LAWR

October 2014 Local Authority Waste & Recycling 15 ENERGY RECOVERY bic digestion (AD) which inject gas to the grid are higher than Feed-in Tariff (FIT) support for electricity-producing AD projects. Similarly, Renewable Obligation Certificates (ROCs) for advanced con- version technologies such as gasifica- tion are also more lucrative than ROCs for more traditional combustion tech- niques. However, more advanced technolo- gies are often less deployed and there- fore present a larger degree of risk that must be 'weighted' against their rewards. For an advanced technology to gain commercial success, it must first be able to demonstrate references from which investors can draw conclusions. In terms of "how proven" must it be, many project sponsors recognise that advanced technologies are rarely "fully proven". For example, some technologies have a reference site, but outside the UK and/or with slightly different waste streams and under different regulations. In many cases, it is less a matter of whether the technology will work or not but rather the extent to which it will work, for instance in terms of throughput availability. Project sponsors must therefore take a technical and financial view based on the evidence available, choose technol- ogies where there is a sufficient comfort and then agree a price that works for everyone. Attractive technologies are these that can take a long-term view on their economic returns and therefore offer sufficiently attractive terms for their earlier projects in order to gain in the long-term. This usually requires being supported by a strong financial backer. In addition to this, successful advanced technologies also develop effective partnerships with EPC provid- ers. These providers, who are usually required to wrap the performance of a technology as part of their EPC con- tract, must have time to familiarize themselves with the technology. We also see integration across the supply chain, with some technology providers playing the role of EPC providers. Moreover, advanced technologies must focus on gaining scale rapidly. More projects on the ground means they are to benefit from scale econo- mies, for example deploy ground staff across several projects, thereby driving cost down across the supply chain and gaining in competiveness. Alternatives to conventional revenue streams The economic attractiveness of projects can further be boosted if they are able to secure revenue streams beyond the traditional ones. This is particularly important considering the general trend is towards declining gate fees, implying that projects which are over-reliant on high gate fees are more vulnerable and therefore less attractive. Waste-to-energy projects that can partly secure private off-take [agree- ment entered between a producer and a buyer to buy/sell a certain amount of the future production] of the energy produced have an edge against projects than projects that fully inject into the grid. Similarly, successful niche recyclers try to derive further value from the waste stream. In certain WEEE and plastics streams for example, there exist cost-effective sorting technologies that further sort and separate components to become closer to virgin substitutes and to thereby attract higher output prices. A final key factor driving investment decision is skill set. Successful projects require a variety of development, technical, commercial and financial expertise to deal with issues such as permits, technical questions during the construction and operations phase and the suite of contractual agreements. Effective project sponsors are good at identifying which skills they have in-house and which expertise must be complemented, for example by sub-contracting out or by hiring experienced staff. To develop an attractive investment model, project developers and companies must consider how best to factor these various aspects, including striking a right balance where there are trade-offs to be made. Investors like Eternity Capital who are sector-focused usually bring more than funding to the table. They can bring specific expertise for example in contract negotiation and experience from similar investments, and therefore usually prefer working closely with the sponsors in shaping successful projects towards financial close. Once a viable model has been developed, investors also try to repeat it across multiple projects in order to benefit from further efficiencies during project development and from the relationships developed with the various project partners. Alon Laniado is director at Eternity Capital, a specialist group that provides funding dedicated to waste recycling and waste-to-energy company. The economic attractiveness of projects can further be boosted if they are able to secure revenue streams be- yond traditional ones, according to Laniado.

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