Biomass fired up?

The wholly bank-financed Sleaford plant was a milestone for dedicated biomass, but has it opened the door to wider investment in the sector, asks David Williams?

The financing of Eco2’s 38MW straw-fired biomass plant in Sleaford, Lincolnshire, was a major coup for the UK’s dedicated biomass industry. The £170 million funding package, announced at the end of 2011, meant the first wholly bank-financed biomass plant since the creation of the Renewables Obligation in the 1990s could get off the ground. In the context of a global recession and diminishing public support for green energy investment, the Sleaford deal proved investors were still willing to back dedicated biomass projects if the conditions were right.

As construction nears completion, has Sleaford pushed open the investment door for dedicated biomass projects and offered the sector a new lease of life?

Part of the project’s success can be attributed to its predecessor, the Ely power station, itself once heralded as providing a watershed moment for the sector. Commissioned in 2000 by the same management team, using the same design, Ely was the UK’s first straw-fired biomass facility. The project signalled a new dawn in bioenergy development, demonstrating that straw could be sourced from local suppliers as a sustainable alternative to imported wood. By the time the project was completed, there was no question that straw-fired technology ticked all the boxes for a local, low carbon economy.

Straw-fired dedicated biomass did indeed take off, with Ely clones popping up around the world, but it soon became apparent that conditions here in the UK were less favourable by comparison. Is anything different this time around with Sleaford?

First, Eco2 has its own plans to replicate the model in at least half a dozen more projects across the UK and mainland Europe. The financial framework and contractual structures, as well as the necessary management experience for these developments, are all easily transferable. Sleaford and Ely provide a blueprint for what is increasingly attractive to savvy investors – small indigenous projects that can be sustained using local resources.

Second, the Green Investment Bank has already started to make good on its pledge to invest in waste-based, sustainable biomass by awarding a grant to a combined heat and power project in Cambridgeshire last month. The bank also supplied Drax with part funding for its coal conversion units last December. There is clearly an appetite for the right kind of biomass projects at the Green Investment Bank and dedicated biomass projects with sustainable credentials stand a strong chance of securing a share of that backing.

Third, it does appear that the government still sees a place for biomass in the UK energy mix. Large-scale conversions and co-firing generation continue to be openly encouraged by the Department of Energy and Climate Change (Decc). The government’s low key but steady commitment to biomass, combined with the high profile of companies involved in coal conversion and co-firing, should help keep investors’ eyes open to opportunities in other corners of the industry.

That it not to say that dedicated biomass development has become a bed of roses – dedicated biomass requires dedication. Taking a project through the construction phase, typically three years, is challenging in the current regulatory environment. Navigating fluctuations in legislation to secure financing is never simple, but that became more so after Decc noted a “cautious” approach towards the development of dedicated biomass projects.

The government’s reluctance to embrace dedicated biomass reflects the growing efforts of those groups lobbying against the burning of virgin wood for energy. The dedicated biomass cap, recently introduced by the Renewables Obligation banding review, has not made the process any easier and many projects in the early planning stages are now unlikely to reach construction, wasting millions of pounds of development effort in companies such as Eco2.

Time will tell if Sleaford has a more significant impact than Ely in opening the investment door to dedicated biomass projects, but there are reasons to be positive and the door has certainly been unlocked. Investors will be watching closely as the project nears completion.

David Williams, chief executive of Eco2

This article first appeared in Utility Week’s print edition of 3rd May March 2013.

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