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Big Interview: Alan Lovell

Perched above south London’s Borough market and towered over by the Shard, Alan Lovell sits in Number 2 London Bridge and hands me a map of future Tamar Energy sites. All corners of England are covered and there is certainly no concentration on the south-east, where most of Tamar’s sites currently reside.

Specialising in turning around companies that are on their knees, Lovell, the self-styled “company doctor”, was a late entrant to the renewable energy sector after transforming businesses in consumer sports goods, construction and environmental solutions, to name a few (see CV).

A slight initial defensiveness gives way to pride in his product, and a belief that Tamar Energy has the capability to drive the anaerobic digestion (AD) industry forward, creating a network of plants across the UK to benefit both councils and communities.

Lovell’s forecast for Tamar begins with a focused process in the UK to include the construction of 40 AD plants by 2018, powering 200,000 homes with 100MW of electricity. This will be followed by moving out internationally to shareholder countries.

Lovell’s eyes light up as he mentions Africa, and AD’s potential to empower relatively undeveloped nations in years to come.

Feedstocks

But things did not start out as expected. “During the 18 months we have been going, the primary… mix of feedstocks has shifted in reaction to the market,” he says.

AD generally splits feedstock into three sectors: agricultural, food processors and waste.

“When we started, we thought that around a third each of our feedstocks would come from the three sectors. It’s not working out like that.”

First, Lovell explains how bad weather in the past two years created a shortage of animal feed, meaning that whatever is available for this use fetches a good price and does not go to waste.

Second, grocery retailers such as Sainsbury’s have improved their supply chain on such a scale that by-products from their manufacturing processes have become miniscule.

Reduced

“They have greatly reduced the amount of waste they produce,” he says. “Total Sainsbury’s waste from its own stores is around 80,000 tonnes a year, which is equivalent to somewhere around 3MW of AD power - that’s an astonishingly low number.”

Although Lovell is pleased with the ethical implications of such figures, one senses significant changes were made to the original plans of Tamar to accommodate the shortfall. Since the agricultural and food processor sectors have become less important to him, he estimates that 60-70% ofTamar’s feedstock will now come from the waste sector.

As a result, the location of Tamar plants has become more connected to urban needs rather than being driven by agricultural or processor demands. This ensures that transporting food waste, most concentrated in urban areas, is cost efficient.

The last thing an AD company wants is to move waste a long distance: “It’s a national network, but there is an urban focus.”

Tamar now has four plants under construction, with an aim to have around a fifth of the market share by 2018. Lovell praises other companies operating in the AD space, but claims that none of them has the scale of ambition that his does.

Monopolies

“Local monopolies are very important and that is one reason why [the plants] can appear quite spread out - you want to dominate an area,” he says.

When asked about the potential for overcapacity in the AD industry, Lovell admits that it is a possibility. But the official national AD website, says the UK produces more than 100 million tonnes of organic material which is suitable for AD treatment, including 16-18 million tonnes of food waste from households and industry.

Lovell claims this means there is plenty of waste material out there and the prospect of overcapacity is very small in the next few years.

“I think we are all rather shocked by the amount of food waste in district collections at the moment,” he says. “I assume that people will, over time, become more disciplined and avoid that but, on the other hand, only 70 councils are collecting food waste separately.”

The latest research from WRAP estimates that UK household food and drink waste totalled 7.2 million tonnes in 2010. This accounts for around 50% of national food waste which ends up at landfill. In 2011, around four million UK households received a food waste collection service - nearly 16% of all UK households.

Separate

Clearly, the AD industry in the UK would benefit enormously from more separate food waste collections and Lovell is inviting the Government to support two policies.

First, he wants to see a ban on food waste going to landfill. He claims this will be the kick-starter for his second wish, which is for many more councils to collect food waste separately. This would significantly reduce the chances of overcapacity.

But he is concerned about a reduction in the Feed-In Tariffs subsidy, which are payments to ordinary energy users for the renewable electricity they generate. He says such a digression is in the balance.

On the positive side, Tamar has a unique funding model, which gives it great freedom in an industry dominated by contracts that can last for 10-25 years. Lovell’s business acumen was a major reason for Tamar raising £97m of equity from shareholders in spring 2012.

When asked about this, Lovell admitts: “It’s fair to say we have more money than anyone else in the industry. We can draw on that cash when we need it, and that enables us to fund the construction of projects without the need for specific project bank finance.

Contracts

“It is a significant advantage to us, and it means we do not have to have contracts for the entire feedstock supply before we start building a plant, and we also don’t have to sell the power in advance.”

Tamar’s principal backer was Lord Rothschild who, combined with the Rothschild Investment Trust, invested £25m. Lovell cites this backing as being crucial to securing other strong lead investors. Rothschild sought out Lovell specifically because of Lovell’s experience as chief executive of landfill gas business Infinis.

Besides a unique corporate backing, Tamar sys it is bringing established AD techniques from the continent to the UK for the first time.

Tamar is building one of the first plants in the UK to deal with poultry litter at Retford, Nottinghamshire, where, working alongside biogas specialist Xergi, large quantities of manure will be digested. The plant is expected to be commissioned next spring.

One of the second-wave plants in Greenwich, south London, will be a dry AD plant. Planning permission has yet to be gained but Lovell expects the plant to be operational by early 2016.

Commingled

“The significance of dry AD is that it can take commingled waste, and that is an interesting area because there is a lot of commingled waste out there, most of which goes to composting or landfill,” Lovell says. “If people can find an economical way of deriving some energy from commingled waste, they will be in a strong position. Food waste will always include contaminants.”

Looking ahead, Lovell claims that, in six months, the first three plants will be in early stage commissioning and start producing digestate. Tamar, in partnership with Peel Environmental, last week announced a handful of plants. This will be followed by the next generation of projects.

Lovell’s enthusiasm grows the longer he talks about Tamar, and it is clear that his vision is enriched by the environmental benefits of AD.

Asked about the public perception of the company’s work, he concludes with an argument that few could dispute: “AD is high up the waste hierarchy. It is generally well looked upon and so it should be. It is the combination of using a waste and preventing it going to landfill, and producing a base-load power.

“It will work 24 hours a day and produce a digestate which you can use as a fertiliser. This makes for a very nice circle. I’m very proud of my product and I think the industry as a whole is. That serves us well when it comes to talking to communities.”

CV

Lovell attended Winchester College and gained a first in Classics at Jesus College, Oxford University.

He became a chartered accountant at PricewaterhouseCoopers in 1980.

As a turnaround specialist (“a company doctor”) between 1989 and 2009, he held various finance director and chief executive posts at five companies: Conder, Costain, Dunlop Slazenger, Jarvis and Infinis.

He then received a call from Jacob Rothschild, who had the AD business idea, and Lovell became chief executive of Tamar Energy from the outset in 2012.

He promotes Al Gore’s film An Inconvenient Truth to various audiences including schools. A keen sportsman, he won five amateur titles for real tennis and was undefeated in 30 internationals.

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