Treating commercial waste is better than dumping it - but how to make it pay? Penny Longstaff investigates.
What can we expect to follow from Prime Minister David Cameron's promise of 'the greenest government ever'? What will emerge from Conservative peer Lord Henley's Defra portfolio for recycling and waste management which includes environmental regulation, sustainable development and biofuels?
One area where things certainly seem to be moving already is that of commercial and industrial waste.
The previous focus on landfill targets to reduce biodegradable municipal solid waste (MSW) now seems to be giving way to increasing emphasis on the treatment of commercial and industrial (C&I) waste. This shouldn't really be a surprise, since C&I waste is believed to represent four or five times the volume of MSW.
There's every sign therefore that we're likely to see a progression of policies and legislation which will include C&I waste in helping to meet tough environmental and sustainability targets such as zero waste to landfill, increased recycling rates, and the generation of more renewable energy.
But with any central government money for PFI ventures likely to be much lower, it looks doubtful that local authorities will be involved in the development of significant infrastructure to treat C&I waste - and it will probably be left largely to the private sector through financial incentives.
So what are these incentives - and what do the opportunities look like for smaller waste contractors who might want to step into the breach? With the chance to diversify into new waste streams and take advantage of a whole new market with four or five times the potential of MSW, it certainly looks as if a little effort could produce very healthy returns.
Sticks and carrots
The big stick is of course landfill tax. The recent announcement that landfill tax will increase to £80 per tonne by 2014 with a floor under £72 per tonne until 2020 means that landfill will progressively become far less economically attractive than recycling and treatment.
And clearly that's the whole intention, since diverting waste from landfill achieves savings in carbon dioxide emissions and provides potential for harnessing waste to energy - as well as avoiding all the obvious downsides of dumping untreated waste in the ground.
And the carrots? Well, they come mainly in the form of the Renewables Obligation (RO) - the UK Government's main measure for promoting the generation of renewable electricity - and Renewable Obligation Certificates (ROCs). Applied to the area of waste resource management, they provide powerful incentives for converting waste into renewable energy.
Introduced in 2002 in the UK as part of the Utilities Act 2000, the Renewables Obligation (RO) is the main support mechanism for renewable electricity projects and requires UK electricity providers to source a mounting proportion of their electricity from renewable sources. A ROC is a green certificate awarded for eligible renewable electricity which is generated and supplied to customers within the UK by a licensed electricity provider.
For every 1,000 units (1MWh) of green electricity generated, one ROC is received by the energy company. If a company generates more than its renewable obligation, it can then sell ROCs to energy suppliers who have failed to meet their own obligations - creating a financial incentive for energy companies to invest in renewable energy generation.
The price of one ROC is set by the market and reflects the degree of difference between the percentage of renewable electricity generated in the UK and the renewable obligation percentage. The bigger the shortfall, the more expensive each ROC becomes, the more green electricity generators are rewarded for their efforts, and the more fossil fuel burners are penalised.
When the RO began in 2003, the obligation was to provide three per cent of electricity from renewable sources. It rose to 7.8 per cent in 2008, to 10.4 per cent in 2010 and will rise further to 15.4 per cent in 2015. Designed as a market mechanism to increase the uptake of renewables, ROCs have increased the profitability of renewable energy generation as the certificates have an additional value over and above the price of electricity itself.
Quite apart from the financial opportunities that lie in the harnessing of energy from waste, waste contractors in the C&I area can also be seen to be helping their business clients in a whole variety of ways.
These can range from supporting them in achieving financial savings through to enabling them to meet their corporate and social responsibility aspirations, and avoiding possible breaches in duty of care (caused for example by treating their waste as MSW rather than C&I at a civic amenity site intended solely for household waste).
Unlike big PFI contracts that favour larger, well established waste companies, the C&I waste sector is fragmented with fewer contracts for geographically integrated waste services, and almost all are short term.
There's therefore a likely need to identify and create economies of scale via clusters of small businesses (such as industrial estates, business parks and shared buildings) that could potentially receive joint collections.
There's also a mass of evolving government policy and legislation to take account of, ranging from Defra's aims, objectives and targets to the national waste strategy, the waste framework directive and the hazardous waste directive.
Pointers for success
But the main issue, of course, for any contractor thinking of diversifying into C&I, is the investment that needs to be made in recycling and treatment plant - often involving the use of new technologies, and the need for planning consent.
Many smaller companies are naturally nervous about the best way of getting involved in all of this, and unclear about the extent of what they need to do. Here then are some simple pointers for success.
The first step in the development of any new treatment facility is a feasibility study to examine the technical and financial aspects, and to determine the viability of the business opportunity. This normally consists of four stages: site appraisal, waste feedstock analysis, technology selection and financial modelling.
Site appraisal is all about determining a set of essential characteristics. The first of these is location, and the proximity principle that waste should be disposed of as close as possible to its source to encourage reduction and cut down time, energy, the risk of accidents and the cost of long distance transport. Any of these could potentially outweigh the benefits of recycling, composting or advanced thermal treatment.
The proximity principle also alerts waste producers and the general public to factors concerning quantity and disposal, which in turn encourages reduction. The size of site that's required will clearly vary according to the technology, but a developable area of between 0.5 ha and 1.5 ha is typical. Transport links are also important, with good access to the strategic highway network normally a prerequisite, and access to rail often advantageous.
There are also specific planning factors that normally need expert consideration as part of the site appraisal - including the future use of the site identified in the Unitary Development Plan (UDP), the current allocation within the emerging spatial planning strategy (for example a location within a regeneration corridor or in an area action plan), and proximity to any potentially sensitive receptors.
These could encompass nature conservation areas, listed buildings and agricultural land, as well as landscape impacts and nuisance impacts like odour, dust and vermin. Proximity to a known flood risk zone can also be an issue.
Waste feedstock analysis looks at the types and quantities of waste being produced in a given area. Geographical information systems (GIS) can map quantitative data from C&I waste streams and compare the potential feedstock applications with existing treatment plants. This can help in spotting opportunities to develop new merchant facilities including waste minimisation, recycling initiatives and organic content for potential residual treatment.
Technology can be a confusing area - but the right waste management consultancy can draw on specialised knowledge and experience to advise on how best to match the waste compositions available with the right treatment process, including options such as anaerobic digestion, energy from waste (including gasification, pyrolysis and incineration) and in-vessel composting.
Finally, a financial modelling exercise is essential once the outline facility design is prepared to determine the financial viability of the project.
So if the treatment of commercial and industrial waste really is the next big thing; and all the indications are that it will be, there seems to be a double opportunity.
While government rightly turns its attention to the more environmentally sound management and treatment of C&I waste volumes that dwarf those of municipal waste, smaller contractors could well benefit from the commercial opportunities that this new emphasis will create.
With more than 4,500 independent waste management companies involved in managing waste in the UK, successful operators should be able to stay one step ahead of their competition by enhancing their existing facilities to maximise recycling and recovering of resources. Getting the right specialist advice can often be the best possible start.
