AD operators warned of future market risks
Turbulence in the anaerobic digestion market is a distinct possibility over the next three years as operators grapple with the marginal versus operational costs of running a plant.
Speaking at the Anaerobic Digestion & Biogas Association’s (ADBA) annual event in London this week, Biogen chief executive Richard Barker warned that these issues could unsettle the market, raising serious concerns among investors.
“People will be starting plants who haven’t probably got a clear view of their feedstock contracts and they are going to be sitting there with a plant that is not full,” he warned.
Barker explained that some start-up AD businesses would be “coming after the market” and because they needed a secure feedstock would take it at any price to generate electricity.
“That’s a marginal cost issue versus an operational cost issue,” he said. “This is going to be a feature of the market and it’s going to be a huge feature of turbulence in the market. Investors and bankers are going to get very concerned about it.”
Barker outlined the value of food waste from a business operator’s perspective. Drawing on Biogen’s experience in the market, he outlined a number of operational challenges that his company has faced and the trade-offs in how Biogen prices contracts depending on the client.
One of the biggest challenges, he said, was the amount and type of packaging. Barker explained that Biogen has to de-package some food, which means the company has to factor in the cost of installing an extra de-packaging line and the associated operating costs.
Working out how much packaging was in their typical tonnage of food waste from different supermarkets determined the price.
Barker said: “Not surprisingly, Marks & Spencer deal with a lot more ready meals and if you look at the quality of the packaging it’s a lot higher so you should, if you are charging M&S versus ASDA, be charging M&S a lot more per tonne because you will be paying a lot more to get rid of the packaging.”
He added that contamination levels were also a significant issue. Depending on the client and how they delivered the food waste to the AD operator, contamination would always get in and would have to be factored in to the operating cost.
“Depending on how that gets into your process, you are going to have to deal with this contamination,” he said.
“You are going to have to pay to get rid of it, pay to take it out of the process and also take a hit on your operating line by having this going through your process and down through your equipment.”
Barker explained that the cost to handle food waste varied depending on different food types. Liquid waste was easy, he said, because it didn’t wear the pumps.
Unpackaged food waste, he added, was more difficult to process in the summer than the winter, which impacted on operational costs and needed to be factored-in.
Barker told delegates that it was important to consider the calorific value of food waste in managing operational costs.
He pointed out that a thousand tonnes of local authority food waste delivered in the summer would produce significantly less gas than in the winter because of the calorific value of the types of food that people ate.
“That’s because everyone’s eating salads and fruits whereas in the winter we are eating a lot more comfort food,” he said.
“We need to be aware that on some contracts we are willing to take a lower gate-fee because we are producing more gas out of the back end.”