Orlen wants to build up to 20 agricultural biogas plants on the largest KOWR farms

Orlen Południe, H. Cegielski-Poznań, the National Support Centre for Agriculture (Krajowy Ośrodek Wsparcia Rolnictwa, KOWR) and the Poznań University of Life Sciences signed on 30 July 2020 a letter of intent on building agricultural biogas plants on farms supervised by KOWR. A total of 20 installations are planned, located on the 20 largest farms belonging to the State Treasury stock. The signing took place at the Ministry of Agriculture and Rural Development.

What the agreement assumes

The main role of investor is to be played by Orlen Południe, a company of the PKN Orlen group. The general contractor is to be H. Cegielski-Poznań, which — as we described in May — holds a licence to build biogas plants based on the Polish Dynamic Biogas patent. The role of scientific partner is to be played by the Poznań University of Life Sciences. The Ministry of State Assets was reportedly to give its consent to the proposal.

The installations are to produce electricity and biomethane from agricultural substrates, and the digestate is to serve as a fertiliser on the fields. The farms may in time be sold to Orlen Południe or leased from KOWR.

What is not known

The letter of intent is a declaratory document. It contains neither a schedule, nor investment amounts, nor the capacity of the planned installations; nor does it settle which farms will be chosen. Implementation will require environmental permits, spatial development plans, connection agreements and corporate decisions of the company. For biomethane the key issue remained the regulations: in July 2020 Poland did not yet have dedicated regulation or a support system for biomethane.

Significance for the market

The entry of a large fuel company into agricultural biogas production is a signal for the whole industry. On the one hand, it may accelerate standardisation and build demand for Polish technology. On the other, it raises questions about the place of independent investors and farmers in a market that until now has relied mainly on small and medium-sized projects. The use of State Treasury farms makes it easier to access substrates (slurry, manure, by-products) and land on which digestate can be used.

What next

The next step was to be the identification of locations and the preparation of projects. The course of events depended on biomethane regulation, grid access and energy prices. In parallel, Orlen announced an expansion of its activity in biogas, which we discuss in subsequent entries.

Why KOWR farms

The State Treasury stock in the form of large farms is attractive to a biogas investor, because it provides access to steady substrate supplies, a compact area for using digestate and the ability to plan investments with a multiannual perspective. On the other hand, projects of this kind must take into account environmental requirements, distances from buildings and local acceptance, which determine the success of any biogas plant, regardless of the owner.

What may change for farmers

For farmers and agricultural companies near the farms covered by the programme a potential market for substrates and for digestate appears. At the same time, competition for slurry, manure and crop residues may affect their prices. Contracts with suppliers should therefore take into account a long horizon, clear pricing rules and quality standards for the materials supplied.