• There are now more than 500 functioning anaerobic digestion plants in the UK
  • The proposed changes to the Feed-in-Tariff and Renewable Heat Incentive schemes could threaten the returns of AD operators and investors
  • Industry experts say continued support for the industry from the government is integral to the future of anaerobic digestion

Today, a wide range of businesses, including farms, factories and even cities – such as Aarhus in Denmark – obtain heating and power from biomass gas. The gas is derived from the breakdown of sewage, energy crops and agricultural and food waste in anaerobic digesters (AD) and harnessed for heat or power.

Market demand for biomass

A decade ago, the non-sewage AD sector was still in its infancy in the UK. However, by December 2016, there were 540 functioning AD plants, according to a report by the Anaerobic Digestion and Bio Resources Association (ADBA).

But while 2016 was buoyant, this year has seen a decline in interest. “It’s not attractive as it was, especially given the low oil prices and the changing value of sterling,” says Thomas McMillan, director of renewables for Savills’ rural, energy and projects division.

Nonetheless, future prospects for anaerobic digesters are promising. As Ollie More, ADBA’s head of policy, notes: “There are over 400 plants currently in the planning process, with a potential aggregate capacity of over 500MW.”

Potential threats to the sector

AD operators and investors face changes to their costs structure and incomes as a result of regulatory updates and market conditions. The proposed crop restriction on both the Feed-in Tariff (FiT) and Renewable Heat Incentive (RHI) schemes is a blow to operators, says More. “AD operators will be increasingly forced to source a higher proportion of their feedstock from farm wastes instead of high-energy crops, such as maize, in order to avoid losing a proportion of their subsidy income,” he explains.

The timing could not be worse, according to More, because domestic supplies of “household and business municipal food waste are becoming increasingly scarce for AD” and other waste is being exported to more profitable markets in Scandinavia, especially Sweden.

In addition, uncertainty surrounds the government’s long-term energy plan. Says More: “The industry needs a stronger long-term commitment from government in the form of a clear strategy for decarbonising heat and transport as well as electricity.” Many industry experts suspect a minority government might find it difficult to pass new legislation, thereby leaving the industry in regulatory uncertainty.

Changes in subsidies

Two separate subsidies can be claimed by investors and operators of AD plants: the FiTs, which pay for the amount of power sold to the grid; and the RHI, which provides financial incentives to increase the adoption of on-site renewable heat generation by businesses, the public sector and non-profit organisations.

Proposed changes to the terms of both the FiT and RHI schemes threaten operator and investor returns. The government’s plans to reduce payments for surplus biomass power sold to the grid will reduce operators’ incomes but will have also unintended consequences, says More. The reduction to FiT payments “is effectively ending support to AD for smaller projects, which will reduce the UK’s chances of meeting its climate obligations.”

The industry needs a stronger long-term commitment from government in the form of a clear strategy for decarbonising heat and transport as well as electricity

Ollie More, head of policy, the Anaerobic Digestion and Bio Resources Association

But in practice, small AD operations are ideally placed to reduce emissions from manure management, a significant source of greenhouse gas emissions. As to the proposed changes to the RHI scheme, McMillan advises operators “to keep in mind that the boiler used to produce heat meets actual needs rather potential needs, and also that the operational costs are not overestimated.”

Managing energy

The ADBA’s Best Practice Checklists advise operators to focus on risk management, procurement and operational performance. Risk management requires operators in particular to prioritise the safety of employees, the public and the environment when undertaking any activity that could result in their harm. Potential AD plant investors and developers need to make informed procurement decisions, which requires knowledge and understanding of the preparation of the raw material inputs (feedstock) and digestion process. To get the best return, as well as to ensure safety, bio security and productivity, there needs to be regular monitoring of the entire process, alongside regular expert maintenance. ADBA emphasises the importance of using fully trained professional staff to operate the AD plant safely and productively.

The introduction of Smart Grids (electrical grids that can adjust to changes in demand and supply in real time), variable real-time pricing and battery storage will allow operators to better manage their energy consumption and the sale of surplus energy to the grid at the best possible price. According to McMillan, this is important, “especially given that a third of the energy used by companies is for heating purposes.”

Prospects for the sector

Currently, there are more than 400 AD plants in the planning process, although More believes the number that will reach completion depend on the level of support offered by the government with its forthcoming RHI amendments.

In the longer term, the Department for Business, Energy & Industrial Strategy’s Clean Growth Plan, and Defra’s 25-year Plan for Nature will shape demand for AD. Post-Brexit, AD policy could look very similar or very different from what we have now, but either way, continued support for the industry is critical to allow biogas to deliver its full range of benefits.

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