Multi-million pound deal signals long-term viability of green gas
PUBLISHED: 08:00 10 September 2019 | UPDATED: 14:57 04 November 2019
Environmental investment fund buys anaerobic digestion plant on the Suffolk-Norfolk border.
A multi-million pound deal to buy an anaerobic digestion (AD) plant on the Suffolk-Norfolk border signals the continued long-term viability of green gas, an investment expert has said.
Listed environmental infrastructure fund, JLEN, announced the acquisition of Warren Power Limited which runs an AD plant at Methwold, near Thetford in Norfolk. The £14.8m deal marks the second AD plant in East Anglia to be bought by JLEN, which also owns the Egmere Energy plant in north Norfolk.
JLEN says its policy is to "invest in environmental infrastructure projects that have the benefit of offering its investors long-term, predictable, inflation-linked cash flows supported by long-term contracts or stable regulatory frameworks".
AD plants fit this bill, according to Chris Tanner, an investment advisor to JLEN.
AD works by breaking down organic material using micro-organisms to produce biogas, a methane-rich gas that can be used as a fuel to provide heat and power on site or, as is predominantly the case with the Methwold plant, to inject into the national gas grid.
Mr Tanner says AD plants are popular in farming areas such as East Anglia because they offer farmers the ability to derive an income from waste products, which are fed into the digesting plant, such as sugar beet pulp, grain husks and animal slurry, as well as break crops like rye and maize.
The Methwold AD plant requires around 40,000 tonnes of this feedstock per annum and has a thermal capacity of c.5MWth.
The solid and liquid bi-products from the AD process, known as digestate, can also be used as a fertiliser and soil improver.
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According to a map on the www.biogas-info.co.uk website there are upwards of 40 agricultural AD plants in East Anglia and several hundred spread across the country.
"Generally speaking, the country is doing well in generating renewable electricity, mainly driven by the off-shore wind sector," said Mr Tanner.
"But we are doing less well when it comes to reducing the carbon from our heat and transport needs. Green gas can make a contribution here both in terms of heating and transport as there are examples of fleets being run on green gas."
Retailers such as Waitrose, John Lewis and Argos have already committed to using the fuel in long-haul articulated trucks while the Government signalled its intention of "accelerating the decarbonisation" of gas supplies by increasing the proportion of green gas in the grid in the Chancellor's Spring Statement in March.
"To meet our climate targets, we need to reduce our dependence on burning natural gas to heat our homes," it said.
Mr Tanner says that AD is "never likely to rival wind and solar" in its overall contribution to reducing the country's carbon footprint but unlike these other renewable energy technologies where no subsidies are provided for new projects, new-build AD still attracts subsidies in the form of the Renewable Heat Incentive (RHI) and Feed-in-Tariff (FiT) schemes, at a lower level than the older Methwold AD plant that attracts 7.24p per kWh under RHI.
He says, these incentives still offer opportunities to build new plants although JLEN prefers to buy operational plants that are already earning revenues, such as Methwold.
Mr Tanner says the JLEN environmental infrastructure fund offers a "steady and growing yield income" for investors and currently offers a 5.6% return.
He added: "Sustainable investments such as these are increasingly attractive to investors because they can make money but know they are not doing any damage to the world."