MGT Power is an independent British company involved in biomass power generation in England. The company is presently developing the Tees Renewable Energy Plant (Tees REP) and the Tyne Renewable Energy Plant (Tyne REP), both located in the north east of England. The two projects are 300MW biomass plants and each one will generate electricity to power approximately 600,000 homes.
In the longer term, MGT Power will develop additional large scale biomass fired projects, using certified sustainable forestry sources and energy crops, in the UK and continental Europe.
Interview date: December, 2009
Interviewer: Toby Price
To kick off the interview, could you please describe how and why MGT Power was incorporated?
MGT Power was set up by Ben Elsworth and myself in late 2007 specifically to develop large scale biomass power plants in the UK and mainland Europe. We had previously worked together at Enron, American Electric Power (AEP) and Renewable Fuel Supply Ltd, which became the largest independent UK biomass supplier, before being sold to EdF. MGT is backed by funds managed by Trafalgar Asset Managers and MKM Longboat Capital Advisors LLP.
This summer, MGT Power received planning consent for two major biomass plants in the north east of England and you have long-term plans to expand into Europe. Where do you see the company five years from now?
Our corporate mission statement has always been “Development of Utility Scale Biomass Power Stations together with delivered biomass fuel supply systems”. We secured planning consent in July 09 from the UK Government for our 295MW biomass plant at Teesport but our second project on the Port of Tyne has not yet been approved. We are completing the necessary technical and environmental studies for the Tyne project and hope to submit a planning application in the early part of 2010.
Our Teesport plant should enter commercial operation by late 2012/early 2013 and if we secure consent for our Tyne Renewable Energy Plant it should be running by 2015. We are now setting up the large scale forestry and logistics operations that will supply these projects, and other future projects. As we continue to expand our team over the coming months we hope to start work on the European port projects that we have, and we also see opportunities in the new US biomass market that will bear fruit by 2015.
Although the overall 20% target established in the EU Renewable Energy Directive is not broken down and any type of renewable energy can count towards it, biomass expansion for heat and power is strongly encouraged and Member States must report to the European Commission every two years on availability and use of biomass for energy. How do you think the biomass sector will evolve in light of the Renewable Energy Directive (RED)?
The RED has given ambitious targets for each member state, and MGT Power believe that biomass is one of the best placed technologies to deliver low-carbon, cost effective and large scale generation in the UK .
Biomass power plants can be built in time to meet 2020 targets with sustainably sourced fuel. It is reliable and deliverable technology.
The RED does not establish any “sustainability standards" for solid biomass and biogas for heat and power, although the European Commission will, by the end of 2009, report on whether they propose any such standards. What is your company doing to ensure your feedstocks are obtained from sustainable sources?
All MGT Power’s biomass will be sourced from forestry activities which have been certified as sustainable by an independent third party such as the Forestry Stewardship Council or the Sustainable Forestry Initiative.
Although MGT is a young company, we already have a firmly embedded sustainability culture. We recruited a management team member (Noel Forrest) who focuses on sustainability. Noel comes with impeccable qualifications in sustainable forestry having completed his Masters Degree at Imperial College London with a thesis entitled “Global Biomass Trade: The Marginal Cost of Sustainable Supply”.
The vast majority of fuel is being sourced from the well-established plantation forestry industry lying on the east coast of North America. This ensures that all biomass comes from well-managed forests and that our biomass procurement does not contribute to degradation or loss of valuable habitats such as tropical rainforests. It actually ensures that our fuel procurement is from an area where forested land area is increasing and it minimises our transportation distances.
Sustainability certification of a forest requires that the forest management activity meets a broad range of social and environmental criteria. Certification of biomass coming from that forest also requires a strong system of track-and-trace from forest to power station.
MGT Power also sponsors the IEA Task 40 “Sustainable International Bioenergy Trade: Securing Supply and Demand” report and welcomes the debate on sustainability standards for biomass in the UK. Could you tell us a little more about where the sustainable international bioenergy trade is currently at?
MGT has repeatedly demonstrated that biomass transportation in large ocean going vessels creates a very low carbon footprint supply chain. Our data is available on our website for anyone to check. And it is important to remember that the alternatives, ie transporting coal from Russia, South Africa or Australia, or Liquid Natural Gas refrigeration in Quatar, are considerably worse in terms of carbon footprint.
While the volumes of biomass traded are increasing annually, we believe the market is in its infancy and through time will develop into a much larger trade with secure – and hence sustainable by necessity – sources of supply and demand. More advanced market features such as a liquid spot market and a futures exchange may develop also with time. The debate within the EU over requirements for legally binding sustainability criteria for biomass continues, and we welcome that debate, however our own sustainability policy in a way supplants this through our commitment to sustainable certification of all biomass fuel.The European Environment Agency’s Scientific Committee has stated that the EU 2020 target cannot be sustainably met in Europe and significant imports will be required which, they warn, will be difficult or impossible to monitor with regards to sustainability. Are all your feedstocks specifically grown for use in your plants or do you use/envisage using other sources, e.g. forest waste and other waste wood, solid recovered fuel and household waste, to guarantee constant supply?
Firstly, it’s worth pointing out that the vast majority of Europe lies beyond the reach of deep water ports, unlike much of the UK. So we must avoid generalising and assuming that European analysis apply to the specifics of a small island. The UK can access globally sourced biomass without difficulty, but our European neighbours have to add on significant (unsustainable) transportation effects in order to get the same forestry products to where they are needed. Our research shows that there is ample resource in the areas that are supplying our biomass, such as in North America. All of our biomass will be certified sustainable. We do not have any plans to use other fuels in the Tees REP and envisage the UK and European biomass resource increasing in size once the market is more established.
Defra published the UK Biomass Strategy in May 2007 drawing on detailed work to evaluate the role biomass can play in helping to meet our future energy needs. To what extent are Defra’s findings in this report holding true two years on and what has the UK Government been doing in recent years to promote biomass usage?
As a result of that Strategy, UK Government has increased support for biomass fired electricity generation (“banded up” ROCs) in order to increase the revenue available and thereby bring about a large increase in the amount of biomass being used for renewable energy. We are aware of 13 large scale coastal biomass projects in the 100-300Mwe size range which has been announced as a direct result of that policy, and if all are built then biomass will become the largest source of renewable energy in the UK.
In that report Defra identified large potential incremental biomass supply from the UK and we believe that resource still largely exists to be utilised. At present, MGT does not envisage UK sources to be able to provide all of the capacity that will be required so there will be a mixture of homegrown and imported sources. In our opinion, demand sources, such as TeesREP, must be developed first, to allow the UK derived biomass supply chains to be developed – establishment of energy crops and better management of woodlands. Imported fuel is in part intended to bridge the gap before these supplies can be developed.
If you were able to give the UK Government a wish list, what would be the top three things you would like to see them doing in the future to enable the biomass sector to contribute to meeting or even exceeding the EU 2020 targets?
The most critical factor for any embryonic business is clear transparent support from all Government departments. It is critical that all Government agencies (IPC, Local Authorities, Environment Agency, DECC, DEFRA, National Grid, OFGEM etc) demonstrate “joined-up” thinking and one central policy, not fragmented department-by-department chaos as we currently endure.
The UK government has taken steps to streamline and give greater clarity on the planning process for major energy projects. We, along with the rest of the energy industry, hope the new planning framework will speed up the process and so save time and money to bring projects to fruition and so meet targets for renewable energy, carbon reduction and strengthen the UK’s energy security.
The ROC structure could also be strengthened and give more stability to potential investors. In particular we would like to see firmer commitment to grandfathering of ROC banding levels from the Government. However, we believe that the UK is an attractive market for biomass generation and believe that with the Tees and Tyne REPs, the UK could be world leaders in this technology.
Your new biomass plants on Teeside and Tyneside will not be operational until 2012 and 2014, respectively. I imagine that the lead time from when these plants were initially tabled through to completion will be considerable. To what extent is this due to bureaucratic and legislative processes and how do such lengthy lead times affect your company’s operations in terms of financing, etc.?
The previous planning process has been modified to ensure a quicker decision, which we welcome.
Our Tees project was welcomed by local businesses, politicians and the local community. Benefits to the local area, such as investment, more jobs and more income for local businesses are crucial to MGT Power’s ethos.
It is important for all stakeholders to remember that the development of a project like TeesREP takes about 5 years and during this time the Developer will have to invest almost £5m, completely at risk. The Developer has to convince all stakeholders (Shareholders, Landowners, DECC, EA, grid co, feedstock suppliers, construction contractors, equipment suppliers, regulators and power offtakers) that the project will proceed. It should be obvious that these developers need all the support they can get. It is no wonder that so many entrepreneurs relocate to the USA where barriers to new business creation are so much lower.
10. Does MGT Power have any plans to diversify into any other renewables sectors in the future , e.g. biofuels?
Not at present.
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