The sustainability engineering chief at liquor giant, Diageo, once asked: "Why are biogas plants so expensive? They're just a bunch of tanks and pipes, am I right?"
"Yes," was the answer, "You're right." And there are even simpler plants, like in-ground anaerobic lagoons. Sure there are complications, but in terms of raw engineering product, why so expensive?
First, we must acknowledge that specifically in Australia, biogas plants cost about twice as much as in any other country.
Twice. But how did it get this way, and what can we do about it?
Sometimes the answers are simple. One experienced German biogas vendor that, unfortunately, went into receivership weeks into its first Australian project, was asked: "How did you come up with your pricing for this first Australian plant?" The answer: "We converted the price in Germany from Euros to AUD, and doubled it." Well, there's one answer.
But what of the local, Australian-based biogas vendors?
A series of factors have led to over-pricing in Australia, including:
The price of actual concrete inputs is twice in Australia as in the US.
Labour rates are about twice the US.
Productivity rates are less than the US, partly due to cautious processes and procedures, some around OH&S.
Value engineering is not an ingrained discipline, in part a hangover from big-end-of-town corporate engineering practices.
RIsk-based pricing for relatively inexperienced biogas vendors is multi-layered in Australia, and can easily add 20% or even 30% to project costs.
Invalid 'engineering changes' are frequently applied during projects, lifting costs during construction in a way that is not always readily countered by clients.
Multi-tiered sub-contracting which adds layers of unnecessary cost.
Unreasonable mark-ups on imported equipment and services.
Unjustifiable margins on maintenance contracts.
Unreasonable PPA deals from the client's perspective.
A general lack of discipline and attention to detail, especially around civils costs and the biological and mechanical challenges of biogas.
And the list could continue, though we feel these are some of the major contributors to excessive capital and running costs.
What can we do about all this to bring costs down to where W2E projects are financially sustainable - which we reckon to be between 50% to 70% of existing costs?
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