The Leicestershire County Council has given the go ahead for a waste management procurement strategy based on energy from waste (Efw) with the potential for combined heat and power (CHP).
The decision taken last week by the Council’s Cabinet, means that the authority can now proceed with sending an expression of interest (EOI) to Defra under the private finance initiative (PFI) scheme.
Provided that Defra approves the submission, the Cabinet has also agreed to the preparation of an outline business case as required under PFI procedures and in principle to the preparation of a “reference project” to evaluate the alternative approaches.
The total capital expenditure involved in developing an EfW facility would be approximately £100m, of which up to 50% could be obtained via a PFI grant.
The PFI scheme allows councils to apply to central Government for credits to help with the capital costs of major schemes. The preferred option of Efw-CHP was arrived at with the help of external consultants.
Architect designed Marchwood ERF in Hampshire shows its futuristic style (Photo - Veolia)
At the moment, county residents recycle or compost 42 per cent of their rubbish – one of the best rates in the country - leaving 225,000 tonnes per year that goes to landfill. Unless the landfill total is reduced each year from 2010, the County Council will face multi-million pound fines.
Any new waste management facilities established will help the council to satisfy the requirements of the national, regional and local waste strategies and assist central Government to meet the statutory targets contained in the Landfill Directive.
The council has looked at a wide range of options under development of its waste strategy and considers that all forms of waste treatment technology will always have a requirement to manage the materials that are produced from the initial process.
Indeed most forms of MBT will require an industrial user or Efw facility available to deal with the refuse derived fuel, or if say anaerobic digestion is used there will be a need for land on which to spread the sludge. Also there will inevitably be a requirement for landfill disposal of some residues from treatment processes.
The conclusion reached by the Council was that Efw-CHP gives the smallest carbon footprint.
Defra has introduced a range of incentives to encourage local authorities to recycle and compost more.
Landfill Allowance Trading Scheme (LATS)
The Landfill Allowance Trading Scheme was introduced by Government to ensuring local authority compliance with the Landfill Directive. Councils that fail to divert sufficient biodegradable municipal waste (BMW) from landfill could be subject to penalties of £150 per tonne, together with a portion of any European fines.
Landfill Tax
Landfill tax is set to increase by £8 per tonne from April 2008 until it reaches £48 per tonne in 2010. There may also be further increases the future to levels of up to £80.
In the last financial year the Council paid £5m in landfill tax. This will rise by a further £2m in 2009/10 as a result of the increase.
PFI
The Council says that the PFI credits have now increased to 50% of the capital value and this therefore outweighs the “cheaper” funding available through prudential borrowing. It also estimates that PFI credits could offset treatment costs by approximately £20/tonne dependent on the final mix of Capital and Revenue costs.
It is expected that the net cost “will undoubtedly be much lower than landfill by the time the facility comes on stream”.
The Private Finance Initiative (PFI) was introduced by central government in 1992 aimed at increasing private sector involvement in public service provision.
Private sector companies are allowed to design, build, finance and operate waste management facilities as part of the scheme. A local authority would pay a unitary charge (monthly or annual fee) through a long-term contract of often 25 years or more.
The advantage to local government is that it gets revenue support from central Government towards the capital element of the unitary charge.
The contractor in effect takes on the risk for asset performance for the major part of the operational life while the length of the contract enables a reasonable return on the significant, front-end loaded financial outlay.
Amendments to the PFI process enable local authorities to benefit from the efficiencies enabled by the long term nature of the contract and risk aspects together with any revenues generated from third parties use of waste facilities to use up any spare capacity.
One of the downsides is that Government funding is limited and not all schemes can be afforded. Schemes have to be prioritized in order to allocate this finite funding.
Comments
Councillor Brian Page, the Leicestershire lead cabinet member for waste, illustrating the Council’s problem said:
“We have three landfill sites that we use, one of which closes in two months time, and so we are really down to two. We also send some rubbish into Warwickshire, Lincolnshire and Northants."
Stephen Massey, Friends of the Earth (FOE) said:
"It is a disincentive for people to recycle and reuse their waste. We think that you are much better off thinking of ways to reduce the amount of waste in the first place."
Recycling - New £300,000 proposal
However the recycling stats for Leicestershire are good by current standards, with around 42% of waste being either recycled or composted. The aim of the council must be to improve on this and only send to a future efw-chp plant the residual waste after maximizing recycling.
Seemingly almost in response to FOE concerns, the County Council yesterday showed their intention by announcing that a £300,000 scheme to boost recycling and composting across Leicestershire will be considered by the County Council’s ruling Cabinet in August.
The Council proposes to launch an incentive scheme to help District Councils - as waste collection authorities - divert more municipal waste from landfill each year, especially for biodegradable waste such as cardboard or food waste.
Brian Page, the Cabinet’s lead member for waste, said:
“By spending £300,000 per year on this scheme, we believe we can boost recycling and avoid landfill fines.
“That’s got to be a good deal for taxpayers and for the environment.”