Benn's vision for farm power plants in doubt

Plans to build anaerobic digesters are being cancelled or shelved because the Department of Energy and Climate Change apparently got its sums wrong.

Defra whipped up enthusiasm for the digesters – enclosed fermentation tanks, producing gas for tapping and burning – as an answer to waste disposal problems and a promising new direction for rural economies. Mr Benn wanted a thousand by 2020.

But the DECC's team on small-scale electricity generation, headed by Lord Hunt, a former health service administrator made a baron by Tony Blair, is besieged with protests about its much-anticipated Feed-in Tariff, which came into effect this week.

The tariff lays down prices which electricity companies have to pay – and pass on to the customer – for contributions to the national grid. The biggest incentives are for the dearest technologies, such as photovoltaic panels, making electricity from light – which are likely to become a fashionable property accessory but to make only a token gesture to our power needs.

Anaerobic digesters could make quite a big contribution with small subsidies, as they do in Germany, but they require a lot of work and the key to involving farmers was to make them worth the trouble.

The tariff proposes 9p to 11.5p a kilowatt hour, depending on plant size, compared to 34.5p pkwh for electricity from small windmills and up to 41.3p for photovoltaics.

It means projected profits are too small to interest the banks – mainly because somebody at DECC assumed small digesters would run entirely on farm waste, costing nothing.

An expert on renewables, Louis Fell, in the East Yorkshire office of George F White, at Shiptonthorpe, told the Yorkshire Post: "It costs three to four million pounds to build a megawatt-size digester to earn 9p a kwh, plus whatever you can get for the electricity. For the same money, you could have that capacity in wind turbines, which do not need feeding all the time."

Big digester projects like those proposed at Driffield and Selby, for processing waste from food factories, are still on course, because they will get paid for waste disposal as well as power and because they will be big enough players to deal in ROCs – Renewable Obligation Certificates – which they earn and which carbon-burning generators have to buy, under an obligation to support 'green' alternatives.

But dealing in ROCs is complicated and risky, because it involves playing the markets. The Feed-in Tariff was supposed to be an easy and reliable alternative for smaller players.

Mr Fell said: "For a plant capacity of up to half a megawatt, you can get 11.5p a kilowatt hour and that just about makes sense. But 9p a kwh is not enough for a one megawatt plant, which is what most people have been looking at.

Some people are considering two half-megawatt plants instead, so obviously something is not right. Some are waiting to see if all the lobbying of DECC and DEFRA will make a difference. But nobody expects anything to change now before the General Election. And the money men are saying 'whoah – we don't like the look of all this'.

"One important group has more or less lost interest – the dairy farmers. When all the talk about digesters started, it sounded like all you had to do was put a cap on your slurry pit and make money out of manure. Trouble is, the feedstock has already been through a digester – the cow – which has taken out four fifths of the methane."

Everyone told Lord Hunt and his team that the running costs of digesters would have to include crops as well as muck. But somehow, the DECC calculations ended up assuming digester fuel would be free. One expert involved in the negotiations said: "It's hard to know if it was simple incompetence or they just decided they didn't have the money."

Rob Heap of Scarborough, general manager of advisory and building service UTS Biogas, told the Yorkshire Post a dozen of his smaller customers had cancelled their plans.

He said: "Between 60 and 80 per cent of farm-based plants that were being developed in anticipation of a robust feed-in tariff will now not be developed."

Charles Booth, who has shelved a plan to invest 2m in a crop-fed digester on the farm he runs with his brother at Brotherton, near Pontefract, commented: "It would have cost 300,000 to connect to the grid. In Germany, that connection would be free. We would have to lose a year's production due to cropping change, to feed the digester – another 200,000 or 250,000.

"The industry asked for 12p per unit but we were ignored. But they offer Mr and Mrs Smith 40p a unit to put a solar panel on the roof, which doesn't make sense except as a vote-catcher."

A spokeswoman for the DECC confirmed this week that its tariff assumed there were "significant opportunities" for digesters to run with zero fuel costs.

She said the next review currently scheduled would be in 2013.