Whilst anaerobic digestion (AD) in the UK has had a relatively sluggish start, according to property consultancy Bidwells, the industry’s expansion finally seems to be ramping up, with over 80 commercial plants now commissioned and many plants expanding.
Amendments and proposed changes to incentives over recent years have had a huge influence on projects – both positive and negative. The Renewable Heat Incentive (RHI), introduced at the end of 2011, has improved the potential returns from biomethane injection substantially and as a result many of the projects Bidwells are looking at are now based on upgrading as an alternative to electricity generation, which was previously considered the only viable option. However, this is only possible for plants with access to the gas grid.
The proposed extension of the RHI to schemes over 200kWth provides opportunity to capture heat if choosing to utilise the biogas through combined heat and power (CHP) or direct combustion. Capturing and making use of the heat tends to be unviable without an incentive due to infrastructure costs but Bidwells are already exploring ways of utilising this wasted resource in anticipation of what we hope is a positive consultation response in 2013. It is hoped that the Department of Energy and Climate Change (DECC) proposals to make this available only to new plants rather than those already commissioned, will not come into fruition following evidence provided as a response to the consultation.
Funding continues to be a barrier but Bidwells are working with a number of banks who are becoming more confident with lending for AD, specifically to those with other assets such as land to lend against, whilst continuing to be cautious. Any bank will want to assess the ‘fundability’ of a project and to mitigate as much risk as possible. We are also seeing more interest from the investment industry which sees the opportunity in AD and many of the plants developed in 2013 will be funded through alternative methods.
The number of farmers looking at AD is continuing to increase but this year’s conditions highlight the importance of a sensitivity analysis on feedstock costs and opportunity costs elsewhere. Whilst growing an alternative break crop for a guaranteed price offers farmers an opportunity to reduce the impact of the volatility of wheat prices, the conditions in 2012 highlighted the importance of structuring price carefully. A 1MWe AD plant will require approximately 20-22,000 tonnes of maize, equating to approximately 1,200 acres of land and roughly the same amount of land is required for digestate utilisation. This is a huge commitment which may involve collaboration between numerous landowners.
Landfill tax will increase to £72 a tonne in April 2013 and the number of waste plants is and will continue to grow. Sites for waste plants, which command higher rents than energy crop only fed plants due to higher returns, also require large areas for digestate. Whilst the PAS110 specification for digestate has been available since early 2010, only a limited number of AD plants have achieved the standard. It is important to set out each party’s obligations, including permitting requirements, contamination thresholds and ensure that this takes in to account the limited spreading period in any digestate contract.
The feasibility and viability of AD continues to be extremely site specific due to the number of variables each project offers but whilst the fundamental issues such as land for digestate, feedstock requirement and grid connection remain the same, many of the previously unknown elements are becoming clearer as the industry develops.
If you have the right site in the right location, AD is certainly a renewable technology worth exploring.