“It would be so easy for the Government to cut local authority budgets,” says Waste Recycling Group (WRG) chief executive Paul Taylor. “There is now no pressure on it to meet the 2013 Landfill Allowance Trading Scheme (LATS) targets because it seems that we have already met them, so there is no pressure on local government to build more infrastructure.
“But it would be a missed opportunity to cut costs in the short-term because so many firms in the waste management sector are looking to invest in the UK.”
One of those companies is waste management firm WRG, with complete support from its parent company Madrid-based FCC. Last week, WRG unveiled its expansion plans and shift to becoming a provider of waste treatment technology, away from its historical position as a landfill provider. This will come at a cost of £1.5bn during the next 10 years. It is a result of changing times because legislation from the UK and EU drives the need for countries to take more responsibility for the waste and carbon they produce, creating a huge shift away from traditional landfilling.
“Moving from landfill to treatment is part of the challenge,” says Taylor. “At the moment, we’re handling 10 million tonnes of waste each year - we recycle and treat two million tonnes while eight million tonnes goes to landfill. Waste arisings have already begun to drop and they will keep going down during the next 10 years because of targets. So we need to develop the right infrastructure to deal with
The company predicts that the amount of mixed waste it directly landfills each year will fall from the current eight million tonnes to 2.5 million tonnes. In contrast, the combined amount it recycles and treats will rise from two million to six million tonnes, demonstrating the absolute need for more waste treatment infrastructure.
“Moving from landfill to treatment is part of the challenge”
WRG’s transition will see it working more closely with sister company Focsa, which collects waste, and FCC, which builds and manages waste treatment facilities across Europe. Taking advantage of FCC’s talents as a technology provider, WRG will offer the whole package of waste treatment facilities, including anaerobic digestion (AD), mechanical biological treatment (MBT), energy from waste (EfW), gasification, in-vessel composting and sorting through materials recycling facilities.
“Waste has an incredibly important role to play in the renewables market as a fuel,” says Taylor. “It is something that has a basic intrinsic value. So we want to be a leading player in the waste management market with our new naturally sustainable and profitable business model.”
Already, WRG has begun the move towards energy with the announcement earlier this year, of a wind turbine project, in partnership with FCC, with energy crops another niche project WRG will be developing. But the threat of Government cuts in the October spending review, which are thought to be around 25% for local authorities, combined with uncertainty within the planning system and the future existence of private finance initiative (PFI) projects, the uncertain future of LATS and what the Government’s review of waste policy will lead to through its zero waste plan, means that some companies are holding off from investing.
Considering this long list of uncertainties, it would seem that FCC and WRG are carrying out a brave move by shifting into a sector that has the potential to be quite risky. But WRG is in a strong position by having FCC as its parent company. Despite the awful economic conditions Spain has been through in the past year, FCC is determined in its plight to become a global company.
Its core businesses are environmental services and water management, construction of large infrastructure, cement production and renewable energy production. FCC is a Spanish company but its revenue from international markets is 44%, which shows phenomenal growth since 2005 when just 5% of revenue came from overseas. With the Waste Framework Directive ruling that EU member states should aim to recycle 50% of municipal waste by 2020, coupled with the EU’s target to have member states providing 20% of electricity from renewable energy by 2020, it is clear that FCC hopes to be the company that can provide infrastructure to achieve these targets.
Chairman and chief executive Baldomero Falcones explains: “It is a great opportunity to do things at the moment. In a crisis we have to take the opportunity to change things.
“Our position in the UK is very important and makes sense to us, because the rule of law is strong, which gives businesses security, and the country is very environmentally conscious. That’s why the most important operation we have at the moment is with the UK and WRG. We’re very proud of this. It is true that [Spain is] facing a very tough situation because of the economic crisis, which is affecting different areas of business, but we must invest into the business in order to secure it.”
Commenting on the challenges ahead for the company, Taylor says: “Certainly, the UK planning regime will be a barrier to developing new infrastructure. For instance if the Infrastructure Planning Commission is being taken away, what is replacing it? And the new Government’s view of localism and giving more power to communities over what is built in their neighbourhoods could also be affected. Waste is a fuel but the public’s acceptance of this is a gap that we haven’t yet bridged.”
Taylor believes that further cuts in programmes such as Building Schools for the Future and funding uncertainty over massive infrastructure projects such as Crossrail are a cause for concern, because it could mean the waste sector is next to see its funding stripped. In addition, there seem to be no further waste PFI projects coming online, which could completely change the way that contracts with local authorities are set up, which may then affect financing.
For Taylor, the LATS issue is key to the future of Government support for waste infrastructure. He says: “That threat of a £150 per tonne fine is tough on local authorities, so it is a good driver for them to introduce infrastructure. But it looks as though there is no longer a threat because we will meet the 2013 target. Are LATS a sufficient driver now? I don’t think that fine is a real threat to local government any more.”
Despite the ambiguous future of the market, FCC’s biggest single investment was buying WRG in 2006 at a cost of €2bn (£1.7bn), and with a further £1.5bn to be injected into WRG, this Spanish company has demonstrated how confident it is the UK will deliver.
FCC’S MADRID FACILITY:
WRG aims to recover all the recyclables it can, creating energy from the organic and biomass waste that is left while landfilling anything that cannot be utilised. It is the same strategy taken by FCC when building its eco-parks, which have a variety of facilities in one place.
One example of this is FCC’s Madrid facility, Planta de las Dehesas, which is a part of the city’s waste management system. The system treats the total tonnage of the city’s waste, which stands at 1.5 million tonnes each year, while las Dehesas separates and sorts 475,000 tonnes of mixed waste and 90,000 tonnes of recyclables each year.
The process begins at a separation and sorting plant, where appropriate organic material is sent to a composter, recyclables are sorted and sent to recyclers and bulky waste is sorted and treated. Plastic material is sent to the plastic recycling facility, while mixed waste containing organic material is transferred to the MBT plant to further segregate organic and recyclable waste.
Once as many recyclables as possible have been recovered from the mixed waste, the organic fraction is then sent directly to the AD plant, which is located a few feet away. It has the capacity to treat 218,000 tonnes a year and was built at a cost of €50m (£43m), 75% of which was funded by the EU Cohesion Fund. It is the largest AD plant in Europe.
FCC captures the biogas created by the AD process to generate electricity and the leachate is fed back into the process, while the digestate is combined with wood before being sent for composting.
An EfW facility which treats dead animals and a landfill site are also situated at las Dehesas, providing a full solution to the mixed waste and recyclables it receives.