Filling the Gap

With the tonnage ‘Capacity Gap’ reducing as more EFW projects start to move towards financial close and into construction, and new planning applications entering the fray on the back of a consensus of a c. 10mtpa capacity gap, what could be the direction of travel in filling this gap?

The first thing to say is that this is not a COVID-19 article but was first drafted before many of the current impacts were being felt. So, there are a number of ‘health warnings’ that might need to be added at the outset as a result of the current circumstances:

• The tonnage of C&I has dropped significantly, and will be lower than any previous modelling of a recession impacting tonnage arisings – speed of ‘bounce-back’ is unknown and therefore so is the rate of recovery of tonnage
• The recovery of waste arisings will probably now mean some of the lower projections in growth will be inevitable, even with ‘bounce-back’, but levels of recycling will probably also be affected as businesses struggle to recover, and ‘NHM’ tonnage was where much of the emphasis was focused to deliver circular economy targets (see our article)
• The drop in tonnage will force the supply chain to review the robustness of fuel supply contracts and contract terms that rely upon C&I waste streams, especially ‘merchant’ models which are likely to require a review of the apportionment of risk between supplier and EFW plant (and no doubt a hard look at Force Majeure clauses)
• Some merchant projects that looked to be in a good position to hit financial close will inevitably be delayed, partly as contracts are reviewed for risk in waste supply and construction (as investors seek to reassure themselves) and partly as these reviews may impact on detailed renegotiation before financial close can be achieved (assuming that the investors, suppliers and contractors involved in projects do not have a ‘change in heart’ as a result of all of this and pull out of some projects).

Notwithstanding the ‘health warnings’ above, the quantum of the capacity gap looking forward to 2030 has probably not altered significantly when the lower range projections for tonnage are considered; with Monksleigh’s figures of around 29.3 million tonnes of residual waste suitable for EFW (with low range growth assumptions and recycling levels an average of 58% across Household and C&I waste streams). This is at the slightly more pessimistic on the growth end of the spectrum and slightly more optimistic on recycling end of the spectrum looking at the consolidating reports by Tolvik and Antheses (for the National Infrastrucuture Commission (NIC)) – but it results in a capacity gap of around 11.5 million tonnes in 2030 (which is well within the documented error margins of the aforementioned reports).

This article looks at our thoughts, then, on how this gap might be filled on these base assumptions, stimulated by our recent efforts to update our own internal databases prior to generating content for WikiWaste with current and future Residual Waste EFW infrastructure.

EFW Infrastructure Pipline – Headline Figures

• Operational Capacity
  • There are 52 sites with a plated capacity of 14.4 million tonnes per annum.
  • At a 90% conversion (plated capacity versus the more likely tonnage delivery through the plant) the capacity forecast totals 12.9 million tonnes per annum.
• In Construction Capacity
  • There are 27 sites with a plated capacity of 6.5 million tonnes,
  • At a 90% conversion to operational delivery this totals 5.8 million tonnes per annum.
• In Planning Capacity
  • There are 91 sites with a plated capacity of 22.3 million tonnes (excluding replacement capacity at Edmonton and Lakeside)
  • At a 90% conversion this totals 20.1 million tonnes – which far exceeds the predicted tonnage capacity gap

The reality is that those facilities in planning and still in development have a considerably different likelihood of delivery (i.e. their ability to reach financial close and go into construction) when looking at them ‘in the round’. The probability of them moving into the construction phase also reduces as capacity is delivered (i.e. projects are less likely to obtain funding if they cannot demonstrate adequate waste supply and coverage ratios, which will become harder to achieve and more problematic over time).

The figure below shows three columns:

• our original view of the gap last year (first column on the left hand side)
• our revised view based on operational and in build review as above, (middle column) and
• our view of ‘new’ EFW capacity which takes all the projects which we believe have a high probability for delivery (1.8mt) and 58% of those with a good chance of delivery (4.3mt) (final column on right hand side)

In each case the figure takes account of:

• the tonnage that always goes to landfill, (as unsuitable for EFW) – this tonnage has already been stripped out of the numbers
• the tonnage to other disposal routes has been reduced (on the assumption that MBT will not continue to deliver the perceived gains it promised and co-incineration through biomass plants look to be more problematic than many forecast)
• a reduction in RDF export to 2.5mtpa to reflect operational demand levels in the EU (but this does not necessarily reflect the economic drivers that could drive this lower) and has been rounded up to fill the remaining gap
• RDF being a net export position – the RDF assumptions and capacity assumptions ignore any economic drivers that might see tonnage shipped to the UK from the EU
• The replacement capacity of Edmonton and Lakeside, which has been stripped out

Points for Debate

• The plated capacity is not necessarily the operational capacity (the former being the design point assumed for an EFW plant in planning and permitting which makes assumptions on the ‘firing diagram’ for a plant) and with changes to assumptions this can lead to a need to apply for an increase in permitted capacity at a later date or operational throughput lower than consented (the operational input tonnage can flex by over +/-20% of ‘plated/permitted’ capacity)
• The export of RDF is set at a balancing figure in the diagram, and it could be argued that this capacity could be additional tonnage to be delivered to additional new plants.
• Notwithstanding the previous points, if the operational plants’ capacity is closer to the plated capacity, that would increase capacity by nearly 2.4mt on our assumptions, and if plants close for maintenance and cannot redirect their tonnage to ‘free plant capacity’ then export could be the buffer solution – so the RDF figure becomes a ‘pragmatic hedge’ of operational capacity.
• Plants with high/medium/low probability are open to huge debate. We have taken what we believe is a pragmatic view with the pipeline that exists, but with new planning applications still coming forward there will be losers (of the 20.1mt of plated capacity in reality 11.4mt has little chance of reaching financial close, this equates to 61 plants on the planning list)
• There are a handful of large projects that distort the numbers in the planning pipeline considerably; 25 of the 91 sites are 350kt or more, 12 of the 25 are over 500kt or more, and so the view on success or failure of these has a large impact on the numbers
• The location of the plants is not considered in this article, merely a UK wide mass balance, and some regions will be better propositions for projects than others when considering supply demand issues and the distances waste may move to take up capacity

In Summary

Ignoring the EFW currently in build, there is 6.1mt of new EFW identified here (or 31 EFW plants at 200kt capacity) still to be delivered which remains both a significant challenge and an opportunity for the sector; alongside of course the usual challenges for delivery and risk management.