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BAT assessment
Thomas Drivsholm
COWI A/S, Denmark
July 2004
Consultant: CMDC Joint Venture
1
Understanding BAT
Environmental Considerations for determining BAT
Dioxins
SO2
waste VOCs CO2
odou
r
Hg
Raw
nois water materials
e
energy
Consultant: CMDC Joint Venture
BOD
2
Understanding BAT
How do you demonstrate you’re using BAT ?
Indicative BAT standards set at sector level, along with
benchmark emission levels, in BREFs
The requirements of IPPC can be demonstrated by
implementing indicative BAT for the sector
Consultant: CMDC Joint Venture
3
Understanding BAT
If BAT is already given in BREFs,
why might a site-specific assessment be needed?
More than one candidate for BAT exists
Operator proposes to deviate from indicative BAT
for reasons of disproportionate costs
because of local environmental conditions
because of technical constraints
No indicative BAT is given for the activity e.g. for new
technology or process
Consultant: CMDC Joint Venture
4
Focusing the BAT assessment
What items are agreed upon?
What items should be negotiated further?
Consultant: CMDC Joint Venture
5
Examples of concrete BAT assessments
… to be chosen …
Consultant: CMDC Joint Venture
6
Annex
IPPC. Environmental Assessment and
Appraisal of BAT.
Horizontal Guidance Note. IPPC H1.
Environment Agency for England and
Wales in collaboration with the Scottish
Environment Protection Agency and the
Northern Ireland Environment and
Heritage Service
Consultant: CMDC Joint Venture
7
Purpose of H1
To provide a structured methodology to:
demonstrate that an activity uses the BEST AVAILABLE
TECHNIQUES (where site-specific assessment is needed, as
part of response to Section 2 of the Application)
to conduct an assessment of the ENVIRONMENTAL IMPACTS
of the installation as a whole (all permits; in response to Section
4 of the Application)
It is a preferred methodology, not obligatory, but designed to
ensure all IPPC requirements are included
Consultant: CMDC Joint Venture
8
Structure of H1
Global warming
Photochemical Chemicals, odour
ozone creation emitted to air
and
Deposition to
land
Noise
Calculated here
Waste treatment
and disposal
Chemicals to water
Consultant: CMDC Joint Venture
Assessment of different types of impact
9
Structure of H1
A “costs and benefits” methodology
Provides methods for assessing different types of impact based on
best current knowledge
Modular approach means it can be simplified for less complex
processes
Allows screening of insignificant emissions - effort is proportional to
environmental risk
provides an audit trail of decisions
structured format and spreadsheet gives consistency in application
Consultant: CMDC Joint Venture
10
Structure of H1
Module 1 - Scope and Options
Module 2 - Emissions Inventory
Module 3 - Quantify Impact
Module 4 - Compare Impacts between Options
Module 5 - Evaluate the Costs
Module 6 - Select BAT
Consultant: CMDC Joint Venture
11
Purpose and Structure of H1
MODULE 1 MODULE 2 MODULE 3 MODULE 4 MODULE 5 MODULE 6
List the
QUANTIFY LOCAL IMPACTS: COMPARE CALCULAT SELECT
Define the OPTIONS to
SCOPE of the EMISSIONS ESTIMATE the levels in the environment after dispersion using simple formulae. E COSTS of BAT
identify the option
activities, and and release (eg calculate PC) with lowest each option
for options points SCREEN out emissions which are not significant (eg PC<1%EAL) environmental use guidelines
appraisals Use the guidelines to see if detailed MODELLING is required ie: PEC>70% EAL, other impact capital and & judgement
identify the factors. Refine predicted concentrations if needed. operating to conclude
OPTIONS COMPARE levels against EQSs/EALs and other benchmarks and REJECT situation for 1. If best option costs BAT
any releases which are unacceptable is evident and presented as
SUMMARISE IMPACTS, using NORMALISATION against BENCHMARKS where will be done. ANNUALISE
appropriate, e.g. EQ (air) , EQ (water) , EQ (land) STOP HERE D COSTS USE COST
BENEFIT
Chemicals
Accidental releases
2. If there are Use standard CRITERIA
Visual impact
and odour cross media PROFORMA to assess if it
to air aspects to should be
resolve: Specify done
Deposition Note: The terms
Use guidelines & discount rate eg:
to land PC, PEC, EAL are and asset life £/t pollutant
judgement to
explained in the abated
RESOLVE
appropriate module.
CROSS MEDIA impact on
They are included product price
Noise Calculated ISSUES. If Best contribution
here for those
here option is now of this
already familiar
evident and will SECTOR to
with them.
be done. STOP national total.
Chemicals HERE
to water
3. Wish to justify
QUANTIFY GLOBAL AND OTHER NON-LOCAL IMPACTS: other than best
Calculate ENVIRONMENTAL BURDEN of: option on
grounds of cost
GLOBAL WARMING POTENTIAL using relative activity indices
GO TO
OZONE CREATION POTENTIAL using relative activity indices MODULE 5
WASTE HAZARD & DISPOSAL using relative score
•SUMMARISE Venture
Consultant: CMDC Joint non-local impacts, using TOTAL BURDEN where appropriate
environmental impact assessments
12
BAT appraisal
Structure of Assessment
Scope & options
Emissions inventory
Assess environmental impacts
Compare impacts between options
Assess costs
Select best option
Consultant: CMDC Joint Venture
13
Module 1 - Scope and Options
Explain why you are doing the assessment:
either
To conduct a cost/benefit appraisal of options to determine BAT for
selected releases from an installation because:
deviating from indicative BAT in Guidance Note
several candidates for BAT
no indicative BAT in Guidance Note
or
To carry out environmental assessment of emissions resulting from the
installation as a whole (stop at Module 3)
Consultant: CMDC Joint Venture
14
Module 1 - Scope and Options
Describe scope of activities to be included
Methane emissions
Sulphur emissions from
from a landfill site a coal-fired power station
Consultant: CMDC Joint Venture Emissions from effluent treatment plant of
Emissions from a pulp mill a chemicals manufacturing facility
15
Module 1 - Scope and Options
Identify key environmental issues (and
eliminate irrelevant ones) and receptors
Types of
Identify candidate options for BAT, by techniques:
considering all relevant techniques to
•Raw materials
prevent and minimise pollution from all
activities •Abatement
•Process control
•Operating mode
Consultant: CMDC Joint Venture •Design
16
Module 2 - Emissions Inventory
Including:
Point source emissions to air
Point source emissions to surface water, groundwater and sewer
Waste emissions
Fugitive emissions to all media
Abnormal emissions from emergency relief vents, flares etc
Raw material consumption including energy and water
Consultant: CMDC Joint Venture
17
Module 2 - Emissions Inventory
Describe:
Substances released
Source, including height, location, efflux velocity and total flow
Predicted normal and maximum emissions expressed on suitable
basis Statistical basis
Predicted frequencies (if intermittent)
Plant loads at which data are applicable
Check all options meet any statutory emission limit values as laid
down in EU Directives
Consultant: CMDC Joint Venture
18
Module 3 Quantify the
impacts
Considerations:
• releases to air method depends on type of impact:
• releases to water local impacts: relate to level in
• deposition to land environment
usually a maximum “protective” level
• ozone creation
non-local impacts: relate to relative
• global warming burden
• waste disposal no maximum “protective” level
• noise
• odour
• accidents
• visual impact
Consultant: CMDC Joint Venture
19
Module 3 local impacts
estimate levels in environment after dispersion :- “Process
Contributions” (PC)
compare PC against environmental benchmarks; EQSs and
“EALs”
EQS may be statutory (EU) or national objectives
EALs are provisional benchmarks established for a wide number of
substances (various sources)
the benchmarks are based generally on a maximum “tolerable”
concentration to a receptor in a medium
benchmarks for human and ecological protection are available and
will be under constant revision
Consultant: CMDC Joint Venture
20
Module 3 - local Impacts (continued)
Identify whether detailed modelling of emissions is needed , eg
if local receptors present which are sensitive to any of the significant emissions
if there is a risk of breaching an EQS or EAL
Add PC to background level to obtain total Predicted Environmental
Concentration (PEC)
Check that PEC does not breach an EQS or EAL - these options will
usually be unacceptable
Consultant: CMDC Joint Venture
21
Module 3 local impacts
100
%
80
% PC / EAL
1%
PC ambient PEC
Consultant: CMDC Joint Venture
22
Module 3 local impacts
normalise against benchmark:
EQ = PC / EAL EQ air
Summarise total impact by 0.3
medium 0.25
EQ water 0.2
PC/EAL
NOx
EQ air 0.15
SO2
EQ land 0.1
0.05
0
1 2 3
option
Consultant: CMDC Joint Venture
23
Module 3 - non-local
Quantify Non-Local Impacts
Use relative Indices for global warming potential
Global Warming
Ozone Creation
3.E+08
Waste:
contribution
2.E+08 N2O
quantify by category CO2
describe disposal route 1.E+08
Summarise as total burden 0.E+00
1 2 3
option
Consultant: CMDC Joint Venture
24
Module 4 - Compare Options
Expert judgement : Guidelines for comparing options
If PCs from options are low compared to EALs this has less influence
on decision than when they are high
If existing environmental quality is poor then greater importance
placed on this consideration in the assessment
Local proximity of sensitive receptors to certain environmental impacts
may be important
Long term irreversible effects are less desirable than short term
reversible effects
How big the contribution of the impact is in relation to national or EU
targets
Bear in mind risk/accidents
Consultant: CMDC Joint Venture
25
Module 5 - Evaluate the Costs
Estimate the costs of implementing each of the options
carried forward from Module 4, to allow a balanced
judgement of the costs of controlling releases of
substances against the environmental benefits
Standardised procedure based on annualised costs -
(described in the next session)
Not necessary if the operator proposes to implement the
option which clearly represents the lowest environmental
impact
Consultant: CMDC Joint Venture
26
Module 6
Select BAT 125
balance environmental benefits 100 4
cost (£k)
against costs 75
justify priority impacts 50 3
show decisions clearly 25 1
2
use expert judgement
0
0 5 10 15 20
pollution reduction
Consultant: CMDC Joint Venture
27
Overview: a “flavour” of H1
Understanding BAT
Purpose and structure of H1
Spreadsheet will do much of the work, but still needs common
sense and expert judgement
Methods and data will improve over time; we are using best
current knowledge
The path taken to reach the result is as important as the result
itself
Consultant: CMDC Joint Venture
28
IPPC and economics
Economics reflected in „available‟ element of BAT
„Available‟ techniques shall mean those developed on a scale which
allows implementation in the relevant industrial sector, under
economically and technically viable conditions, taking into
consideration
the costs and advantages (Article 2(11) IPPC Directive)
Consultant: CMDC Joint Venture
29
Collecting costs from operators is justified through
Schedule 2 of the PPC regulations which discusses
“considerations to be taken into account when
determining best available techniques, bearing in mind
the likely costs and benefits”
Key points
“economically and technically viable”
“taking into account the costs and advantages”
We require sufficient data in order to be able to make a
decision
Consultant: CMDC Joint Venture
30
The IPPC Balancing Act
Advantages Costs
Environmental Issues
Non-Environmental Pollution
Commercial Control
Technically Global Local Pressures Costs
Viable
Techniques
Regional
Desired Environmental Outcome Economic Viability
BEST AVAILABLE TECHNIQUE
Consultant: CMDC Joint Venture
31
Waste Incineration Plant
Advantages Costs
Local Non-Enviro. Commercial Pressures Pollution Control Costs
Technically CO2 NOx, PM10’s
Global Metals Competition Within Sector Waste Handling / mixing
Viable
Warming Dioxins Furans Power of Suppliers & Buyers Furnace configuration
Techniques
Odour Noise Threat of New Entrants FGR / SNCR
From Regional & Substitutes Electrostatic Precipitator
Technical SOx, NOx, Health, Return Expected from Investors Dry or Wet Scrubber
Guidance Acid Rain Amenity Cost of Capital
Desired Environmental Outcome - Economic Viability- how much additional
Operating Techniques and Emission limits cost burden can sector absorb
BEST AVAILABLE TECHNIQUE
Consultant: CMDC Joint Venture
32
Waste Landfill
Advantages Costs
Local Non-Env Commercial Pressures Pollution Control Costs
Technically CH4 Protection of Liner / barrier techniques
Viable Global Local Surface & Competition Within Sector Capping, leachate treatment
Techniques Warming Groundwater Power of Suppliers & Buyers Gas Control/ Flare
From Landfill Odour Noise Threat of New Entrants Waste Handling
Regional
Directive Litter & Substitutes Fencing
Technical Return Expected from Investors Monitoring Methods
None?
Guidance Health, Amenity Cost of Capital Financial Provision
Desired Environmental Outcome - Economic Viability- how much additional
Operating Techniques and Emission limits cost burden can sector absorb
BEST AVAILABLE TECHNIQUE
Consultant: CMDC Joint Venture
33
When would Account Manager need to collect costs / make
assessment?
Not in all cases -so don’t worry !
In the development of guidance the balancing of these issues is already
being addressed at increasingly detailed levels
BREF Agency Technical Guidance Individual Permits
Landfill Directive
Collection of cost data / specific economic assessment is not required:
Where either BAT or the “best environmental option” as per guidance is already
proposed by the operator with no specific local environmental issues that require a
beyond guidance solution.
For a new installation the DETR Practical Guide sets out that the best technique is
normally expected to be BAT (as per guidance)
Consultant: CMDC Joint Venture
34
Collecting cost data and economic assessments will
however be required:
When there are multiple candidate BATs -- and selection of the appropriate one is not
clear-cut
When the BAT set out in the BREF/TGN is not appropriate, e.g. covering the sub-sector
under examination
Where local environmental impacts require a “beyond guidance BAT” solution
Where there are claims for a “sub BAT” outcome
For an existing installation where flexibility might be allowed re scale and timing on the
basis of disproportionate costs
This list is not exhaustive: costs can be required to make the
Consultant:
decision CMDC Joint Venture Account Manager sees fit
whenever the
35
Assessment of costs
Step 1: obtain cost estimates from operators
Step 2: examine the credibility of the operator‟s
cost data
are they complete?
are they accurate?
Step 3: assess whether the costs are excessive
economically viable
in proportion to the environmental benefits
Consultant: CMDC Joint Venture
36
Step 1: collecting costs
Require all costs for the operator resulting from the decision to invest in the
technique
capital and operating costs in disaggregated form
cost savings and changes in revenues
assumptions on aggregation (eg discount rate, time horizon)
Required for all options examined
Operator is responsible for preparing costs
Where possible apportion costs to individual pollutants
Performance of different options varies therefore require cost represented
per unit of pollution abated
Consultant: CMDC Joint Venture
37
Illustrative cost data submission
Option Option 1 Option 2 Option 3
(business as
usual)
Annualised capital costs (£’000) 1100 800 1500
Annualised operating costs 900 1200 1000
(£’000)
Total annualised costs (£’000) 2000 2000 2500
NOx abatement (tonnes/yr) 1600 1000 2000
Cost / tonne abated (£/t) 1250 2000 1250
This submission is not sufficient to determine BAT
The cost data cannot be assessed on the basis of this
break-down
Consultant: CMDC Joint Venture
38
Step 1: capital costs
CAPITAL COST COMPONENT COST (£’000) COMMENTS
1. POLLUTION CONTROL COSTS
a) Primary control equipment Design capacity? Economic life?
b) Auxiliary equipment
c) Instrumentation
d) Modifications to existing equipment Are modifications solely a result of
the installation of abatement?
e) Other
Sub-total
2. INSTALLATION COSTS
a) Land costs Basis of land valuation?
b) General site preparation
c) Buildings & civil works
d) Labour & materials No. of staff and cost?
e) Other (e.g. profits foregone due to shutdown) Installed during annual closure?
Sub-total
3. OTHER CAPITAL COSTS
a) Project definition, design & planning Typically 5-15% of capital costs
b) Testing & start-up
c) Contingency Typically 5-10% of capital costs
d) Working capital
e) End of life (clean-up) costs
f) Other
Consultant: CMDC Joint Venture
Sub-total
TOTAL CAPITAL COSTS 39
operating
Step 1: COST COMPONENT costsQUANTITY
OPERATING ANNUAL COST COMMENTS
(eg tonnes) (£’000)
1. ADDITIONAL OPERATING COSTS
a) Additional labour for operation & maintenance No. staff and cost?
b) Water / sewerage
c) Fuel / energy Details?
d) Reagent
e) Waste treatment & disposal
f) Other materials & parts
g) Additional pollution abatement equipment
operation
h) Insurance
i) Taxes on property
j) Other general overheads
Sub-total
2. COST SAVINGS / REVENUES
a) Energy savings Details?
b) By-products recovered / sold
c) Environmental tax / charge savings
d) Other
Sub-total
NET ANNUAL OPERATING COST
Consultant: CMDC Joint Venture
CHANGE
40
Step 1: total costs
COST COMPONENT OPTION 1 OPTION 2 OPTION N
COSTS
Total capital costs (£’000)
Net change in annual operating
costs (£’000)
Economic assumptions
Time horizon (years)
Discount rate (%)
Equivalent annual costs
(£’000 / yr)
POLLUTION ABATEMENT
“Pollution abatement” (tonnes)
Unit cost (£’000 / tonne)
Consultant: CMDC Joint Venture
41
Economic Terms that Require Further Explanation
Discount rate -assessing the appropriate
rate to use
Opportunity Cost
Weighted average cost of capital (WACC)
Present Value
Equivalent Annual Value
Consultant: CMDC Joint Venture
42
Discounting: rationale
Discounting future cost (benefit) streams to present values allows a
consistent decision to be made now -- this gives the Net Present Value
Three justifications for discounting:
1. pure time preference
Would you like a £1 now or would you like it in a year’s time
2. diminishing marginal utility
As industry and society gets wealthier money means less to
them
3. capital productivity
The most important in setting the appropriate discounting rate-
Rate is largely determined by investors who's expectations
are to receive a return greater than their Opportunity cost ( what they
would have received by investing in another opportunity perceived to
be of equal risk)
Consultant: CMDC Joint Venture
43
Typical Discount rates
For public sector use the social discount rate as
set out by the Treasury (currently 6%)
For private sector projects in established
companies / technologies use the weighted
average cost of capital (real, post-tax) typically in
the range 7% - 12%
WACC = (return expected by shareholders x proportion of
finance by equity) +return required by bank x
proportion of finance by
bank loan
Through development of BREF and technical
guidance economists are likely to have a view of
the appropriate discount rate to apply to a
sector.
Consultant: CMDC Joint Venture
44
Present Value
There are many ways of taking into account time in economic appraisal:
present value (PV) internal rate of return (IRR) payback hurdle rate equivalent annual value (EAV)
PV is the sum of the discounted values of all cashflows in a project
The present value (PV) of a future cost (C) is given by Ct / (1 + r)t
eg1: the PV of a £1 million cost in two years time
discounted at 6% is:
£1 million / (1 + 0.06)2 = £0.89m
eg2: the PV of a £1 million cost stream over 3 years discounted at 6% is:
[£1m / (1 + 0.06)0] + [£1m / (1 + 0.06)1] + [£1m / (1 + 0.06)2] = £2.83m
Consultant: CMDC Joint Venture
45
Discounting: examples
Present value of £100:
Year Present value (£)
Discounted at 6% Discounted at 10%
0 100 100
1 94 91
2 89 83
10 56 39
30 17 6
100 0.29 0.007
Consultant: CMDC Joint Venture
46
Equivalent Annual Value
Equivalent annual value (EAV) is the present value (PV) spread over the
lifetime of the project
The annualised costs are equivalent to the PV, and are given by C . (r / ((1 +
r)t - 1) + r)
eg: the equivalent annual cost of a £1 million capital
expenditure spread over 10 years with a 6% discount rate is:
£1 million x (0.06 / ((1 + 0.06)10 - 1) + 0.06) = £135.8k / year
EAV (or equivalent annual cost, EAC) is the method adopted in H1
Has the advantage of allowing easier comparison of costs associated with
different asset lifetimes and comparison with annual profit
Consultant: CMDC Joint Venture
47
Step 2: Examine the credibility of the data
Three key questions:
are all the relevant cost components included?
are the costs accurate and reasonable?
are the assumptions for discount rate and economic lifetime of equipment consistent and plausible
How to assess (will vary on a case-by-case basis):
probe the operator
expert judgement and internal consultation
control cost database (benchmarking)
economics support
Consultant: CMDC Joint Venture
48
Step 3: Assess whether the costs are
excessive
In IPPC this relates to:
“economic viability” “taking into consideration costs and advantages”
=The IPPC balancing Act (see balance diagrams)
Economic viability:
implies affordability for average operator to afford the technique; not necessarily for each individual operator.
Work is in progress to maintain an ongoing view by collating business information on the sector from annual reports and
the internet.
Consideration of Costs and advantages:
implies a cost-benefit comparison: balancing cost (£) v abatement level and associated advantages (usually not
expressed in £ terms)
Remains an expert and sometimes negotiated judgement
Work in progress to create a database of costs of abatement techniques
Consultant: CMDC Joint Venture
49
The IPPC Balancing Act
Advantages Costs
Environmental Issues
Non-Environmental Pollution
Commercial Control
Technically Global Local Pressures Costs
Viable
Techniques
Regional
Desired Environmental Outcome Economic Viability
BEST AVAILABLE TECHNIQUE
Consultant: CMDC Joint Venture
50
Step 3: determining economic
viability- Existing Burdens
Financial Resilience of Firms within the Sector Using Ratio
Analysis of „Average Good Operator‟, „ best‟& „Worst‟ to gain a
measure of:
Liquidity
Solvency
Financial return
Efficiency
Consultant: CMDC Joint Venture
51
Step 3: determining economic viability-
Existing Burdens
“Five Forces” acting upon Company
Additional Costs Threat of New
to Control Pollution Entrants Extent that other firms /countries not subject
to same regulatory costs move into the market
Power of Intercompany Power of
Suppliers Rivalry Buyers
Will the Firms be able to
Pass through costs in the
form of higher prices
Will there be a shift towards
other products if prices are Substitute
Consultant: CMDC Joint Venture
raised Products
52
Step 3: determining economic viability
Implies affordability by the „average‟ operator
not by the individual operator
Examine in terms of impact on unit profit margin,
eg:
market price : £100 per unit
profit margin : £10 per unit
change in abatement cost : £2 per unit
Can realistically request these data from
operators but analysis should be undertaken
by/with economists
Can be very complex and requires extensive
sectoral knowledge (eg whether firms can pass
through or must absorb cost increases)
Consultant: CMDC Joint Venture
53
Step 3: assessing costs and advantages
Costs should not be disproportionate to the
environmental benefits, - a useful means to
assess is by £s per tonne of pollution abated
The control cost database can support by
providing such figures
But there still remains a need for the Account
manager‟s expert judgement in selecting the
appropriate option
Consultant: CMDC Joint Venture
54
COMMUNITY
Take account of views
Be informed by their knowledge
Access to other expertise
Inform and explain your decision
Gain help and trust for compliance
inspection
Level playing field
Consultant: CMDC Joint Venture
55
REGULATION
Take account of other regulators‟ view
Resolve conflict (e.g. safety valves)
Avoid operator dividing regulators
Clear boundaries (Memorandum of
Understanding
Co-ordinate if necessary (e.g. incidents)
Consultant: CMDC Joint Venture
56
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