Fuel Supply Agreement

A Fuel Supply Agreement or FSA is the name generally given to the contract to supply an Energy from Waste facility with feedstock.

Context

The nature of the Fuel Supply Agreement will be related to the design approach towards the Energy from Waste facility in the following key areas:

1. The Technology of the facility's Kiln/Furnace/Reactor and Boiler. As an example a Fluidised Bed would require a smaller and more uniform particle size than a Grate, and fuel with more Chlorine would require a more robust metallurgy to protect against corrosion by acidic gases. Additionally, the nature of the technology may directly relate to the waste fuel in question i.e RDF vs Wood Waste.
2. The approach taken towards the management of Emissions. As an example compliance with the Industrial Emissions Directive could require a tighter specification fuel with a lower gate fee income but requiring less controls, or a wider specification fuel may have a higher gate fee income but require more robust controls at greater cost.
3. The Operating Cost of the plant. As an example a fuel with high ash content and/or non-combustible element would result in more IBA to be managed. A fuel with more chlorine and heavy metals content would require more consumables and cost to manage emissions.
4. The Energy Content of the fuel. The technology will be designed for a Calorific Value (CV) range. Outside the range and the facility will not perform, but the lower the CV in the range the more fuel that can be received and the higher the CV the less fuel that can be received. Hence more gate fee income that may be realised for a low CV fuel than a higher CV fuel.

Contractual Terms

Contract terms broadly follow typical contractual arrangements for supply agreements, but there are several that are more specific to waste-related fuels:

• The duration of the contract, which could be as long as 15 years or more.
• The specification of the fuel (and the related testing to demonstrate compliance and actions to deal with non-compliant fuel). The key elements being:
  • Calorific Value (CV) and associated Moisture Content
  • Particle Size and Bulk Density
  • Ash Content/Metals and Non-Combustible content
  • Heavy Metal Content
  • Chlorine and Sulphur content
  • Biomass content (if the facility is relying upon some form of subsidy)
• The guarantee of minimum tonnage (and the consequence for both parties of not delivering or receiving that tonnage, often on a 'take or pay' basis)
• The warranties and guarantees associated with the minimum tonnage guarantees and performance of both parties
• Increasing, the requirement for a market review at intervals to review the nature of the market in terms of the availability of tonnage and the associated gate fee