Anaerobic Digestion Exploring the UK opportunity. A comparison of the markets in Germany and UK

Transcription

1 Anaerobic Digestion Exploring the UK opportunity A comparison of the markets in Germany and UK

2 WHAT IS ANAEROBIC DIGESTION?

3 BioWatt Group -Overview The BioWatt Group was founded by its Directors in late It is headquartered in London and operates in Cleantech and Organic Waste Recycling Sectors. BioWatt ENGINEERING BioWatt DEVELOPMENTS BioWatt ENGINEERINGdesigns and builds industrial composting facilities (including exclusive rights to patent pending composting technology) and provides engineering/ procurement to BioWatt Developments BioWatt DEVELOPMENTSis a developer of Biogas Assets for investment and has generated a pipeline of 15 biogas plants in the UK the first 2 have secured funding offers from our financial partners

4 What is AD? TECHNICAL Food wastes Energy from the sun is stored in plants Manures Energy Crops Digestate

5 THE GERMAN AD MARKET A MATURED MARKET?

6 Fraunhofer-Gesellschaft Research and development International research with focus on direct use for both private and public sector, and for the benefit of society Application-orientated fundamental research Entrepreneurship Institutes organized as profit-centers A third of the budget are revenues from industrial projects Spin-offs are promoted Contracting parties/ clients Industrial and service companies Public sector Facts and figures > staff members > 67 research institutes 2 bn annual research budget Sulzbach-Rosenberg Slide 6 Fraunhofer UMSICHT

7 Our Business Consulting & Studies Constructio n to the product From the idea Development & Design Pilot plant operation Processimplementation Feasibility Economy Ecology Safety Legal / Political Framework Slide 7 Fraunhofer UMSICHT

8 Fraunhofer UMSICHT Selected AD Projects and Infrastructure Biosulfex pilot plant Thermal Pressure Hydrolysis BioLoop Sludge to Energy Fermenter test rig Small scale biogas plant Technical center biol. processes Mobile digestion plant Autoclave Slide 8 Fraunhofer UMSICHT

9 The German Energiewende The Role of Bioenergy The German Energiewende 1991: Act on Sale of Electricity to the Grid 2000: Renewable Energy Sources Act (EEG) Aligned with EU 2020 Goals Nuclear phase-out by % renewable energy capacity Challenge of electricity surplus Electricity generation from renewables th May 2014: 44 GW from renewables 75 % electricity demand Bioenergy share 8.1 % AD share 18.3 % 4 % of total electricity consumption Source: AGEE-Stat 2014 Slide 9 Fraunhofer UMSICHT

10 The German AD Market in a Global Context US 2% AT 4% CH NL 1% 1% UK 1% Other 7% Other 31% DE 37% CZ 4% IT 6% FR 5% UK 6% CZ 8% IT 13% DE 74% New AD capacity global (2.681 MWel) Germany: +990 MW UK: +170 MW No. of AD plants global 2012 (10.531) Germany Italy Czech Republic UK Strong contributor to the growing global AD market Market share of German AD plant construction companies >39% global in 2012 Source: Biogas to Energy, by ecoprog & Fraunhofer UMSICHT 2012, Manufacturer information and estimates Slide 10 Fraunhofer UMSICHT

11 The German AD market a matured market? Energy crops vs. Biowaste Agricultural AD plants Fermentation of biowaste More then AD plants operate on the basis of energy crops and manure High remuneration rates in FIT 2009 Restrictions caused by eutrophication in areas with active soil 113 plants in Germany designed for anaerobic treatment of biowaste Only basic tariff until FIT Mt of additional biowaste from 2015 due to obligatory biowaste collection Slide 11 Fraunhofer UMSICHT

12 The German AD Market Regional diversity ha ha ha > 500 kw 82% < 500 kw 18% Ø 250 kw Ø 500 kw Ø >750 kw AD development governed by regional factors Substrate choice dependent on surroundings & AD plant size Source: FNR 2014, KTBL 2006, ecoprog 2012 Slide 12 Fraunhofer UMSICHT

13 The German AD Market Characteristics and developments of AD Liq. manure Chicken manure Biowaste Biogas (m3/t) Gras silage Substrate input in German AD plants 2013 Maize silage % 21% 49% 3% 1% 47% 32% 7% 1% 60% 22% 17% 1% 60% Energy crops Excrements Biowaste Residual waste < 70 kw kw kw > 1000 kw Source: FNR 2014, ecoprog 2012, KTBL 2006 Slide 13 Fraunhofer UMSICHT

14 The German AD Market Market growth & the Feed-in tariff system (FIT) Source: FNR 2013 Slide 14 Fraunhofer UMSICHT

15 THE UK MARKET IN CONTRAST

16 UK Context for Comparison Waste Arisings (h/hold) 36 mill tonnes 29 mill tonnes 444 kg per capita 461 kg per capita Agriculture 16.7 mill ha (47%) 16.8 mill ha (70%) 33% Arable (5.5m ha) 25% arable (4.75m ha) Ave UAA -46 ha Ave UAA -54 ha # of large farms 2,434 # of large farms 1,335 Total Cereals 45 mill tonnes Wheat 22m Barley 10m Maize 5.5m Rye 3.8m Total Cereals 19.5 mill tonnes Wheat 13m Barley 5.5m Maize 0.02m Rye 0.03m AREA: 357,000 km 2 POP: 81 mill GDP Per Capita: $41,000 AREA: 244,000 km 2 POP: 64 mill GDP Per Capita: $39,000 * All figures taken from eurostat website

17 UK Market -Historical 1895 Biogas recovered from sewage system and used to fuel street lamps in Exeter 1907 Patent issued in Germany for the Imhoff tank (early form of Digester) 1970 China now has 6,000,000 on farm biogas plants 2000 German Renewable Energy Act passed into law setting a feed-in-tariff for electricity 2002 Renewable Obligation introduced in England, Scotland & Wales requires electricity producers to increase the proportion of electricity from renewable sources 2008 UK Climate Change Act set 80% cut in greenhouse gas emissions by 2050 UK is the first to set a legally binding framework to cut carbon emissions 2009 Committee on Climate Change calls for UK Government to effect a step change in the pace of reductions in greenhouse gas emissions 2010 Feed in Tariffs for renewable energy introduced into the UK 2011 DEFRA Waste Review recognises AD has the greatest environmental benefit Anaerobic Digestion Strategy & Action Plan launched in UK to support AD development UK Government announces Weekly Collection Support for weekly food collection 2012 WRAP figures show 78 AD plants operating outside of the Water sector with hundreds in planning Renewable Heat Incentive (RHI) launched to support injection of bio-methane into the gas grid and the production of heat from AD *Kindly provided by and adapted from the ADBA

18 UK Biogas Market -Historical Introduction of the FiT Introduction of the RHi First FiTdegressionfor <500kw plants and RHi consultation *Kindly provided by and adapted from the ADBA

19 UK Biogas Market overview Outer circle represents the % of total number of plants Inner circle represents the % of total CHP capacity Waste Industrial Agricultural 43 By the end of 2013 there were 139 operating AD plants (excluding STWs) accounting for 142MWe of installed capacity Number of AD plants built each year The UK biogas industry grew by 31 (farm & waste) plants in An estimated 1.6m tonnes of commercial and municipal waste was used to feed those plants in 2013 (excluding organic fines in MBT plants) By the end of 2013 there were 54 waste biogas plants in the UK, representing c. 71MWe of renewable power.

20 UK Energy Crop Market DEFRA Farming Statistics Report (2013): UAA 9 mill ha (an increase of 1% from 2012) Croppablearea 4.9 mill ha (54% of total) Uncropped Croppable land 237,000 ha Est land use for Energy Crop 40,000 ha [0.8%] Projected land use (2015) 70,000ha [1.4%] 2011 (40,000 ha) 2014 (70,00 ha) Energy Maize Beet Hybrid Rye Other

21 UK Market Immediate Future Plant Size Withplanning approved With planning submitted Feasibility Stage <250kW kW MW MW MW >5MW The large number of plants in the kW range is likely owing to the closing of the first FiT degression in Historically a significant proportion of AD developments with planning have not come to fruition for a variety of reasons Current pipeline where it relates to RHI is stuck and the outcome will largely depend on the RHI review and sustainability criteria

22 FUNDING AD PLANTS THE GERMAN AND UK MODELS

23 Market stimulation FIT The German Feed-in tariff EEG (from 2000) Effective market regulatory mechanism Incentive for technology development & increased efficiency High Feed-in tariffs up to 25 ct/kwh Guaranteed for 20 years Minimal bureaucracy Only basic prerequisites to be eligible Robust technology Low feedstock risk for energy crops Resulting low economic risks Investment security Attractive financing options Slide 23 Fraunhofer UMSICHT

24 Market Growth Impact on structure and funding models Farmers, Cooperatives Municipalities Energy utilities Waste companies, Industry Good policies for biogas project development (incl. FIT) Mature technical concepts (incl. turn-key plants) Calculability of financial risk (policy stability) Capital costs ( EUR / kw) Traditional financing <30 % equity, <15 y financing Project financing 30 % equity, <12 y financing Investment funds Contracting model Low interest rate debt programs incl. initial grace periods Subsidized with up to 50% and up to EUR from federal states Slide 24 Fraunhofer UMSICHT

25 Market Growth Technology Developments Biomethane gas-to-grid Waste heat utilization Increase of alternative substrates Direct marketing Flexibility bonus Increased renumeration with FIT amendment in 2009 AD boom: , Growth of operations parallel with technology developments FIT amendments supported technology advances and rewarded efficiency increases Unblemished record supports further invest MEV Slide 25 Fraunhofer UMSICHT

26 UK Funding Models Equity VCT, EIS, IHT, PE all available/ competitive Project (non/limited recourse) Finance Post construction, > 50m, 70%, refinance? Other Debt EPC, credit/ loan note >10-12% Trends 2012(15-20% IRR) 2014 (12-14% IRR) Educated equity risk profiles Impact of life after solar

27 UK Funding Risk Issues Feedstock Waste only LA s offering long term contracts (fewer) Agri limitation of FBT s to 5 years contracts TREND: reduction in expectation on % and length Construction & Technology Generally, only equity taking pre-construction risk Small Capex issues transaction costs TREND: growing comfort with technology/ construction risk Policy Uncertainty general and specific Modelling impact of degression(rhi/ FiT)

28 THE IMPACT OF GOVERNMENT POLICY

29 The impact of government policy Policy Changes in EEG 2012 Lower feed-in tariff for AD plants < 750 kw Higher feed-in tariff for biowaste fermentation and biomethan upgrading (gas processing) Degression rate of the feed-in tariff increased from 1% to 2% Stronger permit procedures Premiums for direct marketing More technical requirements New digestate storage facility is gas-proof, and the average hydraulic retention time in digesters and digestate storage facility is at least 150 days the share of maize (whole crop) including corn-cob mixes in each calendar year no more than 60 per cent by mass Combined heat and power generation with the heat being used as specified by the Positive List is at least 60 per cent Folie 29 Fraunhofer UMSICHT

30 The impact of government policy EEG 2009 vs. EEG 2012 Slide 30 Fraunhofer UMSICHT

31 Current state of the German AD market Amendment of FIT the fourth to date Energy crops bonus Gas processing bonus More Disadvantages 100 MW Slide 31 Fraunhofer UMSICHT

32 The Rise and Fall FIT system Shepherding in the right direction? Drive bioenergy forward Stability & safeguarding existing plants Optimisation and incentivising new technolgy with every amendment Planning, permit and build-time ~ 2 years No stimulation for exisiting plants Cost to tax payer: est. ~17 bil. EUR Slide 32 Fraunhofer UMSICHT

33 The Impact of Policy (UK) OVERVIEW Major Policy change is very unlikely before the next Govt is elected, the questions are: What commitment will it give to renewables (and what share will Biogas receive)? Will it take a strategic approach will biogas be a focus and see a joined up overhaul? Recognition of non-energy benefits such as avoidance of fossil fuels, carbon sequestration and soil benefits?

34 The Impact of Policy SPECIFICS The key policy constraint is one of consistency and stability of support for biogas: Food Waste Policy Scotland s landfill ban England has had the power since 1999 to ban former foodstuffs RHi consultation response EXPECTED OCTOBER 14 DECC view on Renewable Crops self regulation? Degression: Too soon? Too frequent? Inclusion of planned capacity? Sustainability Criteria: CHP Vs Gas to Grid

35 Industry Issues Feedstock - availability The Solar Effect beating the IRR Offtake Markets debt risk profiles Operational Challenges PR and Image

36 WHERE TO NOW FOR THE GERMAN AND UK MARKETS?

37 The German AD market Outlook EEG Technology Transfer and Export References: Biogas to Energy 2012/2013 The World Market for Biogas Plants - ecoprog / Fraunhofer UMSICHT Slide 37 Fraunhofer UMSICHT

38 Current & Future Markets Extended AD concepts Flexible energy production Digestate management EFFICIENCY IMPROVEMENT Nutrient recycling Value-added chains MEV Slide 38 Fraunhofer UMSICHT

39 Where to Now? My thoughts on CHP vs GAS TO GRID Will DECC get the Sustainability Criteria right? Does Vehicle Fuel offer a viable 3 rd option? FOOD vs FUEL Will DECC succumb to the pervasive Biomass based argument or realise the benefits to sustainable agriculture of Biogas? DIGESTATE Fertiliser or Fuel? SCALE OF THE MARKET.

40 Where to Now? Dates for the diary Sept 2014 Oct 2014 Summer 2015 Autumn 2015 EA Ruling on Crop Residues in AD RHi Tariff Consultation FIT Comprehensive Review RHi Budget Decision