Eunomia Report on Advanced Conversion Technologies in UK : Report: Promising Investment Oportunites in Advanced Waste to Energy
In spite of a of high profile failures investors looking at residual waste treatment facilities should not be put off Advanced Conversion Technologies (ACTs) for extracting energy from waste should not be put off, according to a new report from UK environmental consultants, Eunomia
The report, ‘Advanced Conversion Technologies – Has the time finally arrived?’ has been welcomed by the Renewable Energy Association (REA), which said that the industry is ripe for investment as the successful deployment of commercial projects will take the waste sector well beyond renewable power generation and into the production of renewable transport fuels and green chemicals.
The research includes analysis of the prospects for ACTs, such as gasification and pyrolysis as treatments for residual waste, finding several reasons to think that ACTs can compete effectively against other treatment technologies in the developing market for residual waste.
Key to the competitive advantage of ACTs in the UK is their eligibility for the Contracts for Difference (CfDs) renewable energy support scheme. Incinerators can get support if they meet the criteria for good quality combined heat and power (GQCHP), which few UK facilities are planned to do. Three ACT facilities have already secured CfD funding, though only one has so far commenced construction, and the Department for Business, Energy and Industrial Strategy (BEIS) has recently confirmed that ACT projects are eligible for support at the forthcoming April 2017 auction.
“The UK has world-leading ACT expertise and the Government should act to ensure that a full suite of ACT renewable products are developed for domestic use and, eventually, for international export. ACT can produce green chemicals and renewable transport fuels, including valuable aviation fuel,” commented Mark Sommerfeld, policy analyst at the Renewable Energy Association.
However, the report did caution that while residual waste has the attraction of high gate fees, it is not an ideal feedstock for ACTs.
Current Situation
The UK currently has 12 waste-fuelled ACT facilities either in operation or being constructed. Together, they represent around 1.8 million tonnes per year of treatment capacity, equivalent to around 200 MWe of electrical output.
According to the report, an additional 5.5 million tonnes per year of of ACT capacity has planning consent, which if developed would deliver upwards of 600 MWe of additional power.
However, the authors noted that the key question is whether, in the event that some of the facilities currently being built prove successful in practice, a fresh wave of investor interest may bring these consented sites through the project pipeline.
Another important question for investors is whether a proposed facility will be able to secure sufficient feedstock to keep it in operation for the period over which debt is repaid, which might be 10 to 15 years. Eunomia has raised concerns about a possible shortfall of residual waste in the UK in future, but potential ACT investors may take a more bullish view.
One factor is the likelihood that an ACT facility with CfD support may be able to function profitably at a lower gate fee than competing facilities, whether in the UK or overseas.
However, Brexit could also increase the amount of residual waste in the UK. Assuming it leaves the EU, the UK could choose not to commit to higher future recycling targets resulting from the EU Circular Economy Package.
The export of RDF, which has grown considerably in recent years, may also become less attractive: the weakened pound has raised the sterling equivalent gate fees at continental incinerators.
“Despite current uncertainties, investors need to make a quick decision about whether to get involved in the ACT market,” said Mike Brown, managing director of Eunomia.
“ACTs will be competitive in the April 2017 CfD auction, which could make for a good business case for development. In future rounds, support for ACTs may be refocused on higher value applications of syngas, such asindustrial heat, transport fuel or the manufacture of chemicals,” he concluded.
Eunomia will be commenting further on the implications of Brexit for the residual waste market in the 11th issue of its residual waste infrastructure review, which will be published in December 2016.
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