November 8th, 2013
by Dominic Hogg
Veolia’s UK Director, Estelle Brachlianoff took the opportunity of Guy Fawkes night to lob more fuel on the fiery debate over whether the UK is headed for waste infrastructure overcapacity and announced that the firm has commissioned its own study.
You can understand why Veolia might want its own study to reassure both itself and its shareholders. The industry press has talked up a fierce fight: in the overcapacity corner, we have Eunomia’s Residual Waste Infrastructure Review; while in the under-investment corner, we now have Ricardo-AEA’s report on waste arisings and treatment for CIWM. Which should investors believe?
The two reports are quite different. Eunomia’s concentrates on waste of the type likely to be treated by incineration, MBT, MHT or other thermal treatment approaches. Ricardo-AEA’s concerns all commercial and industrial (C&I) waste, but also brings in local authority collected waste, as well as some C&D waste from England, to estimate a combined ‘capacity gap’, representing the need for all types of waste infrastructure for all the types of waste under these categories.
On the face of it, they appear to be reaching quite different conclusions. The last Eunomia report said “the capacity gap between residual waste arisings and available treatment capacity will fall… moving to a situation of potential overcapacity in the UK in 2017/18 of around 2.2 million tonnes.” By contrast, Ricardo-AEA state that “The capacity gap may be anywhere up to 15M tpa, and is likely to be more than 5M tpa by 2020”. So can we explain why the findings appear to be so different?
The first place to look is the biggest area of uncertainty identified by Ricardo-AEA: how much C&I waste will there be in future? The only estimates we have are based on periodic surveys of questionable quality, which have indicated large reductions: the figures for England are 68m tonnes in 2002/03, falling to 59m in 2006/07 and 48m in 2009.
Ricardo-AEA extrapolate forward using expected employment growth as a proxy for waste arisings. This method seems simplistic and it would be good to see if this assumption could be validated by backcasting (has employment change accurately predicted waste arisings in the past?). However, it predicts a tiny decline in UK C&I waste arisings, down to 57.9m by 2020, and a tiny increase in Ireland. So does Eunomia say something very different?
No – Eunomia projects a small increase in commercial residual waste, offset by a decline in industrial arisings, resulting in 57.5m tonnes of C&I waste in 2020 – almost identical. Interestingly, Defra is the outlier on C&I waste, forecasting a decline of around 8% in England as its central 2020 scenario.
Unlike Eunomia, Ricardo-AEA include 15.4m tonnes of English construction and demolition (C&D) waste that they believe requires treatment. This is the biggest difference between the two reports, and, coincidentally, is close to the 15.3m tonne capacity gap Ricardo-AEA’s report found.
A separate Defra analysis of C&D waste says that only around 5.3m tonnes of this material were landfilled in 2010 with 7.2 million sent for transfer / treatment and the remainder (34.8m tonnes) used for aggregate. The landfilled C&D is the only fraction of the stream which might be relevant to the debate regarding residual treatment infrastructure.
Eunomia on the other hand works on the basis that any of this material that requires treatment is included in the C&I figures.
Ricardo-AEA acknowledge the risk that there may be some double counting between C&I and the C&D wastes because they rely on the Environment Agency data interrogator which in addition to C&I waste:
“includes construction and demolition waste as site returns do not require operators to report the source of waste they accept. For the purpose of this report it is reasonable to exclude ‘SOC Chapter 12’ wastes – mineral wastes, as these are unlikely to be generated by commerce or industry.”
In other words, apart from mineral wastes, all C&D waste handled by permitted sites is already within Ricardo-AEA’s C&I figures. Where the extra 15m tonnes of English C&D waste comes from therefore remains unclear.
Something seems to be amiss with Ricardo-AEA’s figures even for 2013. The key table in their report is table 16. As well as the 10m tonnes of waste deemed to be “unavoidably” landfilled, they calculate a UK treatment capacity gap of 30m tonnes in this year. Presumably that relates to material which is currently landfilled giving a total of 40m tonnes. Yet according to HMRC’s landfill bulletin, only 18.8m tonnes of waste were landfilled at the standard rate of tax in the UK in 2012/13.
The apparent discrepancy can be explained in part by the fact Ricardo-AEA don’t appear to include open air windrow composting, which, according to WRAP’s most recent survey, accounts for 3m tonnes.
Then there is the question of waste exports. Ricardo-AEA suggests export may be a bubble, because “If economic recovery begins in earnest in EU27 countries, waste arisings may increase and over-capacity reduce. In addition, some plants in Europe are approaching their end of life and may close.” They don’t say that in many countries, even those with excess capacity, more is being built. As a result they assume that in both 2013 and 2020, exports will be the same as in 2012 at 0.9m tonnes.
So has Eunomia over-egged the export pudding? It doesn’t appear so.
Exports grew by 300% between 2011 and 2012, but Eunomia estimates only 25% growth in 2013, reducing to 0% by 2016. In fact, the first five months of 2013 saw a 40% year on year increase.
The difference between the two predictions for 2020 is less than 0.4m tonnes – hardly significant. As for the concern that Europe’s overcapacity is temporary, Ricardo-AEA has predicted that UK waste arisings will stay more or less flat through to 2020. Is the prediction that the UK will have much lower growth than the continent? Or that we, but not they, will decouple waste from growth?
Maybe it isn’t surprising that Eunomia’s study of residual waste should produce different results from one that covers a much wider range of waste types. So, how much disagreement is there between the two reports on over-capacity in residual waste treatment?
In their analysis using the EA Data Interrogator, Ricardo-AEA found that some 12.6m tonnes (26%) of C&I waste is currently either landfilled or incinerated in England. Applying the same proportion to the rest of the UK’s C&I arisings yields another 2.5m tonnes giving a total of 15.1m. For LACW, the anticipated 2020 recycling rate of 60% leaves 12m tonnes of residual waste. Put the two together and you have 27m tonnes to tackle.
According to Ricardo-AEA, by 2020 UK capacity for treating residual waste, weighted according to the probability of it becoming operational, is 23.7m tonnes. So their 2020 capacity gap for residual waste appears to be just over 3m tonnes, assuming:
- no waste is landfilled
- C&I recycling doesn’t increase
- C&I arisings decrease very slightly; and
- waste exports don’t increase.
If, on the other hand, one or two more facilities are built, C&I recycling increases, we’re successful in our efforts to cut waste or exports go up, then the two reports are in agreement. Although there’s regional variation, at a national level it appears we have enough treatment capacity in the pipeline.
Ricardo-AEA and Eunomia aren’t alone in reaching this conclusion. The data is publicly available, and although it’s slightly complicated, points in only one direction. It’s unclear what type of capacity Veolia believe will be required in coming years, but others in the market to build residual waste infrastructure are either struggling to find investors or withdrawing.