How to keep the lights on

22 Feb 13
Michael Ware

Believe it or not, local authorities could avert a power blackout in 2015 if they started recycling food waste into renewable energy

I have had a roller coaster of a week. On Monday, one of my projects finally collapsed into administration after nearly three years of work, prompting much wailing and nashing of teeth as our chunky success fee inexorably sank with it. On Tuesday, my 17 year old daughter declared that she wants to become a vicar instead of the lawyer job I had always planned for her and today our client’s Anaerobic Digestion project reached financial close. Only the latter has been the cause of much whooping and back slapping amongst the team.

For those of you who are not geeky about renewable power, Anaerobic Digestion (AD) is a process whereby organic matter is enclosed in an air tight space (hence anaerobic or without oxygen) and millions of little microbes dedicate their short and probably a bit dreary lives to turning it into methane and hydrogen. This is then used to fuel an engine and produce power. It is conceptually very similar to a cow’s stomach but instead of using the extracted energy for mooing and making milk, it is used to drive generators.

This technology has been around for decades but the UK has been very slow to catch on to its potential. We probably have about 65 plants in operation whereas our German friends have 4,500 and it is estimated the Chinese may have as many as 8 million.

I was reflecting on the success of our AD project when I read the somewhat startling news that the UK electricity grid is likely to run out of spare capacity in 2015 and we will start to have blackouts. Unsurprisingly the authors of the report chose somewhat less direct language and speak opaquely of situations where of 'margins of spare capacity will not be positive' and 'total amount of expected energy unserved'. To you and I this means getting out the candles, no telly and an unexpected baby boom some time in 2016. All of this will happen just about the time of the general election which is a nightmare for the coalition and an electioneering slogan just waiting to be written for  Ed Miliband.

I also read that as much as half of the four billion tons of food waste produced globally each year ends up as waste and 30% of the UK vegetable harvest is simply left to rot in the ground because it does not meet the exacting standards set by the supermarkets. So whilst they will happily sell you horse meat lasagna they don’t want to sell you a lumpy carrot less it offends your aesthetic sensibilities. Furthermore up to half of the food actually purchased and taken home by western consumers is simply left in the fridge for a week or so and then thrown away. It is things like this that make the rest of the world hate us.

So we are a faced with a situation where, some 100 years after the national grid was invented we are going to run out of electricity. We are the generation who cocked up the art of generating whilst at the same time we are throwing away the fuel that could be used to run AD plants.

To put these two disparate paragraphs into a single context, a simple 1 Mega Watt AD plant will costs you about £7.5m out of the box, cash on delivery and will need 25,000 tonnes of waste to feed the bugs. Last year, UK local councils collected about 12 million tones of food waste so my  O level maths suggest this could feed about 480 AD plants and produce about 500 MW of electricity or the equivalent of a small nuclear power station.

I suspect David Cameron and Nick Clegg would both sell their grannies to have that amount of new capacity coming on stream just as the country gropes its way in the dark to a  candle-lit polling  station.

So why have we only got a handful of plants and everybody else has got thousands or even millions. The biggest barrier is undoubtedly the way local councils collect waste. Kerb side collection of food waste is a relatively recent phenomenon and many of the few councils that do it are still sending it to be composted instead of feeding AD plants. Why they do this is a mystery to me as it is conceptually the same as collecting petrol from outside every house in your borough then putting it in a big pond and allowing it to evaporate rather than using it as fuel.

A bigger problem is the majority of councils who don’t collect food waste separately at all and simply lump it in with the black bag waste. Like cows, AD plants are living breathing things that are less than partial to glass, plastic and metal etc so it is technically very challenging to feed them this sort of waste.

A final objection is the perennial response of the lack of funds. You would love to build an AD plant for your food waste but nobody will fund it, honestly. This is nonsense. The Green Investment Bank is super keen on AD and has £2 - £3 billion to invest over three years. What’s more, under the current subsidy regime, plants kick off a lot of cash so the traditional private sector funding community is also very enthusiastic about the technology.

So what can the public sector do to change this? Firstly it has to start thinking about food waste as valuable fuel not a problem to be got rid of. At its molecular heart, most food contains long chain hydrocarbons in just the same ways as petrol, diesel etc and it can be used in much the same way to produce power.

Secondly you have to award long-term food waste contracts to contractors. The capital investment of £8m - £10m per plant has to be recovered over a 5 -10 year period and funders would much prefer it if the feedstock contract lasted as long as their debt amorrtisation profile.

Finally start giving planning permission to plants. These are just big shiny tanks that look a bit like gasometers so they should not be an issue for your more touchy residents.

So in four simple steps local government can make a huge contribution to keeping the lights on; collect food waste, find a site, grant planning and award a long term disposals contract. Not difficult. Not rocket science. Nothing in those four steps that can be reasonably prefaced by the phrase, 'Yes, but it will be too difficult to.'

So in provocative conclusion, it is possible to construct an argument that says one of the reasons the UK is facing blackouts in a couple of years is because of the way the public sector collects food waste. You are throwing away millions of tonnes of fuel every year because you do not have the vision or the technical sophistication of the Germans or the Chinese. Like my ex wife used to regularly say, this is all your fault.

Michael Ware is corporate finance partner at BDO @michaelware13


CIPFA latest

Related jobs

PF jobs