Investors may see more rewards than risks with ACTS, says Eunomia analysis

Written by: Editorial staff | Published:
Operational and under construction ACT facilities in the UK

Investors looking at residual waste treatment facilities should not be put off advanced conversion technologies (ACTs) by their checkered track record according to specialist environmental consultancy Eunomia Research & Consulting.

In a new report published at the end of November 2016, Eunomia analysed 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 is their eligibility for the contracts for difference (CfDs) renewable energy support scheme," said Mike Brown, MD of Eunomia, before adding: "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."

Feedstock for ACTs

According to the Eunomia analysis, residual waste is not an ideal feedstock for ACTs, but has the attraction of enabling relatively high gate fees to be charged for the waste the plant receives.

The UK has 12 waste-fuelled ACT facilities either in operation or being constructed (see map). Together, they are said to represent around 1.8 million tpa of treatment capacity, equivalent to around 200 MWe of electrical output. In addition, 5.5 million tpa of ACT capacity has planning consent, which if developed is expected to deliver upwards of 600 MWe of additional power. "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," added Brown. "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."

Potential issues

Eunomia said it 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," warned the MD.

Brown went on to point out that: “Despite current uncertainties, investors need to make a quick decision about whether to get involved in the ACT market. 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 as industrial heat, transport fuel or the manufacture of chemicals.

REA welcomes analysis

The Renewable Energy Association (REA) welcomed Eunomia Consulting’s analysis of the ACT sector.

Mark Sommerfeld, policy analyst at the REA said: “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.

“ACT is a cutting-edge means of turning wastes into renewable gas and products, and should be supported. We hope that this report will be taken on board by Government and used to inform the future Industrial Strategy.

“The beauty of this technology is that it’s by-products include expanding our waste management capacity and reducing the amount of trash heading to landfill," added Sommerfeld .

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.

Investment in Advanced Conversion Technologies - Has the time finally arrived? is free to download and read here.

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