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Government policy is holding back EfW

There have been significant increases in the number of energy from waste plants over the past few years, in particular anaerobic digestors which have doubled in number to 108 since 2011. However, there is still a long way to go to have the national infrastructure in place to put all biomass waste to better use than landfill.  

UK waste policy clearly defines the need for new recycling and recovery infrastructure, but at the same time, it is government policy that is also hindering its delivery.

What is critical for the industry to deliver growth is marketplace stability regarding any government incentives, waste strategy and targets. Building large-scale commercial plants is a massive investment and there are very few companies able to fund this through existing capital, so the need for long-term market visibility is essential for investors to analyse the financial return on such projects.

The sector is predicted to see significant levels of growth over the next few years. Last year, the Office for National Statistics predicted that the UK’s total recycling and recovery market would expand by 4%. Energy from waste is expected to play a major role in driving this growth.

This prediction is backed by a report by analysts Frost & Sullivan, which argued that the UK and Ireland will be the most attractive market for energy from waste investment between 2013 and 2016 when 24 new thermal plants will be built, with revenues peaking at £2.3bn in 2014 when seven plants come online.

However, the current review of the Renewable Heat Incentive (RHI) biomethane injection tariff has the potential to impact on these predictions. Such uncertainty and changing policy more often than not sees teams having to go back and recalculate all their figures to ascertain whether it is still financially viable or worth the risk to continue with projects. 

Indeed, the government’s response to the RHI consultation in 2013 states that there can be no long-term, guaranteed tariff rate as the RHI is funded directly from government spending and is assigned annual budgets by the Treasury at each spending review.

The short-termism of government election cycles is a key issue in the development of long-term strategies which require industry to invest tens, if not hundreds, of million pounds into new facilities. It is naive of the government to expect commercial entities to undertake that level of risk. While the taxpayer cannot be expected to foot the bill, nor can the business sector be expected to operate at a loss.

What the industry really needs is long-term confirmation of the level of incentives that will be paid out over the coming years and a commitment to guarantee the timescale. Too often, there have been policy u-turns that have had significant impact on the affected sector – just look at the feed-in tariff cuts in 2012, which saw scores of solar businesses go to the wall as business dried up.

We have to agree a common goal, which should be to maximise the energy generation potential that waste offers. Engagement with industry on how to develop that strategy is crucial to have in place a workable and achievable methodology that incorporates and tackles the challenges that exist.

With the current review underway, we have to hope that there will be swift resolution and longevity to the outcome. The key watch words for future policy have to be stability, security and visibility.

Philip Simpson is commercial director, Saria UK (formerly PDM Group)

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