Output details

Financial appraisal of wet mesophilic AD technology as a renewable energy and waste management technology

Anaerobic digestion (AD) is not a glamorous renewable energy technology but nonetheless it is a useful one. Food waste fuels a biological process producing gas to generate electricity and heat. A liquid digestate by-product is used as a fertiliser. AD has widely diffused in Germany and Sweden, but not in the UK . This research reveals why this is the case, as well as more general lessons on the design, adoption and use of technologies. The paper investigates the financial implications of design initiatives at multiple scales: from the efficient design of AD plants to the creation of effective public policy concerning feed in tariffs for heat and energy generated from renewable sources. With an overall design approach it concentrates on the financial context, particularly how incentives in the form of tariffs influenced diffusion of AD in Germany and Sweden. The research study developed its own approach to the financial appraisal which focused on the internal rate of return (IRR). Outputs such as renewable electricity and heat payments from tariffs appeared to generate sufficient IRRs. However, the assessment also showed that tariffs, waste management gate fees and the market for digestate by-products are sources of financial uncertainty for AD investors. Diffusion of AD in the UK is therefore dependent on the government creating a stable policy environment. A significant contribution of the research is to highlight the importance of this policy environment in the design, adoption and use of technologies. On the other hand technologies and plant require careful design if they are to be financially successful (for example maximising biogas outputs for conversion into renewable heat and electricity). Designers of public policy, in turn, need to recognise the role and scale of economic incentive payments.