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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
