There was little focus during the last Parliament on new policy and regulation for the waste and recycling industry.
But with a new Conservative administration now in place – and Liz Truss re-appointed as secretary of state at Defra – there is expectation of a clear signal to reignite the energy-from-waste (EfW) sector.
Existing policy means that Truss is working towards increasing the proportion of energy we obtain from renewable sources to 15% by 2020. An important contribution to this will be through a fresh focus on the waste market for refuse-derived fuel (RDF). This is produced by drying and shredding waste that can then be used as a fuel in EfW plants to produce electricity and heat, making excellent use of materials that might otherwise end up in landfill.
Currently, only a fraction of this valuable low-carbon fuel is used in the UK – the rest is landfilled and exported. The problems in the sector are capacity and cost. The UK simply does not have enough EfW plants to deal with the amount of waste produced, and the costs of treating waste domestically are high.
Instead, the UK’s RDF is mainly utilised in EfW plants in Europe, in particular in the Netherlands and Scandinavia, which produce electricity and heat for local homes and businesses. Environment Agency data shows that 256,309 tonnes of RDF was exported to the continent in March, which means the record has now been broken for four consecutive months.
But after close examination of the RDF market last year, we can expect the secretary of state to further engage with the sector – and clarify what RDF should be ‘made of’ and give support to treating our waste here so that energy can be generated for domestic homes and businesses.
A key priority for Defra is introducing a standard or definition for RDF. The environmental cost of RDF means that materials that could be recycled are instead sometimes included. Defra wants to ensure that only true residual waste, which has been properly treated, emerges in the final RDF product.
This could result in additional costs to some RDF operators, including the purchase of new operating equipment, along with an effective reporting and checking process. Watch out also for new regulations and permits governing the production of RDF to avoid environmental problems and poor standards of waste management, including controls over stockpiling.
Defra will want to ensure responsible operators are not alienated through any initiatives. The current capacity issue is being addressed, with a number of clients of law firm Bevan Brittan developing EfW plants across Britain.
Viridor has, in 2015, fully commissioned its energy recovery facilities at various sites, including a 300,000 tonnes a year (tpa) plant in Oxfordshire and a 350,000tpa plant in Cardiff which are both now creating energy.
In Scotland, waste management company Levenseat recently signed a deal, with Green Investment Bank (GIB) support, for the development of a £111m fluidised bed gasification EfW plant and RDF production facility. This infrastructure is now in construction and should be creating energy from RDF in 2017.
GIB support in this sector has been welcomed because it has helped to bring projects to the market at a time when there remains much uncertainty - especially in the renewable subsidies regime, which has now moved to the Contracts for Difference model.
In the longer term, the market for RDF will depend on hard economics. The market is still immature, with significant amounts of RDF being exported because there is currently not enough capacity here and gate fees are high compared with Europe, even after haulage costs.
The crystal ball question is in which year the ‘tipping point’ will arise such that the UK has enough capacity to treat its own waste and its gate fees are competitive. Defra could help to bring the tipping point forwards, but how much it is prepared to do?
It is unlikely that the Government will want to restrict RDF exports because it would prefer to encourage greater competitiveness and expand markets for renewable energy.
It may also examine how EfW plants need to be adaptable to future changes in the composition of waste and advances in technology. This could include clearer measures to maximise efficiency by ensuring the maximum use of heat generated, going beyond electricity-only production. This would tie in neatly with the desire to develop heat networks, a policy which we can expect to continue as part of the new regime.
Some operators remain fearful that red tape could damage a still-emerging EfW industry, and Truss’s in-tray at Defra is full of their representations ahead of any fresh regulation.
But all sides appear committed to creating an industry that will bring new investment and jobs, combined with cheaper and more sustainable energy.
Nadeem Arshad specialises in waste and energy projects and is a partner at law firm Bevan Brittan