Changes to Government subsidies will make it more profitable for on-site anaerobic digestion (AD) plants to produce transport fuel than combined heat and power (CHP), according to research commissioned by AD firm Clearfleau.
The report by Aker Associates said a reduction in Government subsidies through the feed-in tariff and renewable heat incentive will make it more economic to use biomethane as an alternative to diesel.
Proposals on new targets within the Renewable Transport Fuel Obligation (RTFO) could see the percentage of biofuel derived from waste other than used cooking oil increased by up to a third.
Aker Associates estimated that the shift to transport subsidies could lead to nearly a 14% return on investment within 15 years for compressed biomethane and around 10% for liquid biomethane.
The report said that profit margins could be boosted with improvements in technology.
It also called on the Government to work with industry to “stimulate investment and promote the use of cleaner biofuels in the commercial transport sector, including the classification of biomethane as a development fuel in the revised RTFO”.
Aker Associates director Andrew Winship said: “We expect to see growing numbers of food and drink processing companies looking to use this technology, which offers a low-carbon alternative to diesel for fuelling their commercial vehicle fleets.
“With both suitable vehicles and fuels becoming more available, supported through legislation and tax treatment, biomethane as a low-carbon transport fuel is set to grow substantially.”
Food manufacturers and distilleries most commonly produce CHP from on-site AD plants.
The Anaerobic Digestion and Bioresources Association also wants the Government to push ahead with plans to increase the amount of biofuel derived from waste used in the transport sector.
In November last year, transport minister John Hayes said he wanted to boost investment in waste-based and advanced fuels.
Under the RTFO, transport fuel suppliers producing more than 450,000 litres a year are required to ensure that a proportion of the fuel they supply comes from renewable biofuels.
But although a consultation on the target ended in January, no firm policies have yet been produced. The Conservative manifesto for the General Election includes a pledge to invest £600m in electric vehicle technology but does not specifically mention biofuels.
Last year, Clearfleau installed an AD plant at a First Milk Cheese Company creamery to convert cheese whey and production residues into biogas for use as a local energy source.