Biomass and specialist recycling are increasingly adapting their model to take advantage of the significant opportunities offered from treating commercial and industrial waste
Whilst merchant projects are perceived to be higher risk, numerous firms operating in AD, biomass and specialist recycling are increasingly adapting their model to take advantage of the significant opportunities offered from treating commercial and industrial waste, whilst managing risks in a way that can provide sufficient comfort to some investors.
These companies develop a robust commercial and technical strategy that is well-adapted to the dynamics of the particular waste market and location they operate in.
They do this by, for example: Securing visibility in feedstock prices, optimising other sources of incomes and choosing the optimal plant design.
Despite feedstock contracts being shorter in duration than local authority ones, firms choose strategic site locations in which there is a large amount of current and potential feedstock in comparison to existing treatment capacity. In addition, successful models develop long-term relationships with feedstock suppliers by involving them as partner in the project or as consumers of the plant’s output. Also, certain waste streams more naturally benefit from better price visibility, for example those for which UK treatment is not at disadvantage against the export market.
Some companies seek to limit dependency on gate fees by maximising revenues from the outputs generated by the plant. In waste to energy facilities, this for example requires developing a good understanding of the opportunity to sell some of the generated power to private customers at higher prices compared to what could be obtained through grid injection.
Whilst treatment plants require a certain scale to be efficient, the optimal size depends strongly on the chosen commercial strategy. Some companies have opted for a smaller plant to ensure it can be located near feedstock suppliers or near private off-takers. Firms also ensure their plant is sufficiently flexible in anticipation of certain trends, such as change in feedstock composition or changes to the relative attractiveness of certain waste streams.
Alon Laniado, director, Eternity Capital