It is government policy to encourage the generation of energy from waste through anaerobic digestion, which is a process where microbes break down the waste and turn it into biogas.
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There are three main sources of organic waste, sewage, household food waste and the waste from food factories and farms.
The study will assess whether price regulation of sewage sludge treatment is still appropriate and whether there is scope for more competition. The OFT will also assess if there are any barriers to efficient investment in co-treatment plants where waste from different sources is treated in one facility.
The OFT will also try to identify what can be done to encourage investment in anaerobic digestion and other technologies.
Water firms, such as United Utilities and Northumbrian Water, have been building anaerobic digestion facilities. Northumbrian is generating part of its own power requirements from one such plant and another is planned.
Shanks Group is starting construction of its second anaerobic digestionfacility, which will be based in Buckinghamshire. The £11m facility will generate up to 2MW of electricity. Shanks is seeking planning permission for a third facility in east London.
AIM-quoted TEG Group is also involved in building plants that combine its own composting technology with anaerobic digestion facilities. Alkane Energy has linked up with TEG to provide its expertise in turning the gas produced into power. Ireland-based Kedco also intends to use German technology to build anaerobic digestion plants in the UK.
AIM-quoted Pressure Technologies, which makes seamless steel gas cylinders, set up a new business in November 2008 to sell Greenlane? equipment that can be used in anaerobic digestion plants. It will be a beneficiary of increased investment in this area.
The OFT study is expected to last six months and be completed in July. The recommendations can then be taken into account in water regulator Ofwat?s review of economic regulation in the water and sewerage sector.