Waste infrastructure: consenting, contracting and construction

Following on from our blog piece on the treatment capacity of the ‘Big 7’ waste management players in the UK, we have decided to examine the balance between contracted and non-contracted residual waste treatment capacity in the pipeline. By ‘contracted capacity’ we mean facilities that have signed a long-term local authority (LA) contract; ‘non-contracted’ capacity may be facilities that are intending to operate in the merchant sector, or could be currently involved in a procurement process for a local authority contract.

Figure 1 splits planned treatment facilities into the two categories, contracted and non-contracted, and shows the amount of capacity at various stages of development prior to construction.

Figure 1 – Contract and Non-contract Capacity

We can see that there is over 4.5 million tonnes of treatment capacity that has planning consent and is backed by a long-term LA contract. In addition, there is over 2 million tonnes of contracted capacity that is currently seeking planning consent (or is the subject of an appeal or judicial review).

Conversely, there is a far larger quantity of treatment capacity, almost 15 million tonnes, that has planning consent but no LA contract. There is a further 3.3 million tonnes of capacity that is seeking planning consent (or in appeal or judicial review) that also has no associated LA contract.

These findings are interesting because of the relative likelihood of contracted and non-contracted facilities being developed. Particularly in the current economic climate, banks are far less willing to lend the substantial capital required to fund the construction of a facility in the absence of a long-term contract with guaranteed quantities of waste to deliver a future income stream. In the absence of bank financing, only those developers with very deep pockets and a great deal of confidence in their ability to attract merchant waste will be able to bring their planned facilities into operation.

The existence of a 15 million tonnes of consented capacity with a relatively low likelihood of being constructed creates a problem for planning authorities. How much weight should such facilities be given when assessing the need for further capacity? An article by Mike Brown in October discussed the challenges that the planning system faces in dealing with applications for residual waste treatment facilities. One of the issues he identified was the need to take account of consented but not yet built capacity, and these numbers show the increasing extent of this problem.

It is also interesting to note that, with so much capacity consented but not yet built, it seems that in many cases it is not the planning system that is preventing much needed infrastructure from coming to fruition. Calls from George Osborne for planning deregulation to help get such development moving risks aiming at the wrong target. While there are cases where controversial developments have been held up by planning battles, it is clear that many facilities are obtaining consent but struggling to get funded. An approach to addressing this issue would perhaps be more effective in kick-starting construction than a weakening of planning controls.