by Dominic Hogg
7 minute read
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?
Differences arising?
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.
Constructive criticism
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.
Inconsistent treatments
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?
Residual agreement
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?
Waste data can be puzzling. Picture by Steven Straiton, via Wikimedia Commons
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.
In your newsletter article from which I reached this page you state
‘ Scotland and Wales have the scope to recycle 82% and 79% respectively’. Given that Prosiect Gwyrdd has now been signed this appears to constrain SE Wales to 65% recycling of municipal waste for the next 25 years. Hence the questions:
Does the 79% refer to municipal and /or C&I waste streams?
What time constraints apply to these figures?
Does it include the treatment of incinerator bottom ash as recycling?
Thanks for your comment H – as lead author of the report to which Dom was referring, I’m probably best placed to help. In answer to the questions you raised:
– The 79% figure for Wales relates to local authority collected municipal waste as reported by councils in Wales, so it is primarily household waste together with the C&I waste that authorities collect. It does already take account of Viridor’s Cardiff facility, based on our assumptions regarding how much of the facility’s capacity the council is committed to filling with LAC waste.
– Assuming that there is no substantial upward change in waste arisings, the recycling constraints will persist until contracts expire or are renegotiated. The dates vary between contracts, so we can’t define an end date for the limitation.
– Our figures do not take account of bottom ash recycling. The focus is on the type of treatment, rather than the ultimate outcome: 79% of waste in Wales is available for treatment higher up the waste hierarchy than incineration.
Confess I am still unclear as to the process and significance of the figures. The pie chart seems to indicate that English authorities are contracted to provide 40% of their waste to three unnamed types of waste treatment facilities. Prosiect Gwyrdd will operate on Guaranteed Minimum Tonnages estimated to be no more than 35% of the total waste. The additional five percent being gained by IBA processing. A similar arrangement is planned for North Wales. So if ten of the 22 authorities are constrained to 65% for the next 25 years I struggle to see how the 79% is going
to be achieved. Happy to continue by private email as this issue may have limited appeal!
Dominic,
Discussions on capacity are well intentioned, however what would be significantly more helpful is to get a better understanding of what the likely scenario will actually be. Specifically, what we have been asking for is the inclusion of some vital questions in the Residual Capacity Report, these would be:
1. Is the planning permission for a local authority contract or for a merchant plant? You will find applications for EfW clustered around potential contracts, of which only one can win, and therefore you are over estimating. Look to Merseyside as an example of how quickly capacity estimates fall away when an MSW deal is done (or not done). The industry has worked on speculative applications to back PFI/PPP bids for over a decade now.
2. Is the project at financial close? Specifically, the estimates we have seen in Scotland are significantly far off the mark when this is included as a question. Again, if you only want to evaluate speculation then this is fine – but to begin financing, conclude and then build is at least a 3-4 year cycle. With the end of ROC’s and the beginning of CfD, you may be overestimating the ability of developers to turn these projects around in an agreeable timeframe.
3. Is there a Local Authority contract? If so, this will only realistically take MSW, and the C&I capacity will require another outlet. The distinction between MSW facilities and C&I facilities needs drawn out, especially where there will be regional landfill shortfall.
4. Is export cost effective? As you will no doubt be aware, export is cost effective in some regions of the UK but not all – this granularity of detail needs examined.
More fundamentally, you are evaluating the potential of a planning application being taken forward to a full build, and the suggestion in all reports I have read is that most of the capacity in planning WILL be built out, which is simply not the case. If you want to have an analogous argument then you could look at housing or commercial property markets – if we went on the square footage already with planning in the UK then we would be saying “No more” – but we know from experience that builders will not build if market conditions are not right.
I will end with a question that I have yet to find a good answer to. Say, for example, some merchant companies take their chances and build a few plants in the UK – and we end up with a little over capacity – what do we think would happen?
Simon