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Market not ministers driving future of RDF

Rdf production

One of the biggest growth subsectors in the waste industry in recent years has been exports of refuse-derived fuel (RDF). So much so that one UK waste manager told MRW it would have gone out of business without the new revenue stream.

exports logo

exports logo

A Government and business sustain­ability drive to divert material from landfill, combined with a lack of alter­native cheap domestic disposal options, led operators to look overseas for alter­native destinations for waste. Luckily, countries in northern Europe had an overcapacity of energy-from-waste (EfW) facilities due to a slow-down in their own waste production as an effect of recession.

It meant that operators in the Neth­erlands, Germany, Sweden and Den­mark were keen to import feedstock from countries such as the UK.

Competition for feedstock between the receiving facilities meant gate fees for UK exporters were low enough for a healthy market to develop. As such, RDF exports from the UK to Europe have risen from nothing in June 2010 to 3.3 million tonnes in 2015, according to estimates from consultancy Euno­mia.

Rdf exported from england and wales

Rdf exported from england and wales

A major importer, 83% of the RDF imported by the Netherlands is esti­mated to come from the UK. The con­sultancy predicted in December that the overall figure could be 3.5 million tonnes in 2016 but flatline thereafter.

A levelling off of the market has been assumed by most in the industry due to overseas capacity filling up and domes­tic EfW plants coming online and need­ing that feedstock. There has also been the loose assumption that the UK’s recy­cling rates would continue to improve, although they have been flatlining.

Since May, of course, a few things have changed.

We cannot know what effects the UK’s decision to leave the EU will have in the long term until more details of the exit are decided, but its short-term effect has been damaging for RDF exporters.

Louis Calders, commercial director of RDF exporter Totus Environmental, told MRW: “Since the referendum in June, the significant swing in currency has had a direct impact on the bottom line of those exporting fuels from the UK. The fact that the majority of gate fees are paid in euros, together with a high proportion of the logistics costs, has undoubtedly put a number of con­tracts under severe pressure.”

Another exporter, Andusia, told MRW it had guarded itself against such effects but recognised that other com­panies had been “hit”.

Director Stewart Brackenbury said his firm forward- bought currency until the end of Nov- ember, by which time exchange rates had recovered partly due to Donald Trump’s election as US pres­ident lowering the dollar’s value. “The risk to us is not as big as it was,” he said.

Biffa, the UK’s biggest exporter of RDF, said the short-term volatility of the market had actually improved the company’s position. Head of Biffa fuels, Tom Musgrove, said: “The EfW part­ners are increasingly looking to seek fuel from solid and dependable supply partners, so we have seen increasing opportunities due to our recognised leading position.”

He added that the company was not concerned about long-term effects either because importing facilities in the Netherlands and Germany rely on its “supply of consistent tonnage and con­sistent quality fuel”.

One thing that operators of RDF-receiving EfW plants, in the UK or abroad, would appreciate is a higher quality feedstock.

Eunomia said in its recent advanced conversion technologies market report that gasification and pyrolysis plants would operate more efficiently with a higher quality solid-recovered fuel (SRF) feedstock. But this requires more expensive processing, and one of the main attractions of RDF is its cheapness as a disposal route.

Local authorities and businesses like being able to say they are ‘zero waste’, and the simplest way to achieve this is by switching their residual waste end disposal destinations from landfill to an EfW site. Being asked to pay more for better quality processing is nonsensical if their only target is to divert waste from landfill.

Consultancy Grant Thornton has advised councils and waste companies in their bids for waste contracts, often involving the construction of a mechanical biological treatment (MBT) plants in recent years. Principal consultant Michael Berrington said many of the deals the company worked on covered only the period up to the point the facil­ity became operational.

He said: “In the early stages of RDF and SRF, the stuff would have a value. So there wasn’t a cost of disposal, it could become an income stream. I suppose there is a hope that, if you can get that SRF, it can be used in cement kilns and things like that. Then people will pay for its use rather than expect a fee for it.

“A lot of local authorities went for the cheaper solution, with the hope that RDF and SRF markets would come about, which probably means there is more lower grade RDF out there than there is higher grade SRF.”

Top 10 rdf exporting companies

Top 10 rdf exporting companies

But Berrington now predicts a “sea change” in the quality of RDF produced. This has been an issue for many years. In 2013, the All-Party Parliamentary Sustainable Resource Group recom­mended: “Defra should set a minimum processing level for the production of RDF.”

Last year, the department addressed such calls by issuing a two-line defini­tion of the product. This fell short of developing a treatment stand­ard, but Suez external affairs director Dr Gev Eduljee said at the time that doing so would “duplicate existing reg­ulatory measures” and therefore praised Defra’s definition.

Berrington does not think this inter­vention has driven an improvement in RDF quality, but believes market forces could now force such a shift. The capac­ity gap at receiving EfWs in Europe is closing as the countries’ economies pick up and more waste is produced. This will enable the facilities to be more selective and force RDF suppliers to compete with each other, with a better quality product likely to be chosen.

“At the moment, the European mar­ket will accept a lower grade RDF. But as they start getting better quality RDF from their home markets, there is going to be an impact for the UK,” said Ber­rington.

This does not mean the MBT facili­ties built in the UK to produce a lower quality RDF will be scrapped, but they may have to tweak their processes to increase quality to tap into higher value markets.

Improving the product that MBT plants produce does not necessarily mean ensuring they deliver an SRF. Some are producing what is known as a hybrid, which sits between RDF and SRF. While RDF’s definition is loose, SRF must have a calorific value between 17 and 22 megajoules per kilogramme and comply with other specifications under European standard EN 15359.

Hybrid fuel complies with some of the SRF requirements such as calorific value and chlorine content but it will not be processed to the same degree, so is cheaper to make. It can pitch to a sim­ilar market as SRF, such as cement kilns. But kilns that accept hybrid fuel will process the product further before burning it. They therefore charge a higher gate fee.

When the UK completes its EU exit, taxes on RDF exports could rise, accord­ing to Eunomia. In its latest residual waste report, it said: “Municipal waste imported to the EU from any third country is subject to VAT at the stand­ard rate and a most favoured nation duty of 6.5%, unless subject to other measures.”

“While the implications of defaulting to WTO rules require further examination, a tariff could increase the cost of waste exports from the UK and poten­tially make this option less competitive.”

But it also suggested that facilities on the continent receiving RDF could lower gate fees post-Brexit because they will still require UK feedstock.

Another outcome of Brexit could be a lowering of the UK’s recycling ambi­tions. Since the European Commission published its circular economy package, including a 65% recycling target for municipal waste by 2030, the UK has lobbied for more “achievable” goals.

It is uncertain whether the UK’s voice will be heard as the package goes through the European Parliament because others, including rapporteur Simona Bonafe, have pushed for higher targets.

Freed from the EU, the Government could set its own separate resource agenda until 2030. It would, after all, be easier for ministers not to worry about investing in facilities and communica­tions campaigns to boost recycling rates. But public support for greater recycling is generally strong and writing its own plan could require resources Whitehall is short on.

As much of the waste industry is made to wait over some guidance from the Government, in the near future, the game for waste-derived fuel producers looks set to evolve regardless.

So what is RDF?

According to Defra: “RDF consists of residual waste that is subject to a contract with an end-user for use as a fuel in an EfW facility. The contract must include the end-user’s technical specifications relating as a minimum to the calorific value, the moisture content, the form and quantity of the RDF.”

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