June 25th, 2012
Eunomia recently released an update to our six-monthly Residual Waste Infrastructure Review. We maintain a database of non-landfill residual waste facilities – not just those that are currently operational, but also those being built or making their way through the planning system. Twice yearly we publish figures showing current and potential treatment capacity alongside estimates of future waste arisings. This reveals a ‘capacity gap’ between the amount of waste we’re likely to have and the facilities we expect to be in place to treat it – but the findings need careful interpretation.
We’re really pleased with the attention the latest update has received so far. It was picked-up by most of the major industry journals and websites, was referenced by speakers at the CIWM Conference, and has even stirred some interest from two national newspapers. Generally reports have commented on our finding that we appear to be at risk of building excess waste treatment capacity. Here’s the pertinent chart to support the headline.
The grey and charcoal bar on the left shows the amount of waste we currently generate after all recycling is taken out. The bar next to it (second from the left) shows in orange how much treatment infrastructure is operational or under construction, and in yellow, green and blue the amount going through the planning process. The remaining four show a breakdown of the second bar by treatment type (incineration, gasification etc).
The obvious conclusions
A moment’s attention shows that, assuming the landfill tax escalator gradually prices most of the waste currently going to landfill into treatment instead, there is about 5m tonnes more treatment capacity already consented than there is waste available – with still more in the planning system. With recycling rates continuing to rise and the quantity of waste which we produce falling, this is striking. No wonder it makes a good headline.
And no wonder, too, that we’ve also had calls from developers, resident groups and authorities all seeking to clarify whether we’re saying that a specific site that they’re interested in is or isn’t needed. Of course, the findings about national and regional trends don’t directly read across to any particular local project – in depth, bespoke analysis is needed to give a site or area-specific assessment.
The possibility that we end up with too much waste treatment capacity is obviously an important risk. Treatment prices will fall and the economic argument for recycling will be undercut. Developers and funders of a surplus new facility will be left with an expensive white elephant on their hands. If the funder is a public body, this could constitute a real disincentive to increasing recycling rates (“Don’t recycle that plastic, we need it for the incinerator contract!”) There are already plenty of facilities both overseas and in this country which are having to look much further afield than expected for the waste that’s required to fill them.
The less obvious conclusions
But, as I said, interpreting our findings requires more than a moment’s thought. Remember, our findings show that we need to almost double our existing treatment capacity if we’re to divert all the waste we can from landfill, so a lot of new facilities are needed. Obtaining planning consent for a treatment plant does not equate to getting it built. With the current economic backdrop, many facilities with planning consent are struggling to get financed. Numerous sites have been on the blocks for several years. We aim to account for this by factoring a ‘conversion’ rate from consent to operational into our findings – but for those considering waste infrastructure projects, it is critical to understand the subtleties of the issues in play.
The message from our review isn’t that we don’t need any more waste treatment infrastructure, but that we’re approaching the tipping point. The business case for new facilities is finely balanced. An understanding of current and consented capacity remains critical, but increasingly developers and investors will also need to consider the likelihood that other consented facilities will actually get built.
The industry is taking something of a scattergun approach, with individual players seeking to identify projects that will enable them to secure a share of the available waste. The planning system is not geared up to providing a steer as to where new facilities are required: local planning authorities (LPAs) tend only to consider need within their own boundaries despite the fact that waste – especially non-MSW – often comes from elsewhere. Furthermore it is hard for a LPA to refuse consent on deliverability issues – their primary role is to assess whether in land use terms the facility should be consented, not whether the business case for it stacks up. The result is the nonsense situation that more facilities have been consented by apparently rational LPAs (and the Secretary of State) than are required.
In the absence of control through planning, the limit on building new facilities is instead coming from investors. In these troubled economic times it can be difficult to reach financial close on a facility – especially if it relies for any significant element of its throughput on sources less predictable than local authority contracts. When two (or more) consented facilities are competing for the same merchant waste, the additional risk undermines both business cases, with the risk that neither gets built. It’s not planning blight that’s afflicting our infrastructure developments so much as investment paralysis.
Deciding what to build and where would be much simpler if we had a national waste plan. Waste crosses administrative borders and capacity needs to be understood in a regional and national context. A national plan would assist LPAs to take account of need, while offering greater comfort to developers and local authorities who are considering what facilities to fund. It would allow investment to be planned in a rational way to deliver the necessary treatment capacity, while taking account of national recycling and waste prevention objectives.
However, with a government that is wedded, verbally at least, to localism and market solutions, I would not advise holding your breath. While we continue to stumble forward without a plan, developers and investors will need to continue to look closely at competing consented capacity. That will need to be augmented by an understanding of the prospects for competing ventures obtaining funding if we are to continue moving material up the waste hierarchy and avoid the twin perils of investment paralysis and white elephants.