3 ways to increase the revenue on your landfill gas site
|Author: Travis Benn||Read time: 5 mins|
|Client type: Institutional landowners||Technology: Landfill gas|
Landfill gas might not be the most glamorous player in the renewables sector, but that doesn’t mean it’s not a valuable one.
In fact, landfill gas sites added £400m to the UK economy in 2017 alone, producing a staggering 4.07 TWh of electricity. That’s enough to power every household in Northern Ireland for twelve months!
Many landfill sites aren’t yet making the most of the technology available to them, and risk missing out on renewable energy payments.
A renewable energy reality check
It’s estimated that the UK’s top 30 energy-producing sites received a share of a healthy £145 million in revenue from their landfill gas extraction in 2017.
It’s clear that anyone who invests in renewables should be confident that they are receiving fair and full returns from the green energy they’re helping be produced.
Underpayments in perspective
In the UK, 388 out of 452 accredited landfill gas sites produce energy. And across the hundreds of reviews Lumify Energy carries out, we’ve identified a funding gap in 75% of them. That means a staggering 291 of these sites may be eligible for back payments, and the figure could be higher still.
Resolving royalty mishaps
There are lots of reasons why royalty mishaps can occur, and in most cases, it’s the result of an innocent mistake.
Here’s a closer look at three ways you can close the gap and increase the revenue on your landfill gas site:
Each site has multiple landfill gas engines. These vary in size, depending on the scale of the site, and may change over time.
As landfill gas decreases, site operators add new engines and downgrade to match the desired site output. As things shift, engines also change in response.
Every engine on your site has its own distinctive identity. The results and income of each engine may also be recorded separately, providing valuable new insights. If a new engine is added, then this could easily be mistaken for royalty payments.
There are other ways in which a site with multiple engines could accidentally misallocate income streams. For more complex sites, there may be several landowners involved in the site, and results from one engine could be misallocated to one belonging to a different landowner.
In addition, a site may have more engines than have been officially recorded by the royalty accountant and finance team. This can create discrepancies in income reporting.
Practically, landowners can look at the total output produced by the site each month and then compare it to the output recorded in their royalty statement. Reconciliation may be necessary between the two, and for larger sites, we recommend figuring out the number of engines in use and discovering what you would expect to be the output from each.
This can help you to gage whether revenue is being correctly apportioned, particularly in complex cases.
2. Establish strong power purchase agreements
There are two main agreements in place at a site. One is between the landowner and the site operator, whilst the other is with the site operator (the energy company) and a third party to whom the company sell the energy generated. This is the essence of the power purchase agreement.
The agreement is crucial, as it determines how much money the site operator will receive – and provides the landowner with a cut of the funds.
Power purchase agreements change constantly; often, they are flexible agreements wherein the pricing regularly shifts from month to month. Alternatively, the power purchase agreement could last for many years before undergoing changes.
Most of the time, the landowner is not sure how long the agreement will last, or when it will change.
We strongly encourage landowners to include a term in their agreement that states they’ll have full access and awareness of the key changes. This will help mitigate the impact on payments.
3. Resolve anomalies in lease agreements
No two lease agreements are the same. They are negotiated between the landowner and site operator.
As confidential agreements, they can’t be discussed with third parties, and sometimes errors are written into these lease agreements which prove impractical.
At other times, a lease agreement may simply be ambiguous. This opens up opportunities for terms to be misunderstood, and interpretations could lead to differing amounts of rent being paid than the landowner anticipated.
We strongly advice landowners to seek advice from an advisor who has looked at lease agreements before. This will provide a chance to resolve any problems before they develop, and correct mismatches in information.
Anyone can benefit from royalty lease agreement reviews
Underpayments can and do happen to companies of all sizes and scales. Any public company or private board—including waste management firms, government bodies, local authorities, or community funds—could be eligible for a back payment or adjustment.
Payments are often at odds with the correct numbers to hand because very few companies have the in-house expertise to assess the figures accurately. Anomalies are easier to spot when you’re used to scanning through hundreds of royalty agreements, and with so many other tasks at hand, this is often not the case for busy in-house teams.
But there are revenue opportunities to be had simply by reviewing your royalty lease agreements; the likelihood is you’ll be surprised at the benefits.
Reach out to find out how Lumify Energy can help.