DEFRA urges caution on 2020 landfill forecasts

Environment Department (DEFRA) forecasts suggest England will have plenty of treatment capacity for biodegradable municipal waste in 2020. But the department says councils should not rely on the forecast when deciding on the size of future projects.

England could well exceed its target to divert biodegradable municipal waste (BMW) from landfill in 2020, according to the latest internal forecast from the Environment Department (DEFRA)

The forecast, by DEFRA’s Waste Infrastructure Delivery Programme (WIDP), predicts England will have 715,000 tonnes a year of surplus treatment capacity in 2020. The data were presented at a meeting of DEFRA’s waste strategy board at the end of January.1Spare capacity should be used to treat commercial and industrial waste, WIDP said at the meeting.

The EU landfill Directive requires the UK to reduce the amount of BMW it sends to landfill to meet targets in 2010, 2013 and 2020. By 2020, the amount of BMW it landfills per year must drop from its current 10.5 million tonnes to 6.3 million tonnes. The government has set councils individual targets to ensure the overall target is met.

WIDP’s forecast is the first detailed assessment to emerge for 2020. It is based on progress in building waste infrastructure projects, such as incinerators or composting plants. It includes all projects announced by councils, even if they are only at the planning stage. If a council has expressed a preference to use merchant facilities, these are included too.

Each project is given a rating on the likelihood of it being completed on time. This takes account of everything from the quality of the project team to issues such as planning permission.

The rating changes as a project progresses. For example, DEFRA recently lowered the rating of all projects to take account of current difficulties securing finance. Many banks have started refusing to lend to contracts with a significant technology risk, while others will now only finance projects with seven year loans, which is a problem for a typical 25-year waste contract.

The Greater Manchester Waste Disposal Authority is struggling to secure finance for the 25-year contract it awarded to a Viridor-led consortium in January 2007 (ENDS Report 385, p 22 ). The saga has still not reached a financial conclusion.

WIDP’s forecast could be seen as pessimistic given some of its assumptions. For example, it assumes 1% waste growth per year despite England’s municipal waste arisings having remained fairly constant since 2000 at between 28.2 million tonnes and 29.6 million tonnes. In 2007/08, the figure was 28.5 million tonnes.

The forecast also assumes recycling rates will not go beyond 50% and includes conservative estimates on the operating and diversion efficiencies of waste technologies. For example, it assumes only 75% of the output of mechanical-biological treatment plants will find markets; the rest will be landfilled.

Paul Croston of WIDP said its conservative approach is necessary given the potential EU fines for missing the target.

In terms of waste growth, Mr Croston said 1% was justified because councils could soon have to collect so-called schedule 2 waste from institutions such as schools, hospitals and prisons. Most of these institutions have their waste collected by private firms because councils charge more. As well as the costs of collection, councils also include the cost of disposing of their waste in their fees, even though disposal should be free.

Several hospitals and schools have complained about the practice. In February, DEFRA said it had commissioned research into the issue and will publish a consultation on solutions later in 2009. "If schedule 2 waste did become a requirement… there’ll be a significant increase in the waste councils handle," Mr Croston said.

Overall, Mr Croston said WIDP’s forecast is likely to be an overestimate. "With 2020, there’s a level of risk. Some of the projects are still at an early stage and some will fall by the wayside. So if anything our forecast surplus will fall away."

WIDP is not concerned about projects failing due to difficulty securing finance. "There’s no doubt that project timetables will slip, but there’s enough space for us not to be worried [about meeting the 2020 target]," said Melville Haggard, WIDP’s markets development adviser.

In February, ENDS spoke to six councils, none of which thought they would have an insuperable problem securing funding for long-term waste contracts. But it is proving more difficult than before the credit crunch and involves more banks. One council said its contractors expected to have to deal with up to nine banks now rather than the initially forecast two.

Veolia has reportedly won several recent Private Finance Initiative (PFI) contracts by proposing to finance projects itself.

Mr Haggard said DEFRA is discussing ways to improve councils’ chances of securing finance. This may involve encouraging co-financing arrangements where councils raise funds by prudential borrowing as well as waste contractors looking to banks. The government may consider raising the limit on prudential borrowing from its current 10% of capital costs.

  • WIDP has published a series of heat maps to inform future waste PFI projects.2 Bidders for waste PFI contracts have to consider opportunities for generating both electricity and heat from waste. The maps show potential users of heat, as well as potential users of refuse-derived fuel made by mechanical-biological treatment plants.
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