DECC and DEFRA launch Anaerobic Digestion Strategy and Action Plan
20 June 2011
DECC and Defra have published their Anaerobic Digestion Strategy and Action Plan.
What it amounts to
It is a first step towards developing a Strategy and an Action Plan but it is not, as the title suggests, either a strategy or an action plan.
It came about after extensive discussions with more than 50 organisations including AD technology providers, food waste producers, academia, power & water utilities, local & national government and trade associations.
It defines the AD sector, the legal framework, incentives and hurdles to growth. Table 2 on Page 34 identifies 56 actions broadly grouped under three headline themes:-
- Improving knowledge and understanding
- Smarter working models
- Regulation and finance
Reading between the lines this looks like the first step to producing more detailed proposals after the very general commitment in the Coalition Agreement to increased Anaerobic Digestion. The document forecasts the potential for electricity generation from AD as "between 3-5 TWh by 2020."
£10m "Loan Fund"
The Government has agreed that the Waste and Resources Action Programme (WRAP) will set up a new £10m Loan Fund "to help stimulate investment in AD infrastructure". The £10m is expected to be paid out over four years and to stimulate investment in additional AD Capacity. The focus and criteria of the fund should be published by WRAP in September.
However the fund is carved up and paid out, it will not go very far. It will be interesting to see how it is structured to avoid complicating applications for FITs.
There are issues in this sector, but they are being successfully addressed and deals are being done.
From the dozen or so AD Projects on which we are working (or have completed), we would see the main market issues as being (in no particular order):-
- Lack of investor/developer confidence in the level and duration of subsidy
- Uncertainty over the likely future political climate for energy crops
- Highly fluctuating grain prices making it difficult to secure long term energy crop feedstock contracts
- Short term, waste industry food waste management contracts
- A relatively immature market for digestate
- Difficulty in predicting responses to the use of digestate on land
- Uncertainty over the regulatory environment for the co-digestion of sewage sludge and food waste
- Choosing an appropriate technology supplier for specific, generic and changing feedstocks
- The relatively immature markets for direct injection of gas, the use of gas in transport vehicles and the lack of an injected gas quality standard
- Uncertainty over whether digestate will require a disposal cost or secure (as we believe it will) a value representing part of the value of the displaced in organic fertilizers
- The absence of standardised legal agreements
- Lack of investor knowledge on the process and confidence in the feedstock supply chain, coupled with high DD costs relative to capex.
The 56 action streams should, when completed, provide some answers to many of these inhibiters. However, encouraging local authorities to collect source segregated domestic food waste does not seem to be covered, it remains an important priority.
Whilst there is some way to go before there is a streamlined and process-efficient AD deal flow the Strategy and Action Plan represents a solid start. A lot hangs on what the work streams produce and how much leadership the two departments feel able to give.