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					ENERGY FROM WASTE
A guide to opportunities in the UK
UK Trade & Investment is the Government organisation that helps UK
based companies succeed in international markets. We assist overseas
companies to bring high quality investment to the UK's vibrant economy.
Contents
Welcome and introduction                                         02

Market overview                                                  04

How does energy from waste work?                                 05

What kind of waste can be used to produce energy and how?        06

How much waste does the UK generate?                             08

UK Policy drivers                                              09-10

Key technologies and terms                                       12

Business opportunities in energy from waste                      14

How are waste management projects financed?                      15

What are the advantages of Private Finance Initiative (PFI)?     16

Future projects                                                  18

Summary                                                          19

Why the UK?                                                      19

Next steps                                                       20

Useful links                                                     20

 Case Studies:
 Sheffield District Energy Network                                05
 East London Waste Authority (ELWA)                               07
 Slough Heat and Power                                            10
 Tees Valley Energy from Waste Plant                              11
 Leicester Project                                                17
    Welcome and introduction
    The UK is fast developing its reputation, not only for global leadership on climate change, but
    also as one of the largest global hubs for the development of low carbon technology. The UK
    Government is committed to ensuring that the UK can continue to derive maximum benefit from
    the development of a low carbon economy, by working together with companies in the energy
    and waste management sectors.

    Our Trade and Investment Minister, Digby, Lord Jones of          With the UK’s globally competitive business environment and
    Birmingham, recently launched UK Energy Excellence: An           its highly skilled, creative and productive workforce, it should
    International Marketing Strategy for the UK’s Energy Business    come as no surprise to note that the UK is the largest
    with John Hutton, Secretary of State for Business, Enterprise    recipient of Foreign Direct Investment (FDI) in Europe, second
    and Regulatory Reform (BERR). This strategy provides a           only globally to the USA. We will continue to build upon this
    unified, compelling message for the UK’s energy industry,        achievement by working with the best global companies, in
    supporting UK business overseas, and positioning the UK as a     high-growth sectors such as environmental technology and
    worldwide hub for energy technologies.                           renewable energy.

    Waste management in the UK is a significant sector with over     This brochure has been produced as a guide to opportunities
    3,000 active companies, from large multinational corporations    in the UK for companies operating in the energy from waste
    to smaller technology-led firms, employing over 70,000           sector. We hope that both investors from overseas markets
    people. A study carried out jointly for BERR and the UK          considering locating in the UK for the first time, and existing
    Department for Environment, Food and Rural Affairs (Defra)       investors seeking to grow their business in the UK, will take
    forecast that revenues in the sector are likely to double by     advantage of these opportunities by investing in the UK. It is
    2015; industry estimates suggest that up to £30 billion will     our job at UK Trade & Investment to help you to streamline
    need to be invested across the sector by 2020.                   that investment process.

    Energy from waste is an important suite of technologies, with    I am very grateful for the input from Defra. We look forward
    the ability to provide both renewable energy and a solution to   to working with them to help our customers develop and
    the growing challenges of waste management. In 2006              grow their businesses in the UK.                                   Waste management in the UK
    Defra’s Waste Infrastructure Delivery Programme (WIDP)
    analysed the waste treatment and disposal infrastructure
    needed to meet the UK’s 2013 and 2020 landfill diversion
                                                                                                                                          is a significant sector with
    targets and found that an extra 8.4 to 8.9 million tonnes of
    annual processing capacity for municipal solid waste (MSW)
                                                                                                                                         over 3,000 active companies
    alone will be needed. This requires capital expenditure in the
    range of £5-6 billion to achieve the 2013 MSW target and a       Brian Shaw
    further £4-5 billion to reach the 2020 MSW target.               Managing Director - Business Group
                                                                     UK Trade & Investment




2                                                                                                                                                                        3
    Market overview
    Energy from waste (EfW) is the generic term given to a process by which energy
    stored in waste is extracted in the form of fuel, heat or electricity.

    Recovering energy from waste turns the problem of its             To achieve the Government’s goals, the UK needs to build
    disposal into an opportunity for generating income from heat      sufficient infrastructure to process the waste and to dispose
    or power sales. This is becoming increasingly important in the    of the residues remaining after minimisation, recycling and
    UK as legislation demands higher environmental standards of       re-use have taken place. By 2020 some £9-11 billion of
    waste disposal and places pressure on local authorities to        capital expenditure is likely to be required to meet the UK’s
    reduce their quantities of waste generation and landfill.         landfill diversion targets. Only a combination of all these
                                                                      activities will enable the country to divert enough waste from
    Indeed, the Government’s Waste Strategy for England 2007          landfill to meet obligations under the EU Landfill Directive.
    requires significant reduction in the amount of waste created,
    together with a substantial increase in the amount of waste
    re-used and recycled. It requires the maximisation of the cost-
    effective pre-treatment of waste before disposal; and where
    disposal requires combustion, that this is done in the most                                                                        Sheffield District Energy Network
    efficient way possible. Combined heat and power (CHP) is the
    most energy-efficient process for achieving this, the key                                                                          What do Sheffield’s Ponds Forge International Sports               Veolia’s state-of-the-art energy recovery facility has been
    outputs of EfW facilities usually being heat and electricity.                                                                      Centre, Park Hill flats, The Crucible and Lyceum theatres,         constructed to meet and exceed the latest environmental
    With CHP offering a significant improvement on a facility’s                                                                                                                                           regulations. With a waste throughput capacity of 225,000
                                                                                                                                       Millennium Galleries, Weston Park Hospital and the City
    carbon footprint as well as higher energy efficiencies, the CHP                                                                                                                                       tonnes of municipal solid waste a year, the facility plays an
                                                                                                                                       Hall have in common? They all get their heating from the
    market in the UK should see substantial growth.                                                                                                                                                       important part in the city’s innovative approach to waste
                                                                                                                                       waste created by Sheffield residents.
                                                                                                                                                                                                          management, generating up to 60 megawatts of thermal
                                                                                                                                                                                                          energy and up to 19 megawatts of electricity.
                                                                                                                                       In August 2001, Veolia Environmental Services was awarded a
                                                                                                                                       35-year waste management contract by Sheffield City Council.
                                                                                                                                                                                                          On average every year, the Sheffield District Energy Network
                                                                                                                                       It is responsible for waste collection, recycling, treatment and
                                                                                                                                                                                                          prevents over 21,000 tonnes of CO2 from being released
                                                                                                                                       recovery in the city. This includes running the award-winning
                                                                                                                                                                                                          across the city. This has a significant impact on reducing the
                                                                                                                                       District Energy Network, some 44km of underground pipes
                                                                                                                                                                                                          UK's carbon footprint and makes a valuable contribution to
                                                                                                                                       delivering low carbon energy generated by recovering energy
                                                                                                                                                                                                          preventing climate change.
                                                                                                                                       from waste to over 140 buildings of all sizes and types.




                                                                                                                                       How does energy from waste work?
                                                                                                                                       A number of EfW technologies generate heat                         The climate for investment is very encouraging, with
                                                                                                                                                                                                          widespread confidence in the market. The UK Government is
                                                                                                                                       or electricity from municipal, commercial                          committed to sustainable waste management, which brings
                                                                                                                                       and industrial wastes. Together, these types                       important environmental benefits by providing safe, cost-
                                                                                                                                       of waste constitute some 66 per cent of the                        effective waste treatment and disposal and by reducing the
                                                                                                                                                                                                          use of landfill. These principles are enshrined in energy
                                                                                                                                       335 million tonnes of waste the UK produces                        strategy, through legislation and long-term policy goals,
                                                                                                                                       each year.                                                         together with international commitments to EU landfill
                                                                                                                                                                                                          directive targets.
                                                                                                                                       Energy from waste is expected to account for 25 per cent of
                                                                                                                                       municipal waste by 2020, compared to 10 per cent today.
                                                                                                                                       This presents a significant opportunity for investors, plant
                                                                                                                                       manufacturers, technology providers and waste management
    It is estimated that by 2020 some £10 billion                                                                                      contractors over the next seven to 12 years.


    of capital expenditure is required to meet
    the UK’s landfill diversion targets

4                                                                                                                                                                                                                                                                          5
                                                                                                                                                               Waste wood alone going to landfill is estimated
    What kind of waste can be used to produce energy and how?                                                                                                      to amount to 7-10 million tonnes per annum
    Energy is produced when waste is disposed of through combustion. The most efficient output
    is to produce combined heat and power. Waste that can be used in this way is known as
    feedstock, and falls into the following types:


     Type                                                               Use in producing energy from waste

     Municipal solid waste (MSW) is principally domestic                Municipal or local authorities have developed facilities to
     (household) waste and some commercial or trade waste               treat consistently large quantities of MSW for volume
     similar to domestic waste. The responsibility for the              reduction prior to landfill, disposal of the residues and
     collection and treatment of MSW rests with the local               energy recovery to mitigate costs. Many aim, where
     authorities in the UK, although it is generally contracted         feasible, to provide heat to local buildings etc. However,
     out to private enterprise.                                         this is not yet common in the UK.

     Commercial and trade waste comprises mainly paper,                 Some EfW facilities meet some of the private sector's
     card, plastics, packaging and some putrescible wastes from         requirements for the disposal of trade, commercial and
     shops, offices and light industry. These wastes are collected      industrial wastes. This includes the handling of hazardous
     mainly by the private sector.                                      wastes, and confidential or secure wastes that require
                                                                        specialist treatment.

     Industrial waste consists mainly of tyres and scrap materials,     Cement kilns use higher calorific value industrial waste,
     liquids, sludges, metals, plastics and very small amounts of       including tyres, solid recovered fuel (SRF, also named refuse
     putrescible wastes. This is collected exclusively by the private   derived fuel – RDF), waste liquids and sludges. On-site
     sector, where opportunities should exist for small-scale on-       power plants also use these feedstocks.
     site facilities designed for specific types of waste.

     Residues from mechanical biological treatment (MBT).               Such residues will be in the form of an engineered fuel
                                                                                                                                        East London Waste Authority (ELWA)
     This process separates the non-organic parts mechanically          product suitable for use by industrial intensive energy
     and uses the organic remainder in a 'biological' process.          users, whose energy needs may involve combined heat and
                                                                        power eg chemical plant and paper and pulp mills.               In 1996, the East London Waste Authority began a wide        In 2002, a 25-year contract was signed between ELWA
                                                                                                                                        consultation process to decide on its waste management       and waste management group Shanks plc to provide a
                                                                                                                                        strategy. Driven by ever-increasing tonnages of waste to     mechanical biological treatment (MBT) plant that could
     Clinical or hospital waste comprises hospital ward waste,          Many of the facilities to dispose of clinical or hospital                                                                    cope with 360,000 tonnes of waste a year. The technology
     packaging, prescription-only medicine wastes and                   waste are in hospital grounds and contribute to the power       dispose of, reduction of landfill facilities and a
                                                                                                                                        requirement to meet the EU Landfill Directive and National   used by Shanks came from its Italian partner, Ecodeco.
     pathological waste. These wastes are collected by on-site          and/or heat needs of the hospital.                                                                                           Shanks developed two sites, building an Intelligent
     hospital staff or by the private sector under contract.                                                                            Waste Strategy, ELWA looked to the Private Finance
                                                                                                                                                                                                     Transfer Station at both Frog Island and Jenkins Lane.
                                                                                                                                        Initiative and new technology to provide a solution.         The process stabilises residual municipal waste, creating
     Wood waste includes recycled timber from the commercial,           Wood waste alone going to landfill is estimated to                                                                           further opportunities for recycling and recovery of
     industrial and domestic sectors and residues from the              amount to 7-10 million tonnes a year, but the biomass                                                                        materials. The biodegradable fraction of the waste is
     wood processing and forestry industries.                           content in indigenous MSW provides a carbon neutral                                                                          managed to provide a source of heat that dries and
                                                                        source of energy – the trees have absorbed enough carbon                                                                     sanitises this waste, which can then be sorted to create a
                                                                        in their lifetime to offset the carbon used in combusting                                                                    number of outputs including a solid recovered fuel (SRF).
                                                                        the wood waste.
                                                                                                                                                                                                     Five years on, and Shanks East London has a fully
                                                                                                                                                                                                     operational business dealing with 10,000 tonnes of waste
     Hazardous waste is essentially waste with hazardous                There are few specialist EfW facilities dedicated to a                                                                       a week. Working closely with ELWA, it has actively
     properties that may render it harmful to human health or           particular site and purpose, such as treating hazardous                                                                      brought about a doubling of recycling performance since
     the environment. There are 14 hazardous properties,                waste, on-site factory waste, government facility wastes,                                                                    the contract began and is currently diverting over 40% of
     including ‘flammable’, ‘toxic’ or ‘corrosive’. Hazardous           hospital wastes and those with a security or                                                                                 waste away from landfill.
     waste is defined in the List of Wastes Regulations 2005            confidentiality requirement.
     and includes acids, alkalis, mineral oils and more everyday                                                                                                                                     Shanks, meanwhile, has gone on to successfully build
     wastes such as refrigeration equipment, TV and computer                                                                                                                                         another MBT plant to service the Dumfries & Galloway
     monitors and some paints and batteries.                                                                                                                                                         contract which began operating in 2006. It is also
                                                                                                                                                                                                     preferred bidder for a similar solution in Cumbria.




6                                                                                                                                                                                                                                                                 7
    How much waste does the UK generate?                                                                                                                                 UK policy drivers
    The table below details the volume generated of each kind of waste.                                                                                                  Strategic, legislative and economic factors
                                                                                                                                                                         are all playing their part in ensuring the
                                                                                                                                                                         establishment of new waste treatment
       Estimated total annual waste by sector: United Kingdom 2004*                        Million tonnes                             Percentage of total waste          facilities in the UK.
      Household                                                                            31.7                                       9
                                                                                                                                      12                                 The National Waste Strategies provide the policy framework
      Commercial                                                                           41.1
                                                                                                                                      13                                 within which energy from waste operates and reflect the
      Industrial                                                                           42.0
                                                                                                                                      32                                 coming together of energy and waste policies. The Waste
      Construction and demolition                                                          106.1
                                                                                                                                      29                                 Strategy for England 2007 and the Energy White Paper
      Mining and quarrying                                                                 96.4
                                                                                                                                      5                                  (May 2007) set out the Government’s policy on energy and
      Dredged materials                                                                    15.8
                                                                                                                                      0                                  waste, placing strong emphasis on links with overall energy
      Sewage sludge                                                                        1.5
                                                                                                                                      0                                  policy and the need to consider greenhouse gas emissions.
      Agriculture (inc. fishing)                                                           0.6
                                                                                                                                                                         The key objectives are less waste, more re-use and recycling,
                                                                                           335.1                                      100                                recovering more energy from waste and less landfill.
      TOTAL
                                                                                                                                                                         www.defra.gov.uk/environment/waste/index.htm

    Source: Defra, Environment Agency, Scottish Environment Protection Agency, Environment and Heritage Service Northern Ireland, Welsh Assembly Government,             The Energy White Paper makes it clear that generating
    Water UK, Centre for Environment, Fisheries & Aquaculture Science, British Geological Survey (2007)                                                                  energy from the portion of waste that cannot be prevented,
    * Waste volumes are calculated by sector as above. Types of waste are placed into these sector categories rather than into their own category, eg hazardous waste,
                                                                                                                                                                         re-used or recycled has both energy and waste policy
      clinical and hospital waste, wood waste.
                                                                                                                                                                         benefits. Energy generated either directly from waste, or
                                                                                                                                                                         through the use of a fuel derived from waste, has benefits
                                                                                                                                                                         for the security of the UK’s energy supply. In addition, the
                                                                                                                                                                         biodegradable fraction of waste is a renewable resource.
                                                                                                                                                                         www.berr.gov.uk/energy                                          The Waste Incineration (England and Wales) Regulations
                                                                                                                                                                                                                                         2000 (EU Waste Incineration Directive 2000) (WID)
                                                                                                                                                                         The Renewables Obligation (RO) was developed as a               introduced stringent operational conditions, technical
                                                                                                                                                                         substantial market incentive to encourage new renewables        requirements and strict emissions limits for plants
                                                                                                                                                                         generation in the UK. It places an obligation on UK suppliers   incinerating and co-incinerating waste. The Directive's aim is
                                                                                                                                                                         of electricity to source an increasing proportion of their      to prevent or limit, as far as possible, negative effects on the
                                                                                                                                                                         electricity from renewable sources. In 2006-07 the obligation   environment, in particular pollution by emissions into air,
                                                                                                                                                                         was set at 6.7 per cent (2.6 per cent in Northern Ireland),     soil, surface and ground water, and the resulting risks to
                                                                                                                                                                         rising to 15 per cent by 2015. A new banding scheme             human health. www.environment-agency.gov.uk
                                                                                                                                                                         provides more targeted levels of support to different
                                                                                                                                                                         technologies, including eligible energy from waste schemes.     The Landfill Directive (Directive 1999/31/EC) is a key driver
                                                                                                                                                                         www.berr.gov.uk/energy                                          towards energy from waste. Its main objective is to divert
                                                                                                                                                                                                                                         biodegradable municipal waste (BMW) away from landfill and
                                                                                                                                                                         The UK Biomass Strategy meets the commitments made in           it encourages local authorities to consider the role that
                                                                                                                                                                         the Energy Review (2006) and in the Government’s response       energy from waste could play in achieving this objective. By
                                                                                                                                                                         to the 2005 Biomass Task Force Report and brings together       2020 the UK is committed to reducing to 35 per cent of the
                                                                                                                                                                         current UK Government policies on biomass for energy,           1995 figure the amount of BMW that goes to landfill.
                                                                                                                                                                         transport and industry. The Biomass Strategy acknowledges
                                                                                                                                                                         the importance of fuels sourced from biomass in tackling        However, this applies only to BMW. There is currently no ban
                                                                                                                                                                         climate change. Biomass will play a central role in meeting     or restriction in the UK – apart from a few capacity
                                                                                                                                                                         the EU target of 20 per cent renewable energy by 2020.          constraints – on landfilling commercial or industrial waste.
                                                                                                                                                                         www.defra.gov.uk/environment/climatechange/uk/energy/rene
                                                                                                                                                                         wablefuel/index.htm                                             The Landfill Allowance Trading Scheme (LATS) was
                                                                                                                                                                                                                                         launched in England on 1 April 2005. This scheme is
                                                                                                                                                                         The White Paper Planning for a Sustainable Future sets out      intended to provide a cost-effective way of enabling England
                                                                                                                                                                         detailed proposals for reform of the planning system. It        to meet its share of UK targets under the Landfill Directive.
                                                                                                                                                                         proposes reforms to how the UK takes decisions on               Under LATS, tradable landfill allowances have been allocated
                                                 Biomass will have a central role to play                                                                                nationally significant infrastructure projects – including      to each waste disposal authority – either the local or unitary
                                                                                                                                                                         energy, waste, waste-water and transport – responding to the    authority. These allowances convey the right for a waste
                                                  in meeting the EU target of 20 per cent                                                                                challenges of economic globalisation and climate change.        disposal authority to landfill a certain amount of BMW in a
                                                                                                                                                                         www.communities.gov.uk/planningandbuilding                      specified scheme year. Authorities that landfill more BMW
                                                              renewable energy by 2020                                                                                                                                                   than the allowances they hold are liable to a penalty of £150
                                                                                                                                                                                                                                         per tonne of biodegradable waste over the limit.
                                                                                                                                                                                                                                         www.defra.gov.uk/Environment/waste/localauth/lats/index.htm


8                                                                                                                                                                                                                                                                                                           9
     Policy drivers (continued…)                                                                                                                     From 1 April 2008 until at least
     In addition, the landfill tax accelerator is beginning to provide
     an incentive for alternative forms of treatment/disposal. The                                                                                   2010-11, the standard rate of
     accelerator is a mechanism introduced in the 2007 UK Budget
     to make landfill progressively more expensive as a means of
     disposing of waste. Since 1 April 2007, landfill tax has been
                                                                                                                                                     landfill tax will increase by
     charged at £24 per tonne; but from 1 April 2008 until at least
     2010 -11, the standard rate of landfill tax will increase by £8
                                                                                                                                                     £8 per tonne each year.
     per tonne each year. Added to the actual disposal costs, and
     the decrease in available landfill space throughout the UK, it
     will only be a few years before landfill disposal costs are
     around £70 per tonne.

     Other incentives are designed to encourage waste disposal
     authorities to move from low cost landfill to higher cost
     treatment and disposal solutions requiring processing plants.         Slough Heat and Power
     For example, the enhanced capital allowance scheme,
     extended in the 2007 UK Budget, supports combined heat and            Slough Heat and Power‘s combined heat and power
     power (CHP) to help firms cope with the cost of converting            (CHP) plant has a potential generating capacity of 101
     plant from gas to solid fuel firing using solid recovered fuel        megawatts and a current generating capacity of around
     (SRF). www.hm-treasury.gov.uk/budget                                  80 megawatts. It produces electricity plus heat, which is
                                                                           distributed via a steam and water distribution network
     In addition, new EU directives require that all waste going to
                                                                           comprising around 100 kilometres of underground
     landfill be pre-treated, a factor that will play a significant part
     in driving the market. www.environment-agency.gov.uk                  electricity network plus substations. The company has
                                                                           around 3,000 industrial, commercial and domestic energy
     However, it must be noted that while energy from waste is one         customers and on I January 2008 Scottish and Southern
     solution to reducing the amount of waste that goes to landfill,       Energy plc (SSE) completed the purchase of SEGRO plc
     there is no statutory direction from the UK Government to             shares in Slough Heat and Power Ltd.
     choose energy from waste; and some of the drivers in place for
     other waste management techniques specifically do not apply           The CHP plant is the UK’s largest dedicated biomass energy       Tees Valley Energy from Waste Plant
     to energy from waste.                                                 facility. Its main sources of fuel are wood chips, biomass and
                                                                           waste paper, although gas, gas oil and heavy fuel oil can also
                                                                           be used. The site has its own fibre fuel processing plant,       In 1998 SITA UK completed the construction of a new,
                                                                           which takes delivery of waste paper products and converts        state-of-the-art waste treatment facility in Teesside. SITA   SITA chose Von Roll Innova, a Swiss-based company, to
                                                                           these into useable fuel.                                         is now expanding this plant to handle an additional           undertake the development of the facility on a turnkey
                                                                                                                                            140,000 tonnes a year of municipal waste.                     contract basis. On-site construction began in December
                                                                           Part of the plant is contracted under the Non Fossil Fuel                                                                      2006 and is scheduled to be completed by June 2009.
                                                                           Obligation and produces over 200 gigawatt hours of output        The existing energy from waste plant comprises two lines      The expanded plant will be a single line facility based upon
                                                                           qualifying for Renewable Obligation Certificates (ROCs). This    based on proven and reliable moving grate technology and      moving grate technology and incorporating high
                                                                           is equivalent to around 90 megawatts of wind generation. It      incorporating high temperature incineration of waste,         temperature incineration of the waste and flue gas cleaning
                                                                           also comes with an allocation of carbon emissions allowances     together with flue gas cleaning – which exceeds the           equipment that will ensure full compliance with the Waste
                                                                           for Phase II of the EU Emissions Trading Scheme.                 requirements of the Waste Incineration Directive – and the    Incineration Directive. An additional 10 megawatts of
                                                                                                                                            generation of 20 megawatts of electricity. supplied to the    electricity will be produced and supplied to the national grid
                                                                           The plant uses only clean, uncontaminated wood chips.            national grid. The plant was constructed under a turnkey      under a Non Fossil Fuel Obligation contract.
                                                                           Much of the wood is locally sourced, and represents an           contract by Volund and handles 240,000 tonnes a year of
                                                                           investment of over £3 million each year into the rural           municipal solid waste from the local community. It is owned
                                                                           economy. This helps to create and sustain dozens of jobs.        and operated by SITA UK.

                                                                                                                                            Development of a third line began in 2006 once all the
                                                                                                                                            essential elements were in place. These included:

                                                                                                                                            ■   Planning permission from Stockton Borough Council.
                                                                                                                                            ■   A long-term waste contract with Northumberland
                                                                                                                                                County Council, for which the Authority has been
                                                                                                                                                pledged £40.8 million funding through the Private
                                                                                                                                                Finance Initiative.

                                                                                                                                            Private sector funding of the project through a mix of debt
                                                                                                                                            and equity supplied by the partners to the project –SITA,
                                                                                                                                            Royal Bank of Scotland and Axa.


10                                                                                                                                                                                                                                                                         11
     Key technologies and terms
                                                                                                                                   In 2003 Defra launched the New Technologies Demonstrator
      Advanced thermal treatment (ATT)    Waste management processes involving medium and high temperatures to recover             Programme (NTDP) to demonstrate innovative waste
                                          energy from the waste. Primarily pyrolysis and gasification-based processes,             treatments technologies as possible alternatives to landfill.
                                          excluding incineration.                                                                  This research and development programme, which aims to
                                                                                                                                   prove the economic, social and environmental viability of
     Anaerobic digestion (AD)             A process where biodegradable material is encouraged to break down in the absence        each selected technology, is now closed to new applicants,
                                          of oxygen. Material is placed in an enclosed vessel and in controlled conditions the     but current projects are likely to deliver their findings by
                                          waste breaks down typically into a digestate, liquor and biogas.                         2009. There will be a series of impartial reports, presentations
                                                                                                                                   and advice from experts working on behalf of Defra. Each
     Autoclaving                          Steam pressure cooking produces a fuel floc with, usually, high biomass content          project site will also have a visitor centre. Full details of the
                                          which can be burnt to recover energy.                                                    demonstrator programme can be found on
                                                                                                                                   www.defra.gov.uk/environment/waste/wip/newtech/
     Back end plant                       Large single assets (typically EfW, MBT, AD and IVC plant) used for waste treatment      dem-programme/index.htm
                                          and disposal.

     Bottom ash                           The ash that arises from a combustion process in a furnace.

     Flue gas cleaning or air pollution   Driven by the need to reduce emissions to air, these systems produce a small
     control (APC) systems                quantity of hazardous waste from the scrubbing or cleaning of the flue gases. This
                                          is usually sent to a hazardous waste landfill.

     Fluidised bed combustion             A combustion technology system in which a sand bed (or similar inert material) is
                                          fluidised by air jets, heated to temperatures high enough to support combustion, at
                                          which point combustible wastes are added.

     Front end infrastructure             Kerbside recycling infrastructure, household waste recycling centres, collection
                                          vehicles, civic amenity sites.

     Gasification                         Gasification is the process whereby carbon-based wastes are heated in the presence
                                          of air or steam to produce a solid – low in carbon – and a gas. The technology is
                                          based on the reforming process used to produce town gas from coal.

     Incineration                         The controlled thermal treatment of waste by burning, to reduce either its volume
                                          or toxicity. Energy recovery from incineration can be made by utilising the calorific
                                          value of the waste to produce heat and/or power.

     In-vessel composting (IVC)           The aerobic decomposition of shredded and mixed organic waste within an
                                          enclosed container, where the control systems for material degradation are fully
                                          automated. Moisture, temperature and odour can be regulated, and stable compost
                                          can be produced much more quickly than in outdoor windrow composting.

     Mechanical Biological                A generic term for mechanical sorting/separation technologies used in conjunction
     Treatment (MBT)                      with biological treatment processes, such as composting.

     Moving grate system                  A well-tried and proven technology used in EfW plants, involving waste passing
                                          through the combustion chamber on a moving grate/escalator.

     Rotary kiln combustion               Incineration in a rotary kiln is normally a two-stage process consisting of a kiln and
                                          separate secondary combustion chamber. The rotation moves the waste through the
                                          kiln with a tumbling action that exposes the waste to heat and oxygen.

     Plasma and supercritical water       Simultaneously burns wastes and cleans up the combustion by-products.

     Pyrolysis                            During pyrolysis organic waste is heated in the absence of air to produce a mixture
                                          of gaseous and/or liquid fuels and a solid, inert residue (mainly carbon).



12                                                                                                                                                                                                     13
     Business opportunities in                                                                                                          How are waste management projects financed?
     energy from waste                                                                                                                  Greater regional collaboration between authorities, focusing Private Finance Initiative (PFI) on
                                                                                                                                        the infrastructure required for residual waste disposal, stimulating markets for solid recovered
     The collection, management, recovery and                                                                                           fuel disposal and encouraging a mixed economy approach to both financing and procurement
     disposal of waste are predominantly                                                                                                methods are just some of the measures directed to achieving the waste market transformation
     contracted out to private sector companies.                                                                                        needed to deliver infrastructure on the ground.
     This creates abundant opportunities in the UK
     for companies that provide waste                                                                                                   Debt and equity are the principal sources of finance for              However, small, low value infrastructure (household waste
     management and treatment technologies and                                                                                          investment in large-scale treatment and disposal infrastructure.      recycling centres, materials recycling facilities, civic amenity
     services within energy from waste.                                                                                                                                                                       centres, and landfill) is best financed in one of the
                                                                                                                                        Debt is provided by commercial banks in the form of long-             following ways:
                                                                                                                                        term senior debt secured against 25-year waste supply
                                                                                                                                        contracts from local authorities. Typically, this would be an         I   on the balance sheet of a waste management contractor
                                                                                                                                        85/15 debt equity formulation using a special purpose vehicle.        I   through grant funding
                                                                                                                                        A wide range of commercial banks are willing and able to              I   from an authority’s use of its own resources
                                                                                                                                        arrange, underwrite and lend into waste project financings.           I   by use of Prudential Borrowing by a local authority
     Principal clients in the UK are local authorities (Collection     Similarly, due to the relatively recent removal of Crown         Equity for projects comes from industrial, financial or private       Prudential Borrowing allows authorities to borrow for capital
     and Disposal Authorities) and waste management companies.         Immunity and increased emission control standards, the           equity providers. Industrial equity, available from major waste       investment and is one of a number of funding mechanisms
     For long-term waste treatment contracts, the local waste          hospital waste sector may provide some opportunities for         management companies, is linked directly to their participation       available for waste infrastructure procurements. In considering
     disposal authority usually contracts out to the private sector.   technology companies to provide energy improvement               in projects. Investment capacity is potentially augmented by          whether to use Prudential Borrowing, authorities are required by
                                                                       equipment and flue gas cleansing for existing plants.            finance available from private equity markets. This generally         regulation to adhere to the Prudential Code developed by the
     A large EfW facility incorporates a number of different                                                                            involves the acquisition of waste management companies as             Chartered Institute of Public Finance and Accountancy (CIPFA)
     technologies in association with the main combustion              Other opportunities may exist with intense energy users –        well as investment in companies set up to deliver specific            as a professional code of practice to support authorities in
     process. A broader range of services and expertise is offered     such as operators of cement kilns or paper mills – and           projects. Recent examples of private equity activity include          making their decisions.
     in the UK as local and foreign technology specialists work in     companies with substantial heat loads (chemical producers,       Montagu Private Equity’s acquisition of Cory and Terra Firma’s
     partnership in this area of work. For example the foreign-        for example) who are seeking alternative sources of energy to    acquisition of WRG.                                                   Further guidance is available in the consultation document:
     based expertise of the main combustion process technologist       operate their plants. These plant operators are showing                                                                                Prudential Borrowing - Frequently Asked Questions, available
     and the local waste operator may work well together to            interest in the potential for energy from solid recovered fuel   With the increase in UK Landfill Tax and the excess of demand         from WIDP.
     improve the efficiency of their technology.                       (SRF) from the industrial and municipal waste sectors.           over the supply of waste treatment capacity, companies are
                                                                       Cement kiln operating companies in the UK include Cemex,         exploring what are known as merchant projects – the provision
     The best opportunities for suppliers of specialised separate      Lafarge and Castle Cement, while Ineos Chlor, amongst            of waste treatment capacity not underpinned by long-term
     items of equipment for flue gas scrubbing or waste sorting,       others, has indicated interest in using SRF as an alternative    contracts. The fact that companies are willing to take the risks
     or separation and preparation equipment, may be gained by         feedstock to gas.                                                themselves, without the security of guaranteed long-term
     approaching the leading UK waste management companies                                                                              contracts, is an indication of the scale of demand.
     or electricity generating companies. Such companies may           Processes that use waste or treated waste as their
     require new equipment if their EfW facilities or power            feedstock require the combustion gases to be subject to          Defra encourages a mixed economy of financing and
     stations were constructed before current legislation (eg the      the Waste Incineration Directive. In this respect there is       procurement approaches, depending upon the asset type. Large
     Waste Incineration Directive and its related guidance,            considerable potential for growth in these sectors for           single asset treatment and disposal infrastructure can be project
     Pollution Prevention and Control legislation) imposed stricter    alternative technologies.                                        financed with or without PFI credit support. In some instances,
     emissions control limits.                                                                                                          local authorities may choose to work with a waste management
                                                                                                                                        contractor without applying for PFI credits. This is often referred
                                                                                                                                        to as a Public Private Partnership (PPP).




                                                                       Photo courtesy of Waste and Resources Action Plan (WRAP)                                                      Photo courtesy of Waste and Resources Action Plan (WRAP)
14                                                                                                                                                                                                                                                                               15
     What are the advantages of Private Finance Initiative (PFI)?
     The majority of facilities are funded through the Private Finance Initiative (PFI). The UK pioneered
     this financing technique in the 1990s and its practice is well established. Increasingly, PFI is being
     used across the world: gaining experience of it in an established market such as the UK offers
     valuable expertise as well as exposure to potential partners for the rest of a company’s operations.
     PFI uses private finance to fund long-term public sector contracts for a wide range of public
     infrastructure – such as schools, hospitals, roads and waste management facilities – which involve
     a significant capital expenditure component. Local authorities procure assets in partnership with
     the private sector following a competitive tender process designed to ensure value for money. A
     private sector contractor builds the new facilities and provides the service using these facilities
     over (typically in waste management contracts) a 25-to 30-year period.

     Unlike other forms of contract, a PFI provides additional         There could be opportunities in the current contracts for
     government money to local authorities to help them meet           assistance with improved technologies (e.g. flue gas cleaning
     the costs of a contract. In all other respects a Waste PFI is a   as required by legislation) or for ancillary treatment processes
     commercial financing arrangement, using well recognised           to improve efficiencies.
     project financing techniques.
     Defra’s PFI credit allocation criteria can be viewed at:          Where contracts are ’in procurement‘ there may be
     www.defra.gov.uk/environment/waste/localauth/funding/             opportunities to participate either individually or in
     index.htm                                                         consortium with other partners. And with pending or future
                                                                       contracts there will be greater opportunities because the local
     Last year Defra set up the Waste Infrastructure Delivery          authorities in question have not yet sought or received
     Programme (WIDP) which brings together the project delivery       tenders or expressions of interest from technology providers
     activities of Defra’s Waste Implementation Programme,             and/or waste management contractors.
     Partnerships UK and the Public Private Partnership
     Programme (4Ps). This unit within Defra helps local
     authorities accelerate investment in the large-scale
     infrastructure required for processing residual waste, without
     compromising efforts to minimise waste and increase
     recycling levels.

     WIDP oversees the allocation of PFI credits and has
     introduced four award rounds to give every authority the                                                                             Leicester Project
     chance to submit an application for credits in a fair and
     transparent process. The two-step application process                                                                                In response to a Public Finance Initiative (PFI) tender
     consists of Expressions of Interest (EoI) followed by Outline                                                                        award, Biffa plc, a long-established waste management
     Business Cases (OBC). The latest round attracted EoIs from
                                                                                                                                          company, was asked to meet stringent environmental
     nine projects and it is particularly encouraging to see more
                                                                                                                                          performance criteria for the management of household
     authorities working collaboratively. The deadline for
     authorities to submit EoIs for the fourth and final planned                                                                          waste in the City of Leicester that did not require
     round is April 2008                                                                                                                  segregated kerbside collections of food and garden
                                                                                                                                          waste and avoided incineration technologies.

                                                                                                                                          The city has a population of 330,000, generating just under
                                                                                                                                          160,000 tonnes of waste each year of which 60,000 tonnes is
                                                                                                                                          directly recycled from kerbside or civic amenity sites. The
                                                                                                                                          balance of the waste passes to a 100,000 tonne Outo Kumpo
                                                                                                                                          ball mill currently processing four days per week, using a         of methane which is then burnt in gas engines to produce
                                                                                                                                          rotating eight-metre mill containing 50 tonnes of cannon           1.5 megawatts of electricity. Heat is re-circulated, while
                                                                                                                                          balls that reduce and homogenise the material.                     residues are used as a soil conditioner in reforestation and
                                                                                                                                                                                                             coal mine renewal projects. The fuel floc is currently used as a
                                                                                                                                          The homogenised waste then passes through trommels,                coal substitute in cement kilns but could feed a new gasifier
                                                                                                                                          magnets, eddy currents and screens to create 20,000 tonnes         being commissioned by Biffa in Spring 2008 to produce
                                                                                                                                          of rejects to landfill, 40,000 tonnes of organic rich solids and   hydrogen/CO syngas as a fuel feedstock.
                                                                                                                                          40,000 tonnes of derived fuel floc. The organic solids pass to
                                                                                                                                          an integrated anaerobic digester that generates 8,000 tonnes       The plant was completed in 2007 at a cost of £20 million.


16                                                                                                                                                                                                                                                                              17
     Future projects                                                                                                                   Summary                                                          Why the UK?
     Future PFI contracts in the UK are likely to be               Particular priority will be given to combustion solutions that      The UK is the ideal market in which to invest. The escalating    ■   Global leadership on climate change, and global leader
                                                                   involve combined heat and power (CHP). The increasing cost          costs of waste disposal, regulatory and legislative framework        for the carbon market
     focused on the larger ’back-end‘ treatment and                of fossil fuels is causing industrial intensive energy users with   and an energy from waste sector requiring £9-11 billion          ■   Size of the waste market
     disposal plants such as energy from waste and                 existing heat loads to consider converting gas fired CHP to         investment over the next 12 years make a compelling case for     ■   Number 1 recipient of foreign direct investment (FDI) in
     mechanical biological treatment (MBT)                         solid fuel firing using SRF. Some local authorities have            investors, plant manufacturers, technology providers and waste       Europe (2nd globally behind the USA)
                                                                   developed or are planning MBT capacity whose SRF residues           management companies to enter and expand the market.
     facilities, as these are more suitable for project            are an ideal feedstock for CHP plant. Industrial hosts would
                                                                                                                                                                                                        ■   Range of waste solutions required
     financing. Smaller ’front-end‘ infrastructure can                                                                                                                                                  ■   Globally competitive business environment
                                                                   not want to take untreated municipal solid waste onto their
                                                                                                                                                                                                        ■   Focus on combined heat and power
     be financed using Prudential Borrowing, or                    sites but will consider an engineered fuel product like SRF;
                                                                   while for a local authority access to a reliable, long-term SRF                                                                      ■   Highly skilled, creative, adaptive and productive workforce
     local authorities’ own funds, or by arranging for                                                                                                                                                  ■   Opportunities to partner with energy intensive users
                                                                   disposal route turns an MBT plant into a total waste
     waste management contractors to finance                       management solution.                                                                                                                 ■   London recognised as the centre of global finance
     projects from their own balance sheets.                                                                                                                                                            ■   Market confidence driven by government commitment
                                                                   The Government’s response to the Renewables Obligation                                                                                   and strong policy frameworks
     Local authorities electing to apply for PFI credits will be   (RO) Banding Review consultation published on 10 January
     encouraged to work in partnership with neighbouring           2008 sets out a number of measures aimed at providing
     councils while those seeking mechanical and biological        additional support to the energy from waste with CHP
     treatment technology will need to demonstrate how they will   provisions already contained in the RO, including the
     dispose of the resulting solid recovered fuel (SRF).          ’deeming‘ of biomass content and new provisions for the
                                                                   treatment of heat. A further provision on ’neutrality for
                                                                   waste‘ opens up a potential additional outlet for SRF with
                                                                   coal-fired electricity generators who may consider co-firing
                                                                   the product with coal.




18                                                                                                                                                                                                                                                                        19
                                                                Useful links
                                                                UK Government
                                                                UK Trade & Investment
                                                                www.uktradeinvest.gov.uk

                                                                BERR
                                                                www.berr.gov.uk

                                                                Defra
                                                                www.defra.gov.uk

                                                                Environment Agency
                                                                www.environment-agency.gov.uk

                                                                4PS
                                                                www.4ps.gov.uk

                                                                National Association of Waste Disposal Officers
     Next steps                                                 www.nawdo.org

                                                                National Industrial Symbiosis Programme (NISP)
     UK Trade & Investment would be delighted to work
                                                                www.nisp.org.uk
     with you to investigate opportunities in the UK
     market. With unrivalled local access and knowledge,
                                                                Waste and Resources Action Plan (WRAP)
     UK Trade & Investment can offer overseas
                                                                www.wrap.org.uk
     organisations the support and contacts they need to
     establish a presence or expand in the UK quickly
                                                                Technology Strategy Board
     and efficiently. Working in partnership with the
                                                                www.berr.gov.uk/innovation/technologystrategyboard/
     Regional Development Agencies and the National
     Development Agencies in Scotland, Wales and
     Northern Ireland, UK Trade & Investment provides
     free, confidential tailored advice and support in key
     areas. It can:                                             Industry bodies
                                                                Renewable Energy Association
     ■   Provide access to industry networks and centres        www.r-p-a.org.uk/home.fcm
         of excellence.
     ■   Make introductions to sector leaders and business      Chartered Institution of Wastes Management
         contacts, including arranging visit programmes.        www.ciwm.co.uk
     ■   Provide information on the UK business
         environment including taxation and comparative         Environmental Services Association
         cost analysis.                                         www.esauk.org
     ■   Help find land, property and sites and provide
         guidance on issues such as planning.                   Combined Heat and Power Association
     ■   Provide information on the UK labour environment       www.chpa.co.uk
         including recruitment, retention and training.
     ■   Offer information and advice on UK grant               Energy from Waste Association
         schemes aimed at encouraging investment and            www.energy.rochester.edu/uk/ewa
         job creation in specific industries and specific
         areas of the UK.                                       Composting Association
                                                                www.compost.org.uk
     ■   Provide access to UK and European programmes
         supporting technology and process transfer.
                                                                Resource Efficiency KTN
     ■   Assist with regulatory issues.                         www.resource-efficiency.org
     ■   Make introductions to UK legal experts in
         employment law, contracts, work permits,               Integrated Pollution Management KTN
         immigration and unions.                                www.ipm-ktn.com
     ■   Act as a voice in Government for business interests.
     ■   Provide continued support through its Investor
         Development network to help companies mature
         and develop successfully.                              www.uktradeinvest.gov.uk
20
This document is printed on 100 per cent recycled material, produced using 100 per cent post consumer waste.
No environmentally damaging chemicals were used in the production process, with waste and water recycled and reused.
In the UK, companies, including many of the world's major corporations, plug
directly into the heart of global finance, global creative and professional services,
global media and global talent. They enjoy access to world-class science and
academia and link into a wide network of smaller enterprises, many of
which are also world leaders in their fields.

A unique multicultural and entrepreneurial economy, the UK is at the hub of
international business, bringing the world to a company's door. In short, it is the
gateway to the globe.

You too can be at the heart of this global crossroads. Start by talking
to UK Trade & Investment.




Whereas every effort has been made to ensure that the information given in this document is accurate,
neither UK Trade & Investment nor its parent Departments (the Department for Business, Enterprise &
Regulatory Reform, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or
misleading statements, and no warranty is given or responsibility accepted as to the standing of any
individual, firm, company or other organisation mentioned.

Published January 2008 by UK Trade & Investment
© Crown Copyright URN 08/537

				
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