Dutch healthcare scheme PFZW is to invest in a “revolutionary” Dutch technology that can transform wet organic waste into the fuels of methane and hydrogen.
The investment would be the first of a new €500m private equity allocation, specifically aimed at impact investing in the areas of climate, water scarcity, food security and care, it said.
The €217bn pension fund said it would take a minority stake of “several millions” in Alkmaar-based SCW Systems, which has built a demonstration plant in a co-operation with New Energy, a subsidiary of Dutch gas supplier Gasunie.
SCW’s “super critical water gasification” technology involves the transformation of material, such as sewage sludge and agricultural biomass as well as garden, vegetable and fruit waste, under high pressure and high temperature.
The company said it would initially focus on supplying industrial large-scale users. It expected to have completed three gasification plants with an output of 20 petajoules by 2023. This equates to 2% to 3% of the demand for gas and 1% of the entire energy demand in the Netherlands, according to SCW.
It added that it would need 500,000 tons of waste material for gasification annually within four years.
“It shows that within the existing economy, we can improve sustainability with relatively small changes in the infrastructure”
Peter Borgdorff, director of PFZW
Peter Borgdorff, director of PFZW, said that the new technology deserved a place in energy production in the Netherlands.
“It shows that within the existing economy, we can improve sustainability with relatively small changes in the infrastructure,” he said.
Maurice Wilbrink, spokesman for PGGM – PFZW’s asset manager – said the pension fund expected to make further investments in the project as it expanded.
He highlighted the potential of the technology, noting that all current industrial installations using natural gas in the Netherlands had to improve their sustainability in the coming decades.
“Approximately half of future Dutch energy use will remain dependent on methane or hydrogen, so all of SCW’s output will find its way to the industry,” he said.
According to PFZW, the gasification process also releases carbon dioxide, which could be captured and used in horticulture to improve plant growth.
It added that SCW was investigating the possibility of transforming the carbon into a fixed material that could be used as a replacement for lime or concrete.
“This way, the carbon could be permanently removed from the atmosphere,” the pension fund said.
The healthcare scheme further noted that the gasification process would also release minerals, including phosphate, which was important to retrieve as natural reserves were limited.
Above target returns
PGGM’s Wilbrink said that, given the higher risk profile of the project, the expected return of the investment was higher than PGGM’s target return of 8% to 12% for infrastructure.
He further indicated that PFZW wanted to use its additional private equity allocation to invest earlier in the development phase of projects through specialist private equity houses.
The pension fund preferred to participate as a co-investor, in order to exercise as much influence as possible, he said.
PFZW already had a €12bn private equity allocation, equating to 5% of its entire assets. The portfolio generated 5% last year.
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