Palm oil mill effluent (POME) biogas pays back far faster when the plant is sized to use all the power it can make. In a preliminary assessment for a palm oil mill in West Africa, the same biogas plant gave a simple payback of about 1.5 years if its full output displaced diesel and grid power, but about 3.5 years if it only covered the mill’s own measured load. Sizing to the site’s demand is therefore as important as sizing to the effluent.
The challenge: power that is worth more than it looks
Palm oil mills make a high-strength wastewater, and where the mill is remote or the grid is unreliable, the mill often runs on diesel as well as grid power. Treating POME in a covered lagoon anaerobic reactor reduces the chemical and biological oxygen demand (COD and BOD) of the effluent and produces methane-rich biogas. That gas can run engines for power on site, or for export if there is a connection.
After a site visit and a review of the mill’s operations, the assessment estimated that the effluent could support between 3.0 and 3.5 MW of electricity. The figure came from the data collected and typical COD levels for POME, not from a measured campaign, so it was explicitly preliminary.
The approach: two scenarios, one plant
The assessment tested how the economics change with how much of the output is used.
Scenario A: use all the energy
Here the maximum energy from the digester (about 3 MW at 85% availability) was assumed to be used in full. The cost of making that same energy by the existing methods, diesel and local grid power, was calculated and set against the cost of the biogas plant. The result was a simple payback of about 1.5 years.
Scenario B: cover only the stated load
Here the biogas plant covered only the load the mill had reported, an average of about 1.47 MW continuous through the year. The avoided cost was lower, so the simple payback lengthened to about 3.5 years.
| Scenario A | Scenario B | |
|---|---|---|
| Electrical output used | About 3 MW at 85% availability | About 1.47 MW average |
| Energy displaced | Diesel and grid | Diesel and grid |
| Simple payback | About 1.5 years | About 3.5 years |
| What it needs | An extra user or an export route | Nothing beyond the mill’s own demand |
The lesson is that the gas the mill cannot use is gas it has paid for. Scenario A only works if there is a second buyer, such as a neighbouring load or a grid connection.
Delivery and financing
A turnkey biogas plant, including gas engines and a connection to the existing electricity line, typically takes 10 to 12 months from order to commissioning, depending on when the rainy season falls. If lender support is needed, the assessment allowed a further 6 to 12 months for due diligence and credit approval.
Three ways to finance the project were proposed:
- The supplier forms an independent power producer (IPP) company, possibly in a joint venture with the mill.
- The mill funds the plant from its own balance sheet, with the supplier providing long-term technical and operating support.
- A hybrid, where the mill finances construction and refinances the plant with a lender once it is running.
The first step: a pre-implementation study
Before a detailed offer, the assessment proposed a full pre-implementation study. This would analyse the technical and financial parameters on site, with the aim of producing a case a lender would accept. A related letter of interest for another mill in the region listed the usual development route:
- The mill completes a baseline questionnaire.
- A preliminary feasibility study assesses the project.
- Project finance availability is checked.
- Commercial terms are agreed and a memorandum of understanding signed.
- The wastewater and wet cake are analysed in the laboratory.
- A detailed business case and a financial model are prepared.
- Permits are applied for, including grid connection and construction approvals.
- Contracts such as engineering, procurement and construction (EPC), operation and maintenance (O&M) and power purchase are drawn up.
Why it works
The covered lagoon is a low-skill, stable digester. It suits mills where highly trained biochemists are not available, and its long retention time converts stubborn COD that faster reactors miss. The benefits cited beyond power were compliance with water-quality standards, protection of surface water and aquifers, a lower carbon footprint through avoided methane emissions, and a hedge against fuel price swings over the plant’s life.
What to consider for your own project
- Measure your real electrical load. Hourly data across the year shows how much of the output you can use.
- Price your current energy honestly. Diesel, grid and any outages all change the avoided cost.
- Look for a second user. A neighbouring load or an export agreement can move the payback from Scenario B towards Scenario A.
- Test the effluent. Typical COD values are a starting point. Laboratory analysis and flow measurement should replace them before a design is fixed.
- Choose the financing route early. It affects the programme as much as the engineering.
For how a plant like this is designed in detail, see our post on sizing a covered lagoon for palm oil mill effluent, and for what an early feasibility phase covers, see the scope of a POME biogas feasibility study.
FAQ
How much power can a palm oil mill make from its effluent?
In this assessment, between 3.0 and 3.5 MW. The actual figure depends on mill throughput and effluent strength and should be confirmed by measurement.
Why is the payback so different between the scenarios?
Because the biogas plant costs about the same either way, but Scenario A displaces much more diesel and grid power.
How long does a POME biogas plant take to build?
Typically 10 to 12 months from order, with up to 6 to 12 months more if lender due diligence is needed.
Do we have to finance the plant ourselves?
No. The options included a supplier-led IPP, mill-funded construction, or a hybrid.
Considering biogas at your mill?
Share your throughput and current energy costs and we will outline the sizes and scenarios worth testing.