The Road to Resource Recovery - Equipment Procurement, Natural Gas Utility Negotiations, D3 RINs, and IRA Credits for an Enhanced Energy Recovery Project

Introduction Capital Region Water (CRW) in Harrisburg, PA is embarking on a project to convert its 22 MGD Advanced Wastewater Treatment Facility (AWTF) to a true resource recovery facility through an Enhanced Energy Recovery Project. This project takes a multifaceted approach to maximize the biosolids energy extracted and beneficially utilized including the following: - Thickening upgrades to enhance percent Total Solids (%TS) in digester feed - Hydrolysis of Waste Activated Sludge (WAS) using a Thermal-Alkaline process - Importing local High Strength Waste (HSW) and blending into digester feed - Implementing Renewable Natural Gas (RNG) and interconnecting with an existing Natural Gas (NG) utility gas injection station adjacent to the plant This project is a culmination of a long-term planning, design, and implementation program that took a holistic view of the facility to devise a comprehensive resource recovery strategy. This strategy allowed CRW to invest in fundamental solids infrastructure (thickening) as well as embrace new technology (Thermal-Alkaline Hydrolysis) all while providing significant financial returns and sustainability benefits. Biogas production is expected to double and be 100% utilized as renewable fuel. Revenue from monetizing RINs and tipping fees from HSW will more than offset the cost of the project (including annual debt service on capital) with net revenue from the project expected to exceed $1 million/year. As this program developed from planning in 2018 to currently ongoing construction, there were a variety of changes in the resource recovery landscape that needed to be accounted for. These included: - Rising value of D3 and especially D5 RINs and emergence of voluntary markets - Material and labor shortages and resulting inflation due covid and global conflict - Passing of the Inflation Reduction Act (IRA) - RFS update to amend rules governing D3/D5 splits for co-digestion These developments led to a variety of new challenges and benefits that shaped how CRW and its engineering partners went about executing their vision for enhanced energy recovery. This paper details the various endeavors undertaken to keep up with the fast paced change as the project moved from planning to implementation. Procurement of Lysis A specialized Thermal-Alkaline Hydrolysis (Lysis) process was selected to enhance digestibility of sludge while increasing digester solids feed concentrations and lowering viscosity. The Lysis process was procured under a separate equipment procurement contract with the supplier, which will then be assigned to an installing contractor. This had a number of benefits including: allowing the design of WAS thickening and Lysis as one unified process, accelerating the delivery of long lead time equipment, and locking in pricing to mitigate against rising inflation. As provisions and timelines for the IRA came to light, early procurement of this equipment also became a tool when seeking to officially start construction before 2024. Negotiations with Natural Gas Utility There is a natural gas peaker facility located directly adjacent to the CRW plant. This facility stores pressurized natural gas and injects it into the grid on very cold days to augment local gas pipeline supply. The entity operating this facility is an unregulated energy services division of the local distribution company which means that they not only can provide access into the pipeline but could also serve as the buyer and monetizer of RINs. This was advantageous as it allowed negotiations and contracting with one single entity for both pipeline connection/injection terms, as well as gas and attribute sales. It also created natural incentives for cooperation and streamlining interconnection terms, as the energy services entity would also be losing profit if the interconnection was shut in. In this spirit of cooperation, there was a single gas monitoring station owned and maintained by the energy service entity but located on the CRW plant site with foundations and utilities provided by CRW. For the jurisdictional gas piping connection from the RNG skid to the interconnection station, the CRW installing contractor is responsible for the earthwork while the energy services entity will deploy its own expert staff to install and certify the pipe. Retaining D3 RINs with Co-digestion Acceptance of HSW was identified during planning due to local food producers such as Hershey Creamery and Utz Potato Chips creating an abundance of high-quality digester feedstock. Original plans included blending this HSW with feed sludge and accepting a lower value D5 RIN as the financial basis of the project. CRW wanted to maximize sustainability benefits of the project while also providing a local outlet for organic recycling and were willing to sacrifice D3 RIN revenue for these goals. During design, steps were taken to segregate HSW and inject it separately into a single digester to retain D3 RINs in one of two plant digesters. This added cost and complexity to the project and limited digester capacity to accept HSW. In June 2023, the EPA released updates to the RFS which amended rules around co-digestion and created pathways to retain D3 RINs in a digester that was receiving a mix of sludge and HSW. Due to this change the design was altered to return to a single, blended digester feed. This not only reduced project cost and complexity, but also assisted in digester feed hydraulics. The heated and lyzed sludge from WAS Lysis is blended in-line with HSW directly at the receiving tank for use as a pumpability enhancing transport medium. Provisions for the new co-digestion rules under the RFS included the requirement to establish a baseline of biogas production with just sludge to set D3 RIN benchmarks, with biogas production above these benchmarks being counted as D5. This lead to a significant baseline data analysis effort as well as staging of the project to get the WAS Lysis system up and running prior to injecting HSW so that the D3 baseline benchmark for the plant can include Lysis benefits. IRA Credits and Timelines The passing of IRA legislation in 2022 created a groundswell of activity in the field of resource recovery from biogas, with a number of credits (including Investment Credit 48 - Energy Property) providing the potential for tremendous capital cost offset in the form of direct pay tax credits. The IRA also brings with it a slew of requirements and timelines to be satisfied, with the timelines of needing construction to start before 2025 being particular challenging to municipal entities. The engineering team engaged with tax professionals with expertise in IRA provisions to develop an effective strategy for the CRW Energy Recovery Project. One insight gleaned from working with these experts was that a credit application does not need to be confined to a single project or single contract. The strategy included establishing a fact pattern to demonstrate ongoing improvements to the overall energy system which encompasses the feedstock collection and processing, the primary digesters, and the biogas collection and utilization. Based on this view, Primary Digester rehab work conducted between 2018 and 2022 were included as part of continuous improvement effort on this system and was considered in the credit application along with the Energy Recovery Project. This yielded a variety of benefits including establishing the start of construction well before the 2025 timeline while also granting safe harbor from onerous IRA requirements that escalate with time such as domestic content provisions. Conclusion This project demonstrates the dynamic nature of the resource recovery landscape and the various activities required to keep a vision up to speed with real world implementation. The engineering role in these endeavors is no longer to simply produce plans and specifications. A true partner involves skills ranging from crafting agreements with gas companies to interpreting federal legislation, all while continuously evolving approaches to keep up with changing external factors. Currently CRW has executed the procurement contract for Thermal-Alkaline Hydrolysis, executed the interconnection and gas sales agreements, and have awarded the construction contract for the Enhanced Energy Recovery Project. From planning to implementation the original vision has persisted despite unprecedented inflation (approximately doubling capital cost over projections). By taking advantage recent changes in credit markets and legislation, the project financial outlook actually improved with a projected annual net savings to CRW in excess of $1 million (including debt service on capital). The project will also double the plant biogas production while providing a beneficial outlet for 100% of gas produced, reducing the GHG footprint by ~7,200 Metric Tons of CO2/year.