and the assumptions made in the financial model which identifies open issues and opportunities for improvement, if any.
Comprehensive due diligence also extends to the legal framework conditions. Requirements within the scope of plant operation apply to areas including air pollution control, water protection and noise protection and the maximum content of pollutants in digestate residues. Hygiene regulations must also be taken into account. The handling of gas, electricity and heat is regulated by Germany's Renewable Energy Sources Act, the Renewable Energies in the Heat Sector Act or regulations by local grid owners.
Profitable and safe operation of a biogas plant involves the interaction of many factors. Providing 360°screening, technical due diligence ensures clarity regarding safety and cost-effectiveness throughout all phases of the project. TÜV SÜD's experts have long-standing experience in the assessment of biogas plants, whether new, existing or under construction. As an impartial organisation, they support investors, lenders and owners, providing reliable and robust expert opinions on investment risks and opportunities for improvement.
Matthias Herold, Head of Risk & Reliability, TÜV SÜD Industrie Service, Chemnitz
Dr. Rolf M. Zöllner, Senior Consultant Risk Management and Due Diligence, TÜV SÜD Industrie Service, Munich
TÜV SÜD Industrie Service GmbH
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