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Biomass: how to navigate the obstacles to get a plant built

Improvements in technology, combined with government subsidies and incentives, mean that biomass remains an attractive investment. Yet there are still several obstacles to navigate when it comes to getting a plant built. Here's a short guide to overcoming three of the most common:

Planning

The biggest obstacle to overcome is often planning. The differing attitudes of local authorities and communities can see approval time for projects taking anywhere between 13 weeks and several years. 

A one-size planning application does not fit all and there are two options to address this; employ someone experienced in submitting relevant applications, or employ the relevant planning authority to help prepare the application. Problems can be flagged and addressed before a formal submission by working with the people whose views will influence the planning committee. This will save time and reduce the risk of rejection. 

Buying technology

Investing in the right technology is a major part of any project and an area that needs careful consideration. There are a number of different options including bespoke kits that can be tailored to a particular project.

However many of the companies involved in the delivery of such projects are SMEs, and if they were to become insolvent there is a risk that the equipment would not be able to be maintained and the plant output could be affected.

To mitigate this risk, the easiest solution is to use established technology that is widely available on the market. Whilst a single supplier contract is always preferable, this route gives other maintenance options if that single supplier were to become insolvent. 

Bankability

The next hurdle is the bankability of the project. A bank will need to be convinced that the financed assets have the appropriate protections in place. There are several things to consider including:

  • Construction and installation contracts - these contacts are crucial to the process for technical as well as practical reasons. It is ideal to use a single, established, biomass technology supplier. This also helps to offer the lender re-assurance about ongoing maintenance and replacement. 
  • Liability caps/provision for performance damages - any firm involved with the process, be that construction or operation, must have the financial capability to meet any liabilities if there are difficulties. It is also important to consider any caps on liability.
  • Lease termination rights/breach of lease - in the event that the developer becomes insolvent, it is essential that the bank is able to step into the lease so that they can prevent problems with the lease being terminated, and access to the site being restricted. 
  • Multiple landowners - where cables and conduits run across multiple sites, have the correct rights of access and rights to lay heat infrastructure been secured?
  • Bankable grid export agreements and suitable heat supply agreements – these agreements need to meet the specific regulations for the export of this type of gas to the grid. There must also be a guaranteed heat purchase agreement for the minimum required to meet the developer's capital works payments. 
  • Fuel supply agreements - biomass plants rely on the supply of quality fuel to prevent any damage to equipment. The wrong fuel can cause serious problems. It is vital to have contracts that guarantee the purchase of good quality fuel for up to a 20 year period. 

It may seem like a never ending list of asks but none of these are insurmountable obstacles. The key to the successful development of biomass plants can summarised by two things - good planning and sound contracts.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2015. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

TLT LLP is a limited liability partnership registered in England & Wales number OC 308658 whose registered office is at One Redcliff Street, Bristol BS1 6TP England. A list of members (all of whom are solicitors or lawyers) can be inspected by visiting the People section of this website. TLT LLP is authorised and regulated by the Solicitors Regulation Authority under number 406297.

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