Use of a Joint Venture to enable carbon insetting in pyrolysis

Shropshire Council has approved £2 million spend on the installation of a pyrolysis unit, but to gain a better understanding of the biochar and carbon credit market a Joint Venture has been established with a local pyrolysis unit manufacturer. This case-study describes this approach compared to exclusive ownership.

In presenting our case for pyrolysis as a self-financing means of carbon capture, we had two key uncertainties in our financial model; the market values of carbon credits, and of biochar. Markets for both these products appear to be increasing globally but given the small scale of the market in the UK there is considerable uncertainty which undermines our financial model. Global data on carbon markets and a financial sensitivity analysis have provided some assurance of the viability of the idea but hard data on where biochar is being sold, and at what price, is hard to come by. Thirdly, we were keen to innovate in this area of climate technology, but with little experience with this technology and its operation and set up, we wanted to learn further before we committed more investment. 

A Joint Venture with Woodtek Ltd, a manufacturer of pyrolysis units, has provided them with the capital to build and install one of their next generation pyrolysis units - the C1000. When functional in October 2024, this will allow Shropshire Council to gain insight into the markets for biochar and the carbon credits derived from the biochar. It provides a low risk first step into pyrolysis and these new markets because the loan to Woodtek is secured by the value of the equipment. Woodtek benefits from the clean, renewable energy produced by their equipment and the ability to test their latest model firsthand. Two C1000 units are in operation as of July 2024 with two more, including the joint venture unit, coming online later in 2024.

Shropshire Council have invested in the joint venture by way of a loan at commercial interest rates to fund the capital required to commission a new C1000 unit.

Estimated annual returns for just Shropshire Council from the sale of biochar and carbon credits are £115,000 per annum. 

Carbon sequestration will be over 1600 tonnes of CO₂ per annum. Initially, we will be trading these carbon credits to pay off the loan, but we see this investment as a means of generating the capacity to offset our emissions in future as a form of carbon insetting. Two of these units would offset Shropshire Council’s current direct net carbon emissions (Scopes one and two).

Through our Joint Venture, we not only provide a means to demonstrate the carbon inset technology and markets, but we also generate income and repay all upfront investment within five years. 

Our local business partner has employed three new members of staff and likely more in the next few months. 

Our financial model accounts for staff time to run and maintain the unit.

The joint venture has been a vehicle to test climate innovation, understand an emerging market and be a catalyst for business growth with minimal financial risk.  

Initially, the joint venture was set up to help us understand carbon and biochar markets. We now feel that this approach would help us work with other councils and businesses, including industries that have a large requirement for heat energy. 

We have developed a governance protocol to continually manage and review the joint venture's business operations and finances. We have developed integrated steering and working groups with council directors and Woodtek Engineering directors and staff to jointly manage the business and ensure our learning is captured and shared within both organisations and further afield. 

Get a good team of project managers and solicitors to help push things forward quickly. This process has been long and, at times difficult, so Shropshire Council are working with consultancy Klere Ltd to develop a framework and roadmap of documents and guidance that would enable other LAs or businesses to adopt this approach in a quicker more cost-effective manner. 

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You can find more information on biochar and pyrolysis on Shropshire Council website.