Biomass facilities have become a more attractive investment than wind and solar technologies, according to experts in the renewable energy sector. A survey by KMPG found that 37% of respondents intended to invest in biomass, while 36% wanted to invest in solar and 35% wind.
KPMG energy partner in the UK Andy Cox said: “Biomass plants have the potential to yield much higher returns than other renewable sources. A well-executed biomass plant can deliver substantially greater economies of scale than wind, and the heat generated from incineration can supply neighbouring buildings, creating another revenue stream.”
But issues such as securing finance for construction and identifying long-term sources of fuel are hampering many projects.
Cox said: “Securing funding for construction is no mean feat in the current environment, with lenders requiring a ‘turnkey’ construction contract, which effectively guarantees the construction cost and delivery programme for projects, with clear contractor penalties if there are delays. Unfortunately, turnkey contracts in biomass do come at a price, adding up to 20% to the capital cost.”
The survey’s results showed that the UK is the third most popular country for future investment in renewables. And it was the only country that was said to be a popular investment as a result of consumer demand rather than Government incentive. North America, China, India and other large Asia-Pacific countries were all attractive because of incentives from their governments.
The mergers and acquisitions market has seen an increase of 145% in deal volume in the first quarter of 2010 against 2009 and a 63% increase in value. It is expected that many start-up SMEs in the renewables sector with limited finances that have come through the recession may face the prospect of being bought up by another company this year or not surviving at all due to their frailty.
Capital from banks is likely to continue to be limited for the next year, and their ability to provide financing will not grow as quickly as the growth in the renewables energy market.