Firm seeks finance to lease anaerobic digesters to farmers
PUBLISHED: 05:29 09 March 2011
A company which has developed a unique anaerobic digestion (AD) system aimed at small farms is seeking investment to lease its products after sales were hampered by a lack of finance.
Add Energy, based at the Hethel Engineering Centre near Norwich, has lined up about £18m in prospective orders for its systems which use animal or plant waste to generate up to one megawatt of electricity.
Under the government’s feed-in tariff (FiT) scheme, electricity generated by AD and other renewable sources can be sold back to the grid at a guaranteed price, potentially netting farmers up to £100,000 a year.
But the orders have been delayed as banks have been unwilling to provide finance for farmers for the systems, partly due to uncertainty over the future of FiTs, which the government is set to review in April.
Director Tom Cree said he was now in talks with foreign investors to finance the systems under a new business model, which will see them leased to farms.
The systems will be provided at no cost to the farmers, with the company taking a portion of the income from the electricity for a fixed period, after which they will become property of the farm.
So far 12 farms have been lined up as prospective customers, two in East Anglia and the rest small dairy farmers in the south-west of England.
The cost ranges from about £500,000 for a 100 kilowatt system to £2.5m for a 1MW plant.
Mr Cree said: “We are in the process of getting ourselves refinanced as a company so we can come up with a different business model.
“If we can put these systems on the farm for free, and earn the farmer tens of thousands of pounds a year for eight years, and after that they keep the system.
“Who is going to say no?”
Unlike many others, Add Energy’s AD systems are fitted on site at farms, avoiding transport issues, and are underground, making planning permission easier to gain.
As well as producing gas, which is burnt to generate electricity, the waste product can be used as fertiliser.
Mr Cree added: “The talks with financiers are looking good.
“The difficulty is we have got to get people to start believing FiTs are going to remain in place.
“The government has got to get much more firm with its statements of the guarantee on FiTs and how long they are going to last, without change or only change upwards.
“We have go a situation where banks don’t believe the government.”
A pilot scheme in Devon is set to be completed in the coming months after being delayed by a lack of bank finance.