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Active Energy (LON:AEG), the timber and forestry group, is teaming up with a US firm to commercialise what it describes a “revolutionary” new manufacturing process that allows biomass to be burned in unconverted coal-fired power stations.
It is teaming up with Utah-based Biomass Energy Enhancements, or BEE for short, to form AEG CoalSwitch.
The AIM-listed firm will hold 51% of the joint-venture company and will contribute the initial working capital.
However, Active said it has begun negotiations “leading investment funds” to raise the capital required to roll out its 'build-own-operate-toll' business model.
The cash will fund the construction of a network of advanced fuel manufacturing facilities close to large-scale biomass raw material sources, including forests, sawmills and agricultural and industrial waste sites.
BEE has been developing its ground-breaking fuel processing system for the past seven years and Active Energy reckons it is a “game changer".
The environmentally-friendly process cleanses the raw biomass by removing salts, minerals and other contaminants that harm the atmosphere and damage power plant furnaces.
This converts the material into valuable high-energy fuel feedstock, without the low and medium volatiles resident in other biomass-based fuels, such as 'white pellets'.
Crucially, and this is significant, it means the fuel can be burned in coal fired power stations, or alongside coal – negating the need for an expensive conversion.
To put this into context, the Drax power station in Yorkshire, one of the country’s major generating plants, made the switch to biomass starting from 2013. The cost of the change to green fuels was in excess of £700mln.
Chief executive Richard Spinks said: "By utilising our sustainable clean energy biomass fuel, coal-fired power generators across the globe can choose to 'go green' - improving air quality and contributing to arresting climate change - faster than was previously possible, without investing huge sums in upgrading and converting their power plants; enabling them to avoid the other option… being forced to close.”
He described the timing of the JV as “perfect”, coming just weeks after president Obama's landmark speech setting stringent emissions reductions targets on US energy producers and piling the pressure on them to clean up or shut down.
It also comes just days after the owners of the Eggborough coal-fired power plant in Yorkshire announced that they would be closing the 2,000 MW facility in March 2016, with the loss of 250 local jobs and 4% of the UK's electricity generation capacity.
This was due to a lack of government funding to convert it from coal to traditional biomass.
Spinks said AEG CoalSwitch is aiming to have a market-ready product - a system capable of producing high volumes of clean energy coal switch biomass fuel - by mid next year.
“We have a great deal to do, but I'm confident that combining BEE's outstanding technology and expertise with Munro's world-leading engineering capabilities and AEG's international network and industry experience will herald the start of a new dawn in sustainable biomass-fuelled power generation," he added.
In an interview with Proactive Investors, CEO Spinks said BEE’s was the only technology the company had identified during a seven year search that could produce an end product that could directly replace coal in power stations.
“This something no-one has managed to do to date,” he added.
The process isn’t limited to wood waste, almost all other types of biomass can be treated, Spinks revealed. Potentially the opportunity could be huge.
“There is about 9bn tonnes of coal a year burned,” the Active Energy boss told Proactive.
“That’s a lot of coal. And average power station burns around a million plus tonnes a year of coal.
“We can start by allowing a number of plants to immediately meet their emissions requirements by burning perhaps 30% of our product.
“But they can use 100% if we produce enough for them and they pay the right price.”
The shares, which have more than doubled in value in the year to date, at a further 13% in the wake of the news and are now changing hands for 6.24p each. At that price, Active Energy is valued at £36mln.