Project ARBRE: Lessons for bio-energy developers and policy-makers

ARTICLE IN PRESS Energy Policy 36 (2008) 2044– 2050

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Project ARBRE: Lessons for bio-energy developers and policy-makers Athena Piterou a,, Simon Shackley b,1, Paul Upham b a b

Brunel Research into Enterprise, Innovation, Sustainability and Ethics (BRESE), School of Business and Management, Brunel University, Uxbridge, Middlesex UB8 3PH, UK Manchester Business School and Tyndall Centre Manchester, The University of Manchester, P.O. Box 88, Manchester M60 1QD, UK

a r t i c l e in f o

a b s t r a c t

Article history: Received 24 October 2007 Accepted 25 February 2008 Available online 18 April 2008

Project Arable Biomass Renewable Energy (ARBRE) was a ‘flagship’ project in the UK to demonstrate electricity generation from dedicated energy crops, employing the high efficiency of gasification combined cycle technology while also contributing to the waste management problem of sewage disposal. The plant never reached commercial operation and this paper provides the first detailed public account of the reasons, drawing on interviews with the main actors. Project ARBRE failed due to three unfortunate developments: the withdrawal for reasons of commercial strategy of the main company that initiated and financed the project; bankruptcy of the turnkey contractor appointed to oversee the project; and technical problems with the gasification technology, which could not be resolved within the financial and time constraints. All these factors acted in reinforcing manner and they were individually preventable: documenting the process of failure is a learning experience that can prevent their recurrence. & 2008 Elsevier Ltd. All rights reserved.

Keywords: Bio-energy ARBRE Project management

1. Introduction It is increasingly acknowledged that the current patterns of energy use in industrialised countries, which is largely carbonbased, conflicts with sustainability goals, such as the required reduction in carbon dioxide (CO2) emissions for the UK of 60–80% by 2050 (DTI, 2003). Hence in the UK, the 2002 Renewables Obligation Order for England and Wales set a target of 10% of national electricity supply to be renewably sourced by 2010. As of 2005, only 4% of the UK’s electrical supply came from eligible renewable sources (DTI, 2006). In the UK significant development has been made in introducing a Biomass Strategy, which came in response to the Biomass Task Force conducted in 2005 highlighting key barriers to the biomass and bio-energy resource. The UK is currently committed to reducing its carbon emissions by 60% by 2050 and intends to achieve this in part through the use of renewables. Biomass although not currently produced at significant levels is considered to be an untapped resource with potential to help deliver on such targets (Energy Technologies Unit, DBERR, 2007). The EU has also committed to reducing

Abbreviations: ARBRE, Arable Biomass Renewable Energy; NFFO, Non-Fossil Fuel Obligation; AEL, ARBRE Energy Limited; SWP, South Wales Power; SEC, Schelde Engineers and Contractors; EPRL, Energy Power Resources Limited.  Corresponding author. Tel.: +44 1895 265547. E-mail addresses: [email protected] (A. Piterou), [email protected] (S. Shackley), [email protected] (P. Upham). 1 Tel.: +44 161 306 3258; fax: +44 161 306 3255. 0301-4215/$ - see front matter & 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2008.02.022

its overall emissions to at least 20% below 1990 levels by 2020, and is ready to scale up this reduction to as much as 30% under a new global climate change agreement if other developed countries make comparable efforts (European Commission, 2007). Biomass for heat and power has certain advantages as an energy source. It is almost net carbon neutral, having perhaps the lowest net atmospheric emissions of carbon dioxide per unit of energy next to wind (Thornley, 2006). Biomass can be stored in the form of fuel prior to its conversion to heat or electricity, hence (unlike most other renewables) does not suffer from the problem of intermittent supply (Thornley, 2006). Biomass is particularly suitable for providing heat as well as electricity, though clearly a local demand for heat is required. Electricity and heat generation from biomass can occur efficiently on a wide range of scales, from less than 250 kW, to at least 25 MW, which provides useful flexibility in connecting with the national grid (Thornley, 2006). Biomass cultivation provides opportunities for rural development and agricultural diversification (RCEP, 2004). It is also possible that biomass-derived energy will be more socially acceptable than other forms of renewable energy, e.g. on-shore wind, provided that there is adequate consultation with local communities (Pitcher et al., 1998), though there are documented examples where opposition to biomass plants has been intense (e.g. Upreti, 2004; Upreti and van der Horst, 2004; Upham and Shackley, 2006a, b). There are considerations regarding the use of bio-energy originating from dedicated crops. An EEA (2006) study estimates the environmentally compatible bio-energy potential from agriculture in Europe up to 142 MtOE by 2030, compared to 47 MtOE

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in 2010, although short-term the largest potential lies in biomass from waste. There is, at present, a diversity of technical options which can be tailored to the characteristics of the bio-fuel and to the capacity level of the generating units (RCEP, 2004). Perhaps because of the diversity of technological options and the different types of biomass fuels there is, at present, no consensus on the most adequate method of energy conversion or on the choice of fuel. We cannot clearly identify a dominant design (Utterback, 1996) (or set of designs for different applications) being established in the industry, as most technologies and applications are still not commercially proven (Rensfelt et al., 2003). Biomass demonstration projects have been advanced in order to establish the viability of different bio-energy technologies. They are a means to promote innovative technologies to market by illustrating their technical efficiency compared to more established conversion methods. Market penetration could then be achieved through the replication of successful demonstration plants on a larger scale. In this paper, we describe one such demonstration project, Project Arable Biomass Renewable Energy (ARBRE), which was led by a commercial partnership with significant public funding. We seek to explain the reasons behind the commercial failure of this plant and consider the significance of the case, if any, to the future of the biomass sector and its promotion in the UK. This case was chosen because of the perceived importance of Project ARBRE for the future of the biomass industry at the time it was designed; its collapse appears to reinforce the more recent perception that the UK bio-energy industry is falling behind that of other European countries (RCEP, 2004; Van der Horst, 2005). To all appearances Project ARBRE looked set to succeed, with the participation of a well established technology provider, the financial and organisational backing of a large utility company, public funding in place, a long-term contract to supply electricity at a favourable rate and the buy-in of farmers to grow and supply the biomass. Following Project ARBRE’s demise, a number of competing interpretations began to circulate within the bioenergy community regarding the underlying reasons for its failure. Amongst the reasons cited were: technical problems with the gasification process; the withdrawal of the major backing company; over reliance on a particular type of fuel; and poor project management. Whether a project is a ‘failure’ depends in part on the expectations of the involved parties and their understanding of the stated objectives of the project. Moreover, failure of some individual projects is to be expected when developing sustainable technologies. Regarding the promotion of sustainable technologies Kemp et al. (1998) introduce the concept of strategic niche management as an alternative tool of technology policy. The lesson for policy-makers is that they should select which technologies to supports on the basis of their technological potential. These technologies should be allowed space to develop in incubation niches, however, it is important to note that not all individual ventures will materialise (Kemp et al., 1998). In a similar vain, it is noted in the Stern Review (2006, p. 348) that ‘‘policy should be aimed at bringing a portfolio of low-emission technology options to commercial viability’’. Because of the unpredictable nature of innovation and constraints on each individual emission reducing technology policy measures should encourage technological variety (Stern, 2006, p. 348). Furthermore, some components of a large project can still be deemed to have succeeded even in the face of wider project failure. This paper aims to provide a public account of what went wrong and what may be learned for the future.

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2. Methodology The research for the project was undertaken in 2004 for the requirements of the first author’s M.Sc. Dissertation. The names of individuals that could provide relevant information were identified through relevant documentation, such as conference papers and a journal article on ARBRE. Semi-structured interviews were used as the method of data collection. Interviews were conducted with representatives of the participant firms and organisations and from academic researchers in the field who could provide an evaluation of the technology applied. These methods enabled us to understand the complications of the topic as (with the exception of the academics) each interviewee adopted, to some extent at least, the viewpoint of the organisation for which they worked. We were able to compare and cross-check the different accounts and to identify where differences of opinion occurred and the extent to which these accounts appear to be commensurable or otherwise. However, there are certainly limitations in the information we collected, such as the unwillingness to provide confidential commercial information, technical data and the reluctance on the part of some respondents to discuss failed projects. The following list details the organisational affiliation of the interviewees. We have used the letters in attributing comments or information in the paper to these interviewees. A. B. C. D. E. F. G. H. I.

former manager of a firm involved in ARBRE former manager of a firm involved in ARBRE manager of a firm involved in ARBRE manager of a firm involved in ARBRE Research Fellow, Tyndall Centre for Climate Change Senior Lecturer, Imperial College official, Department of Trade and Industry, UK Government, Manager, Forestry Commission official, Directorate General for Energy and Transport, European Commission

3. Project ARBRE: establishment, organisation and technical characteristics Table 1 summarises the main milestones in the development of the ARBRE power station. ARBRE was designed as a Biomass Integrated Gasification Combined Cycle (BIGCC) technology. Dedicated Short Rotation Coppice (SRC) was intended to be the main fuel source with the Table 1 Key developments in Project ARBRE Date

Key development

July 1993 July 1994 December 1994 December 1995 December 1995 December 1995 May 1996 May 1996 February 1997 February 1997 February 1997 February 1998 Spring 1998 Spring 2000 May 2002 July 2002 May 2003

EU call for gasification proposals ARBRE proposal approved NFFO contract NIRO A/S and AEP withdraw Completion of main technical designs Formation of AEL Application for planning permission Establishment of ARBRE farming Ltd Granting of planning permission SWP withdraws Turnkey contract with SEC Turnkey contract made unconditional Construction begins in Eggborough SEC withdraws from the project Acquisition by EPRL Liquidation Acquisition by DAS Green Energy UK

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remainder consisting of forestry residues. BIGCC technology is not yet established in commercial applications. However, it was decided at European Commission level that biomass gasification demonstration projects would receive financial aid through the EC’s DGXVII Thermie Programme (Morris and Waldheim, 2002). In 1993 the European Commission launched a call for proposals for the construction of 8–12 MWe BIGCC power plants. Three projects gained funding support. Project ARBRE in the UK and the Energy farm project in Italy were based on atmospheric gasification and the Biocycle project in Denmark applied pressurised technology (Morris and Waldheim, 2002). ARBRE, one of the three successful proposals, had to demonstrate to the EC the feasibility of biomass gasification and combined cycle energy systems, as well as the development of an effective fuel supply chain derived from energy crops and forestry residues (Paterson and Weekes, 2003). ARBRE would produce enough electricity for the domestic needs of 33,500 people (Fardy, 2000). Experience gained in the project concerning the farming of SRC and the conversion technology, would, it was claimed, allow for its replication in other member states and elsewhere (Pitcher et al., 1998). Project ARBRE was developed by a consortium of four companies that signed the contract with the European Commission: Kelda plc (then called Yorkshire Water), Terminska Processor AB (TPS) of Sweden, Associated Energy Projects(AEP) and NIRO AS (Morris and Waldheim, 2002). Kelda participated through its subsidiary First Renewables Ltd. (FRL) which had former experience in the development of willow coppice sites. TPS is one of the main European firms in the field of gasification and gas conditioning. It designed the technological process and licensed it to the turnkey contractor. In principle the EU Thermie grant covered approximately 40% of the cost although in practice it supplied only 28% of the funds due to an escalation in the costs of establishing ARBRE (Interview A, 2004). ARBRE was the first biomass project to be included in the third tranche of the UK Non-Fossil Fuel Obligation (NFFO) scheme. NFFO was a scheme established by the government in 1989 as a support mechanism for non-fossil fuel energy. Bids were submitted by developers to supply renewably generated electricity at a specified price and government generally chose to award contracts to the lowest bidders. The successful developer was provided with the difference between the going market price and the bid price for a guaranteed number of years (Mitchell, 2000). The NFFO contract did not, therefore, provide direct funding but guaranteed the sale price of electricity for a set period. In the ARBRE case it guaranteed a premium price for the electricity at 8.75 p/kwh, linked to the UK retail price index, for a period of 15 years starting in 2002 (Morris and Waldheim, 2002). ARBRE Energy Limited (AEL) was formed in December 1995 by First Renewables Ltd (FRL) (the main shareholder), TPS, AEP and South Wales Power (an electricity utility). After the withdrawal of South Wales Power in 1997, First Renewables owned 85% of the company. TPS maintained 10% of the project so as to ensure access to information and protect its technology. AEP also withdrew early on and was replaced by the Dutch firm Schelde Engineers and Contractors (SEC). SEC was awarded the turnkey contract and a firm of the same group, Schelde Heat and Power, was responsible for operation and maintenance. Prior to the turnkey contract, decisions were made regarding the choice of technology, namely atmospheric, air-blown, BIGCC. Construction began in 1998 and the plant was intended to have been operational by 1999 (Pitcher et al., 1998). The turnkey contractor encountered serious financial problems, which led to significant delays and the plant was not completed until 2000. That meant that ‘hot start up’ could not begin until mid 2000. In practice, hot commissioning started in early 2001. AEL was

Table 2 Commissioning process May 2000 August 2000 August 2000 November 2000 January 2001 February 2001 February 2001 March 2001 March 2001 March 2001 March 2001 April 2001 May 2001 September 2001 October 2001 December 2001 January 2002

Gas turbine operation on kerosene Major system pressure testing Wood gas combustion equipment fitted to gas turbine Commissioning of boiler feedwater system Commissioning of waste heat boiler completed Cold commissioning of gasification system Commissioning of wood fuel treatment plant Commissioning of wood fuel feeding system Cold commissioning of bag filters Cold commissioning of wet scrubber Commissioning of steam turbine Gas first produced in gasifier from wood Hot commissioning of bag filters Hot commissioning of wet scrubber Clean low calorific value gas first produced First sustained operation of clean gas production Gas first routed to gas compressor and gas turbine

Source: Rensfelt et al. (2003).

responsible for commissioning the work from the sub-contractors to ensure co-ordination (Interview B, 2004), as well as for establishing contracts with local farmers in Yorkshire for the supply of fuel. The commissioning of the plant was never completed, for the reasons described below. The plant design was complex and sought to link components that, while most had been tested individually, had not been tested in an integrated system (Interviews E, F, I, 2004). World wide there are very few examples of similar biomass gasification technologies. These include a pressurised BIGCC system in Varnamo, Sweden, as well as the other two projects which were given grants in the same round of Thermie funding (Interview I, 2004). As we shall see, there are conflicting opinions regarding the technical feasibility of the plant. A number of problems arose, the most important of which regarded the cooler evaporator. The main steps in the commissioning process of ARBRE are listed in Table 2). When Kelda decided to withdraw from ARBRE in 2002 its share was bought by Energy Power Resources Ltd. (EPRL), a firm that operates several renewable energy projects. Under the agreement Kelda would continue to finance the project till the completion of commissioning. When Kelda stopped supplying finance, ARBRE was put into liquidation and it was bought by a company that did not appear equipped to operate it (Interview B, 2004).

4. Three phases in the development of project ARBRE We can separate the development of ARBRE into three distinct phases. Phase One consisted of the initial commercial partnership and came to an end when three of the firms withdrew, namely AEP, Niro AS and South Wales power (SWP). This happened when the project was still at the planning stages (before the turnkey contract had been awarded), though the NFFO and EU Thermie contacts had been awarded. Little is known about the influence on project planning of these three firms and the reasons for their withdrawal. It appears, however, that AEP regarded the proposed plant design as immensely complex without any evident technical advantages (Interview C, 2004). Phase Two consisted of the re-configured AEL, dominated by Kelda, and with SEC appointed as designer and turnkey contractor. ARBRE was in the progress of being commissioned but there was a divergence of opinions regarding how successful this process was. This phase came to an end with the bankruptcy of SEC in 2000 and the strategic decision taken in Kelda (Yorkshire Water plc) at about this time to withdraw from all renewable energy ventures.

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This strategic repositioning led to the sale of the company’s subsidiary First Renewables Ltd. in 2002. The actions of both SEC and Kelda were not connected to the specific progress of ARBRE but were nonetheless crucial to its future. Phase Three consisted of the ownership of ARBRE by EPRL in 2002, but came to an abrupt end in July 2002 after only 2 months, when the company liquidated ARBRE and sold on its assets. EPRL reported that that the company was mainly interested in acquiring other going concerns of FRL, particularly those more compatible with their favoured biomass conversion technologies such as combustion (Interview C, 2004). It appears that, as AEP during Phase One, EPRL regarded the technology of ARBRE as overly complex.

5. The key challenges facing project ARBRE We can break down the problems or challenges which had to be tackled if Project ARBRE was to be a success as follows. (1) Financing: The development of the power station required the acquisition of sufficient financial resources. We consider how these resources were collected and whether the financing process was effective. (2) Organisational: ARBRE was developed as a joint venture between firms, each of which had different motives for becoming involved. The motives of, and relationships amongst, these firms and their influence on the project are discussed. (3) Public funding support: Because ARBRE was conceived as an innovative plant it required the support of public programmes at the UK and European level. Another public institution involved in the development of ARBRE was Selby District Council in North Yorkshire that granted the planning permission. (4) Technical: Several technological components had to be integrated for the plant to operate effectively. (5) Fuel supply: The functioning of the fuel supply chain required close cooperation between the fuel suppliers, the Forestry Commission and the government department responsible for biomass (now the Department for Environment, Food and Rural Affairs (DEFRA) which was, at the time, MAFF). The fuels themselves (SRC and forestry residues) had to function as expected.

6. Financing issues There are no detailed financial accounts available in public for ARBRE Energy Ltd. Overall, the project is thought to have cost about £40 million (Interview C, 2004). The initial cost estimate provided in the application for the Thermie Grant funding was the significantly smaller sum of 33 million euros, with the EU contributing approximately 40% in years 1994 and 1998. Return on investment was expected in 9.3 years (http:// www.nf-2000.org/secure/Ec/S472.htm). In practice, the actual contribution of the Thermie grant to the project cost was almost 28%, amounting to approximately £10 million, because the costs of the project gradually increased and the grant was fixed (Interview A, 2004). There were, initially, some efforts to attract financing from banks but they proved unsuccessful. Banks are usually unwilling to be involved in a technology development project that is considered to be high-risk, posing a problem for the advancement of innovative technologies in biomass conversion (Interview B and D, 2004). It is claimed that a bank would have been very unlikely

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to get involved in a project as complicated as ARBRE, but that the outcome would have been more positive if this had occurred. For example, one interviewee considered that if a bank had been involved the project would have been monitored more carefully (Interview E, 2004). The enrollment of a bank proved unnecessary because of the THERMIE programme grant and also because (at that time) Kelda showed sufficient commitment to the project to undertake the main part of the cost on its balance sheet, although some time was spent to attract debt financing (Interview B, D, E, 2004). The cost was covered in the form of equity and through a loan that Kelda had provided to AEL. It is significant that Kelda, a firm whose main business was water supply and treatment, not renewable energy, took on the main part of the balance sheet cost. Kelda’s intention at the time was to diversify its business so to reduce its dependency on the water management sector (Interview E, 2004). Kelda was involved in renewable energy developments through its non-regulated subsidiary FRL, which also had interests in wind energy and biomass from poultry litter operations. As the water management sector is highly regulated in the UK and the profit margins are generally stable but low, it made sense for Kelda to seek to develop non-regulated activities. In addition, Kelda had shown an interest in the development of SRC plantations as a means of recycling composted sewage sludge that could be used as a fertiliser for SRC. This was an important incentive for Kelda’s involvement in the project since disposal of sewage sludge in the sea has been progressively phased-out through the EU’s Urban Waste Water Treatment Directive (91/271/ EEC), increasing the cost of disposal. By linking-up sewage sludge disposal with SRC development, it would be possible not only to reduce costs but also perhaps to turn sewage sludge into a useful input to a profitable bio-energy business. As consequent events demonstrated, the fact that Kelda provided the larger part of financing rendered the project quite dependent upon the company’s backing. The THERMIE programme grant shaped, to some degree, the financial and technological risks undertaken by the firms. The aim of the THERMIE grant was to encourage risk in technology development by undertaking a part of the initial cost, hence involving firms which would otherwise have regarded projects as too risky (Interview C, 2004). ARBRE managed to cover 40% of the initial estimated cost through EU funding because it was a high-risk project in the sense that the specific combination of technologies had not previously been tested or demonstrated (Interview D, 2004). One of the pre-requisites to receiving funding was the participation of three European partner companies, in this case from the UK, Sweden and the Netherlands (Interview H, 2004). The progress of the projects that gained funding was monitored but there was no mechanism by which the European Commission could impose any disciplinary action if it was deemed unsatisfactory (Interview I, 2004). There were, overall, eight applications submitted when the targeted call for gasification proposals was launched. Besides ARBRE and the two other projects that were selected, only one other candidate project in Germany was seriously considered for approval. The remaining projects failed to convince the EU authorities of their potential as the proposals provided poor technical documentation. The technical expertise of TPS in the field of gasification was an important factor that helped ARBRE to gain support. According to the examination of the project by the EU officials it was considered a highly feasible project (Interview I, 2004). There are a variety of funding mechanism regarding renewable energy project in that case it was a direct fund.

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7. Organisational issues This section considers the interaction among the firms involved in ARBRE and the type of relationships they developed. Some of the firms initially involved in the THERMIE grant application and the formation of ARBRE Energy Ltd. withdrew early from the project: NIRO, Associated Energy projects and South Wales Power. AEP chose to withdraw from the project as it felt that the technological design was too complex, without having any considerable efficiency benefits (Interview C, 2004). The withdrawal of SWP is important because it was the only electricity utility company that participated in the project. According to some it would have been more appropriate for a plant such as ARBRE to be controlled by a large and experienced power utility (Interview B, 2004). Another reason that the withdrawal of South Wales Power (SWP) was important is the fact that First Renewables took over its equity stake, hence enhancing Kelda’s already majority position from 51% to 85%. As the major shareholder Kelda then had even more control over decisions as well as more influence in defining the role of other actors involved and delineating the evolution of the project. For example, developing an SRC fuel chain is complex (Pitcher et al., 2000), SRC is considered a relatively difficult fuel to gasify (Interview D, 2004) and alternative fuels such as waste wood or organic waste could have been used instead. Yet Kelda’s objective of finding an outlet for its sewage sludge influenced ARBRE’s decision to persevere with the SRC source for fuel. The resources possessed by Kelda were financial capital, reputation and expertise in the development of SRC plantations. Its reputation as a large utility proved influential in the development of the fuel supply chain, as will be described below. Kelda’s strategy towards diversification into renewable energy changed, however, following changes in the ownership and management of the company. In April 2000 Kelda decided to refocus on its core water supply and waste water operations. Therefore, it opted to divest all its environmental services and renewable energy activities. This decision was related to managerial changes within Kelda (Kelda Group, no date). Kelda had thus started to question its participation in the project for at least 2 years before the sale of FRL to EPRL. Renewable energy was a diversification activity for Kelda and its involvement in the ARBRE project was developed through a subsidiary. In that sense ARBRE was therefore never one of Kelda’s main strategic concerns. The enrollment of the Kelda Group senior management by the management team of First Renewables Ltd., which had proved so effective in the early stage of ARBRE (Interview A, 2004), proved to be transient and fragile in the sense that Kelda withdrew 5 years later. Kelda’s withdrawal led to a serious destabilisation of the project. TPS was a contributor from the initial stages till ARBRE was sold to the present owner. Although TPS only owned 10% of AEL, it had an influential role in the early stages of the project when the technology choices were being made. TPS is recognised as one of the leading companies in the field of biomass gasification (Interview I, 2004) and was one of the technology developers that had been initially contacted by the EU Commission regarding the THERMIE programme (Interview I, 2004). TPS’ main goal was to promote its gasification technology, but it was also trying to gain access to the UK market. Before contacting Kelda, TPS had attempted to make contact with engineering and utility companies in the UK (Interview D, 2004). TPS provided the gasification technology for ARBRE by licensing the design to the turnkey contractor. It obtained a minority share in AEL in order to safeguard its interest and also to have access to information on the performance of the technology.

It was important for TPS’s reputation to prove that the technology could be made operational. Regardless of the reasons, it was bad publicity for TPS that ARBRE, a plant based on its design was not operational when expected (Interview E, 2004). This might explain why TPS tried to attract new commercial partners for ARBRE even after the liquidation of the plant (Interview D, 2004). However, it appears that despite its technological credentials TPS could not by itself gather sufficient resources for the continuation of the project. Also, TPS had not been a major investor in ARBRE in the first instance, so perhaps had less influence at this later stage. SEC was involved in ARBRE as the turnkey subcontractor and a minority shareholder. Its main incentive was business diversification as in the case of Kelda. Also, a firm of the same group had been awarded the O&M contract. According to some claims, SEC had some experience in similar applications (Interview A, 2004), but the allegedly poor design it executed at ARBRE caused serious delays in the commissioning process. SEC suffered from financial constraints imposed by its parent company and that led to problems in the construction of ARBRE. SEC eventually went bankrupt leaving ARBRE Energy Ltd. with the challenge of completing construction and commissioning within a short time. EPRL joined the project in 2002 by acquiring FRL from Kelda. However, from the beginning EPRL’s managers were skeptical about whether the complicated design of ARBRE really had any efficiency benefits. One such manager had been involved with ARBRE as a former employee of Associated Energy Projects, one of the companies which left the joint venture early on as a result of concerns over the design. ERPL seemed more interested in another of FRL’s biomass projects (the vibrating moving grate combustion system). The agreement it made with Kelda regarding the financing of the plant was a way for ERPL to avoid taking any risk related with ARBRE. Also EPRL may have faced short-term cash flow problems at the time that could have led to its divesting ARBRE (Interview D, 2004). We can conclude that the firms involved demonstrated different degrees of commitment to the project. TPS had perhaps the greater interest in making the project work, but only a 10% ownership of the joint venture. The relations between the firms were heterogeneous. Formally they were commercial partners but there was also a licensing relationship between TPS and SEC, and a subcontracting relationship between SEC and AEL. The degree of communication and trust between the participants appears to have been relatively low. For instance TPS was unaware of the details of the financing agreement between Kelda and EPRL. Also the problems with the turnkey contract became evident only after the withdrawal of SEC. As their strategies evolved over time, the different expectations of the firms could not be accommodated. It has been argued that the outcome of ARBRE would have been different with another set of commercial partners (Interview E, 2004). Certainly, as a demonstration renewable energy plant, it may have been better if there had been more control from a company, which had a larger vested interest in making the technology work than did Kelda, e.g. a power utility firm (Interview B, 2004).

8. UK government support There do not appear to have been any major problems with attracting the necessary support from public officials. ARBRE had to be awarded planning permission by the Selby District Council Planning Committee but the process was not as time-consuming as is common for such applications (Rensfelt et al., 2003). This can be explained by ARBRE Energy Ltd. managing to convince the local authorities that ARBRE would have environmental benefits and

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contribute to rural diversification. The local authorities had to take the involvement of local farmers into account, and were not faced with any major public resistance. In addition, ARBRE was awarded a preferential NFFO contract. The government’s energy agency, the Energy Technology Support Unit (ETSU), had expressed an interest in projects which integrated gasifiers and gas turbines and as a demonstration plant ARBRE was considered adequate for support. The NFFO contract guaranteed a preferential price for electricity. Award of the NFFO contract did not imply any government oversight or monitoring of the project (Interview G, 2004).

9. Technical issues A biomass integrated gasification combined cycle (BIGCC) system involves gasification of the biomass to produce a gas that is combusted and used to drive a gas turbine (Horne, 1996). In a pressurised BIGCC system the product gas is kept at pressure and burnt to drive the gas turbine. In an atmospheric pressure BIGCC system, such as ARBRE, the hot product gases are cooled to a temperature of 300 1C by passing them through a cooler evaporator (also known as a fire tube heat exchanger). The heat exchanger is then used to heat up water in a boiler to produce steam which drives a steam turbine. The amount of gas directed to the steam and gas turbines is altered so that the gas turbine is kept operating at full load (Rensfelt et al., 2003). The gasification of the biomass at the ARBRE plant took place on a circulating fluidised bed, rather than employing the more established fixed bed technology (Bridgwater, 2003). A detailed account of the plant’s design is given in Rensfelt et al. (2003). There are some benefits in an atmospheric over a pressurised system. It allows the use of more problematic feedstocks, e.g. wastes. It incorporates simpler fuel and ash handling systems and produces gas of higher heating value. Also, the output of the plant can be supplemented through the use of a heat recovery and steam generator system (HRSG). In addition gas purification is more reliable; the use of a gas turbine ensures that the product gas is of sufficient quality for gas turbine operation. With regard to the gas turbine, an atmospheric system has weaker process coupling between the gasifier and the gas turbine, so it permits more independent operation between the two systems (Morris and Waldheim, 2002; Rensfelt et al., 2003). In an atmospheric system the product gas has to be cleaned so that the tars contained within it will not condense out and stick to the heat exchanges, causing loss of efficiency, need for more frequent maintenance and, quite soon, technical failure. The advantage of the pressurised system is that the tars remain within the gas and do not condense out; hence the product gas does not have to be cleaned before combustion. On the other hand, the more integrated pressurised designs are less flexible and difficult to fix if things go wrong. A pressurised system is also regarded as less inherently safe (Interview D, 2004). The gas cooling and cleaning processes proved to be the technical ‘Achilles heel’ of project ARBRE. The tar cracker, which was the main innovative component of the plant, did not operate as intended and the problem proved difficult to resolve in the rapidly diminishing time available to the project, once Kelda had withdrawn its support. The tar cracker was only effective in removing the tars by 50–60%. Still during commissioning, by keeping the temperatures high, tar was not really a problem; the major problem was the recalcination of CaO to CaCO3. (Interview B, 2004). Cracking was meant to be catalytic but in practice the thermal effect was equal to the catalytic effect; the fact that recalcination occurred indicates that the cracker had to operate at higher temperatures than it was designed to, because the catalysis

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alone was not effective (Interview F, 2004). There were, nevertheless, some technical achievements at ARBRE, including the fact that the burner was successfully lit using product gas (Rensfelt et al., 2003). In addition to the problems of the cooler evaporator and tar cracker, it was believed that technical problems with ARBRE also arose from the integration of so many new components together in a novel way (Interviews E, F, I, 2004). Whilst those components were largely tested individually, they had not been tested through their integration as a functioning system. It is argued by some that ARBRE technology was too complex for a plant at this scale, without providing any substantial efficiency benefits (Interview C, 2004), but this is disputed by others (Interview I, 2004). Those suspicious of complexity point out that as more components are included, there is more potential for problems to emerge (Perrow, 1984; Collingridge and Reeve, 1986). Since ARBRE only ran for a short period of time it is difficult to know whether the technical problems could have been overcome through design modifications. A demonstration plant was expected to face such problems and so it is not unreasonable to expect that perseverance might have led to their solution (Interviews A, E, 2004). There are conflicting opinions from the interviewees regarding this issue. On the basis of the information available, it is not clear whether the technical issues could have been resolved. It was argued that if it were possible for the plant to work then it would not have been sold as assets and at such a low price by the receiver (Interview F, 2004). Still, it is considered by some experts that with the replacement of the evaporator and tar cracker most major technical issues would have been resolved through the experience of consecutive gasification runs (Interview A, 2004).

10. Fuel supply issues ARBRE Farming Ltd. worked with the Forestry Commission and DEFRA to attract enough farmers to cultivate SRC in the region close to the plant. DEFRA and the farmers had to address the problem of rural diversification that would increase the farmers’ income at a time of dwindling subsidies for conventional crops. The development of SRC plantations was regarded as one potential solution. A number of farmers were convinced to accept the role of fuel supplier. The methods used for their enrolment have been described as effective but costly (Interview H, 2004). As the plant did not become operational, however, the farmers were left in an uncertain situation. It is for this reason that the original goal of getting the farming community to commit 2000 ha to SRC was not achieved, though 1100 ha was committed. It is considered by all the respondents that the development of the fuel supply chain was quite successful. It was perhaps too ambitious for ARBRE Energy Ltd. to try and establish SRC plantations and at the same time develop a new gasification technology. When ARBRE failed the farmers were faced with a long-term commitment to SRC without a market for it. The farmers felt disillusioned; they had been convinced that because of the size and reputation of Kelda, as well as the governmental support, their contracts would be safe (Guardian, 2003). A cooperative, the Renewable Energy Growers, was formed to defend their interests and seek out alternative markets. It was announced in 2005 that a large coal power station (Drax) which is situated close to the Project ARBRE site, would purchase the willow biomass that had been intended for ARBRE, to be co-fired with coal. It could be argued that the goals in establishing ARBRE were perhaps two ambitious as they involved novelty both in technology design and in supply chain development. Although

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the enrolment of farmers was successful, perhaps when novel technology is used the supply chain development should be less demanding.

11. Conclusions Arguably, there was insufficient control and monitoring by the organisations and companies involved in Project ARBRE. This lack of control seems to have exacerbated the degree of technical errors and the failure to address these errors in sufficient time. Perhaps the key policy message to emerge from the case is that effective scrutiny and oversight of publicly funded demonstration projects is required throughout their development, especially when bodies that might usually be performing this function in a commercial setting (e.g. banks) are not involved in this capacity. Project ARBRE raises some questions concerning the role of government in supporting high risk technologies. The financial case for Project ARBRE was significantly bolstered through support from both the EU Commission as a demonstration project, and the award of a 15-year NFFO contract by the UK government. The EU Commission’s support resulted in the selection of the higher-technology gasification option, yet this choice generated considerable uncertainties and risks at a later stage, when problems with technology development became manifest. The THERMIE grant presupposed a level of commitment and engagement with Project ARBRE from the commercial partners that turned out not to be justified. Meanwhile, as a deployment instrument, NFFO was intended primarily to assist in the wider use of reliable and proven renewable energy technologies for commercial and environmental reasons, whereas the EU grant was explicitly provided to support demonstration of an experimental, unreliable technology (Watson and Scott, 2001). It appears that the technological aspirations of the DTI might well have resulted in their offering a NFFO contract to ARBRE in a way which lent considerable support to the entire project, even whilst it was unlikely to be consistent with wider deployment objectives. The problem in the UK situation might well be that for the past several decades there has been a lack of basic R&D funding for new and novel energy technologies with the exception of nuclear power (Watson and Scott, 2001), perhaps encouraging occasional extension of deployment mechanisms beyond their recognised role. In the end, one could conclude that the failure of Project ARBRE can be attributed to the unfortunate co-incidence of several factors, and this would be a fair comment. On the other hand, as with many ‘accidents’ these factors were individually preventable, and documenting the process of failure may help to prevent their recurrence.

Acknowledgements The authors are very grateful to the interviewees who took part in the project. All conclusions are the authors’ own. References Bridgwater, A.V., 2003. Thermal processing of biomass for fuels and chemicals. In: Renewable Bioenergy: Technologies, Risks and Rewards, IMechE Conference Transactions, 2003-3, pp. 33–63.

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