3i Infrastructure plc (“3iN”), an investment company advised by 3i, invested in Infinis, the largest generator of electricity from landfill gas (“LFG”) in the UK in December 2016. In March 2018, 3iN funded Infinis’s major follow-on acquisition of Alkane Energy, an independent power generator from both Coal Mine Methane (“CMM”) and reserve and power response operations and the largest generator of electricity from CMM in the UK.
The power generation sector in the UK is undergoing fundamental changes in both supply and demand and in energy distribution.
The retirement of old coal and gas plants to meet stringent emissions regulations has been driving the shift towards new platforms.
The drive for decarbonisation over recent years has resulted in the rapid and increasing deployment of renewable power (24.5% of total power generation in the UK in 20161), much of which from intermittent sources such as solar and wind. This has presented National Grid with challenges in managing system stability.
Security of supply has therefore become a key objective, along with an ever-growing need for highly responsive, flexible generation to provide reliable baseload power.
As it burns LFG and CMM to generate power, Infinis provides an efficient, secure and non-intermittent source of power generation, while also abating the global warming impact of the methane emissions generated in the sites it operates. In addition, by operating reserve and power response generators it further alleviates the issue of system stability deriving from an increase in intermittent power sources in the UK generation mix.
1 Source: Energy UK
Biodegradable waste deposited into landfill sites breaks down, forming LFG. LFG predominantly comprises methane (57%), one of a number of gases contributing to global warming and carbon dioxide (43%). Methane is a highly potent greenhouse gas with a contribution to global warming over 20 times greater than that of carbon dioxide. Combustion is the most efficient way to dispose of these gases.
Infinis extracts the gas from its landfill sites by sinking wells into the site, it then removes the moisture from the gas and burns it in engines to generate electricity, which is fed into the distribution network. Most of Infinis’s sites are closed to new tipping and, as such, the LFG from these sites is a finite, depleting resource.
CMM assets are similar to LFG assets. Infinis generates power from the methane accumulated in abandoned coal mines, also a finite and depleting gas resource. While the gas resource differs, the technology employed for gas extraction and power generation is almost identical.
Unlike solar or wind power generation, the combustion of LFG and CMM provides constant, and not intermittent, baseload power, which is complementary to power generated through more traditional renewable sources such as wind or solar.
As its LFG and CMM resources deplete, Infinis has increasing spare engine and grid connection capacity, which it is exploiting to develop non-LFG and CMM generation activities, such as power response operations. Power response plants are generally run only at times of peak demand for electricity. They generally burn natural gas in gas turbines, however a few, situated in areas not supplied with natural gas, burn biogas or liquefied petroleum gas.
Power response plants are becoming increasingly important in countries, such as the UK, that are growing the weight of intermittent energy sources such as solar and wind in their generation mix.
Infinis operates as a platform for consolidation for power response generation assets, and its acquisition of Alkane was driven by this logic. Infinis is investing heavily in the opportunity presented by peaking and reserve power generation, providing an essential service in managing system stability as the use of intermittent renewable generation grows.
Infinis has 35MW of reserve power generation now under development, for which 3iN has agreed to provide further funding of £12 million and is committed to developing Alkane’s power response project pipeline post-acquisition. The combination of the two companies creates a business of significant scale and offers opportunities for operational improvement.