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Market Opportunity

"The UK AD industry is in a high growth phase. It is however, still dominated by the wastewater treatment sector. The development of agricultural and solid waste AD facilities has increased since the introduction of various government backed fiscal initiatives to support the “waste hierarchy” which expresses a preference for AD type technologies over so called mass burn, incineration. This includes examples where the incineration process incorporates an element of renewables, for example Energy from Waste facilities with heat recovery."

The recent changes in legislation are being effective in encouraging the growth of the UK AD sector outside of its historical strength area of wastewater treatment. Iona Capital have been tracking this market for over the last three years and have now established a strong pipeline of investment opportunities of AD projects where we are looking to invest in tranches of £3M- £9M a project. We have achieved a financial close of our first Local Authority AD plant in July 2012 in North West Wales  followed by the second financial close of a Local Authority AD plant in October 2012 in North East Wales.

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The Market Size

There are currently 214 operational AD plants (food waste, farm waste, purpose grown crops and waster waste & sewage) processing 5mln tonnes of waste p.a. and generating 170MWe of electricity. Very few of these facilities operate on pure food waste. Figures reported by DEFRA in July 2012 show the development of the food and farm waste AD sector in the UK. There are currently 78 of such AD plants operating in the UK:

Type of facility

Operational

Capacity (tonnes p.a.)

Capacity (MWe)

Waste Feedstock

48

~3.7M

~59

Farm Feedstock

29

~270k

~10

AD facilities in the UK (WRAP, June 2012)

The industry is rapidly growing, with more additional sites having received planning permission:

Feedstock

Number

Capacity (tonnes p.a.)

Capacity (MWe)

Waste Feedstocks

85

 ~ 3M

 ~125

Farm Feedstocks

38

 ~ 550k

~ 21

Total

123

   3.5 M

146

AD Projects with planning permission (WRAP, June 2012)

In terms of capacity, it is estimated the UK produces over 100 million tonnes potential feedstock for AD each year (DEFRA, 2012).

  • 15  million tonnes food waste (approximately half of which is municipal waste and the rest commercial);
  • 90 million tonnes agricultural animal slurries; and
  • 1.73 million tonnes sewage sludge (dry weight – wet weight figures not readily available).

These figures and escalating landfill tax on biodegradable waste (£64/t) present a clear opportunity for the UK AD sector. Figures for the availability of energy crops are not available as these projects will be driven by the decision making process of farmers and land owners to utilise land that would otherwise be used for food or grazing purposes being diverted for energy crop growth. This particular sector may also be limited future legislation to ensure the availability of sustainable food crop production.

Contacts

Iona Capital Ltd.
86 Jermyn Street, London, SW1Y 6JD
Telephone: +44(0)207 0643 300
Email us: info@ionacapital.co.uk