SubsectorsBioenergy & Energy-from-Waste

Biofuels

  • Most major transport fuel consuming nations have biofuel support policies (incentives/targets) in place, typically favouring advanced biofuels
  • However, while several structural drivers remain in place – climate change & energy security concerns – the biofuels sector has been hit by both cyclical forces (collapse in oil prices) and more importantly, secular forces (transport electrification)
  • Global biofuels production & consumption is currently dominated by the US & Brazil (ethanol), followed by the EU (biodiesel); biodiesel consumption is relatively small and generally constrained by blending potential (with current engine legislation / designs)
  • The strong interest in migrating from 1st gen (resource competitive) to (advanced) 2nd (cellulosic, including enzymes) and 3rd (e.g. algae …) generation biofuel technologies/feedstocks has been diminished by oil price declines as well as major challenges at leading 2nd gen proponents
  • 2nd gen biofuels present a relatively heterogenous technology landscape, causing some retinence to invest in “technology plays” (not yet proven to be commercially viable), given significant upfront (demo/pilot plant) and beyond CapEx requirements
  • VC investment in the biofuel sector (especially commodity 1st-gen) plummeted after 2006, with 2nd/3rd gen investment now also very muted; the best change for a recovery being seen to be any potential rebound in oil prices
  • Strategics – (bio)chemicals, oil majors, utilities … – are essential co-investors (feedstock, offtake, project expertise …) in the sector, especially for late-stage companies; even they have greatly reduced their activities in the sector

Biomass

  • Biomass (BM) is more relevant for Heating than Power given relative conversion efficiencies and – with slow electrification of the heating sector – can form an important pillar of governments’ decarbonisation initiatives
  • Biomass has failed to achieve similar penetration momentum to other (more technology-driven) renewable energy (RE) sources (PV, wind), but has nonetheless established its position within many countries’ diversified RE portfolios
  • Biomass is a relatively heterogenous technology landscape – combustion, co-fired (biomass/coal), CHP/cogeneration, gasification vs. pyrolysis, energy-from-waste, anaerobic digestion (AD)
  • Depending on geography and context, biomass is deployed in small- (home heating), medium- (e.g. commercial, district heating) and large-scale (coal-replacement power plant) settings
  • Nonetheless, biomass has some long-term disadvantages:
    • Technology curves and intensity are significantly less steep
    • Proximity, security and price stability of feedstock is a critical element of project investment attractiveness
    • Controversy vis-à-vis sustainable/renewable “credentials” of some biomass sources
  • … and therefore appears to have less scope for becoming financially viable without some degree of government support
  • The principal sector investment vehicles are developers / operators / projects, with established technologies (e.g. combustion) vastly easier to fund

Energy-From-Waste

  • Energy-from-waste (EFW) (aka waste-to- energy, WTE) is capturing a growing share of waste management volumes, and can be a key contributor to governments reaching their renewable energy (RE) targets
  • EFW/WTE is less sensitive to government incentives etc. risk and can be lower LCOE (vs. other RE forms) given gate fees (incl. generally increasing landfill taxes)
  • Diverging circumstances (waste streams, gate fees, landfill taxes, incentives, permitting …) in different geographies are causing different deployment trajectories & strategies
    • Europe (in particular D, NL, AT, BE, DK) has led the development of the EFW/WTE sector (including AD); the UK, IT, ES, F are major markets in catch-up mode
    • There is a huge opportunity for EFW/WTE in the developing world, particularly China, India & Brazil
    • Interest in US currently muted given structural reduction in (competitive) natural gas prices
  • In “mature” (waste management) geographies, available waste volumes are shrinking, leading to expansion in cross-border waste trade
  • Incineration/combustion remains the principal EFW/WTE technology, with ongoing interest in advanced technologies (gasification, pyrolysis), but generally insufficient operational track record
  • Smaller / emerging companies are generally taking the lead in advanced technology development & commercialisation
  • VC/PE investors have shown limited/shrinking appetite for EFW/WTE, given capital-intensity (US$100-400/ton capacity), feedstock risk, regulatory volatility … with particular financing (bankability) challenges for newer technologies