Best Practices for Repowering a Landfill Gas Project
 Topic: landfill gas |  Read Time: 9 mins |
 Landowner type: Institutional landowners |  Energy: Landfill gas |
20th December 2024If you’re repowering a landfill gas project, I’ll take you through everything you need to consider during the process. That way, you can continue earning income from your natural gas supply.
If you’re dealing with a landfill gas project operating on a capped landfill site, you’ll already be aware that your contract with your landfill gas operator will eventually come to an end.
When this happens, you’ll have several choices. These choices largely depend on how much gas your site is producing and the landfill gas operator you’re working with.
If there’s still a good rate of landfill gas production, you’ll probably want to consider repowering. Usually, this ensures the continued generation of electricity at your site with few to no hiccups. However, repowering can be a tricky business with a few potential pitfalls that you’ll want to avoid.
So I’ve put together this step-by-step guide to help you through the process.
What Is a Landfill Gas Project?
Over time, all of the organic matter that makes up the waste in a landfill site breaks down. This chemical process produces carbon dioxide and methane. Methane makes up about 50 per cent of landfill gas. That’s the part of the mixture we’re interested in here.
A landfill gas project collects methane at the surface of a landfill, pipes it off and combusts it in engines. This process produces renewable energy. A landfill gas operator can then export this energy from the project through to the Grid to use across the country.
As a landfill site owner, if you don’t run the site yourself, you’ll likely have an operator that manages the landfill gas on your land. While they work on the land, you’ll receive rental payments. The lease will lay out the terms of this agreement, which will naturally vary from site to site.
Over time, the landfill gas in a capped landfill site runs out. Typically, this could happen at a rate of between 6 to 28 per cent per year. The final figure depends on the current stage of the lifecycle of the landfill site.
When your contract with your operator ends
You may find you don’t have enough gas remaining to make it worth entering into another contract with a third-party landfill gas operator.
But, should you still have a healthy supply of landfill gas, it’s wise to repower. This will help you to continue earning income from your project. You’ll just need to make sure that it’s happening at a fast enough rate to be profitable. Otherwise, a third party operator won’t want to continue managing the site on your behalf.
So, if you’re going to repower, do as much groundwork as you can.
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Best Practices for Repowering a Landfill Gas Project
Having worked with numerous landfill site owners, I know exactly how the repowering process works and how to secure the best deal for the next stage of your project’s life.
Here are, in my experience, the best practices for repowering your landfill gas project.
Check your contract
Step one is simple: Check the terms of your current contract with your existing landfill gas operator.
Decommissioning a landfill gas project can be complicated. This is because these projects have more of an environmental impact than other renewable energy projects, such as wind or solar farms. So landfill gas projects will require close liaison with the environmental regulator to remain compliant.
Determine who’s responsible for what
For this reason, it’s important to know who will be responsible for removing the combustion equipment, rectifying any environmental pollution and maintaining the site’s environmental safety once the operator leaves.
Depending on the terms of your existing contract, you may find that some or none of the landfill gas equipment will remain, making it more challenging to enter into an agreement with a new operator if you decide you want to. For this reason, forward planning will be very important.
Review all your rental payments
It’s also wise to undertake a thorough audit of all rental payments received over the past six years to ensure that all rent payments are fully up-to-date before the end of your current landfill gas contract. You may receive attractive contract renewal terms that make it financially beneficial to remain with the same landfill gas operator.
On the other hand, you might find the complete opposite is true. So, make sure you’re checking what the financial and commercial pros and cons would be for remaining with the same operator or moving to a new third-party landfill gas operator.
Know your rights
You may find your current landfill gas contract grants the operator the right to extend the contract once the current contract ends. Don’t be dissuaded by this. You’re still well within your rights to renegotiate the rental payment terms (and other commercial terms), even if the operator remains the same.
Equally, it’s always important to check your lease terms and whether you’ve successfully opted out of clauses 24 to 28 of the Landlord and Tenant Act 1954. If you did, you’ll have no obligation to retain your current landfill gas operator.
Do your research
It’s crucial to know how much landfill gas remains when you choose to repower.
Is your landfill site running low on landfill gas? If so, perhaps your project will appeal more to companies with smaller equipment or those that run microturbines.
Or perhaps, when you’ve done your research, you might find you have a bigger landfill gas supply than you thought. In these cases, you’ll have greater negotiating power and you might want to market your site to several different landfill operators and select the one that is best equipped to manage your site for years to come.
Either way, this is essential information that you should be armed with when entering into a repowering negotiation.
Investigate current market rates
Rental income from a site is always something you’ll want to carefully think about, as it impacts both the short and long-term gains from a project.
It’s always wise to look at current market rents for similar landfill gas projects around the country and see how they measure up.
Open negotiations with your existing operator
When approaching negotiations with your current landfill gas operator, it’s important to remember that they want the gas your site produces. Therefore, you should always aim for terms that you are happy with – not just ones that you can tolerate.
Remember that a lot has changed in the past 20 years. What was a good deal last time you entered into your current contract is probably very paltry now in comparison. And that’s largely because the renewables industry and landfill gas rental payment terms have changed significantly over time.
If your current landfill gas operator refuses to match typical rates around the country, it’s always worth exploring your options to maximise the overall value of the project.
Don’t fall for scare tactics
Landfill gas operators are not above using scare tactics to intimidate you into re-signing with their company, rather than looking elsewhere.
I’ve seen operators threaten to take their Grid connection with them if they go. It’s also common for them to claim that the landfill site owner won’t be able to obtain ROC accreditation and/or an environmental permit for the site without their continued involvement.
Of course, your current operator may have originally secured the relevant permits required to operate the project, including the current Grid connection, ROC accreditation and environmental permit.
However, it’s entirely possible for a new operator to independently procure replacement agreements. Claiming that you won’t be able to obtain the various permits without them is simply scaremongering.
If they’ve managed to operate a landfill gas project on your land for 20 years, another company will be able to do the same once they’re gone. So stand firm.
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Open bids
I would advise landfill site owners, especially local authorities, to put their landfill gas project out to tender when their current contract comes to an end. This should allow them to obtain best value and maximise the future income that will be earned from the landfill gas.
This is partly because entertaining competing offers from different operators help to ensure the best deal for their site. However, it also legally covers their back in any eventuality, including where there is a legal requirement for a local authority to undertake a competitive tender.
So, it’s usually best practice to invite bids from different operators to ensure that landfill site owners are both covering themselves legally and getting a great deal.
Review contractual terms carefully
Along with the actual rental income a landfill gas operator is willing to pay, you’ll want to carefully look at the contractual terms they’re offering. You shouldn’t accept one-sided terms and should instead try to work with landfill gas operators offering fair, balanced contracts.
You’ll also want to look at which landfill gas operator is willing to pay the highest rent and who will best maintain the project and its associated equipment.
On occasion, some landfill site operators will over-extract gas from the project for short-term gains. Not only does this harm the long-term prospects of the project, but it can also seriously damage the environment.
Look for a transparent, efficient operator
A transparent and efficient landfill site operator can be worth their weight in gold. Most landfill site operators aren’t purposefully deceptive, but some may be more unwilling to share their income and running costs than others.
Having a good degree of transparency between owner and operator is crucial for keeping rental payments fair. However, it’s also critical for keeping both parties on the same page in terms of how the project is going.
As well as being transparent, efficient operators who catch issues early and maintain the project well will be more likely to run the site for far longer – while inefficient landfill site operators could terminate the contract prematurely if they fail to maintain consistent, long-term profitability for the project.
Serve notice in good time
If you’ve put a contract out to tender and secured a better offer from a competing operator, you’ll need to notify your current operator. It’s imperative that this is done as soon as possible, as there is a lot to organise to facilitate the changeover.
There may also be strict legal timescales required for serving notice depending on the nature of your current contract.
Once it’s clear to all parties that the repowering is happening, you can begin to finalise things such as:
- The drawing up of a new contract (more on this below)
- The collection or handing over of certain equipment owned by the existing landfill gas operator
- The handover of any environmental permits, ROC Accreditation and/or other agreements for the landfill site, otherwise you might need to independently reapply for or vary these agreements (more on this below)
- Confirmation or negotiation of whether your current operator will leave the connection to the National Grid intact for the new landfill gas operator
- The procurement and installation of a flare stack to flare excess gas if there is any downtime between the two operations.
The more time you leave to sort these elements out, the better.
Inform the regulator of the changes
Landfill gas projects are very heavily regulated due to their potential environmental risk. Therefore, it’s crucial to inform the Environmental Agency/Natural Resources Wales of all the planned changes that will take place at your site throughout the entire process.
You will also need to contact the energy regulator, Ofgem, and National Grid before the repowering takes place. This is certainly the case if you’d like to continue generating electricity at the site independently of the existing landfill gas operator.
Your new landfill gas operator must inform Ofgem of any change in operator within 14 days of the previous operator leaving the site. Therefore, extreme care must be taken to comply with all relevant requirements.
For this reason, it’s especially important to open communication early and push your new operator to notify Ofgem well ahead of time to avoid delays. If the relevant permissions aren’t secured by changeover day, you could be prevented from generating electricity and you may be required to flare the gas at your own expense.
Make sure permits are in order
The authorities provide an environmental permit, grid connection agreement and ROC Accreditation that allows for the production of electricity at a landfill gas site. These permits are operator specific and will need to be reapplied for or transferred into your name at the end of the current landfill gas contract.
Make sure to reapply for these agreements in plenty of time to avoid unnecessary disruption and project downtime when setting up with your new operator, which will ultimately be costly.
I would normally recommend that you work alongside your new landfill gas operator to secure them. Every operator will have applied for them all before on other sites, so they should have a wealth of experience and can more easily secure these agreements.
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Put new contracts into place
Once you’ve thoroughly examined every bid and chosen an operator to repower with, it’s time to get all the paperwork in order.
You need a new contract drawn up codifying the new commercial terms and the amount of rent the operator will pay you and any other concessions either side needs to make. This can include:
- The ownership of the landfill gas equipment
- ROC accreditation
- Grid connection agreement
- Environmental permit
- Any other consents associated with the project, and how this might change over time.
Final Thoughts
Repowering and securing a watertight, long-term contract requires a lot of time and effort.
There can also be a lot of hoops to jump through during the process, but don’t let that put you off. Securing that financially rewarding long-term contract will make it all worth it in the end.
Get in touch with the Lumify Energy team, who is here to guide you every step of the way. From helping with negotiating your contracts to advising you on the current market landfill gas rents, we’ll help you untangle the many steps that come with repowering your project.
