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The clock is ticking…

Tough targets set by the EU to cut the amount of biodegradable municipal waste we send to landfill are getting closer, with landfill diversion targets set for 2013 and 2020. But all that waste needs to be dealt with, which means putting in place the treatment facilities to do it.

Speaking at a recent MRW/New Civil Engineer conference on ‘Building Waste Infrastructure’, Defra waste infrastructure delivery programme (WIDP) manager Paul Croston said: “If we are going to be zero waste, there is a lot of waste to be dealt with by infrastructure that is not around at the moment.”He confirmed that all PFI credits available have now been allocated to projects: “There are no approvals outstanding but we recognise the close rate needs to accelerate. Last year only two projects closed, one being Greater Manchester [the other Cumbria],” he told delegates.

He said this slow rate of close had been recognised and measures had been put in place to deal with it. As a result, he was “optimistic” about the rate of close of PFI projects for 2010/11 and confirmed the current state of play with waste PFI projects: five are at preferred bidder stage, 10 are at two-bidder stage, four are at short list stage and four are at long list stage.

“Do we have enough treatment capacity in the system to deal with the tonnages of waste that will have to come out of landfill?”

Croston flagged up policy uncertainty, with the Government waste review in progress; investment uncertainty; planning uncertainty; and data uncertainty as key issues affecting progress in the development of the UK’s waste infrastructure. But he added that WIDP would help in the areas it was able to. So do those working and operating facilities within the waste management sector think we will get the waste infrastructure needed in place?

Sita UK director of external affairs Gev Eduljee says: “The question we have to ask is: in order to meet our 2020 landfill diversion targets, do we have enough treatment capacity in the system, either built, being built or pending in planning, to deal with the tonnages of waste that will have to come out of landfill? Defra’s view appears to be that the infrastructure commitments under PFI to date will be sufficient to deal with these tonnages to 2020, because PFI contracts are typically 20-30 years long and that will cover the 10 years to 2020.”

But he warns that there are two qualifiers: “First there’s the matter of timing. Even if local authority spending on all the necessary infrastructure was committed and locked in, we are seeing planning delays and refusals for the big-ticket items such as energy-from-waste plants, mechanical biological treatment plants and so on - the sort of plant sizes that would make the most contribution to landfill diversion.

“Every year’s delay tied up in objections and inquiries adds cost and makes the fixed deadlines that much harder to meet,” Eduljee adds.

“Second, with the recent change in the definition of municipal waste, significant tonnages of commercial and industrial waste of ‘similar composition’ will now have to be added to our landfill diversion targets.

“Of course, PFI does not apply to C&I waste, and the Government is relying on the private sector to come up with the funds. With C&I waste recycling around the 45% mark, meeting the 2013 target is not an immediate problem. But Defra is aware that recycling and energy recovery from C&I waste will have to increase significantly during the next few years; hence the attention Defra is now giving to C&I waste policies: separate collection, landfill bans, voluntary sectoral agreements like the Courtauld Commitment and so on.”

Cory Environmental chief executive Peter Gerstrom is quietly confident that the UK will meet the targets. “We have got a gap [to achieve the 2020 targets] but they are achievable, and I gather it is not looking too bad because of potential developments in the pipeline.”

AEA practice lead for waste management and resource efficiency Dr Adam Read is more sceptical: “I’m not convinced about the jump in diversification needed to achieve the 2020 targets.” He says there is an issue with the banks being willing to fund only high-diversion facilities such as incinerators - which are unpopular with the public and politicians.

But Veolia Environmental Services deputy chief executive Paul Levett thinks the economic drivers are there: “I do not think that funding will be a problem for good projects because landfill tax underpins the economics for new waste treatment infrastructure. Veolia will continue to invest in new treatment facilities to meet the requirements of its municipal, commercial and industrial customers.”

Eduljee from Sita UK agrees: “The bottom line is that our targets, both EU and UK, are here to stay, as are issues such as climate change, in which waste management has a big part to play with renewable energy, renewable heat, recycling to save on carbon emissions, as so on. Sita will continue to invest in facilities because the long-term direction in which our sector is heading is clear and unambiguous.”

But Read points out that for councils, now more focused on efficiency, spending on waste infrastructure may be harder to justify in the next few years. “The only savings on waste infrastructure are not having massive fines from the EU in 2020 - but that’s not really a saving in terms of a local authority budget sheet. It’s difficult for local authorities and we need more leadership around CHP and thermal efficiency.” He adds that the previous Government’s anaerobic digestion action plan was an example of strong leadership, setting clear policy and targets to achieve.

While there may be uncertainties, Gerstrom says it is important to remember how far the waste industry has come in terms of raising recycling rates and putting the infrastructure we now have in place. He adds: “The link with the energy sector stopped the industry being a carbuncle. Once people started to understand that and started to look at waste alongside other renewable energy types, then I think the penny dropped. There’s been a real sea change on that and I think the Government has grasped that key link.”

According to one company that offers alternative treatment to landfill, the recent financial conditions have made it difficult to raise funds. Sterecycle operates a 100,000 tonnes a year autoclave plant in Yorkshire that converts residual ‘black bag’ waste into an organic soil-like product called Sterefibre, once all the recyclates have been removed. It can be used in landfill restoration or be burned as a biomass fuel.

The company has an interim contract with Rotherham, Barnsley and Doncaster Metropolitan Borough Councils to treat their black bag waste. It sees a niche for itself in interim contracts of 6-10 years, effectively dealing with a local authority’s waste while it works out its long-term residual waste management solution. Sterecycle chief executive Tom Shields explains that councils worry about smaller businesses going bust when offering long term contracts, so prefer companies with “very strong balance sheets”, which is difficult for companies new to the market.

He can see the business opportunity in residual waste treatment - according to Defra we need £10bn of investment in alternatives to landfill - which means plenty of waste for various treatment providers to get their hands on.

Sterecycle raised all its own money in private equity, but welcomes the help on offer in the form of renewable obligation certificates. “The more help, the better. In the aftermath of the world crisis in credit, it was impossible to raise money from banks,” says Shields. “You have to enter into debt vehicles which places a huge debt burden on companies. We desperately need the whole credit market to return to a more normal state. With autoclaving or gasification it’s very difficult [to raise finance] because they are seen as far too risky. So we [the industry] do need to find ways to support green technologies with funding.”

Despite Sterecycle’s Rotherham plant being cash-positive since March last year and the business now proven, raising finance using traditional methods has been difficult, with high street banks offering double-digit interest rates. Sheilds says the other option is to go public but the “markets have to be condusive to that”. The company wants to roll out across the country, but needs help in terms of financing and for the credit markets to improve.

Most in the industry will agree that underpinning the confidence needed by investors is economic and regulatory certainty - which is why the industry is calling for the Government to conclude its waste review as soon as possible.

“It helps if a local authority has the right plans in place and has a waste plan. And I do think in the past few years that councils have been joining the dots with the waste policies that are in place. The jury is out to a large extent [about localism]. You have to go through the local planning engagement process and I would expect those processes to become more important. I don’t think the recycling sector has been far from localism - most waste facilities have already had to engage with local communities.”
Cory Environmental chief executive Peter Gerstrom

“I think we are likely to see small treatment facilities focused on local waste arisings - subject of course, to minimum economies of scale. And we expect to see financial incentives for local authorities and residents in the form of council tax retention and discounted heat and power.”
Veolia Environmental Services deputy chief executive Paul Levett

“I think localism is a recipe for disaster. And how local is local? We need to put sites where they make sense. Local input is critical but could derail decisions. Will a local plant give you the efficiency gains you need? The economies of scale won’t be there and you may be affecting six communities rather than one. Localism is great for recycling, but when it comes to infrastructure you need sensibly located and sized facilities.”
AEA practice lead for waste management and resource efficiency Dr Adam Read

“Last year Sita sponsored a report from Policy Connect, looking at a few case studies - not in the waste sector - where communities have benefited from the siting of a facility. There is no reason why it cannot be tried in the waste sector. The coalition Government has ideas as well, such as communities being allowed to keep the business rates for X years if they accept a facility. And the Community Infrastructure Levy is to be looked at again.”
Sita director of external affairs Gev Eduljee

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