One of the most topical sources of renewable energy generation is anaerobic digestion (AD). Strongly backed by the new coalition government, AD is set to play an important role in helping reduce carbon emissions and increase sustainability.
On Farm AD facilities are typically fed with a combination of farm by products (animal slurries and manures) and energy crops, the most widely used of which is maize silage.
Most arable crops are suitable for anaerobic digestion subject to suitable processing and mixing to maximise biogas production and quality. With volatile commodity prices it is interesting to consider where an AD facility might fall as a prospective market for arable produce. When does it become more profitable to use a crop as a fuel for AD than it does to sell it at global market prices?
Depending on the mix of feedstock, size and efficiency of CHP unit, the quality of biogas and type of AD unit in use, it is possible to achieve a rate of return that rivals and exceeds open market crop prices. The table below shows an estimate of the net margins and costs of production of three common arable crops compared to maize silage, the most common AD feedstock.
Under the Feed in Tariff (FiT) scheme announced in February 2010 each kWh of surplus electricity produced from an AD facility receives 11.5p/kWh (for plants up to 500kWh) or 9p/kWh (for plants above 500kWh). The electricity sold will receive a minimum of 3p/kWh. If electricity can be used on site to substitute for purchased electricity it will have a typical value of 8p/kWh. The total value of the electricity is therefore in the range of 12 p/kWh to 19.5 p/kWh as illustrated in Table 2.
Prices will remain at this level until the FiT is reviewed in 2013. Any new project applying for FiTs between now and then, however, will be able to guarantee the current tariffs in Table 2 for 20 years with index linked increases.
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