December 2015

A Reality Check: Residual Waste Arisings and Treatment Capacity

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The latest update to the Eunomia Residual Waste Infrastructure Review was issued on 27th December 2015.

Eunomia’s ninth issue of its Residual Waste Infrastructure Review maintains that the UK is still on course to exceed the waste infrastructure it will need in future. This is especially true if it is to achieve the higher levels of recycling envisaged in the European Commission’s Circular Economy Package, but remains true at lower recycling rates.

The capacity of facilities either currently operational, being built or having reached financial close and expected to be operational by 2020/21, combined with anticipated waste exports, will total 23.1 million tpa of demand. Fully utilised, this will exceed the 22.7 million tonnes of residual waste expected to be produced in the year.

In reaching this conclusion, Eunomia also reviewed the various alternative assessments of treatment capacity and arisings presented by waste industry organisations, summarised in the recent Biffa report The Reality Gap. One suggestion was that scenario analysis should be deployed to understand the sensitivity to some variables.

In the figure below, we have therefore:

  • Included a “low recycling” scenario in which the UK does not reach 65% municipal recycling by 2030, and both commercial and industrial waste recycling continue at expected 2020 levels.
  • Revised downwards our capacity estimates for a number of facilities to reflect recent data and expectations regarding their performance
  • Excluded all facilities other than those that are operational, under construction or which have reached financial close from the analysis (so excluding the facilities which have relevant consents, but which may not be constructed).

 

Capacity Graph

 

The headline analysis provided in the latest version of the report:

  • Includes a “low recycling” scenario in which the UK does not reach 65% municipal recycling by 2030. Both commercial and industrial waste recycling continue at expected 2020 levels.
  • Revises downward our capacity estimates for a number of facilities to reflect recent data and expectations regarding their performance
  • Excludes all facilities other than those that are operational, under construction or which have reached financial close from the analysis (so excluding the facilities which have relevant consents, but which may not be constructed).

These changes push back the date at which the supply of treatment capacity exceeds the amount of suitable waste available. Nevertheless, Eunomia’s main findings continue to refute those of other commentators, all of which have concluded that there remains significant scope for additional investment in UK residual waste treatment infrastructure. By contrast, Eunomia finds the residual waste market rapidly becoming more competitive, especially when recent increases in waste export are taken into consideration. Eunomia has therefore reviewed the alternative reports to seek to understand the reasons for this variance.

The Infrastructure Review’s lead author, Adam Baddeley, explains:

“When you focus on the overall conclusions of the reports, they appear consistent with one another, and Eunomia looks like the odd one out. However, breaking them down and looking separately at their estimates of capacity and arisings produces a rather different picture.”

Eunomia’s analysis is broadly consistent with each of the others’ in terms of either capacity or current arisings. The different conclusions result from pairing a similar capacity estimate to Eunomia’s with a higher estimate of residual waste; or a similar estimate to Eunomia’s assessment of available waste with a lower figure for capacity.

Baddeley added:

“The interesting question isn’t – ‘Why are Eunomia’s conclusions different?’ Rather, it’s ‘Why, despite disagreeing so significantly on their assumptions, do all of the other reports reach the same conclusions?’”

In broad terms, Eunomia’s estimates of waste arisings are similar to those of Biffa, the Green Investment Bank and Tolvik; meanwhile, Eunomia’s estimates of residual waste treatment capacity broadly align with those of Ricardo-AEA and SITA.

 

Report Comparison Graph

 

Eunomia’s report continues to be the only source of estimates through to 2030. Given the long-term nature of residual waste treatment facilities, investors will want to understand the viability of facilities in the light of the municipal recycling target of 65% proposed as part of the European Commission’s Circular Economy Package for 2030. Suggestions from the UK that the Commission’s proposed targets are ‘too high’ must also be understood in the light of a long-term failure on the part of the UK Government to provide clear direction on waste infrastructure policy.