REPOWER – INSIGHTS FROM INDUSTRY REQ
Pre-accreditation rigour critical to AD roll-out
I
n the new era of Feed-in-Tariff (FIT) degression, a lack of financial rigour in pre- accreditation of anaerobic digestion (AD) projects is triggering a ‘false’ FIT degression ceiling that then marginalises robust projects with serious potential. This is hampering the roll-out of AD in the UK, where progress is painfully slow.
Impact of degression Over the last 12 months the AD industry has experienced the first rounds of degression. These triggers are supposed to be enacted when the FIT ceiling is reached, the ceiling being a combination of AD projects already generating, along with projects that have been pre-accredited. The idea behind degression is, of course, sensible - in ensuring that the taxpayer receives value for money whilst driving the cost of AD development down. As more projects are built, this tapering
down of financial incentives is intended to reflect the de-risking that comes from time, practice and knowledge. It is intended to ensure that capital becomes cheaper as confidence grows from the investor community, while equipment/developers, such as ENER-G, find innovative new ways and economies of scale to drive costs down. The problem, however, is that the majority of these pre-accredited projects are unlikely ever to be built. To give some idea of the
Greater financial scrutiny is essential to halt the sluggish
growth of the anaerobic digestion (AD) sector, argues Stephen Kemp, Head of AD at ENER-G
problem, in 2013 there were 55 projects pre- accredited between the 250-499 kWe band, of which only 8 have been commissioned to date. In August 2014, no new projects were commissioned - a clear indication that something is amiss. As a crude estimate, the industry should be commissioning around 7 to 10 projects a month if the pre-accredited data is used as a potential run-rate indicator. The damaging consequence is that the industry is not getting a chance to understand how to reduce the costs of these developments, since far too many proposed schemes are never likely to be developed. In addition, investor confidence cannot grow because there is a lack of reliable data, and
ENER-G biogas
generation system at North British Distillery
projects with serious potential are now being overlooked as they become increasingly marginal due to degression.
Seeking a solution Much of the problem lies in the ease at which pre-accreditation is obtained. Simply having a grid connection and planning permission is not enough rigour to ‘weed’ out the projects that do not have ‘legs’. ENER-G has a lot of experience in developing biogas generation projects overseas, where the pre- accreditation process is often more rigorous. I would certainly advocate that the UK raises the bar to accreditation at the very least by ensuring that potential projects demonstrate they have project finance in place. If the project has obtained financial close, then we can rely on the due diligence carried out by the potential funder as a reliable gauge as to whether the project will actually happen. There is no doubt that AD is failing in its
growth potential. If the underlying issues aren’t addressed, we could be left with a ‘zombie’ industry - comprising hundreds of ‘potential’ schemes, but with very few being built.
Complete funding support Biogas utilitisation and AD specialist ENER-G provides a complete outsourced AD service at no capital cost. This includes the design, installation and operation of anaerobic digestion renewable energy facilities and can help organisations combat rising water effluent and energy costs. ENER-G shoulders all the development, planning, permitting and overall financial risk - sharing operational savings with customers over an agreed contract term. This provides businesses with a steady and attractive income stream.
REQ
FOR FURTHER INFORMATION Contact ENER-G for a free consultation. Email:
stephen.kemp@
energ.co.uk www.energ.co.uk/biogas
www.r-e-a.net
WINTER 2014
|
RENEWABLE ENERGY QUARTERLY
| REQ 21
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36