Investors still keen to fund bioenergy projects

Despite continued uncertainty over the future level of government support for renewables, investors are keen to back well-planned, feasible bioenergy projects, said Peter Dickson of BNP Paribas Clean Energy Partners.

Speaking at last week’s Bioenergy Finance Forum in London, he stressed that investors see a large number of projects and ensuring those that go on to receive backing are suitable can take considerable time.

“Investors don’t give us a mandate to take risks. We are looking for a structured project that will provide security to our investors,” said Mr Dickson. In the case of the 38MW straw-fired Sleaford Renewable Energy Plant, which received £170m funding from BNP, one of the key factors for investment was the strategy to procure straw directly from local farmers.

“We don’t put a lot of store in the use of counter parties to provide feedstock. Fuel supply is a key point,” added Mr Dickson.

Feedstock is also a key consideration for biogas projects – Tamar Energy has received funding from Dubai investment house Fajr Capital, along with the Duchy of Cornwall, the Rothschild family, the Rothschild Investment Trust and Sainsbury’s.

The company is currently constructing its first two plants and having Sainsbury’s as an investor is a key to the business model, as the supermarket will provide a steady supply of food waste to the planned network of 44 plants around the country.

“The key for us is that AD is a proven technology,” said Tamar Energy financial director David Kunzer.

This made biogas a more attractive investment than less developed techniques such as gasification – turning solid biomass into biogas by heating – and second generation biofuels.

Key pointers

  • Well-planned, feasible projects are most likely to get funding
  • A steady, guaranteed fuel supply is essential – investors need to feel confident you will have the feedstocks to fuel your plant
  • Most projects require planning consent before financing is agreed
  • Be aware that changes to government support – FiTs, ROCs, RHI etc – makes investors a bit more cautious about financing renewables projects
  • When engaging in planning, speak to the local community to make sure they understand the project before you submit the planning application

However, he urged the government to do more to help investor confidence. “We currently see a big disconnect between Feed-in Tariffs and the Renewables Obligation Certificates, but we also believe the Renewable Heat Incentive is essentially more stable than either FiTs or ROCs,” he said.

He was also optimistic about the potential value of the digestate produced by biogas plants, although it was hard to include it in financial models. “Digestate is a very good fertiliser. There should be a value attached to it, but we’re not sure yet,” he said.

For most projects, planning permission will need to have been granted before financing can be agreed.

The process can be notoriously difficult, but there are things you can do to smooth the application, said Chris Williams, managing director of Green Energy Parks, who are behind plans for a biomass power station at Sutton Bridge on the Lincolnshire/Norfolk border.

“The community is the biggest barrier in planning. It’s very important to understand your project before you put your planning application in,” he said.

He urged potential developers to work with the local community, including those who were opposed to the scheme, because their suggestions can sometimes improve your plans. “Planning is subjective and you should accept that some people will hate it. However, your neighbours are local experts too,” added Mr Williams.

Gemma Mackenzie on G+