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Market report: Organics

Britain’s anaerobic digestion (AD) sector received a timely boost at the start of the month with the announcement that support for AD projects below 5 MW under the Renewables Obligation (RO) will not be removed, as had been proposed by the government in July.

This announcement caused widespread concern in the industry, with trade bodies and operators arguing that this policy would seriously undermine investor confidence in the sector, risking future growth. AD and waste management infrastructure projects more broadly can take years to build and it is therefore imperative that there is certainty in the stability of the support mechanisms so investors and operators can be confident of the returns they will receive.

Further positive news for the market has arrived with the prospect of a far greater number of projects being able to benefit from generating renewable heat, under government proposals for the Renewable Heat Incentive (RHI) scheme. Support under the RHI currently excludes all biogas combustion plants with a thermal capacity over 200 kW, but larger schemes with good heat uses are set to be supported from summer 2013.

An important indicator of progress for the AD and waste management industry arrived in September with the publication of WRAP’s annual organics survey report. Documenting the profile of the organics recycling sector, data showed that permitted AD plants processed over one million tonnes of material for the first time in 2010, reflective of the fact that the number of sites increased by 182% between 2009 and 2010.

Growth in the wider organics recycling sector was also illustrated by the fact that 7.2 million tonnes of organic waste was recycled in 2010, up from around six million tonnes in 2009. Demonstrating the role the industry has in contributing not just to sustainability but also to economic growth, the survey found that it employed more than 1,500 people in the UK.

These survey results are especially welcome given the relative dearth of available industry data. In order to be able to properly assess the state of the industry and pinpoint where action must be taken to drive progress, accessible and comprehensive data must be an absolute priority.

For example, one of the key drivers for AD in the coming years will be the development of the digestate market. The nutrients in food waste could be worth around £200m each year, so could become a valuable revenue stream. Digestate offers a number of key environmental benefits - recycling valuable nutrients within organic waste back to land and removing the need for expensive carbon intensive artificial fertiliser - but it is still viewed as a cost by many AD operators.

As well as developing sensible end of waste legislation, we need to ensure that we fully understand where in the supply chain digestate is not being valued properly. This needs more than anecdotal evidence and hence the work that WRAP is currently doing in this area should prove very valuable.

The coming weeks could bring significant announcements with news of successful bids under Eric Pickles’ £250m weekly collection support scheme expected by the end of the month. MRW’s investigation suggested that local authorities in England are increasingly looking to roll out separate food waste collections. This would be welcomed in the AD industry, potentially increasing the availability of the feedstock for plants and moving England towards more sustainable resource management.

With government policy seemingly on the right track, despite some concerning noises from ministers on supporting renewable energy, the coming months should certainly see rapid growth. As AD continues to become a more attractive option for waste management companies and investors, the market is working hard to hurdle the technical, regulatory and financial barriers and is well on the way to building a mature industry.

Charlotte Morton, Chief Executive at The Anaerobic Digestion and Biogas Association

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