Skip to content

About PERC

All Areas of Focus

All Research

Donate

Transforming Pollution Into Profits

  • Gijsbert Nollen
  • Every year, Thailand’s largest agroindustrial companies discharge approximately 175 million cubic meters (6.18 billion cubic feet) of water into open air lagoons, polluting stream, rivers, bays, and water tables. The discharge, a byproduct of the agroprocessing industry, contains agricultural pollutants such as manure, sewage sludge, and polluted wastewater. The wastewater also contains several greenhouse gases, including methane, which pound for pound contributes 21 times more than carbon dioxide to global warming.

    Because Thailand’s effluent emission standards are hardly enforced, companies have no incentive to do much about pollution control.

    A recently established company, Prime Energy Development (PED), is creating economic incentives for industries to clean up the wastewater using a process that converts the methane and other biogases into much needed energy and allows the agroindustrial company to buy its energy back at a reduced cost. All excess energy will be sold to the local utilities at market cost—a win-win-win-win business proposition for PED, industry, utility customers, and the global environment.

    Pollution in the name of shareholder value

    In Southeast Asia, the environment is suffering for the wealth of the local elite and the western shareholder. The world should have learned by now (will we ever?) that “the West” is investing in industries in this region, not only for cheaper labor, but for lack of environmental protection as well. One should not generalize, and both the industry and nations involved will claim they do their utmost to protect the environment, but the facts speak for themselves and pollution in the name of shareholder value prevails.

    Research has shown that countries in the process of wealth creation ultimately demand and achieve environmental stewardship. In the meantime, a few entrepreneurs are trying to clean up the short-term mess. There is no lack of ideas or technology to develop projects as such, but patient capital to make these projects financially sustainable (and thus replicable) is hard to find. For many investors, short-term return on equity is more important than the long-term internal rate of return. Additionally, local banks do not provide debt financing for an industry they do not know. Therefore, having proved that biogas technology works, the challenge now is to secure the money. Luckily for PED, the world’s perceived fear of global warming is making funds available for biogas development.

    Bring on the Biogas

    Thailand, a country with huge agriculture and agro-industrial production, is one of the world’s largest producers of wastewater—making it a prime location for PED to build biogas facilities. Significant industries such as cassava starch and sugar cane (bio-ethanol) processing, breweries and distilleries, and large livestock operations, generate most of this waste, which is dumped into open lagoons that end up polluting the waterways.

    Most agro-industrial plants currently use an aerobic treatment, which requires oxygen, as the primary wastewater process to reduce pollution levels of the plant. While the aerobic lagoon treatment is widely used and serves to meet government effluent standards, it allows large amounts of biogases to be emitted into the atmosphere. No sanitary precautions are taken, resulting in polluted water.

    PED has developed a system to convert this waste to gas through anaerobic conversion. The process of anaerobic conversion is what happens naturally at the bottom of ponds and results in the production of methane. By altering the water treatment from aerobic to regulated anaerobic digestion using a biogas collection and power generation facility, the wastewater pollutants, including harmful pathogens, can be substantially reduced while reducing emissions of methane and other gases. The environmental benefits are threefold: 1) Methane captured by the system can be used as a clean fuel for a gas engine equipped with a generator to produce electricity; 2) Levels of greenhouse gas emissions are reduced; 3) The waste from the biogas facility can be used as fertilizer.

    Prime Energy Development’s objective is to construct, own, and operate biogas facilities throughout Thailand and eventually develop projects in the Philippines, Malaysia, and Vietnam. It will reach this objective by taking agro-industrial companies’ wastewater and, through the anaerobic conversion process, capture the methane to produce electricity that can be sold back to those plants and to the national grid. PED will implement this goal through its so-called “Build, Operate, Own, and Transfer” (BOOT) model by which PED will operate these facilities for a period of ten years before transferring ownership to the companies producing the wastewater.

    The BOOT model is about to be tested as PED has recently signed its first agreement to build a 1.5 megawatt biogas plant at one of Thailand’s largest agro-industrial producers. This contract calls for PED to finance, construct, and operate a power facility to produce clean, renewable energy. The “host” company will provide the wastewater at no cost. PED will supply the biogas for energy at below market prices. The company gets a convenient and clean disposal process for its wastewater and PED gets a revenue stream that more than covers its capital and operating costs. Additional revenues come to PED from electricity sales to the local utility through the national grid system, and by earning carbon credits from emissions reduction through the Clean Development Mechanism of the Kyoto Protocol.

    The potential growth prospects are strong. The Thai government’s Power Development Plan for 2007 details the demand and planned power production growth. Since Thai law requires local utilities to purchase all electricity produced by small plants (less than ten megawatts), the growth prospects for the market are only limited by the supply a company can produce. Each PED site will have a legally enforced power-purchasing agreement and at least one customer (the local utility) that is required to purchase the electricity at market price. The fuel supply is expected to increase in the future because of projected growth in ethanol and agricultural production. Moreover, the Thai government has set policy to help stimulate renewable energy markets.

    Green makes green

    Prime Energy Development—along with its parent company, International Consultancy Europe BV (ICE)—has a mission to develop projects that conserve biodiversity, alleviate poverty, contribute to the environment, and make money at the same time. By taking into account a company‘s goal to generate profits, ICE and PED develop economic, social, and environmentally sound projects, which tackle key development challenges, but also generate profits and jobs.

    As important, companies like PED are structuring local agreements that will bring knowledge transfer to the host companies and countries. For example, PED is currently developing other Renewable Energy projects in Asia with local partners such as Full Advantage Pvt. Ltd., a firm specializing in renewable energy development and carbon trade, and TOPEC BV, a company that designs, manufactures, and supplies turnkey Biogas and Biomass power plants.

    By transforming pollution into profit, PED hopes to set a precedent. Success in project development lies in the potential to create a business model that is financially attractive and operationally replicable. As an enviropreneur, I believe that in emerging markets, we can combat the collapse of environmental resources by turning waste into revenue streams. Now it is effluent, next it will be solid waste or other pollutants. Finding capital will remain a struggle; however, ICE and PED are working hard to overcome this challenge. It will be fight, fail, and fight all over again; we’re ready for it.

     

    Written By
    Date
    Topics
    Related Content