Capacity-cost and location-cost analyses for biogas plants in Africa

Many rural African communities are characterised by low population densities and are remotely situated, making centralised energy generation and transmission prohibitively costly and inefficient due to greater transmission and distribution losses. Beyond certain breakeven distances from the grid, implementation of decentralised energy generation, e.g. from biogas could be more cost effective. Biogas plant serves the dual purposes of reducing environmental pollution and generating energy. This paper investigates the significance of scale economies with increasing plant capacity and the effect of location on the capital investment cost of African biogas plants. Whilst the conventional financial wisdom in the process industry is that larger installations have advantages resulting from economies of scale, the regression analysis of the investigated 38 biogas installations from twelve African countries indicates that such economies of scale do not exist in the small to institutional scale biogas sector, as the cost capacity factor obtained exceeds unity (n=1.20), and is significantly different from the conventionally used “six-tenths” rule. The estimated value of scale exponent in community—large-scale biogas systems were less than unity (n=0.80) but t-tests could not reject the hypothesis of constant returns to scale at the 95% confidence level. Inferential statistics, F- and t-tests statistical analysis carried out on the coastal and landlocked biogas plants further conclude that the cost of biogas technology is largely independent of geographical location of the plant.