Eunomia has today published the latest version of its residual waste review. This has generated headlines on the basis that England's local authorities are going to build so much capacity that they will effectively place an upper limit on their recycling rates of 60%.
Eunomia makes this claim on the basis that England will build roughly 5 million more tonnes of capacity on top of the current 5.5 million tonnes, thereby only leaving only 15.5 million tonnes available for recycling. But this is of course a partial analysis which is only looking at residual LA waste (taking their figures at face value). England also generates much larger quantities of residual commercial waste which also needs to find a home.
Eunomia's report/media line talks about local authorities tying themselves down with the minimum tonnages which they are committing to the facilities in the pipeline. But minimum tonnages in residual waste contracts consist not only of Contract Waste from the Authority, but Substitute Waste from commercial sources as well.
In other words, as levels of local authority residual waste fall during the life of a contract, the shortfall is made up using commercial sources, i.e. more and more residual commercial waste is used during the life of the contract so that the plant can keep running while the authority remains incentivised to meet its recycling commitments elsewhere.
To say that England's authorities are therefore constraining their recycling rates to 60% is nonsense.
Thanks for reading our press release. Further detail is provided in the report at www.eunomia.co.uk/product.php/113.
ReplyDeleteUndoubtedly, most facilities procured today by local authorities will process residual commercial wastes in addition to those collected by the local authority. Indeed the majority are sized to do exactly that, whereby lending is secured on the back of the (usually high gate fee) local authority contract, and the rest of the capacity sold off to the highest bidders. Accordingly, we modelled only 70% of the tonnage (or less so if there was clear evidence of this) of each facility being contracted to local authorities in the long term.
The key point here, however, is that the vast majority of contracts do have a GMT, and this might even rise over time (we have seen one recent major contract that did exactly that), and therefore although in theory commercial waste could fill any capacity that resulted from higher levels of local authority recycling, this is very unlikely. This is because the gate fee agreed with the local authority is usually far in excess of what would be received by the operator for commercial wastes. Consequently, there is no incentive for the contractor to not enforce the GMT clause. At the same time the penalties on the local authority for not meeting the GMT are usually too prohibitive for it to consider not meeting it. That is not to say some contracts will not be renegotiated in the future, but only where this is in the interests of the contractor.
Thanks for responding Adam.
DeleteMy point is that the provisions in the WIDP contract which relate to contract waste, priority of waste, and substitute waste interact to constrain the amount of merchant capacity built in newer facilities constructed under PFI. As I mention in the post, the Contractor is compelled to find Substitute Waste to make up shortfalls in the Contract Waste and both form part of the 'minimum tonnage'.
I think you are forecasting circa 5m tonnes of capacity to come onstream by 2020. There is around 11m tonnes of (standard rate) non-household waste that we are either landfilling or exporting as RDF. My contention is that there is more than enough of this to be attracted to residual waste facilities which would not make the 60% household recycling limit you cite a real constraint. This material will be attracted precisely because the Contractor is incentivised to get it, both through the contract under the Substitute Waste provisions and also by simple commercial imperative.