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Sewerage sites set to be seats of power in resource market

These once-neglected inner-city sites and ‘council yards’ languished from the 1970s as disposal migrated to rural landfills occupying aggregates quarries. As logistics costs to distant landfills rose from 1990, they reinvented themselves as transfer stations.

These are now the sought-after areas for MRFs and plants running more advanced technologies but, alas, they are often too small and technology-restrictive. Technology suppliers desperate to fund exemplars have nevertheless adopted them in response to the risks of using greenfield locations.

Examples of standalone MRFs, energy-from-waste plants, recycling consolidators and bio-treatment activities are commonplace - all dependent on expensive logistics between sites by road and rail for feedstock or output transfer.
In the long run, however, winning investors will seek and find three golden rules for the highest returns:

  • The overall supply chain (from collection, feedstock preparation and conversion) will have to maximise energetic efficiency.
  • The ‘back-end’ products must sell for more per input tonne than competitors. For example, plastic as recyclate at £300 a tonne currently beats the £150 if pro- cessed into electricity in a gasifier.
  • Because of the high probability of carbon taxes during the life of these plants, they must ensure low carbon footprints from waste to resource.

Even with these three factors, the operation will be more economic if it is located with other recycling and waste facilities close to exit markets.

In a world where asset utilisation becomes critical to profitability, particularly for feedstock preparation/MRFs, competition for feedstock will accelerate, gate fees weaken and dependence on ‘back-end’ revenue will become the norm. The ability to maximise sales and asset utilisation will drive procurement strength for feedstock.

On this basis, I responded to an Office of Fair Trading inquiry, emphasising the relevance of about 100-150 large (10 hectare-plus) sewerage installations near urban locations. These offer space for a properly integrated series of huge processing facilities for resource recovery.

These sites have spare space because of a technology shift in the past 20 years, and the water companies are themselves keen to expand their use outside their regulated business. If evaluated by an objective scorecard approach, such as that developed by Advantage West Midlands, they are attractive in terms of distance from houses, co-location to suitable energy grids, biodiversity issues, and access to motorways and rail links. They are also going to be around for their primary function for generations ahead.

How might such a transition be managed? My suggestion would be for those 100 or so attractive sites to be removed from the regulated water asset base into a new category of planning use for ‘resource recovery’, embracing biogenic, biochemical, thermo-chemical and mechanical recovery in all their forms.

Existing ownership would be subject to an Order in Council, obliging them to be auctioned off for these uses, together with the acceptance of Water Act regulations for extant sewerage treatment and the Transfer of Undertakings (Protection of Employment) Regulations of staff and assets.

A pipedream? Perhaps, but I remember the hugely inefficient and expensive distribution networks for food in the 1960s before the age of supermarkets. Since the introduction of large integrated logistical transfer sites backed by information technology, the cost of food to UK households as a share of income between 1970 and 2008 has been halved. The inbound tonnage from food and non-food supply chains is not dissimilar to that from waste, at 60 million tonnes annually, and our sector needs to adopt the same principles.

Major plcs, mindful of the three golden rules, are circling water company assets. In the long run they will beat those with single technology sites far from feedstock or valuable markets for their low embedded-carbon renewable outputs. Watch that space.

Peter Jones runs the consultancy Ecolateral and is a former director of external affairs at Biffa

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