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Biomass overtakes wind as champion in renewable energy

Biomass facilities have become a more attractive investment than wind and solar technologies, according to the renewable energy sector.

The annual survey of global renewable energy mergers and acquisitions (M&A) by KPMG International indicates that 37% of respondents intend to invest in biomass, while 36% want to invest in solar and 35% in wind energy.

The M&A market increased 145% in deal volume in the first quarter of this year against 2009, with a 63% increase in value. It is expected that many start-up small firms in the renewable energy sector, which have limited finances but have survived the economic recession, may face the prospect of being bought up by another company this year or not surviving due to their frailty.

“Biomass plants have the potential to yield much higher returns than other renewable sources,” explains Andy Cox of KPMG.

“A well-executed biomass plant can deliver substantially greater economies of scale than wind, and the heat generated from incineration can supply neighbouring buildings, creating another revenue stream.”

Utilities looking for next trend in renewable energy

“While wind is still seeing enormous deal activity at the moment, our research has shown that dealmakers, particularly the large companies such as the utilities, are looking for the next global trend and biomass looks set to be the ‘new wind’,” adds Cox.

“The potential for biomass to operate as a base load power source provides advantages in comparison to intermittent technologies such as wind and solar in large-scale electricity system integration.”

“Investors in biomass have important challenges to address, in particular focusing around the visibility of long-term fuel supply and pricing,” Cox continues. “These challenges are hampering the availability of funding for many projects.”

Turnkey contracts in biomass add 20% to the capital cost and, despite the fuel and construction challenges, companies with financial resources are driving biomass forward as a complement to their wind and solar portfolios.

The research also revealed a continuing gap between expectations in valuation between buyers and sellers of renewable assets.

Powering Ahead: 2010 - an outlook for renewable energy M&A was produced for KPMG International by VB/Research. It surveyed 250 senior executives in renewable energy between January and March, with 33% based in western Europe, 29% in North America and 18% in Asia-Pacific.

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Bioenergy  •  Energy infrastructure  •  Photovoltaics (PV)  •  Policy, investment and markets  •  Wind power

 

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