Anaerobic Digestion Market Report - spending review special December 2015

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Anaerobic Digestion Market report December 2015

Contents

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Contents 1.

ADBA Chief Executive FOREWORD

2. Summary

4 5

3.

Market growth 3.1. Impact of policy changes 3.2. Whole industry projections 3.3. Electricity ≤250 kWe 3.4. Electricity >250 kWe ≤ 500 kWe 3.5. Electricity >500 kWe ≤ 5 MWe 3.6. Electricity >5 MWe 3.7. Biomethane 3.8. Planning data 3.9. Feed-in Tariff (FIT) data 3.10. Renewable heat incentive (RHI) data

7 7 8 10 11 12 12 12 14 15 16

4. Feedstocks 4.1. Plants by feedstock category 4.2. Tonnes of feedstock used 4.3. Land use 4.4. Food waste collections 4.5. Gate fees 4.6. 2015 anaerobic digestion feedstock use survey

18 18 20 21 22 23 23

5. Current and potential energy generation 5.1. Overview 5.2. Load factors 5.3. Market potential

24 24 25 27

6. Greenhouse gas savings 6.1. Potential savings 6.2. Projected savings in 2020 6.3. Carbon cost effectiveness

28 28 28 28

7. Investment, jobs and exports.

7.1. Investment 7.2. Operations and maintenance 7.3. Exports 7.4. Market value 7.5. Jobs

29 29 29 29 29 30

8. Technology cost and innovation

31

9. Commodity prices 9.1. Carbon price 9.2. Current and historic energy prices 9.3. Projected energy prices 9.4. Input commodity prices

33 33 33 34 36

10. Geographical breakdown

38

Appendix 1: Disclaimer and notes on data 39 Appendix 2: Feedstock categories

40

Appendix 3: Projection scenarios

41

Market analysis enquiries Ollie More ADBA Market Analyst Email: ollie.more@adbioresources.org ADBA Market Analysis web page: http://adbioresources.org/members-area/market-analysis

Press enquiries Derek Sivyer ADBA Public Relations Manager Email: derek.sivyer@adbioresources.org

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1. ADBA Chief Executive Foreword

W

elcome to our second comprehensive Market Report, launched at our seventh National Conference. Looking back to our first Conference in December 2009, the UK’s AD landscape looked rather different:

• about 80% of AD plants were operating within the water sector; • there were only 17 on-farm AD plants; and, • there were no biomethane plants in operation at all.

Since then, AD’s multiple benefits have caught the imaginations of government, farmers, big business, fleet operators and even the high street banks – indeed the last government committed in its Coalition Agreement to supporting “a huge increase in energy from waste through AD”. We have come a long way since securing the Coalition’s pledge, with over 600 per cent growth across that period outside of the water sector. Today there are 424 plants across all sectors, generating enough baseload energy to replace Wylfa nuclear power station, which is being decommissioned at the end of this year.

As this report demonstrates, there may have been a huge increase in AD deployment but we are still a long way from delivering our potential.

Our National Conference has always served as the place to look at the industry’s future drivers, and analyse major announcements such as those we have seen recently on reforms to the financial incentives, the Committee on Climate Change’s recommendations for the fifth carbon budget and work to advance the case for separate food waste collection services.

Last week’s commitment from the Chancellor in the spending review for indigenous green gas under the Renewable Heat Incentive (RHI) is welcome, and could sustain industry’s current rate of biomethane deployment – helping to decarbonise the heat sector, reducing the UK’s reliance on imported natural gas from volatile parts of the world and supporting job creation. As the budgets for each technology and scheme rules have not yet been confirmed there is still some uncertainty in our projections, but the government has at least set out a budget which allows reasonable room for continued growth once that uncertainty is resolved.

In stark contrast, however, proposed reforms to the Feed-in Tariff (FIT) threaten the industry’s ability to deploy any additional electrical capacity at the very point at which baseload energy is most needed, with National Grid this week issuing its first Notification of Inadequate System Margin for three years, indicating an impending capacity crunch. The proposed deployment cap under the FIT scheme now represents just 73MW over three-and-a-quarter years – to put this in context the AD industry deployed more capacity than that under the FIT scheme in 2014 alone.

Perhaps even more troubling is the threat to investor confidence following the government’s decision first to remove LECs, and then pre-accreditation from the FIT scheme. Given the proposal to cap deployment and the length of time that it takes to develop AD plants, the removal of pre-accreditation means that investors are not offered any guarantee on whether they would be able to access the FIT scheme, let alone what tariff level they would receive on completion. This measure alone compromised over $250 million in overseas investment.

Without coordinated support under both the RHI and FIT schemes, industry cannot scale to deliver its potential of 30 per cent of the UK’s domestic gas or electricity demand. There are also no firm commitments from government to support the use of biomethane to directly supply up to 80 per cent of heavy good vehicles, which are responsible for a quarter of UK road emissions. By decarbonising our heat, farming and transport networks, AD could reduce UK greenhouse gas emissions by 4 per cent – and the technology’s contribution to food production and farming resilience could reverse a troubling decline in British farming.

By demonstrating the excellent return on investment that AD offers bill payers; by working together to drive up industry standards and performance; by supporting farmers to secure greater recognition of AD’s valuable non-energy benefits; by reducing the cost of inputs, maximising the value of outputs and unlocking new feedstocks – through all these actions industry can build a competitive world class AD industry here and, through our technical expertise and innovation, access a global exports market worth billions. We look forward to continuing to work with our members and partners to deliver the full potential of this exciting, inspiring and essential industry.

Charlotte Morton, Chief Executive, ADBA

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2. Summary The new government elected in May has done nothing to address the challenges to deploying new small scale AD plants or those using CHP at any scale, but has made more promising proposals for the biomethane and renewable heat side of the industry. The government announced at the spending review on 25 November that: “The government will increase funding for the Renewable Heat Incentive to £1.15 billion by 2020-21, while reforming the scheme to deliver better value for money”.1 This report outlines what impact these and other decisions are having on the anaerobic digestion industry. As a consequence of these decisions we now have a clearer picture than we did beforehand of what the industry will look like up to 2020, though some important issues remain unresolved across all of the incentive schemes and in other policy areas such as waste collection.

Key points highlighted in this report are: • ADBA expects around 100 MWe-e capacity to be installed in 2015 – 30% lower than 2014 (but 180% higher than 2013); • Following the decision to provide an RHI budget for new projects, we forecast an increase of up to 140 new biomethane plants between now and 2020 (a potential 32% increase per year); • Biomethane and biogas RHI budgets and scheme rules need to be confirmed quickly for AD to play its full part in meeting 2020 heat targets; • A potential end to new small scale AD construction by 2017/18 without policy change; • The industry to be reducing the UK’s GHG emissions by 4.8 million tonnes per year by 2020 (equivalent to taking nearly 2 million cars off the road); • The government is missing the opportunity to support a huge increase in farm-scale AD – potentially thousands of small-scale AD plants offering huge greenhouse gas reductions and supporting farm businesses will not be built without policy change; • There are currently 4,000-4,500 direct full-time equivalent jobs in the industry (this could be 35,000 if the industry was building at its full potential).

The following two tables provide a snapshot of where the industry currently stands: Operational plants broken down by electricity/CHP, heat-only and biomethane (excludes CHPs on biomethane sites) Electricity/ heat/ biomethane Outside of sewage sector Electricity/ CHP plants (not including on biomethane sites) Heat-only plants Biomethane plants Total Sewage sector Sewage electricity plants (not including on biomethane sites) Biomethane sewage plants Total Total (all sectors) Electricity/ CHP Heat-only Biomethane Total

1

Number of operational plants

Capacity of operational plants

225 6 36 267

222 MWe 0.1 MWth 26,691 m3/ hr 326 MWe-equivalent

153 4 157

180 MWe 4,200 m3/ hr 196 MWe-equivalent

378 6 40 424

401 MWe 0.1 MWth 30,891 m3/ hr 522 MWe-equivalent

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2. Summary

With planning application approved (not including extensions to existing schemes) With planning application submitted (not including extensions to existing schemes) Total proposed Operational non-sewage plants potentially converting to biomethane Operational sewage plants potentially converting to biomethane

Number of electricity/ CHP plants

Proposed AD plants Potential Number of Potential installed installed biomethane biomethane capacity, MWe plants capacity, m3/hr

Total number of plants

Total potential installed capacity MWe-e

316

311

19

11,950

335

357

103

113

4

2,555

107

123

419

424

23

14,505

442

480

N/A N/A 1

1,000 N/A

4

N/A N/A 2

1,550 N/A

6

ADBA members can access all the latest market information, including all of the figures in this report and the raw data behind the numbers, on the Market Analysis page of the ADBA website (adbioresources.org/members-area/market-analysis). We inform members through our weekly email updates each time we update the information on the market analysis page.

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3. Market growth 3.1. Impact of policy 3.1.1. Renewable Heat Incentive The spending review announcement in principle provides a positive picture for development of biomethane and biogas heating over the coming five years. RHI spending is forecast to increase to £1.15bn by 2020/21, from a current level of £430m.

The growth in spending from the 2015/16 £430m figure is outlined below:2

Year 2016-17 2017-18 2018-19 2019-20 2020-21

growth in spending Total RHI budget £640m £780m £900m £1,010m £1,150m

Effectively available to new plants £210m £140m £120m £110m £140m

The details of how any budget for 2016/17 will be allocated between technologies, and whether the scheme will be open to new applications when the current legislation lapses on 31 March 2016, is yet to be confirmed by government. The total ‘effectively available to new projects’ will depend on the actual spending under the scheme by March 2015: if this is higher than £430m the amount available for new plants will be less than quoted here. The latest information is available on the following page: adbioresources.org/news/tag/18-RHI. The government wishes to change the RHI to deliver better value for money. We therefore expect an increased focus on the greenhouse gas savings per pound of taxpayer money spent and on effective management of the budget. How and when this is transferred into policy will be important for the industry.

The implications of the spending review announcement on the growth of the biomethane-to-grid industry are outlined in section 3.7 below.

The announcement should be positive news for biogas heat. ADBA requested an additional £20m per year for biogas heat in the spending review as it offers excellent value-for-money for government in generating renewable heat and improving the competitiveness of the farming and manufacturing industries. However, the heat supply market could also be undermined by the changes outlined below to the Feed-in Tariff.

3.1.2. Feed-in Tariff At the time of writing DECC is considering responses to the review of the Feed-in Tariff. The government has proposed severe restrictions on deployment under the Feed-in Tariff. The government could close the scheme as early as 1 January 2016 if deployment to the end of 2015 is beyond DECC’s expectations across all technologies. In a very best case scenario, the proposed capping scheme would limit deployment to the following levels (which could also be reduced if deployment during the DECC consultation proves higher than expected): FEED-IN Tariff

2016 (excluding pre-accreditations) 2017 2018 2019 ≤500 kWe 10.9 10.6 10.4 2.5 >500 ≤ 5 MWe 15.1 11.8 9.4 2 DECC has already removed the pre-accreditation system, and proposed a faster system of tariff reductions (through automatic degressions) than previously, which is likely to mean that even this capacity will not be deployed.

2

Official figures provided to ADBA by government.

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3. Market growth The industry responded to this new uncertainty by seeking to gain pre-accreditation for all possible electricity plants before 30 September 2015, the last date on which pre-accreditation was available. Ofgem received 92 pre-accreditation applications from AD in September 2015, with a total capacity of 65 MWe.3 It is likely that a proportion of that capacity will not receive pre-accreditation, and of that which does a proportion will not go on to be funded and constructed. Those plants that did get pre-accredited and succeeded in attracting finance will then have 12 months from their pre-accreditation eligibility date to build plants, indicating that the period until September 2016 will see intense construction work, followed by much lower deployment under the scheme after that.

3.1.3. Climate Change Levy Exemption for Renewables The government removed the exemption from the Climate Change Levy (CCL) for renewables. This was a certification system in which generators of renewable electricity were able to claim certificates (LECs) for renewable electricity output, which they could then sell-on to electricity suppliers, who were then exempt from paying the levy on that proportion of their supply.

LECs had a value of approximately £4.50 per MWh. Removing this for the entire AD industry had the impact of reducing the industry’s income by £11m per year. It also sent the signal that the government was willing, without consultation, to remove an income stream from renewables projects which had been assumed in financial calculations (i.e. retrospectively).

3.1.4. Renewables Obligation With declining Feed-in Tariffs, many in the industry have shown an interest in accessing the Renewables Obligation as an alternative source of income. In most cases it has been seen as a worst-case scenario if the Feed-in Tariff becomes unavailable. The Feed-in Tariff has always been the preferred scheme to the industry due not only to the higher tariffs in the scheme but also the relative simplicity and lack of a need to negotiate high prices for certificates (ROCs).

The RO may be worth £75 / MWh to operators commissioning before 31 March 2017 on the assumption of 1.8 ROCs/ MWhe and a ROC price of £42/ ROC.

3.1.5. Separate food waste collections The Resources Minister Rory Stewart set up a ‘Harmonisation and Consistency’ Working Group, where a number of organisations including ADBA and representatives from local authority, recycling and waste organisations worked on proposals to reduce the number of different household waste collections systems in England, with a view to increasing recycling rates and decreasing costs. This work is ongoing and could lead to more separate collections of food waste for AD in future.

In addition, WRAP is leading a process to develop a Food Waste Recycling Action Plan, which is developing specific practical recommendations for increasing the capture of food waste in existing and new schemes. A report should be published in March 2016.

Separate collections of food waste for AD are increasing across the UK, but progress in England is slow and is not being led by central government or enforced by the Environment Agency. Cuts to local authority budgets in the Spending Review will clearly not help. Chapter 4 has further details.

3.2. Whole industry projections We expect approximately 80 AD plants to be built in 2015 (with a range of 65-95).4 The electrical equivalent (MWe-e) capacity of these plants is likely to be approximately 98 MWe-e (87-108 MWe-e). This compares to 103 plants built in 2014 (142 MWe-e).

The exact numbers are still uncertain because many plants commissioning under both the Feed-in Tariff and Renewable Heat Incentive will do so in December 2015 due to tariff deadlines. We have on record 23 plants commissioning this year to date, but this does not yet include plants commissioning in September under the Feed-in Tariff (a key deadline), or those that will commission in December under both schemes.

3 4

8

Figure provided to ADBA by Ofgem; not officially published.

See appendix 3 for our forecasting methodology

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The exact numbers are still uncertain because many plants commissioning under both the Feed-in Tariff and Renewable Heat Incentive will do so in December 2015 due to tariff deadlines. We have on record 23 plants commissioning this year to date, but this does not yet include plants commissioning in September under the Feed-in Tariff (a key deadline), or those that will commission in December under both schemes.

3. Market growth

Chart 1 shows plant growth to date.

Chart 1 Chart 1 shows plant growth to date.

Chart 1

Cumulative number of operational AD plants (including water sector, not including CHPs on biomethane sites) 600

Number of plants

500 400 300 200 100 0 2008

2009

2010

2011

2012

2013

2014

2015

Agricultural

Agricultural and municipal/ commercial

On-site industrial

Municipal/ commercial waste

Sewage

Other

Projected 'Mid-point' additional plants 2015

Across all capacities, chart two shows projections for plant numbers up to 2017. This includes the possible continued contribution of biomethane and the

Across allfalling capacities, chartoftwo showsAD. projections for plant numbers up to 2017. This includes the possible continued contribution potentially contribution electricity of biomethane and the potentially falling contribution of electricity AD. Chart 2

Projections Projections -- whole whole industry industry number number of of new new plants plants commissioned commissioned (including sewage sector, projections include conversion of electricity to (including sewage sector, projections include conversion of electricity to biomethane) biomethane)

Chart 2

120

See appendix 3 for our forecasting methodology

Number of plants commissioned

4

100

10 | P a g e

80

60 40 20 0

2010

2011 2012 Project "Low" scenario

2013 Actual

2014

2015 2016 Projected "High" scenario

2017

Chart 3 shows this in capacity terms.

Chart 3

Projected cumulative electrical-equivalent (electrical plus biomethane) capacity (including sewage sector,adbiouresources.org includes existing electricity plants onDigestion Market report DECEMBER 2015 Anaerobic biomethane sites)

9

0

2010

2011 2012 Project "Low" scenario

3. Market growth

2013 Actual

2014

2015 2016 Projected "High" scenario

2017

Chart 3 shows this in capacity terms.

Chart 3

Chart 3 shows this in capacity terms.

Chart 3

Projected cumulative electrical-equivalent (electrical plus biomethane) capacity Projected cumulative electrical-equivalent (electrical plus biomethane) capacity (including sewage sector, includes existing electricity on sites) (including sewage sector, includes existing electricity plants on plants biomethane biomethane sites) 900 800

MWe-­‐e

700 600 500 400 300 200 100 0 2011

2012 Actual

2013

2014

Projected 'High'

2015

2016

2017

Projected 'Low'

3.3. Electricity ≤250 kWe The ≤250 kWe scale is the category 3.3.

Electricity ≤250 being kWehit hardest by the cuts to the Feed-in Tariffs. It is unclear whether, at this scale, any plants will be built following September 2016. Up to September we expect the current high rate of construction to continue (from plants that pre-accredited in September 2015, which have 12 months to commission).

Developers now have no certainty over: • Whether a scheme will exist from 1 January 2016; • What the tariff levels will be (with a tariff review forthcoming and potential degressions of 10% per quarter); and, • How long they would have to wait to receive accreditation (if at all) following building a plant under the capping system.

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Given AD plants even of this small scale can take 6-12 months to build, this uncertainty is likely to deter investment. A highest possible tariff for October 2016 appears to be 8.1 p/ kWh (this is the tariff rate from 1 April if no other tariff changes are made, before adjustment for inflation). At this tariff, investment returns in most projects would be negative, so deployment would fall to negligible levels. This low level of deployment is a missed opportunity for the government - recent research5 has shown the cost effectiveness of greenhouse gas reduction at this smaller scale of plant at tariff levels of 16 p/ kWh, in particular at the ≤100 kWe scale.

5

10

www.biogas.org.uk/images/upload/news_116_REABangorUnismallscaleADreportfinal.pdf

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Given AD plants even of this small scale can take 6-12 months to build, this uncertainty is likely to deter investment. A highest possible tariff for October 2016 appears to be 8.1 p/ kWh (this is the tariff rate from 1 April if no other tariff changes are made, before adjustment for inflation). At this tariff, investment returns in most projects would be negative, so deployment would fall to negligible levels. This low level of deployment is a missed opportunity for the government - recent research5 has shown the cost effectiveness of greenhouse gas reduction at this smaller scale of plant at tariff levels of 16 p/ kWh, in particular at the ≤100 kWe scale.

3. Market growth

Chart 4 shows this expected decline in deployment without policy change: Chart 4 shows this expected decline in deployment without policy change:

Chart 4

Chart 4

≤250 kWe projections (excluding small CHPs on biomethane sites) Number of new plants commissioned

35 30 25 20 15 10 5 0 2012

2013 Actual

2014

2015

Low projecUon

2016

2017

2018

High projecUon

3.4. Electricity >250 kWe ≤ 500 kWe 3.4. Electricity >250 kWe ≤ 500 kWe

The factors impacting on the ≤250 kWe also apply to this scale. The highest possible tariff on 1 October 2016 is 7.5 p/ kWh (before inflation is added).

The slowdown is unlikely to be as sudden as the ≤250 kWe scale due to the lower capital cost per kWe constructed at this scale.

The factors impacting on the ≤250 kWe also apply to this scale. The highest possible tariff on 1 October 2016 is 7.5 p/ kWh (before Chart 6 inflation is added). The slowdown is unlikely to be as sudden as the ≤250 kWe scale due to the lower capital cost per kWe Chart 5 shows this expected decline in deployment without policy change: constructed at this scale.

Chart 5 shows this expected decline in deployment without policy change: Chart 5

>250≤500 kWe projections (excluding small CHPs on biomethane sites)

35 http://www.biogas.org.uk/images/upload/news_116_REABangorUnismallscaleADreportfinal.pdf

Number of new plants commissioned

5

30

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25

20 15 10 5 0 2012

2013 Actual

3.5.

2014

2015

Low projecUon

2016

2017

2018

High projecUon

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3. Market growth 3.5. Electricity >500 kWe ≤ 5 MWe This scale of plant may be more insulated from tariff changes than smaller scale plants. A higher proportion of feedstock is likely to be from food waste and other material which would otherwise have a cost to dispose of (see chapter four below). So a lower proportion of project income is generated from tariff income and electricity sales. This scale can therefore be less dependent on tariffs.

This scale will, however, often be more dependent on waste policy both at local and national levels. Progress on separate food waste collections in England is currently extremely slow, as outlined in chapter four below, putting significant downward pressure on gate fees. Tariff reductions and the FIT capping mechanism will also slow deployment to the levels outlined in chart six below. The “low projection” for 2017 onwards is therefore 0 plants being built per year – i.e. it is possible that new plants will not be viable.

Chart 6

>500 kWe ≤5 MWe projections

Number of new plants commissioned

25

20

15

10

5

0 2012

2013 Actual

2014

2015

Low projecUon

2016

2017

2018

High projecUon

3.6. Electricity >5 MWe 3.6. Electricity >5 MWe

Outside of the sewage treatment sector, just three plants have been built at this scale (compared to eight in the sewage sector). One large plant uses food

waste,of andthe twosewage use organic wastes generated on industrial sites.have Five more planning to build at this one of which is under Outside treatment sector, just three plants beenplants builthave at this scalepermission (compared to eight in scale, the sewage sector).

Oneconstruction. large plant uses food waste, and two use organic wastes generated on industrial sites. Five more plants have planning permission to build at this scale, one of which is under construction.

Plants at this scale are highly complex to finance, construct and supply with feedstock. We do not expect more than one plant of this scale per year to be

Plants at this scale are highly complex to finance, construct and supply with feedstock. We do not expect more than one plant of constructed. this scale per year to be constructed.

3.7. Biomethane 3.7.Projections Biomethane for biomethane are within a wide range, reflecting the uncertainty over how the RHI budget will be managed. If decisions are made quickly, and sufficient budget is allocated to biomethane at a reasonable tariff, 28 plants of 700 m3/ hr of biomethane could be constructed each year. Given a relatively positive outcome toare the spending review,range, we would now expect see a minimum 9 plants 2016be(bearing in mind Projections for biomethane within a wide reflecting thetouncertainty overofhow thecommission RHI budgetinwill managed.

If the lead 3 time for are building ADquickly, plants), with “low” scenario decreasing each year if tariff and policy changes go against decisions made andthe sufficient budget is allocated to biomethane at a reasonable tariff, the 28industry. plants of 700 m / hr of

biomethane could be constructed each year. Given a relatively positive outcome to the spending review, we would now expect to see a minimum of 9 plants commission in 2016 (bearing in mind the lead time for building AD plants), with the “low” scenario decreasing each year if tariff and policy changes go against the industry.

Chart 8 12

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Chart 7

Number Numberofofplants plantscommissioned commissioned

30 30

3. Market growth Biomethane projections Biomethane projections (including conversion of previous electricity plants to biomethane, including (including conversion of previous electricity plants to biomethane, including water sector) water sector)

25 25 20 20 15 15 10 10 5 5 0 0

2012 2012 Actual Actual

2013 2013

2014 2014

2015 2015

Biomethane 'Low' projecUon Biomethane 'Low' projecUon

2016 2016

2017 2017

Biomethane 'High' projecUon Biomethane 'High' projecUon

Chart 9 Chart Chart 98

Projected biomethane cumulative capacity (m33/ hr) Projected biomethane cumulative capacity (m / hr) (including sewage sector) (including sewage sector)

80000 80000 70000 70000

m3/ m3/hrhr

60000 60000 50000 50000 40000 40000 30000 30000 20000 20000 10000 10000 0 0

2011 2011

2012 2012 Actual Actual

3.8.

3.8.

2013 2013

2014 2014

Projected 'High' Projected 'High'

2015 2015

2016 2016

2017 2017

Projected 'Low' Projected 'Low'

Planning data Planning data

Planning data gives a good indicator of industry deployment over the next couple of years.

Planning data gives a good indicator of industry deployment over the next couple of years.

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3. Market growth 442 AD plants are in the planning process, with either approved applications or with applications that have been submitted to 3.8. Planning planning authorities.data The following table breaks this down. The industry has, since 2013, consistently had over 400 plants in the planning process. Falling below this 400 number moving through the planning process would indicate a significant loss of Planning data givesinvestors a good indicator industry deployment over the next couple of years. confidence among in the ofsector.

Proposed ADplants plants 442 AD are in the planning process, with either approved applications or with applications that have been submitted to planning authorities. The following table breaks this down. The industry has, since 2013, consistently had over 400 plants in the planning process. Falling below this 400 number of Potential Number of Potential Total moving through the planning processNumber would indicate a significant loss of confidence among investors in the sector. installed

electricity/ CHP plants With planning application

Number of electricity/ approved (not including

CHP plants extensions to existing schemes) 316 With planning application With planning application approved (not including 316 submitted (not including extensions to existing schemes) extensions to existing schemes) 103 With planning application Total proposed submitted (not including Operational non-sewage plants extensions to existing potentially converting to schemes) Total proposed biomethane Operational non-sewage Operational sewage plants plants potentially converting potentially converting to to biomethane biomethane Operational sewage plants potentially converting to biomethane

installed biomethane capacity, MWe Proposed ADplants plants

biomethane capacity, m3/hr

number of plants

Potential installed capacity, MWe

Number of biomethane plants

Potential installed 11,950 biomethane capacity, m3/hr

Total number 335 of plants

311

19

11,950 2,555

335 107

311

19

113

4

419

424

23

14,505

442

419 N/A

424 N/A

23 1

14,505

1,000

N/A

103

113

4

2,555

N/A N/A 1

N/A

N/A

2

N/A N/A 2

107

442

1,000 N/A

1,550

N/A

1,550 N/A

The average number of planning applications being made per month is an indication of confidence levels in the sector. As the following chart shows, in 2015 that confidence has been falling. However, at over 10 applications per month, this is still reasonable compared to previous years.

The average number of planning applications being made per month is an indication of confidence levels in the sector. As the following chart shows, in 2015 that confidence has been falling. However, at over 10 applications per month, this is still reasonable compared to previous years.

Chart 10

Chart 9

Average number of planning applicaUons submiWed per month 14 12 10 8 6 4 2 0 2012

2013

2014

2015 to end October

Average per month

3.9.

Feed-in Tariff (FIT) data

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3. Market growth

3.9. Feed-in Tariff (FIT) data

Even before the removal of pre-accreditation and the proposed review of tariffs and capping mechanism, the degression Even before the removal of pre-accreditation and the proposed review oftotariffs and capping mechanism, thelast degression mechanism having the impact of and significantly reducing the mechanism, scheme.

DECC released the Feed-in Tariff Even before thewas removal of pre-accreditation the proposed review ofdeployment tariffs and capping the degression mechanism was having the mechanism was having the impact of significantly reducing deployment to the scheme.

DECC released the last Feed-in Tariff 6 .

They showed that up to October 2015 (the most recent month available), deployment to the scheme statistics on 23 November 6 impact of significantly reducing deployment to the scheme.

DECC released the last Feed-in Tariff statistics on 23 November.

They showed that up to 6 They period showedinthat up Further to October 2015 are (thefactored most recent available), to the scheme statistics November had fallenon by23 29% over the .same 2014. declines in to month our projections in deployment chapter three.

October 2015by(the most recent to the scheme hadare fallen by 29%inover the same period inin2014.

Further declines are factored had fallen 29% over themonth sameavailable), period indeployment 2014. Further declines factored to our projections chapter three. in to our projections in chapter three.

Chart 11 Chart 11

MWe MWe

Chart 10

90 9 80 8 70 7 60 6 50 5 40 4 30 3 20 2 10 1 -­‐0

-­‐

FITs AD installed capacity deployment (pre- and fullFITs AD installed capacity deployment (pre- and fullaccreditations) accreditations)

Jan-­‐Oct Jan-­‐Oct

Jan-­‐Oct Jan-­‐Oct

2014 2014

2015 2015

As chart 12 below shows, the impact of tariff degressions has been higher on the ≤500 kWe scale than the larger end. Here the

As below shows, the impact of tariffofdegressions has been higher on thehigher ≤500 kWe scale than the larger end. Here the reduction is 68% over the Aschart chart1112 shows, the impact tariff2015 degressions has been reduction is below 68% over the period to October on the previous period. on the ≤500 kWe scale than the larger end. Here the period to October 2015 on the the previous reduction is 68% over period toperiod.

October 2015 on the previous period.

Chart 12

Chart 11 12 Chart

MWe MWe

≤500 kWe FITs AD installed capacity deployment (pre- and ≤500 kWe FITs AD installed capacity deployment (pre- and full- accreditations) full- accreditations)

120 120 100 100 80 80 60 60 40 40 20 20 -­‐ -­‐

Jan-­‐Oct Jan-­‐Oct

Jan-­‐Oct Jan-­‐Oct

2014 2014

2015 2015

3.10. Renewable heat incentive (RHI) data 3.10. Renewable heat incentive (RHI) data The following DECC charts77 show the total scheme, biomethane and biogas uptake to the RHI. These are used to calculate the level of The following DECC charts the total scheme,depending biomethane uptake to the RHI. These are used to calculateand thethe level of degression which takes placeshow for each technology, onand the biogas interaction of expenditure for individual technologies degression which takes place for each technology, depending on the interaction of expenditure for individual technologies and the

6 6 https://www.gov.uk/government/statistical-­‐data-­‐sets/monthly-­‐mcs-­‐and-­‐roofit-­‐statistics 7 https://www.gov.uk/government/statistical-­‐data-­‐sets/monthly-­‐mcs-­‐and-­‐roofit-­‐statistics 7 https://www.gov.uk/government/statistical-­‐data-­‐sets/rhi-­‐mechanism-­‐for-­‐budget-­‐management-­‐estimated-­‐commitments

https://www.gov.uk/government/statistical-­‐data-­‐sets/rhi-­‐mechanism-­‐for-­‐budget-­‐management-­‐estimated-­‐commitments 6

www.gov.uk/government/statistical-data-sets/monthly-mcs-and-roofit-statistics

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3. Market growth 3.10. Renewable heat incentive (RHI) data The following DECC charts7 show the total scheme, biomethane and biogas uptake to the RHI. These are used to calculate the level of degression which takes place for each technology, depending on the interaction of expenditure for individual technologies and the scheme as a whole.8 Taken together, we have outlined why a 10% 1 January 2016 degression and 10-15% 1 April 2016 are the most likely outcomes. For plants commissioning after 1 April there is also the question of how the scheme will operate once the current legislation ends on 31 March 2016.

Chart 12

Total forecast expenditure, as at 30.09.2015

450

Forecast expenditure (£m) - Accreditations receiving payment

400

£ million

350

250

Forecast expenditure (£m) - Accreditations that have not yet received payment as at 30.09.2015

200

Forecast expenditure (£m) - Full applications

300

150

Forecast expenditure (£m) - Preliminary applications and preliminary accreditations

100

7 8

16

31 Dec 2015

31 Oct 2015

31 Aug 2015

30 Jun 2015

30 Apr 2015

28 Feb 2015

31 Dec 2014

31 Oct 2014

30 Jun 2014

30 Apr 2014

28 Feb 2014

31 Dec 2013

31 Oct 2013

31 Aug 2013

30 Jun 2013

30 Apr 2013

0

31 Aug 2014

50

www.gov.uk/government/statistical-data-sets/rhi-mechanism-for-budget-management-estimated-commitments Explained here for members adbioresources.org/news/rhi-degression-update-larger-degressions-looking-more-likely

Anaerobic Digestion Market report DECEMBER 2015

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Expenditure threshold (Total expenditure anticipated for subsequent year) (£m) Expenditure threshold (50% of total anticipated expenditure) (£m)

3. Market growth Chart 13

Producers of biomethane for injection forecast expenditure, as at 30.09.2015 200 Forecast expenditure (£m) - Accreditations receiving payment

180 160

The threshold lines begin on the 31 July 2014 because threshold values prior to this were based on a combined biogas and biomethane tariff which have now been split

£ million

140 120 100 80 60

Forecast expenditure (£m) - Accreditations that havenot yet received payment as at 30.09.2015 Forecast expenditure (£m) - Full applications Forecast expenditure (£m) - Preliminary applications and preliminary accreditations

40 20

Expenditure threshold (Total expenditure anticipated for subsequent year) (£m) 31 Dec 2015

31 Oct 2015

31 Aug 2015

30 Jun 2015

30 Apr 2015

28 Feb 2015

31 Dec 2014

31 Oct 2014

31 Aug 2014

30 Jun 2014

30 Apr 2014

28 Feb 2014

31 Dec 2013

31 Oct 2013

31 Aug 2013

30 Jun 2013

30 Apr 2013

0

Expenditure threshold (or scaled trigger) (£m)

Chart 14

Plants which generate heat from biogas forecast expenditure, as at 30.09.2015 12 Forecast expenditure (£m) - Accreditations receiving payment

The threshold lines begin on the 31 July 2014 because threshold values prior to this were based on a combined biogas and biomethane tariff which have now been split

8 6 4

Forecast expenditure (£m) - Accreditations that havenot yet received payment as at 30.09.2015 Forecast expenditure (£m) - Full applications

Forecast expenditure (£m) - Preliminary applications and preliminary accreditations

2

adbiouresources.org

31 Dec 2015

31 Oct 2015

31 Aug 2015

30 Jun 2015

30 Apr 2015

28 Feb 2015

31 Dec 2014

31 Oct 2014

31 Aug 2014

30 Jun 2014

30 Apr 2014

28 Feb 2014

31 Dec 2013

31 Oct 2013

31 Aug 2013

30 Jun 2013

0 30 Apr 2013

£ million

10

Expenditure threshold (Total expenditure anticipated for subsequent year) (£m)

Anaerobic Digestion Market report DECEMBER 2015

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4.1.

4.Plants Feedstocks by feedstock category

[Chart x] below shows the number of plants using different feedstocks3. For the first time, the number of agricultural plants4.1. is now higher the number of sewage plants. 81 new agricultural plants were constructed in 2014, more than Plants by than feedstock category doubling the number of operational agricultural plants in a single year4.

Chart 15 below shows the number of plants using different feedstocks.9 For the first time, the number of agricultural plants is now higher than the number

[Chartofx]sewage plants. 81 new agricultural plants were constructed in 2014, more than doubling the number of operational agricultural plants in a single year.10 Chart 15

Actual cumulative number of plants by feedstock 180 160 Number of plants

140 120 100 80 60 40 20 0 1979 1987 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Agricultural

Agricultural and municipal/ commercial

On-site industrial

Municipal/ commercial waste

Sewage

Other

Chart 16 below shows the electrical-equivalent capacity of plants by feedstock. Sewage has the highest capacity. The red block shows the expected new

[Chartcapacity x] below the electrical-equivalent capacity of plants by feedstock. Sewage has the highest capacity. The by theshows end of 2015. red block shows the expected new capacity by the end of 2015.

Actual whole sector cumulative capacity by feedstock category Chart 16 (includes electricity plants converting to biomethane) [Chart x] 700 600 500 MWe-e

400 300

200

See appendix two for feedstock categorisations 100 The final 2015 figures will show a higher increase.

Figures for 2015 are not yet complete.

0 2008

2009

2010

2011

2012

Sewage

Agricultural

Agricultural and municipal/ commercial

On-site industrial

Municipal/ commercial waste

Other

2013

2014

2015 15 | P a g e

Projected 'Mid-point' additional capacity 9

See appendix two for feedstock categorisations Figures for 2015 are not yet complete. The final 2015 figures will show a higher increase.

10

18

Chart [x] shows the breakdown of number of plants by both feedstock and capacity ranges. Biomethane has a relatively high proportion of agricultural plants,adbiouresources.org while the electrical >500 kWe ≤ 5 MWe range has a relatively Anaerobic Digestion Market report DECEMBER 2015 high proportion of municipal/ commercial waste plants.

4. Feedstocks

Chart 17 shows the breakdown of number of plants by both feedstock and capacity ranges. Biomethane has a relatively high proportion of agricultural plants, while the electrical >500 kWe ≤ 5 MWe range has a relatively high proportion of municipal/ commercial waste plants.

Chart 17

80

Number of operational plants within capacity ranges using different types of feedstock Number of operational plants within capacity ranges using types (including sewage sector, including electricity plantsdifferent converting to of feedstock (including sewage sector, including electricity plants converting to biomethane) biomethane)

70 Number of plants

60 50 40 30 20 10 0 =<250 kWe Agricultural On-site industrial Sewage

>250kWe=<500 >0.5 Mwe=< 5 Mwe >5 Mwe Biomethane kWe Capacity category Agricultural and municipal/ commercial Municipal/ commercial waste Other

Chart 18 below shows the relativethe proportions electrical-equivalent capacity of each feedstock.capacity Sewage capacity is atfeedstock. nearly 200 MWe. The vast [Chart x] below shows relativeof proportions of electrical-equivalent of each Sewage majority of AD capacity is of organic wastes and by-products such as sewage, food waste, and slurries and manures. capacity is at nearly 200 MWe. The vast majority of AD capacity is of organic wastes and by-products such as

sewage, food waste, and slurries and manures.

Chart 18

[Chart x]

Operational MWe-e capacity by feedstock sector 7; 1% 145; 28% 196; 37%

35; 7% 42; 8% 98; 19% Agricultural

Agricultural and municipal/ commercial

On-site industrial

Municipal/ commercial waste

Sewage

Other

hart x] shows the number of plants with planning permission by feedstock. The vast majority are agricultural. There are adbiouresources.org Anaerobic Digestion Market report DECEMBER 2015 17 | P a g e er 50 municipal/ commercial food waste plants that could come forward.

19

On-site industrial

Municipal/ commercial waste

4. FeedstocksSewage

Other

Chart x] shows number of plants planning permission by feedstock.

The are vast majorityThere areare agricultural.

There are Chart 19the shows the number of plantswith with planning permission by feedstock.

The vast majority agricultural. over 50 municipal/ commercial over 50 municipal/ commercial food waste plants that could come forward. food waste plants that could come forward.

Chart x]

Chart 19

Number of plants with planning permission by feedstock sector 300

Number of plants

250 200 150 100 50 0 Agricultural

Agricultural and municipal/ commercial

On-site industrial

Municipal/ Sewage (none/ commercial unknown) waste (includes residual waste MBT)

4.2. Tonnes of feedstock used AD currently processes the following tonnes of feedstock.

11,12

Farm waste (FW) 1.2

Industrial residues (ILW and ISW) 6.2

Processed feedstock Crops Food waste (C) (FDW) 1.4 1.7

Residual waste (RW) 0.5

Other

18 | P a g e

Sewage Sludge (SS) rounded to nearest million 22.0

alculated from operational tonnage capacity. Assumes operators process 80% of their permitted tonnage capacity. This 80% figure is based on a C WRAP survey of the industry carried out in 2013. www.wrap.org.uk/sites/files/wrap/A_survey_of_the_UK_Anaerobic_Digestion_industry_in_2013.pdf 12 See appendix 2 for further information on what is included in each feedstock capacity.

11

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4. Feedstocks The growth in the industry is focussed on food waste, crops and farm wastes. This growth is outlined in chart 20 below.13 Chart 20

Main feedstocks use projections (assumed 80% of capacity)

2.5

Million wet tonnes

2.0

1.5

1.0

0.5

0.0

2011

4.3.

Land use

2012 Actual food waste

2013

2014 2015 Actual crops

2016

2017

Actual farm wastes

Projected food waste 'Mid-point'

Projected crops 'Mid-point'

Projected farm wastes 'Mid-point'

Growth in land use for AD crops is slowing in line with slower industry growth. [Chart x] below shows the “mid-point” projected land !!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !

4.3. Land use use up tofrom 2017.

5 Calculated operational tonnage capacity. Assumes operators process 80% of their permitted tonnage capacity. This 80% figure is based on a

WRAP survey of in theland industry outisinslowing 2013. in line with slower industry growth. Chart 21 below shows the “mid-point” projected land use up to 2017.

Growth use forcarried AD crops http://www.wrap.org.uk/sites/files/wrap/A_survey_of_the_UK_Anaerobic_Digestion_industry_in_2013.pdf [Chart x] 6 See appendix 2 for further information on what is included in each feedstock capacity.

Chart 21 7 These are the projected final uses for 2015, so 2015 will be higher than the ‘current’ use because they include use from plants expected to come Land used for AD crops projecLons on-line (as well as commissioned plants yet to be entered onto our system).!

! !

19 | P a g e ! ! !

60

Thousand hectares

50

!

40 30 20 10 0 2014

2015

2016

2017

Projected "mid-­‐point"

T hese are the projected final uses for 2015, so 2015 will be higher than the ‘current’ use because they include use from plants expected to come on-line (as well as commissioned be entered onto our system).

The following chart shows howplants land yet usetofor AD feedstocks might compare to some other feedstocks in 2020, based on a “medium” 13

and “high” growth scenario for AD. Even in a “high” scenario, crops for AD use a small amount of land compared to agricultural land not in production and land used for golf courses. adbiouresources.org Anaerobic Digestion Market report DECEMBER 2015

21

4. Feedstocks The following chart shows how land use for AD feedstocks might compare to some other feedstocks in 2020, based on a “medium” and “high” growth scenario for AD. Even in a “high” scenario, crops for AD use a small amount of land compared to agricultural land not in production and land used for golf courses.

Chart 22

Percentage of UK agicultural land

UK agricultural land use 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Land used for growing crops for AD 2020 "medium" growth

Land used for growing crops for AD 2020 ''High' growth

Uncropped arable land 2014 (not in production e.g. game cover)

2005-2013 2000-2013 Land used as reduction in reduction in golf courses in land use due to land use due to England 2013 reduced cattle reduced cattle breeding herd breeding herd

Maize (including for AD) - 2013

4.4. Food waste collections WRAP provides information on the collection schemes which different local authorities offer to households.14 The most recent breakdown of LAs providing a food waste collection is as follows: Percentage of local authorities collecting food waste 2014/15

Separate Food Waste Food Mixed In Garden Waste Both Scheme Types No Food Collection England 31% 17% 8% 45% Wales 86% 5% 9% 0% Scotland 56% 19% 6% 19% Northern Ireland 8% 65% 15% 12% UK 34% 19% 8% 39% However, LAs offering collection schemes do not necessarily do so to all households in their area. A more detailed review of WRAP data provides the following breakdown shows that over half the UK’s households still do not receive any form of food waste service: Chart 23 UK Household Food Waste Services

19.8% 50.6% 29.6%

14

22

■ Food Mixed in Garden ■ Separate Food Waste ■ No Food Waste CollecLon

http://laportal.wrap.org.uk/ORIS.aspx

Anaerobic Digestion Market report DECEMBER 2015

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4. Market projections In total, 8.3m households now have access to a separate food waste collection, and 5.5m can mix food waste with garden waste. In March 2013 less than 40% of households had access to some form of food waste collection scheme, so 49% represents a significant increase. Just 19 councils provide food waste collections services to their commercial customers, even though the vast majority offer some form of refuse or recycling option for businesses.

The increase in household collections has been driven largely by action from the devolved administrations: central government policy has the greatest impact on the availability of food waste collection schemes. ADBA has pushed strongly for action in England over the last five years, and has continued to do so in meetings with the Defra minister under this government.

4.5. Gate fees Gate fees for receipt of packaged and unpackaged food waste have been falling in recent years. This is as a result of separate food waste collections not matching the increase in capacity of food waste AD plants. A huge range of gate fees exists in the industry, varying widely between regions, type of food waste, length of contract and the year in which the contract was signed.

In 2014 DECC assumed a gate fee of £15 per tonne of unpackaged food waste to calculate the tariff for new biomethane plants seeking to claim the RHI (using a model for the levelised cost of generating energy).15 This was assumed to be the average gate fee over the 20 year life of the plant. This £15 figure is lower than has previously been assumed by government (the consultation was initially based on a £25 per tonne figure) and reflects the reduction in longer-term, council-led, fixed-term contracts that are being offered compared to 2-5 years ago. It was perhaps DECC’s most difficult task for the tariff review to understand the industry’s gate fees, reflecting the degree of sensitivity over the data and the rapidly-changing market conditions.

WRAP conducts an annual gate fee review (see www.wrap.org.uk/content/wrap-gate-fees-report-2014-0) and the numbers in that report are every year higher than the average gate fees that most AD food waste operators can actually negotiate. This is because, as the report states, the review is focussed on the gate fees paid by local authorities with existing contracts – so will not account for AD plants using non-local authority waste or for new plants being built that have not yet received food waste under these contracts.

Parson Brinckerhoff16 has also recently studied the subject for DECC and did not find any new information, other than that gate fees are falling.

4.6. 2015 anaerobic digestion feedstock use survey We will be working with WRAP and the NNFCC over the next two months to measure the amount of feedstock being used by the sector. This is an important piece of work because it demonstrates the contribution the sector is making to meeting recycling and climate change targets. It also helps the industry measure progression against potential. We need industry to support us with this work, and we will be in contact with operators before Christmas on this subject.

15 16

h ttp://bit.ly/1Gxtp6v http://bit.ly/1MIuRJx

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5. Current and potential energy generation We track energy generation by the AD sector and compare it to the industryâ&#x20AC;&#x2122;s theoretical potential.

5.1. Overview Below is an overview of energy generation from the sector in 2015.

Biogas 2015 7.4 TWh

Heat-only Transport <0.1 TWh

Gas grid 1.5 TWh

Electricity generation 5.9 TWh

Electricity 2.2 TWhe

Co-generated heat (mainly vented) 3.7 TWhth These calculations are based on plant capacity (see chapter three), assumed load factors (see section 5.2 below) and electrical efficiency assumptions17 Most biogas produced in the UK is used for electricity generation, although biomethane production for grid injection is increasing rapidly.

Heat produced in association with electricity in combined heat and power (CHP) units has a variety of potential uses. Heating the digesters and pasteurisation tanks is already common. Other current uses include heating farm houses, cottages, cheese manufacturing processes, chemical processes, mushroom growing, greenhouse horticulture and dairy operations. Digestate drying is also being taken up. An increasing number of plants are also using waste heat to generate additional electricity via the organic rankine cycle. Most heat, however, is still being vented to the atmosphere.

DECC has estimated18 electricity generation from AD across the sewage and non-sewage sectors at 1.85 TWhe in 2014. Using our methodology gave an electrical output of 1.72 TWh in 2014. So the two different methodologies produce results within 10% of each other.

A ssumed at 37% on average across larger and smaller plants. Manufacturer information suggests higher efficiencies for plants above 400-500 kWe. We will seek to establish more accurate estimates in future.

18 Digest of UK Energy Statistics Chapter 6.4 17

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DECC has estimated18 electricity generation from AD across the sewage and non-sewage sectors at 1.85 TWhe in 2014. Using our methodology gave an electrical output of 1.72 TWh in 2014. So the two different methodologies produce results within 10% of each other.

5. Current and potential energy generation

5.2.

Load factors 5.2. Load factors Anaerobic digestionis is a secure, baseload generation technology.

Anaerobic digestion a secure, baseload generation technology.

Based on Ofgem data19, we have calculated the load factors for electricity plants outside of the sewage sector. Load factor is a 19 plants are performing against their expected maximum levels of output. These load factors have been good how Basedmeasure on Ofgemofdata , we have calculated the load factors for electricity plants outside of the sewage sector. Load factor is a good measure of how increasing significantly each year sincemaximum 2011, aslevels the industry matured.

Thehave industry’s load factor is noweach approximately 71% plants are performing against their expected of output.has These load factors been increasing significantly year since 2011, as the 20. outside of the sewage sector.

In the sewage sector we assume 51% 20 industry has matured. The industry’s load factor is now approximately 71% outside of the sewage sector. In the sewage sector we assume 51%.

Chart 25 Chart 24

Monthly load factors -­‐ electricity sector excluding sewage gas plants

80% 70% 60% 50% 40% 30% 20% 10%

2011.04 2011.06 2011.08 2011.10 2011.12 2012.02 2012.04 2012.06 2012.08 2012.10 2012.12 2013.02 2013.04 2013.06 2013.08 2013.10 2013.12 2014.02 2014.04 2014.06 2014.08 2014.10 2014.12 2015.02 2015.04

0%

Industry average

Chart 26 Chart 25

Monthly load factor -­‐ AD sector (outside of water sector) 80% 70% 60% 50% 40% 30% 20% 10% 0%

2011 18

2012

2013

2014

2015 to date

Digest of UK Energy Statistics Chapter 6.4 19 https://www.renewablesandchp.ofgem.gov.uk/Public/ReportManager.aspx 20 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/360517/ro.pdf

As well as monthly load factors, it is important that the industry generates electricity consistently over shorter time periods. The

electricity grid system operator needs to be able to rely on output from AD at all times of day and at all times in the year. We surveyed

a number of members, which shows the consistency of output over these time periods21. Charts 26 and 27 show this within the day 29 | P a g e and between different months/ seasons.

Chart 26 20

ww.renewablesandchp.ofgem.gov.uk/Public/ReportManager.aspx w 2014 average half-­‐hourly (HH) load factor of 9 AD plants on www.gov.uk/government/uploads/system/uploads/attachment_data/file/360517/ro.pdf

first day of each month

plant

19

100% adbiouresources.org

Anaerobic Digestion Market report DECEMBER 2015

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0%

5. Current and potential energy generation 2011

2012

2013

2014

2015 to date

As well as monthly load factors, it is important that the industry generates electricity consistently over shorter time periods. The electricity grid system operator needs to be able to rely on output from AD at all times of day and at all times in the year. We surveyed As well as monthly load factors, it is important that the industry generates electricity consistently over shorter time periods. The electricity grid system a number of members, which shows the consistency of output over these time periods21. Charts 26 and 27 show this within the day operator needs to be able to rely on output from AD at all times of day and at all times in the year. We surveyed a number of members, which shows the and between different months/ seasons. consistency of output over these time periods21 Charts 26 and 27 show this within the day and between different months/ seasons.

! !

Chart 26 26 Chart

80% 60% 40% 20%

01/01/2014

01/02/2014

01/03/2014

01/04/2014

01/05/2014

23.00

22.00

21.00

20.00

19.00

18.00

17.00

16.00

15.00

14.00

13.00

12.00

11.00

10.00

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

0% 1.00

Chart 27

Chart 27

100%

0.00

kWhe / HH as a proportion of plant capacity

2014 average half-­‐hourly (HH) load factor of 9 AD plants on first day of each month

01/06/2014

kWhe / day as a proporUon of plant capacity

Average daily load factors of 9 AD plants on first day of each month

100%

21

For further information see http://adbioresources.org/news/ad-as-a-source-of-baseload-power-adba-discussions-with-national-grid

80%

60%

30 | P a g e

40%

20% 0% 01/01/2014 01/02/2014 01/03/2014 01/04/2014 01/05/2014 01/06/2014 01/07/2014 01/08/2014 01/09/2014 01/10/2014 01/11/2014 01/12/2014

A further performance indicator important to operators and the industry as a whole is the methane yields operators are attaining in practice, measured

A further performance indicator important to operators and the industry as a whole is the methane yields operators are attaining in against the potential methane yields for different feedstocks. We will be working with operators on this measure in future. practice, measured against the potential methane yields for different feedstocks. We will be working with operators on this measure in future.

5.3.

Market potential

Existing feedstocks for AD, including sewage, crops, manures and food waste, can in total potentially provide 35-40 TWh of methane.

21 F

or further So far, we are information providing see 7.4 adbioresources.org/news/ad-as-a-source-of-baseload-power-adba-discussions-with-national-grid TWh of this potential. With new technologies and feedstocks coming through to commercialisation, the industry’s potential would be closer to 80 TWh. The following diagram shows this.

26

Anaerobic Chart 28Digestion Market report DECEMBER 2015

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F g m

A

5.3. Market potential Existing feedstocks for AD, including sewage, crops, manures and food waste, can in total potentially provide 35-40 TWh of methane. So far, we are providing 7.4 TWh of this potential. With new technologies and feedstocks coming through to commercialisation, the industryâ&#x20AC;&#x2122;s potential would be closer to 80 TWh. The following diagram shows this.

Chart 28

AD methane production (TWh): Current

Potential

Potential with R&D

90 80 70

26 60

TWh

! !

5. Current and potential energy generation

50

6 5

40

78

5

30

28

20

35

10 0

7 Current production

Improve Market Pre-treatment Improving industry's yields potential technologies access to (current feedstocks technologies) - Maximise yields

New feedstocks

Power-tomethane

Market potential with R&D

For example, the 9 million tonnes of inedible food currentlyproduced produced by society 70tonnes millionof tonnes and slurries For example, the 9 million tonnes of inedible foodwaste waste currently by society and 70 and million manuresof andmanures slurries generated on farms generatedcould on farms beButused for million AD. But justof1.7 million of foodtonnes waste and wastes 1.2 million tonnes of farm wastes being (including be usedcould for AD. just 1.7 tonnes food waste tonnes and 1.2 million of farm (including manures) are currently used. So manures) are currently being used. So there is huge potential for AD to deliver more. there is huge potential for AD to deliver more.

At a 38% electrical efficiency 78 TWh can provide 3.4 GW of electrical capacity, or be used for injection on to the gas network.

At a 38% electrical efficiency 78 TWh can provide 3.4 GW of electrical capacity, or be used for injection into the gas network.

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6. Greenhouse gas savings 6.1. Potential savings By reaching its full potential AD could reduce UK greenhouse gas emissions by 21.7 million tonnes CO2e, saving around 4% of the UK’s emissions.

These avoided emissions include not only the impact of displacing fossil fuel combustion but also avoided methane emissions from manure and waste management and avoided emissions from the manufacturing of nitrogen fertiliser by use of digestate.22

6.2. Projected savings in 2020 If the industry follows a “mid-point” deployment trajectory up to 2020 then AD would be reducing emissions by 4.8 million tonnes CO2e.

6.3. Carbon cost effectiveness Given that each pound of government money spent on energy produced from AD will often not only reduce fossil fuel energy generation but also other emissions, the actual cost per MWh of AD is low.

See this outlined below: Carbon cost effectiveness

AD Solar Offshore New nuclear New gas

wind (from 2024?) (from 2017?)

Cost of electricity generated £/ MWhe £125 £68 £119 £95 £77 Cost as an intermittent technology (£/ MWhe) N/A £30 £30 N/A N/A Economic value of avoided fossil emissions -£32 -£32 -£32 -£32 N/A Economic value of non-energy carbon reduction (average £/ MWhe) -£32 N/A N/A N/A N/A Total cost of electricity generated £/ Mwhe £62 £66 £118 £64 £77

Columns may not add up due to rounding

22

28

ADBA calculation based on published studies

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7. Investment, jobs and exports 7.1. Investment Using capital cost data assumptions per MWe23 (or biomethane equivalent) we have estimated the amount of investment that is being made in building new AD plants.

In 2014 this was £610m. In 2015 our current estimate is that between £370m - £465m is being invested. 2016 will see this downward trend continue.

The RHI budget announcement could support an increase in biomethane investment from 2017.

7.2. Operations and maintenance Expenditure on operations and maintenance is £170m-£180m in 2015, up from £143m in 2014.24 Expenditure on operations and maintenance will continue to increase as more plants come on-line.

7.3. Exports Based on our members survey conducted earlier this year, the UK is already exporting at least £50m-£100m of AD-related equipment and expertise.

No detailed study of the potential global AD market has yet been conducted, although ADBA is starting to work on this. We have made an initial estimate of the potential UK share of the potential global market at £0.6bn-£2.2bn.25 We will be making more detailed assessments for future reports.

The United Nations University recently published a report26 outlining the potential global value of using sewage to produce methane via AD. AD can first and foremost support a reduction in the number of people that do not have access to proper sanitation (2.4 billion, of which a billion have no access to toilets). In terms of biogas production, the main conclusion of the report was that “if all of the world’s human waste were to be collected and used for biogas generation, the potential value ranges from US$ 1.6 billion to 9.5 billion”.27 This highlights the significant potential for AD to support a number of development objectives around the world.

7.4. Market value Adding the capital expenditure being invested to the operational expenditure and export value gives us the ‘market value’ of the UK AD sector. This is £620m-£720m in 2015, down from a high of £800m in 2014, and falling further to £410m-£705m in 2016.

£ 4.3m per MWe-e (see page 44 of our July 2015 Market Report for further explanation) Assumes £300k per MWe-e (see page 44 of our July 2015 Market Report for further explanation) 25 ADBA initial estimate based on extrapolating global potential to UK potential and adjusting for local parameters 26 http://inweh.unu.edu/wp-content/uploads/2015/11/Valuing-Human-Waste-an-as-Energy-Resource-Web.pdf 27 Ibid., page 8 23 24

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7. Investment, jobs and exports 7.5. Jobs We estimate the number of development, construction, manufacturing and feedstock procurement jobs in the industry on an ongoing basis. Many of the jobs in the AD sector are in companies which supply equipment to a number of different sectors. For example, jobs are created and protected in construction companies, concrete suppliers, pipe manufacturers, agricultural and waste management advisors, engine manufacturers, gas cleaning equipment suppliers, energy consultants, waste management companies, electrical and mechanical engineering contractors, developers, tank suppliers, farmers, and other technology suppliers. Therefore estimating the number of jobs supported by the industry is less certain than an industry which supports a large number of jobs in a small number of large manufacturing plants.

The best estimate is therefore to be made by multiplying the average number of people employed per MWe of capacity in construction and operation by the capacity in construction and operation. Jobs in construction and handover may be created for a two year period â&#x20AC;&#x201C; therefore the estimate for the number of jobs in construction depends on the expected deployment over the coming 12-24 month period.

Using surveyed data on jobs at each stage of development28 and accounting for projected deployment in 2015 and 2016, we estimate there are currently 4,000-4,500 full time-equivalent staff employed in the industry. This compares to the 35,000 that could potentially be employed over a 10 year period at the industryâ&#x20AC;&#x2122;s full potential.29

28 29

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8. Technology cost and innovation Energy tariffs for electricity and biomethane have been falling at a rapid speed over the last 2-3 years. The industry is currently unable to cut costs of producing energy at this rapid rate. The cost of generating energy from anaerobic digestion has already fallen considerably since the first plants were built in the 1980s, as design and operation have improved.

As the technology reaches higher levels of optimisation, potential future cost reductions become more difficult to achieve.

Factors which have a significant impact on the cost of producing energy from anaerobic digestion include: • Staff costs (operational and construction); • Levels of regulation/ best practice/ health and safety – appropriate regulation/ best practice will reduce costs, over-regulation/ best practice would increase them; • Cost of finance (increased by perceived and real feedstock and technology risk, policy risk/ uncertainty); • Feedstock cost/ income; • Input costs to civil works, electrical and mechanical equipment, pipework, engines and equipment housing – impacted by commodity costs such as steel, concrete and copper (see chapter nine for the latest of these prices); • Income from digestate or other products (e.g. use of waste carbon dioxide).

• Improvements in performance; and, • The price of carbon.

The FIT rate for AD plants deploying in 2016 above 250 kWe are between 7.5-8.7p/ kWhe30 depending on whether pre-accreditation was awarded in 2015. Assuming a wholesale electricity price of 4.5p/ kWhe, AD that deploys from that date at that scale will produce electricity for a levelised cost of 12.1-13.2p/ kWhe. 65 MWe applied for pre-accreditation in September, not all of which will go on to construction. The 12.1-13.2p/ kWhe compares to nuclear power (Hinkley Point C) planned for 2024 at a cost of approximately 9.5p/ kWhe, based on the strike price the government is proposing. Hinkley’s strike price is guaranteed for 35 years, compared to just a 20 year government commitment for FIT. Like Hinkley, AD provides baseload generation so this is a useful comparison, although AD offers far greater greenhouse gas benefits, as outlined in chapter five.

If certain government policies are put in place, AD could be put on a trajectory to provide baseload electricity at a cheaper rate than Hinkley Point C by 2024. The first policy would be for the government to support AD deployment at an equivalent or higher rate than that of the record year of 2014. This would allow economies of scale to be introduced in the development, construction and operational phases.

Further aspects which would be needed to support this trajectory include: government support for introducing separate food waste collections, policy stability leading to reduced cost of finance, much higher investment in research and development (R&D), and industry best practice (leading to improved process efficiency and fewer incidents). ADBA will support this effort through the establishment of a Cost Competitiveness Task Force. This will bring together operators, technology providers, government officials and financiers to consider the long-term potential for reducing the cost per MWhe of electricity. We will then outline the options that can support this, including in research and development and policy.

Cost competitiveness will be a core focus of ADBA’s annual Research and Innovation (R&I) Forum of spring 2016 and our AD research conference at our July trade show, as well as the development of ADBA’s R&D Strategy.

The launch of our Best Practice Scheme in July 2016 will also support continual improvement in the sector. By improving operational, environmental and safety performance we can reduce operational risks and costs.

30

Before inflation is added

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8. Technology cost and innovation The following chart shows the trajectory the industry would need to follow to be competitive with nuclear electricity by the time the Hinkley Point C power station is due for completion (equating to a 4-5% reduction in levelised costs per year): Chart 29

£350

3.0

£300

2.5

£250

2.0

£200

1.5

£150 £100

1.0

£50

0.5

£0

1980

2010

2016

AD £/ MWhe >0.5 Mwe AD GWe

32

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2020

2024

Nuclear £/ MWhe Hinkley GWe

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-

GWe cumulative

£/ MWhe (2015 prices)

£400

Cost of generating baseload electricity.

As more AD capacity is built, the cost falls. In 2024 it becomes cheaper than nuclear.

9. Commodity prices

9. Commodity prices

Ofgem and DECC publish information on current and projected wholesale energy prices, which are relevant to the economics of the AD sector thepublish reasons outlinedonbelow.

Ofgem andfor DECC information current and projected wholesale energy prices, which are relevant to the economics of the AD sector for the reasons outlined below.

9.1. Carbon price 9.1. Carbon price

Carbon emitters do not currently pay a price for the impact those greenhouse gas emissions have on society. A carbon price would support the development of anaerobic digestion by increasing the cost of fossil fuel generation, therefore increasing the wholesale Carbon emitters do not currently pay a price for the impact those greenhouse gas emissions have on society. A carbon price would support the price. As and when amendments are made to improve the currently ineffective Emissions Trading Scheme (ETS), Carbon Price Floor development of anaerobic digestion by increasing the cost of fossil fuel generation, therefore increasing the wholesale price. As and when amendments and other mechanisms, we will publish the prices. are made to improve the currently ineffective Emissions Trading Scheme (ETS), Carbon Price Floor and other mechanisms, we will publish the prices.

Current and historic 9.2.9.2.

Current and historic energy energy prices prices AD project developers need to assess the likely current and future income streams from wholesale electricity and gas sales. The AD project and developers needincome to assessfrom the likely and future income from wholesale andviability. gas sales.The The price expected, realised, expected, realised, thesecurrent wholesale sales havestreams a significant impactelectricity on project thatand operators income for fromtheir thesepower wholesale impact onmarkets, project viability.

The price thatthem operators for in their power and gas depend on receive andsales gas have salesa significant depend on these and DECC take intoreceive account their models forsales renewable these markets, and DECC take them into account in their models for renewable financial incentives. financial incentives.

31 price31. Natural gas prices have fallen even in nominal terms in the past five Chart belowshows shows historic wholesale gas Chart 30 30 below thethe historic wholesale naturalnatural gas price.

Natural gas prices have fallen even in nominal terms in the past five years. years.

Chart 30

Chart 30

Wholesale gas price ‘Day-ahead’ gas prices at the GB gas hub (the National Balancing Point) for delivery the following working day. The data is averaged by month £35 £30 £25 £20 £15 £10 £5 4/1/2015

2/1/2015

12/1/2014

8/1/2014

10/1/2014

6/1/2014

4/1/2014

2/1/2014

12/1/2013

10/1/2013

8/1/2013

6/1/2013

4/1/2013

2/1/2013

12/1/2012

8/1/2012

10/1/2012

6/1/2012

4/1/2012

2/1/2012

12/1/2011

8/1/2011

10/1/2011

6/1/2011

4/1/2011

2/1/2011

12/1/2010

10/1/2010

8/1/2010

6/1/2010

£0

Chart 31 below shows the historic wholesale electricity price. Wholesale electricity prices have also fallen marginally in nominal terms in the past five years.

Chart 31

31

https://www.ofgem.gov.uk/monitoring-­‐market/wholesale-­‐market-­‐indicators

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9. Commodity prices

Chart 31 below shows the historic wholesale electricity price. Wholesale electricity prices have also fallen marginally in nominal terms in the past five years.

Chart 31

of electricity onwholesale the wholesale market GBdelivery for delivery the next working PricePrice of electricity on the market in GBinfor the next working day at a constant ‘baseload’ The data is averaged by month day at a constant ‘baseload’ rate.rate.

The data is averaged by month £70 £70 £60 £60

£/ MWhe

£/ MWhe

£50 £50 £40 £40 £30 £30 £20 £20 £10 £10 £0 £0

9.3. Projected energy prices Projected energy prices 9.3. 9.3. Projected energy prices The following charts show DECC’s reference case scenario for future price changes. These are based on DECC’s energy supply and demand projections.32

The DECC’s case for changes.

These are based on falling DECC’s energy supply The following chartscharts showshow DECC’s reference scenario for future changes.

These are based on DECC’s energy supply Notefollowing that these projections were made inreference 2014 case so have not scenario yet factored in future theprice priceprice falls since then. The projections indicate fossil fuel and 32. Note that these projections were made in 2014 so have not yet factored in the price falls since then.

32 and demand projections that projections wereprice made in 2014 so have not yet factored in the price falls since then. and demand electricityprojections prices over the. Note coming fivethese years before longer-term increases.

The projections indicate fuelelectricity and electricity the coming five years before longer-term increases.

The projections indicate fallingfalling fossilfossil fuel and pricesprices over over the coming five years before longer-term price price increases.

Chart32 ChartChart 32 32

DECC wholesale gas electricity and electricity projections ('reference' DECC wholesale gas and priceprice projections ('reference' priceprice assumptions, assume carbon increases, real prices prices) assumptions, assume carbon priceprice increases, real prices -2014-2014 prices) 80.0 80.0 70.0 70.0 50.0 50.0

£/ MWh

£/ MWh

60.0 60.0 40.0 40.0 30.0 30.0 20.0 20.0 10.0 10.0 0.0 0.0 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 2030 Electricity £/ MWh Electricity £/ MWh

Natural £/ MWh Natural gas £/ gas MWh

32

32

Available Available on: on: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/368021/Updated_energy_and_emissions_projections2014.pdf, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/368021/Updated_energy_and_emissions_projections2014.pdf, 32 Available on: http://bit.ly/1HsNVfT and http://bit.ly/1llv6kf https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2014 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2014 and and https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/360598/DECC_2014_fossil_fuel_price_projections.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/360598/DECC_2014_fossil_fuel_price_projections.pdf

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9. Commodity prices

Chart below shows theretail retail electricity forfor each sector.

AsAs subsidies a larger of of AD only Chart3333 below shows the electricity pricesprices for each sector.

As subsidies fall, a largerfall, proportion of proportion ADproportion projects will only beprojects viablewill where theybebe Chart 33 below shows the retail electricity prices each sector. subsidies fall, a larger ADprojects will only viable where are some on-site use. this would bebe where farms oror factories have high on-site are offsetting some on-site energy use.

Examples ofenergy this would beExamples where farmsoforof factories have high on-site electricity use for lighting orhigh mechanical viable wherethey they areoffsetting offsetting some on-site energy use.

Examples this would where farms factories have on-site electricity use for lighting or mechanical equipment.

Chart 33 gives an indication of the kind of retail prices that these on-site equipment. use Chartfor 33lighting gives an or indication of the kind of retail prices users of electricity can expect to prices be paying, can therefore electricity mechanical equipment.

Chartthat 33these giveson-site an indication of the kind of retail thatand these on-siteusers users of of electricity can expect tofrom bebe paying, and can therefore calculate potential savings from electricity on-site. electricity can expect to paying, and can therefore calculate potential savings fromgenerating generating electricity on-site. calculate potential savings generating electricity on-site.

Chart 33 Chart Chart 33 33

DECC DECCretail retailelectricity electricityprice priceprojections projections('reference' ('reference'price priceassumptions, assumptions, assume carbon price increases, real prices -2014 assume carbon price increases, real prices -2014prices) prices) 25.0 25.0

£/ MWh £/ MWh

20.0 20.0 15.0 15.0 10.0 10.0 5.0 5.0 0.0 0.0

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Industrial Industrial

ResidenUal ResidenUal

Services Services

Chart 3434 below thethe retail gas price projections. is therefore relevant to to companies developing ADAD which wish Chart 34 below shows the retail gas price projections.

Itprojections. is thereforeItrelevant to companies developing AD projects which wish toprojects offset significant on-site Chart belowshows shows retail gas price It is therefore relevant companies developing projects which wish to offset significant on-site gas use for heating by using heat from AD CHP units or boilers. gas use for heating by usingon-site heat from ADuse CHPfor units or boilers. to offset significant gas heating by using heat from AD CHP units or boilers.

Chart 34 Chart Chart 34 34

DECC DECCretail retailgas gasprice priceprojections projections('reference' ('reference'price priceassumptions, assumptions,assume assume carbon price increases, real prices -2014 carbon price increases, real prices -2014prices) prices) 60.0 60.0 50.0 50.0

£/ MWh £/ MWh

40.0 40.0 30.0 30.0 20.0 20.0 10.0 10.0 0.0 0.0

2016 2020 2022 2024 2030 2016 2017 2017 2018 2018 2019 2019 2020 2021 2021 2022 2023 2023 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 Industrial Industrial

ResidenUal ResidenUal

Services Services

Chart 3535 below thethe heating oiloil cost projections.

It is relevant to to companies developing ADADprojects which wish to to offset Chart belowshows shows heating cost projections.

It is relevant companies developing projects which wish offset significant on-site heating oil use for on-site heating by using heat from AD CHP units or boilers.

The high cost of heating significant on-site heating oil use for on-site heating by using heat from AD CHP units or boilers. The high cost of heatingoiloil

4040 | P| Pa ag ge e

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9. Commodity prices

Chart 35 below shows the heating oil cost projections. It is relevant to companies developing AD projects which wish to offset significant on-site heating oilrelative use for on-site by using heatthose from AD CHPorunits or businesses boilers. The high costheating of heating relative to gas currently makesable thosetofarms or rural to gasheating currently makes farms rural using oiloil prime candidates for being make savings by installing AD plants. businesses using heating oil prime candidates for being able to make savings by installing AD plants.

Chartrelative 35 to gas currently makes those farms or rural businesses using heating oil prime candidates for being able to make savings by installing AD plants.

Chart Chart 35 35 DECC retail heating oil price projections ('reference' price assumptions, 80.0

assume carbon price increases, real prices -2014 prices) DECC retail heating oil price projections ('reference' price assumptions, assume carbon price increases, real prices -2014 prices)

£/ MWh £/ MWh

70.0 80.0 60.0 70.0 50.0 60.0 40.0 50.0 30.0 40.0 20.0 30.0 10.0 20.0 0.0 10.0 0.0

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2016 2017 2018 2019 2020 2021 2022 Gas 2023 oil 2024 2025 2026 2027 2028 2029 2030 Gas oil

9.4. Input 9.4.

Inputcommodity commodityprices prices Input commodity prices part Steel and concrete prices a significant part of the AD AD plants.

Therefore, in considering the potential cost reduction in the sector, Steel9.4. and concrete prices formform a significant thecost costofofbuilding building plants.

Therefore, in considering theforpotential for cost reduction theofsector, the price ofhas these commodities a significant impact.

Policymakers therefore to be theinprice these commodities a significant impact. has Policymakers and the industry therefore need and to bethe keptindustry up-to-date with theseneed prices.

Steel and concrete a significant part of the cost of building AD plants. Therefore, in considering the potential for cost kept up-to-date withprices these form prices. reduction in the sector, the price of these commodities has a significant impact. Policymakers and the industry therefore need to be Quandl publish global prices. commodity prices. As chart 36 shows, steel prices have fallen recently from very high levels.33 kept up-to-date with these Quandl publish global commodity prices. As chart 36 shows, steel prices have fallen recently from very high levels33.

36global commodity prices. As chart 36 shows, steel prices have fallen recently from very high levels33.

Quandl36Chart publish Chart

Chart 36

LME GLOBAL STEEL price (Cash Buyer) LME GLOBAL STEEL price (Cash Buyer)

600

$USD/Tonne $USD/Tonne

600 500 500 400 400 300 300 200 200 100

2015-­‐11-­‐01 2015-­‐11-­‐01

2015-­‐09-­‐01 2015-­‐09-­‐01

2015-­‐07-­‐01 2015-­‐07-­‐01

2015-­‐05-­‐01 2015-­‐05-­‐01

2015-­‐03-­‐01 2015-­‐03-­‐01

2015-­‐01-­‐01 2015-­‐01-­‐01

2014-­‐11-­‐01 2014-­‐11-­‐01

2014-­‐09-­‐01 2014-­‐09-­‐01

2014-­‐07-­‐01 2014-­‐07-­‐01

2014-­‐05-­‐01 2014-­‐05-­‐01

2014-­‐03-­‐01 2014-­‐03-­‐01

2014-­‐01-­‐01 2014-­‐01-­‐01

2013-­‐11-­‐01 2013-­‐11-­‐01

2013-­‐09-­‐01 2013-­‐09-­‐01

2013-­‐07-­‐01 2013-­‐07-­‐01

2013-­‐05-­‐01 2013-­‐05-­‐01

2013-­‐03-­‐01 2013-­‐03-­‐01

2013-­‐01-­‐01 2013-­‐01-­‐01

2012-­‐11-­‐01 2012-­‐11-­‐01

2012-­‐09-­‐01 2012-­‐09-­‐01

2012-­‐07-­‐01 2012-­‐07-­‐01

2012-­‐05-­‐01 2012-­‐05-­‐01

2012-­‐03-­‐01 2012-­‐03-­‐01

0

2012-­‐01-­‐01 2012-­‐01-­‐01

100 0

33

https://www.quandl.com/data/LME/PR_FM-Steel-Billet-Prices

33

https://www.quandl.com/data/LME/PR_FM-Steel-Billet-Prices 33 www.quandl.com/data/LME/PR_FM-Steel-Billet-Prices

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9. Commodity prices

As chart 37 below shows, copper havebeen been falling since the levels high levels As chart 37 below shows, copperprices prices have falling since the high of 2012.of 2012.

Chart Chart 37 37

Copper Cash Buyer (LME Official Prices) 10000 9000

US$ per tonne

8000 7000 6000 5000 4000 3000 2000 1000 2012-­‐01-­‐01 2012-­‐03-­‐01 2012-­‐05-­‐01 2012-­‐07-­‐01 2012-­‐09-­‐01 2012-­‐11-­‐01 2013-­‐01-­‐01 2013-­‐03-­‐01 2013-­‐05-­‐01 2013-­‐07-­‐01 2013-­‐09-­‐01 2013-­‐11-­‐01 2014-­‐01-­‐01 2014-­‐03-­‐01 2014-­‐05-­‐01 2014-­‐07-­‐01 2014-­‐09-­‐01 2014-­‐11-­‐01 2015-­‐01-­‐01 2015-­‐03-­‐01 2015-­‐05-­‐01 2015-­‐07-­‐01 2015-­‐09-­‐01 2015-­‐11-­‐01

0

34 concreteprices prices remained relatively stable recent years, ranging fromto$89 per tonne to The Statista website 34 The Statista websiteindicates indicatesthat that concrete havehave remained relatively stable over recentover years, ranging from $89 per tonne $104. $104.

34

http://www.statista.com/statistics/219339/us-prices-of-cement/

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10. Geographical breakdown ADBAâ&#x20AC;&#x2122;s market analysis page on the website provides details of operational and pipeline plants. This information is also aggregated to county and national level.

A snapshot of this aggregated information is provided below. All the details are available here: adbioresources.org/members-area/market-analysis

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Appendix 1: Disclaimer and notes on data Plant database ADBA holds a database of each AD plant operating and in the planning process. We collect the data from a number of sources, including planning information (e.g. the Government’s Renewable Energy Planning Database), RO/FIT/ RHI/ REGOs databases, WRAP’s online database, local online news articles and information provided by members.

This forms the basis of much of the information contained in this document, and is available to members.

Accuracy While we have made every effort to check the accuracy of all the data in this document, we cannot guarantee its accuracy and are not responsible in any way for the way it is used by readers.

Estimates Where a particular data item is unknown, we use other characteristics about the plant to estimate that item. For example, if we know the feedstock tonnages of a plant but not the electrical capacity, we will use standard data to estimate the capacity. This is to ensure that the overall industry figures are as realistic as possible and not underestimated. All estimates are highlighted red in the spreadsheet on the Market Analysis page of our website.

Estimates account for approximately 20% of the data used.

Projections We make projections on the possible number of plants that may commission each year (and other data that is calculated from this) depending on policy scenarios. Any projections of this kind are highly uncertain. They are a ‘best guess’ as to what may happen given the environment the industry is working in. Our projections change frequently (usually every three months) as the market develops. They are intended to give a guide as to what may happen under a number of different scenarios.

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Appendix 2: Feedstock categories We divide all feedstocks used into three ‘primary’ categories and 10 more ‘detailed’ categories. Please note that none of these are intended to relate in any way to categories for regulatory or other purposes. They are categorised solely for the basis of how data appears in the planning applications and so how easy this is to categorise.

Primary categories Agricultural Feedstocks originating from farms, including crops grown for the purpose of being used in an AD plant, manures and slurries from farm animals, waste crops with no market, vegetable outgrades where these have not left the farm (including from packhouses or greenhouses), vegetable waste and horticultural waste.

Municipal/ commercial Feedstocks originating from local council collections or collections from businesses. These include food waste collected wastes/ residues from households, food wastes collected from businesses such as food processors or the hospitality industry (e.g. restaurants, schools, supermarkets), fruit and vegetable outgrades where these are generated at sites off farms, the organic fraction of general/residual household waste where this waste is processed at a Mechanical Biological Treatment (MBT) plant using anaerobic digestion in the process and garden waste (which might be used in a ‘dry’ AD plant).

On-site industrial These are the food processing residues that are produced and treated on the same site. For example, a brewery may produce a by-product that is treated by AD at the brewery itself. We would categorise these as on-site industrial plants.

They may not have as many contamination or waste collection or delivery complexities as commercial food waste plants.

Where the by-products are liquid effluents, there may also be vast amounts of feedstocks (in the millions of tonnes) producing relatively small amounts of energy.

Sewage sludge

The separated solid fraction of waste water separated at water treatment works.

See below how these are broken down into more detailed categories and the keys used in tables throughout the document.

Feedstocks key (these do not indicate categories for regulatory purposes)

40

Code FW

Description Farm waste/residues (e.g. manure, slurry, straw, mushroom waste, horticultural waste, waste from vegetable sorting and packing, outgrade vegetables pre-packed)

‘Primary’ category Agricultural

ILW

Industrial liquid waste/ residues (e.g. effluent)

Industrial

SS

Sewage waste

Sewage sludge

GW

Garden waste/residues (including park waste, local amenity waste, organic street sweepings, airport grass cuttings etc.)

Municipal/ commercial

C

Crop

Agricultural

FDW Food waste (source segregated, packaged food waste, industrial organic waste taken off-site to AD etc.)

RW Residual waste - organic fraction (mechanically separated)

Municipal/ commercial

G

Glycerol

Municipal/ commercial

ISW

Industrial on-site generated solid waste/ residues (e.g. brewery solid waste, food manufacturing Industrial organic wastes - potato skins cut at factory, carrot tops cut at factory, fish waste from fish processing etc.)

TEST

Test facility - variety of feedstocks used by test laboratories etc.

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Municipal/ commercial

Various

Appendix 3: Projection scenarios We make projections for future deployment of AD. We consider a wide range of data when making these projections. Projections are more certain over shorter (1-2 year) time periods, and get less certain over longer periods. To reflect this uncertainty, we make “high” and “low” deployment projections.

In “high” scenarios a number of factors are more supportive of the industry: policy, the finance environment, the planning environment, the cost of the technology compared to alternatives etc. In “low” scenarios the opposite is the case. The “mid-point” is simply the average of the two points.

We make projections for each of the categories: • ≤250 kWe • >250 kWe ≤ 500 kWe • >500 kWe ≤ 5 MWe • >5 MWe • Biomethane of all capacities The factors that are taken into account when making projections on the number of plants to be constructed are: • The number of plants that commissioned in previous recent periods and the changes in policy since those periods; • Expected tariffs, energy wholesale prices, and the cost of generating energy from AD compared to those; • How many developers are submitting planning applications for new plants; • How many planning applications have been approved; • How many projects have received finance and are under construction (based on member information or announcements); • What DECC pre-accreditation data tells us about current deployment compared to past deployment; • What Ofgem ‘pending’ FIT applications tell us about current deployment compared to past deployment; • Impact of government policy such as separate food waste collections and sustainability criteria; • Government policy towards renewables and carbon pricing; and, • Government finances.

Projecting capacity follows on from the number of plants expected to commission. We track the average capacity of plants with planning permission within the different capacity ranges. These are the current average capacities within the different ranges: Planned (with planning permission) feedstock capacity tonnes/ MWe-e

Number of plants MWe-e Ave. plant capacity =<250 kWe 66 13 0.20 >250kWe=<500 kWe 140 67 0.48 >0.5 Mwe=< 5 Mwe 105 201 1.92 >5 Mwe 5 29 5.86 Biomethane 19 47 2.45 Total 335 357 1.07 Using this information we can project the capacity coming forward. And using similar assumptions for feedstock use per MWe-e we can then estimate the future feedstock uses.

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Notes

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Anaerobic Digestion Market report DECEMBER 2015

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adbioresources.org ANAEROBIC DIGESTION AND BIORESOURCES ASSOCIATION LTD. Canterbury Court, Kennington Park, 1-3 Brixton Road, London SW9 6DE T: (+44) 020 3176 0503 F: (+44) 0844 292 0875 E: enquiries@adbioresources.org W: www.adbioresources.org Follow us on Twitter: @adbioresources 44

Anaerobic Digestion Market report DECEMBER 2015

adbiouresources.org