Ticking Time Bomb

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In a national first, a brewery in Suffolk is planning to turn its leftover hops, grain, yeast and food waste into biogas, and feed it into the national grid for use along with the existing "natural gas", which is distinctly less organic.

David Cameron and his ministers see it as the start of an energy revolution, which could simultaneously lessen Britain's dependence on imported gas (particularly from Russia), tackle climate change, increase energy security and cut down on rubbish. 

The business sector is warning that these plans are being put at risk by George Osborne's Treasury – as is the Government's wider vision for a low-carbon economy, partly fuelled by a massive increase in renewable energy. The cuts, they say, are jeopardising the incentives needed to get clean-tech industries off the ground.

The fresh-brewed gas is to be produced by an exceptionally green brewery, Adnams of Southwold, who already produce a successful "low-carbon beer" from organic hops, sold in the "lightest beer bottle on the market".

The firm – which won a Carbon Trust/Daily Telegraph Innovation Award three years ago – will start with food waste, but aims to move on to its other raw materials later.Something similar – but less appetising – is being planned across the country at Davyhulme sewage works near Manchester, which aims to generate gas for the grid from its unsavoury raw material.

It will initially supply enough for 500 homes, which could be scaled up to cover 10 times as many.The two projects, says the Department of Energy and Climate Change, will be the first in Britain to provide biogas to the grid.

The agreement that set up the Coalition promised a "huge increase" in it, and ministers envisage farms and supermarkets – as well as sewage works and companies – making it all over the country. The department calculates that every ton of food waste turned into gas in this way instead of being dumped on to rubbish tips will save the equivalent of between half a ton and a ton of carbon dioxide.

Eventually, according to a key Conservative Party policy document, such gas could heat half of Britain's homes. A German report has concluded that its biogas supplies – which are already being fed into the grid – could match current gas exports from Russia to the whole of the EU by 2020.

On Tuesday, Greg Barker, the climate change minister (and one of the architects of the "greening" of the Conservative Party), called a round-table meeting of businesses, farmers, the water industry and others to "investigate how we can be far more ambitious" in using the technology.

He sees biogas as just the first in a suite of local, small-scale forms of renewable energy, such as hydroelectric power from streams and rivers and wider use of solar panels. To help this along, he is abolishing a prohibition on local authorities generating their own power.However, renewable energy firms point out that the impending cuts, and the uncertainty they induce, are endangering both the biogas revolution and other renewables.

Duncan Valentine, a director of Renewable Zukunft, which develops large biogas plants on farms, says that its four large projects are stalled because bankers took fright after the last government said that it could not guarantee its levels of subsidy beyond a few years. A solution was worked out in Labour's last months, and was due to be announced about now.

But it has been put on hold amid uncertainty about the cuts, causing the company "very, very painful" difficulties.Ministers have also stalled on the implementation of the so-called Renewable Heat Incentive, which would reward families who installed solar water heaters and heat pumps, and which the last government was to bring in next spring.

Worse, the Chancellor has already cut grants supposed to tide things over until then."If we lose any incentive for people to buy heat pumps, we will go bust," says Richard Freeborn, the chairman of Kensa Engineering, one of the manufacturers. Aidan Walker, the managing director of Hoval, a manufacturer of woodchip-fuelled boilers (whose sales have slumped by 30 per cent), says that "shockwaves" are going through the industry.

Barker rightly points out that the Government's flagship policy – giving householders big loans to implement energy-saving measures – is still intact. But its success will depend on the interest rate that's set, and the Treasury isn't exactly in a generous mood."The Government has got to decide," says Mr Freeborn, "whether it wants a low-carbon industry in this country or not." But in practice, it hasn't even resolved yet whether or not it will start cooking with biogas.

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