interviews

Andy Wood and Steve Steve Sharratt, CEOs of Adnams and Bio Energy

“Sombody else’s waste is our energy”

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Adnams Bio Energy is a joint venture established by Adnams, which has been brewing beer for over 100 years, and Bio Group, a leading developer of AD technology. In this exclusive interview, Renewable Energy Magazine spoke to Andy Wood (AW) and Steve Sharratt (SS), CEOs of the two companies.
“Sombody else’s waste is our energy”

Not content with producing the UK’s first carbon neutral beer, Adnams brewery in Suffolk on the southeast of England has entered into partnership with Bio Group to develop a ground-breaking anaerobic digestion (AD) plant; the first in the UK to use brewery and local food waste to produce renewable gas for injection into the national gas grid. The biomethane facility will also power Adnams’ entire commercial vehicle fleet in due course.

In partnership with British Gas and the National Grid, the £2.75 million facility started injecting renewable gas into the gas grid back in October, and will generate up to 4.8 million kilowatt-hours per year.

The supermarket chain, Waitrose, was the first business to sign up to supply waste to the facility and has committed to sending food waste from seven of its nearby branches of Waitrose along with a local John Lewis retail store. Meanwhile, other suppliers of organic material are queuing up to use the facility, attracted by the savings they can make on avoiding landfill tax. Andy Wood has revealed that the AD facility is proving so successful that Adnams Bio Energy is already planning to expand the plant.

Interview date: March 2011

Interviewer: Toby Price

Looking at Adnam’s business model, are you be more inclined to focus on energy generation or energy saving?

AW: Both really. As a company we try to do what we can to save energy. Brewing and distilling are very energy-intensive activities, so we have looked at reducing energy consumption by radically redesigning our production process. We did this first, but it was a natural step for us in 2008 to then move from energy saving to generating energy from our waste streams.

How easy was it to convince shareholders to take that step; of investing hard cash in a cutting-edge renewable technology like AD?

SS: Adnams' shareholders asked lots of questions, but they were always extremely positive about the scheme. Bio Energy has a history and a track-record, which no doubt helped, nevertheless, it was a brave step for Adnams to step outside its core activities and its sphere of understanding and join us on this project. However, their decision to forge ahead with AD was also a powerful endorsement of this technology.

AW: That’s right. We have a long tail of small shareholders and a few major shareholders, and we work hard at communicating what we, the management, are about. Almost universally, they are very proud about what Adnams stands for. We had to deal with some dissenters, as would be expected in a large organisation, but on the whole support was high.

In terms of the technology itself, is the AD plant proprietary technology?

SS: Yes. It’s very much our project. We’ve been around for 12 years, starting out treating organic waste for composting… AD is an evolution to that. Adnams has played a significant role too, as what we have delivered through Adnams Bio Energy is very much the first of its kind. It incorporates several new technological edges, a number of which match Adnams’ own environmental aspirations, such as building to low carbon criteria and maximising energy efficiency. Because we are generating energy, we don’t want to waste it.

Our working together as partners was critical to the successful implementation of the project. There are many people who talk about world-class partnerships, but very few who actually deliver. You can have a 100-page legal contract, but if the relationship isn't right – as it’s predicated on trust and a shared value system – it’s going to go wrong at some stage. The ingredients on this project were all right. As the larger partner, Adnams did exactly what it promised, and that’s why the project has been successful.

Is Adnams looking at using this experience to influence other companies by sharing best practices, for example the use of lightweight bottles for your carbon neutral beer?

AW: Anyone can replicate the carbon map of our supply chain. It’s just a question of doing it. We worked with the University of East Anglia to assess our carbon footprint, and other companies could follow suit. Carbon Trust standards are also universally available to help in this regard.

What we did do during the process of developing our carbon neutral beer was to work with our bottle manufacturer, OI, to take 33% of the weight of glass out of the bottle and create the lightest weight bottle on the market. That started somewhat of an arms race in the brewing industry where everybody tried to reduce the weight their bottles, and now we no longer have the lightest bottle on the market. We see that as a good thing because it has taken more carbon out of the system.

But what about speaking to competitors about AD to tell them what a good thing it is?

AW: We do. Some other brewers are already looking at AD. SAB for example is coming to visit us in May.

The answer is yes, but what we have really done is to put together a company in its own right, Adnams Bio Energy, that can go out and offer turnkey solutions to others. This is something that is ready to be taken to market and can be taken to market. That’s why we structured the project in the way we did, so that we could expand this as a standalone business.

Part of this solution involves using waste not only from the brewery, but also from third party sources. Did this complicate the project from a regulatory perspective?

SS: If you're a business that produces a certain volume of waste that is then feeds straight into an AD plant right next door, there is less of a regulatory issue in terms of how you operate. However, there are very few businesses that generate enough waste to be able to do that… to be able to operate without some input of third party waste, even if you look at major food retailers. None of them produce enough waste in one place for it to become remotely viable to locate a plant next door to their operations.

So what Adnams Bio Energy brings to the equation if you like is handling that feedstock. While there is a more complex regulatory framework around that, to us its second nature, so we don’t perceive it as an obstacle.

Is there anything you would like to the see from the Government in terms of legislation to drive up the use of AD?

SS: Yes. AD isn’t sexy like wind, so from that point of view one can empathise, albeit not agree, with the emphasis the Government has given to wind; but a number of things are required. Where we have got to is that the Labour administration introduced a system of escalating landfill taxes rates six or seven years ago… They did too little, too long, so it's only now that these rates are starting to influence behaviour. It should have happened five years ago. That changes people’s attitude towards throwing rubbish in a landfill and actually makes them do something with it or not produce the waste in the first place.

So the attraction of AD is more about avoiding paying landfill taxes than reducing carbon footprints?

SS: It’s a legislative driver. It takes waste out of a hole in the ground, but there isn’t any legislation which says that once you take it out of the ground and stop it producing methane – this all goes back to Kyoto – what you do with it next should have low carbon at the heart of it. If it did, it would stop the mass burning of waste such as the 500-million pound scheme planned for Suffolk, which is effectively a high-quality stainless steel chimney pushing carbon dioxide up into the atmosphere at a rapid rate of knots. That plant is being sold as a CHP plant, but where the heat will be used remains a mystery and there certainly doesn’t appear to be any use for the electricity in that area.

I would argue that Government has to transform economies by putting “low carbon” and “best value” at the heart. In terms of renewable energy, AD, we now have a range of incentives with the Renewable Heat Incentive (RHI) being introduced only last week, which has surprisingly come out slightly higher than we expected. The feed-in tariffs (FiTs) however have gone the other way and I think it's wrong for the Government to say that FiTs were introduced to encourage small-scale generation and what they are doing is promote large-scale projects. We need renewable energy for goodness sake, whatever its form!

The RHI is great news for biomethane, but the problem for us is that at the moment we are still required by Ofgem [the gas system regulator] to use gas injection equipment that is North Sea gas standard; normally costing in excess of a million pounds when it should be about 100 thousand pounds at most. Even more, we shouldn’t be paying for it at all, the gas system operator should.

Ofgem also insists we add propane, when the UK energy industry and the National Grid are completely happy with alternative methodologies… dilution for example… mixing gas. It costs next to nothing, but here we are producing green gas and having to add a fossil fuel to it. It’s ludicrous. If it's diluted enough, it doesn’t matter. National Grid is one of the most risk adverse organisations I have come across and so if they are happy to do it, it must be safe.

Another issue is that in the UK oxygen levels have to be 0.1 to 0.2%, while in Germany it’s 3%. We can meet a 1% level in the biogas industry, but not 0.1%, so at the moment we get specific exemptions. This needs to be looked at from a regulatory perspective. If they’ve had 3% in Germany for years, why is it taking so long in the UK!

I was recently in Westminster with Charles Hendry and Oliver Henley [Minister of State for Energy and Climate Change and Parliamentary Under Secretary of State for Environment, Food & Rural Affairs, respectively] and I made the point that we have the RHI and businesses like ours banging on the door to produce biomethane; but we have a regulator (Ofgem) sitting there saying: “well yes but we need time to think about this, that and the other". We’re pushing the barriers.

So what you’re saying is that regulatory reform to make it easier to get projects up and running is what the biogas industry is really calling for?

SS: Not just that. The problem is that economies of scale mean that without the RHI, the energy value of the output from biogas plants is, in the scheme of things, negligible. The costs of exporting that energy, which has to be done (you can’t really become your own internal power station), are significant and therefore the payback on these projects is around 12 to 15 years, so in the context of funding the capital, banks aren’t interested and VCs aren’t interested because a) the payback is too small and b) it’s too long.

In a fair market, I agree the market ought to drive it, but the drivers aren’t there. We’re competing with coal, which per unit is much cheaper, and you can’t. Without the RHI you can’t compete.

AW: The externalities of fossil fuels need to be factored in to put up the price of fossil fuels. That’s the cheapest option and so has to be better than bringing in an RHI or FiT, but at the moment...

SS: I agree. The budget announced today includes a carbon floor at £16, which is a start to the idea of the polluter paying… the start of bringing up the cost of carbon technologies so that low carbon can compete.

Looking at the low carbon issue, how easy was it for Adnams to audit the carbon footprint of the whole production chain of your carbon zero beer, East Green?

AW: Pretty easy. We kind of designed the beer with this in mind. We co-created it with Tesco and we were in charge of the whole methodology for doing that. We went away and liaised with the University of East Anglia and it was a very, very simple process.

They looked at every step of the process, measuring the emissions at each stage. It’s something we’re going to do across our whole product range… we see it as good practice.

What it also did, which is an important consideration, was that it also transformed our relationship with the big retailers. Suddenly we were seen as a supplier that could add value because we had a methodology and a particular stance. Suddenly our relationship with some of the biggest retailers in the UK went from being a commodity supplier to being somebody who could make a difference.

SS: One mustn’t forget too that the AD facility takes 60,000 tonnes of carbon dioxide equivalent out of landfill, which is also important.

Lastly, what about the energy balance of Adnams operations?

AW: Well clearly, the AD plant will have a huge effect on our energy balance, especially when you take into consideration the energy savings we are making throughout the business in terms of energy efficient production processes, the eco-distribution centre, etc.

We’re taking the benefits of AD back into the business. When you start to factor in just the absolute powerful impact of having our whole commercial fleet of vehicles running on biomethane… these benefits are enormous.

For additional information:

Adnams Bio Energy

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