With challenging recycling targets, a 5% landfill reduction target and aspirations towards a circular economy, we can be forgiven for the significant attention paid to the collection and value generation activities of front end recycling and organic waste treatment. There is, however, a rather more troubling issue lurking that will diminish the ability to deliver our aspirations.
The waste management industry has been undergoing a wholesale change in its approach to valuing the materials previously disposed. What this means is that traditional disposal systems with their known and predictable economics, have been replaced with a fluid, often volatile, variability of costs and revenues.
Material revenues have fallen by approximately 30% in less than three years, and in that time disposal costs have added to the issue with average prices rising 30%. Further increases and decreases to the balance of payments will inevitably result in further casualties unless stability can be brought to either costs or revenues.
Material prices on globally traded commodities are unlikely to be tamed, leaving residual disposal as the key area for controlling costs, and acting as a stabilising influence in a fluid market.
The current residual disposal delivery landscape in Scotland is heavily focussed on local authority residual waste, with existing EfW capacity in Dundee and Shetland and projects underway for Glasgow and Edinburgh and Midlothian Councils. It remains to be seen what, if anything, will result from the current Clyde Valley procurement group.
This delivery landscape misses the remaining local authorities in Scotland who are resisting the large scale procurement route for a variety of reasons including long-term price uncertainty. It also significantly misses the desperate need for residual EfW capacity for C&I residual wastes across Scotland as a better environmental and lower cost alternative to landfill.
Different commentators have pointed to the capacity already with planning permission across Scotland as a solution but, with little or no activity on the vast majority of these projects, it is clear that without contract awards or a different delivery landscape this capacity will remain unbuilt.
Export is also often mooted as the solution. It is clear however, that with much RDF remaining portside, short term contracts, and variable pricing structures this solution is often less attractive than is presented. Indeed, the current consultation in the Netherlands on EfW taxation underlines uncertainty over the viability of the long term future of exports. It also represents a needless loss of economic activity and energy.
We have, therefore, a problem emerging in residual disposal. In short, in the current short to medium term, we have a landfill-based disposal strategy while the long-term future of many landfills is being considered.
So what is the failure in our residual waste treatment market? Is it a market or a policy failure? Either way, the solution is as clear as the issue itself.
Of all the items required for a successful EfW project, access to a viable technology and feedstock is key. Of these the main issue is feedstock supply. Projects can receive planning, PPC permits, grid connections etc. with relative ease but, without access to feedstock, projects will not proceed.
Access to municipal feedstocks is currently consigned to complex, expensive and often controversial public procurement exercises, taking years to complete and rarely delivering value. The structure of public procurement in turn diminishes the ability of markets to innovate and the ability for many companies to deploy capital and create jobs at the rate they would desire. For the larger segment of commercial and industrial residual waste, merchant solutions are even more challenging.
In Scotland’s predominately SME based waste market, few companies have the financial covenant to stand behind long-term feedstock contracts. Even the larger UK players struggle to guarantee their supply base over the length of term needed for most merchant facilities.
It is clear therefore that a more intuitive, fluid and pragmatic solution is needed to move disposal from the increasing cost of landfill to the secure long-term cost of domestic EfW disposal.
Both local authorities and the commercial resource sector need access to a non-landfill, stable priced disposal solution. Developers need access to a simplified means of procuring feedstock.
One possible solution is to provide access to all residual wastes, on a regional basis, on secure long term feedstock only contracts. Both municipal, and commercial residual wastes are placed in a regional “pot” and feedstock in each “pot” can be bid for by developers on a long term basis.
This removes the requirement for complex design, build, finance and operate procurement, removes expensive procurement fees and provides a market that encourages innovation to deliver the best mix of benefits. A system that encourages development of capacity and incentivises developers to deliver for the whole market.
Simon Glenn and John Ferguson, directors at project development consultancy Indecol