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 Market overview How does energy from waste work? What kind of waste can be used to produce energy and how? How much waste does the UK generate? UK Policy drivers Key technologies and terms Business opportunities in energy from waste How are waste management projects financed? What are the advantages of Private Finance Initiative (PFI)? Future projects Summary Why the UK? Next steps Useful links
Case Studies: Sheffield District Energy Network East London Waste Authority (ELWA) Slough Heat and Power Tees Valley Energy from Waste Plant Leicester Project

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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 Birmingham, recently launched UK Energy Excellence: An International Marketing Strategy for the UKs Energy Business with John Hutton, Secretary of State for Business, Enterprise and Regulatory Reform (BERR). This strategy provides a unified, compelling message for the UKs energy industry, supporting UK business overseas, and positioning the UK as a worldwide hub for energy technologies. Waste management in the UK is a significant sector with over 3,000 active companies, from large multinational corporations to smaller technology-led firms, employing over 70,000 people. A study carried out jointly for BERR and the UK Department for Environment, Food and Rural Affairs (Defra) forecast that revenues in the sector are likely to double by 2015; industry estimates suggest that up to 30 billion will need to be invested across the sector by 2020. Energy from waste is an important suite of technologies, with the ability to provide both renewable energy and a solution to the growing challenges of waste management. In 2006 Defras Waste Infrastructure Delivery Programme (WIDP) analysed the waste treatment and disposal infrastructure needed to meet the UKs 2013 and 2020 landfill diversion targets and found that an extra 8.4 to 8.9 million tonnes of annual processing capacity for municipal solid waste (MSW) alone will be needed. This requires capital expenditure in the range of 5-6 billion to achieve the 2013 MSW target and a further 4-5 billion to reach the 2020 MSW target. With the UKs globally competitive business environment and its highly skilled, creative and productive workforce, it should come as no surprise to note that the UK is the largest recipient of Foreign Direct Investment (FDI) in Europe, second only globally to the USA. We will continue to build upon this achievement by working with the best global companies, in high-growth sectors such as environmental technology and renewable energy. This brochure has been produced as a guide to opportunities in the UK for companies operating in the energy from waste sector. We hope that both investors from overseas markets considering locating in the UK for the first time, and existing investors seeking to grow their business in the UK, will take advantage of these opportunities by investing in the UK. It is our job at UK Trade & Investment to help you to streamline that investment process. I am very grateful for the input from Defra. We look forward to working with them to help our customers develop and grow their businesses in the UK.

Waste management in the UK is a significant sector with over 3,000 active companies

Brian Shaw Managing Director - Business Group UK Trade & Investment

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 disposal into an opportunity for generating income from heat or power sales. This is becoming increasingly important in the UK as legislation demands higher environmental standards of waste disposal and places pressure on local authorities to reduce their quantities of waste generation and landfill. Indeed, the Governments Waste Strategy for England 2007 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 costeffective pre-treatment of waste before disposal; and where disposal requires combustion, that this is done in the most efficient way possible. Combined heat and power (CHP) is the most energy-efficient process for achieving this, the key outputs of EfW facilities usually being heat and electricity. With CHP offering a significant improvement on a facilitys carbon footprint as well as higher energy efficiencies, the CHP market in the UK should see substantial growth. To achieve the Governments goals, the UK needs to build sufficient infrastructure to process the waste and to dispose of the residues remaining after minimisation, recycling and re-use have taken place. By 2020 some 9-11 billion of capital expenditure is likely to be required to meet the UKs landfill diversion targets. Only a combination of all these activities will enable the country to divert enough waste from landfill to meet obligations under the EU Landfill Directive.

Sheffield District Energy Network

What do Sheffields Ponds Forge International Sports Centre, Park Hill flats, The Crucible and Lyceum theatres, Millennium Galleries, Weston Park Hospital and the City Hall have in common? They all get their heating from the waste created by Sheffield residents.
In August 2001, Veolia Environmental Services was awarded a 35-year waste management contract by Sheffield City Council. It is responsible for waste collection, recycling, treatment and recovery in the city. This includes running the award-winning District Energy Network, some 44km of underground pipes delivering low carbon energy generated by recovering energy from waste to over 140 buildings of all sizes and types. Veolias state-of-the-art energy recovery facility has been constructed to meet and exceed the latest environmental regulations. With a waste throughput capacity of 225,000 tonnes of municipal solid waste a year, the facility plays an important part in the citys innovative approach to waste management, generating up to 60 megawatts of thermal energy and up to 19 megawatts of electricity. On average every year, the Sheffield District Energy Network prevents over 21,000 tonnes of CO2 from being released across the city. This has a significant impact on reducing the UK's carbon footprint and makes a valuable contribution to preventing climate change.

How does energy from waste work?

A number of EfW technologies generate heat or electricity from municipal, commercial and industrial wastes. Together, these types of waste constitute some 66 per cent of the 335 million tonnes of waste the UK produces each year.
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 contractors over the next seven to 12 years. The climate for investment is very encouraging, with widespread confidence in the market. The UK Government is committed to sustainable waste management, which brings important environmental benefits by providing safe, costeffective waste treatment and disposal and by reducing the use of landfill. These principles are enshrined in energy strategy, through legislation and long-term policy goals, together with international commitments to EU landfill directive targets.

It is estimated that by 2020 some 10 billion of capital expenditure is required to meet the UKs landfill diversion targets
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What kind of waste can be used to produce energy and how?

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:

Waste wood alone going to landfill is estimated to amount to 7-10 million tonnes per annum

Type Municipal solid waste (MSW) is principally domestic (household) waste and some commercial or trade waste similar to domestic waste. The responsibility for the collection and treatment of MSW rests with the local authorities in the UK, although it is generally contracted out to private enterprise. Commercial and trade waste comprises mainly paper, card, plastics, packaging and some putrescible wastes from shops, offices and light industry. These wastes are collected mainly by the private sector.

Use in producing energy from waste Municipal or local authorities have developed facilities to treat consistently large quantities of MSW for volume reduction prior to landfill, disposal of the residues and energy recovery to mitigate costs. Many aim, where feasible, to provide heat to local buildings etc. However, this is not yet common in the UK. Some EfW facilities meet some of the private sector's requirements for the disposal of trade, commercial and industrial wastes. This includes the handling of hazardous wastes, and confidential or secure wastes that require specialist treatment. Cement kilns use higher calorific value industrial waste, including tyres, solid recovered fuel (SRF, also named refuse derived fuel RDF), waste liquids and sludges. On-site power plants also use these feedstocks.

Industrial waste consists mainly of tyres and scrap materials, liquids, sludges, metals, plastics and very small amounts of putrescible wastes. This is collected exclusively by the private sector, where opportunities should exist for small-scale onsite facilities designed for specific types of waste. Residues from mechanical biological treatment (MBT). This process separates the non-organic parts mechanically and uses the organic remainder in a 'biological' process.

Such residues will be in the form of an engineered fuel product suitable for use by industrial intensive energy users, whose energy needs may involve combined heat and power eg chemical plant and paper and pulp mills. Many of the facilities to dispose of clinical or hospital waste are in hospital grounds and contribute to the power and/or heat needs of the hospital.

East London Waste Authority (ELWA)

In 1996, the East London Waste Authority began a wide consultation process to decide on its waste management strategy. Driven by ever-increasing tonnages of waste to dispose of, reduction of landfill facilities and a requirement to meet the EU Landfill Directive and National Waste Strategy, ELWA looked to the Private Finance Initiative and new technology to provide a solution.
In 2002, a 25-year contract was signed between ELWA and waste management group Shanks plc to provide a mechanical biological treatment (MBT) plant that could cope with 360,000 tonnes of waste a year. The technology used by Shanks came from its Italian partner, Ecodeco. Shanks developed two sites, building an Intelligent Transfer Station at both Frog Island and Jenkins Lane. The process stabilises residual municipal waste, creating further opportunities for recycling and recovery of materials. The biodegradable fraction of the waste is managed to provide a source of heat that dries and sanitises this waste, which can then be sorted to create a number of outputs including a solid recovered fuel (SRF). Five years on, and Shanks East London has a fully operational business dealing with 10,000 tonnes of waste a week. Working closely with ELWA, it has actively brought about a doubling of recycling performance since the contract began and is currently diverting over 40% of waste away from landfill. Shanks, meanwhile, has gone on to successfully build another MBT plant to service the Dumfries & Galloway contract which began operating in 2006. It is also preferred bidder for a similar solution in Cumbria.

Clinical or hospital waste comprises hospital ward waste, packaging, prescription-only medicine wastes and pathological waste. These wastes are collected by on-site hospital staff or by the private sector under contract. Wood waste includes recycled timber from the commercial, industrial and domestic sectors and residues from the wood processing and forestry industries.

Wood waste alone going to landfill is estimated to amount to 7-10 million tonnes a year, but the biomass content in indigenous MSW provides a carbon neutral source of energy the trees have absorbed enough carbon in their lifetime to offset the carbon used in combusting the wood waste. There are few specialist EfW facilities dedicated to a particular site and purpose, such as treating hazardous waste, on-site factory waste, government facility wastes, hospital wastes and those with a security or confidentiality requirement.

Hazardous waste is essentially waste with hazardous properties that may render it harmful to human health or the environment. There are 14 hazardous properties, including flammable, toxic or corrosive. Hazardous waste is defined in the List of Wastes Regulations 2005 and includes acids, alkalis, mineral oils and more everyday wastes such as refrigeration equipment, TV and computer monitors and some paints and batteries.

How much waste does the UK generate?

The table below details the volume generated of each kind of waste.

UK policy drivers
Strategic, legislative and economic factors are all playing their part in ensuring the establishment of new waste treatment facilities in the UK.
The National Waste Strategies provide the policy framework within which energy from waste operates and reflect the coming together of energy and waste policies. The Waste Strategy for England 2007 and the Energy White Paper (May 2007) set out the Governments policy on energy and waste, placing strong emphasis on links with overall energy policy and the need to consider greenhouse gas emissions. The key objectives are less waste, more re-use and recycling, recovering more energy from waste and less landfill. www.defra.gov.uk/environment/waste/index.htm The Energy White Paper makes it clear that generating energy from the portion of waste that cannot be prevented, re-used or recycled has both energy and waste policy benefits. Energy generated either directly from waste, or through the use of a fuel derived from waste, has benefits for the security of the UKs energy supply. In addition, the biodegradable fraction of waste is a renewable resource. www.berr.gov.uk/energy The Renewables Obligation (RO) was developed as a substantial market incentive to encourage new renewables generation in the UK. It places an obligation on UK suppliers of electricity to source an increasing proportion of their electricity from renewable sources. In 2006-07 the obligation was set at 6.7 per cent (2.6 per cent in Northern Ireland), rising to 15 per cent by 2015. A new banding scheme provides more targeted levels of support to different technologies, including eligible energy from waste schemes. www.berr.gov.uk/energy The UK Biomass Strategy meets the commitments made in the Energy Review (2006) and in the Governments response to the 2005 Biomass Task Force Report and brings together current UK Government policies on biomass for energy, transport and industry. The Biomass Strategy acknowledges the importance of fuels sourced from biomass in tackling climate change. Biomass will play a central role in meeting the EU target of 20 per cent renewable energy by 2020. www.defra.gov.uk/environment/climatechange/uk/energy/rene wablefuel/index.htm The White Paper Planning for a Sustainable Future sets out detailed proposals for reform of the planning system. It proposes reforms to how the UK takes decisions on nationally significant infrastructure projects including energy, waste, waste-water and transport responding to the challenges of economic globalisation and climate change. www.communities.gov.uk/planningandbuilding

Estimated total annual waste by sector: United Kingdom 2004* Household Commercial Industrial Construction and demolition Mining and quarrying Dredged materials Sewage sludge Agriculture (inc. fishing) TOTAL

Million tonnes 31.7 41.1 42.0 106.1 96.4 15.8 1.5 0.6 335.1

Percentage of total waste 9 12 13 32 29 5 0 0 100

Source: Defra, Environment Agency, Scottish Environment Protection Agency, Environment and Heritage Service Northern Ireland, Welsh Assembly Government, Water UK, Centre for Environment, Fisheries & Aquaculture Science, British Geological Survey (2007) * 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, clinical and hospital waste, wood waste.

The Waste Incineration (England and Wales) Regulations 2000 (EU Waste Incineration Directive 2000) (WID) introduced stringent operational conditions, technical requirements and strict emissions limits for plants incinerating and co-incinerating waste. The Directive's aim is to prevent or limit, as far as possible, negative effects on the environment, in particular pollution by emissions into air, soil, surface and ground water, and the resulting risks to human health. www.environment-agency.gov.uk The Landfill Directive (Directive 1999/31/EC) is a key driver towards energy from waste. Its main objective is to divert biodegradable municipal waste (BMW) away from landfill and it encourages local authorities to consider the role that energy from waste could play in achieving this objective. By 2020 the UK is committed to reducing to 35 per cent of the 1995 figure the amount of BMW that goes to landfill. However, this applies only to BMW. There is currently no ban or restriction in the UK apart from a few capacity constraints on landfilling commercial or industrial waste. The Landfill Allowance Trading Scheme (LATS) was launched in England on 1 April 2005. This scheme is intended to provide a cost-effective way of enabling England to meet its share of UK targets under the Landfill Directive. Under LATS, tradable landfill allowances have been allocated to each waste disposal authority either the local or unitary authority. These allowances convey the right for a waste disposal authority to landfill a certain amount of BMW in a specified scheme year. Authorities that landfill more BMW 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
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Biomass will have a central role to play in meeting the EU target of 20 per cent renewable energy by 2020
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Policy drivers (continued)

In addition, the landfill tax accelerator is beginning to provide an incentive for alternative forms of treatment/disposal. The 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 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 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. For example, the enhanced capital allowance scheme, extended in the 2007 UK Budget, supports combined heat and power (CHP) to help firms cope with the cost of converting plant from gas to solid fuel firing using solid recovered fuel (SRF). www.hm-treasury.gov.uk/budget In addition, new EU directives require that all waste going to landfill be pre-treated, a factor that will play a significant part in driving the market. www.environment-agency.gov.uk However, it must be noted that while energy from waste is one solution to reducing the amount of waste that goes to landfill, there is no statutory direction from the UK Government to choose energy from waste; and some of the drivers in place for other waste management techniques specifically do not apply to energy from waste.

From 1 April 2008 until at least 2010-11, the standard rate of landfill tax will increase by 8 per tonne each year.

Slough Heat and Power

Slough Heat and Powers combined heat and power (CHP) plant has a potential generating capacity of 101 megawatts and a current generating capacity of around 80 megawatts. It produces electricity plus heat, which is distributed via a steam and water distribution network comprising around 100 kilometres of underground electricity network plus substations. The company has around 3,000 industrial, commercial and domestic energy customers and on I January 2008 Scottish and Southern Energy plc (SSE) completed the purchase of SEGRO plc shares in Slough Heat and Power Ltd.
The CHP plant is the UKs largest dedicated biomass energy 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, which takes delivery of waste paper products and converts these into useable fuel. Part of the plant is contracted under the Non Fossil Fuel Obligation and produces over 200 gigawatt hours of output qualifying for Renewable Obligation Certificates (ROCs). This is equivalent to around 90 megawatts of wind generation. It also comes with an allocation of carbon emissions allowances for Phase II of the EU Emissions Trading Scheme. The plant uses only clean, uncontaminated wood chips. Much of the wood is locally sourced, and represents an investment of over 3 million each year into the rural economy. This helps to create and sustain dozens of jobs.

Tees Valley Energy from Waste Plant

In 1998 SITA UK completed the construction of a new, state-of-the-art waste treatment facility in Teesside. SITA is now expanding this plant to handle an additional 140,000 tonnes a year of municipal waste.
The existing energy from waste plant comprises two lines based on proven and reliable moving grate technology and incorporating high temperature incineration of waste, together with flue gas cleaning which exceeds the requirements of the Waste Incineration Directive and the generation of 20 megawatts of electricity. supplied to the national grid. The plant was constructed under a turnkey contract by Volund and handles 240,000 tonnes a year of municipal solid waste from the local community. It is owned and operated by SITA UK. Development of a third line began in 2006 once all the essential elements were in place. These included:

SITA chose Von Roll Innova, a Swiss-based company, to undertake the development of the facility on a turnkey contract basis. On-site construction began in December 2006 and is scheduled to be completed by June 2009. The expanded plant will be a single line facility based upon moving grate technology and incorporating high temperature incineration of the waste and flue gas cleaning equipment that will ensure full compliance with the Waste Incineration Directive. An additional 10 megawatts of electricity will be produced and supplied to the national grid under a Non Fossil Fuel Obligation contract.

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.
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Key technologies and terms

Advanced thermal treatment (ATT) Waste management processes involving medium and high temperatures to recover energy from the waste. Primarily pyrolysis and gasification-based processes, excluding incineration. A process where biodegradable material is encouraged to break down in the absence of oxygen. Material is placed in an enclosed vessel and in controlled conditions the waste breaks down typically into a digestate, liquor and biogas. Steam pressure cooking produces a fuel floc with, usually, high biomass content which can be burnt to recover energy. Large single assets (typically EfW, MBT, AD and IVC plant) used for waste treatment and disposal. The ash that arises from a combustion process in a furnace. Driven by the need to reduce emissions to air, these systems produce a small quantity of hazardous waste from the scrubbing or cleaning of the flue gases. This is usually sent to a hazardous waste landfill. 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. Kerbside recycling infrastructure, household waste recycling centres, collection vehicles, civic amenity sites. 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. 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. 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. A generic term for mechanical sorting/separation technologies used in conjunction with biological treatment processes, such as composting. A well-tried and proven technology used in EfW plants, involving waste passing through the combustion chamber on a moving grate/escalator. 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. Simultaneously burns wastes and cleans up the combustion by-products. 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). In 2003 Defra launched the New Technologies Demonstrator Programme (NTDP) to demonstrate innovative waste treatments technologies as possible alternatives to landfill. This research and development programme, which aims to prove the economic, social and environmental viability of each selected technology, is now closed to new applicants, but current projects are likely to deliver their findings by 2009. There will be a series of impartial reports, presentations and advice from experts working on behalf of Defra. Each project site will also have a visitor centre. Full details of the demonstrator programme can be found on www.defra.gov.uk/environment/waste/wip/newtech/ dem-programme/index.htm

Anaerobic digestion (AD)

Autoclaving

Back end plant

Bottom ash Flue gas cleaning or air pollution control (APC) systems

Fluidised bed combustion

Front end infrastructure

Gasification

Incineration

In-vessel composting (IVC)

Mechanical Biological Treatment (MBT) Moving grate system

Rotary kiln combustion

Plasma and supercritical water Pyrolysis

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Business opportunities in energy from waste

The collection, management, recovery and disposal of waste are predominantly contracted out to private sector companies. This creates abundant opportunities in the UK for companies that provide waste management and treatment technologies and services within energy from waste.

How are waste management projects financed?

Greater regional collaboration between authorities, focusing Private Finance Initiative (PFI) on the infrastructure required for residual waste disposal, stimulating markets for solid recovered fuel disposal and encouraging a mixed economy approach to both financing and procurement methods are just some of the measures directed to achieving the waste market transformation needed to deliver infrastructure on the ground.
Debt and equity are the principal sources of finance for investment in large-scale treatment and disposal infrastructure. Debt is provided by commercial banks in the form of longterm senior debt secured against 25-year waste supply contracts from local authorities. Typically, this would be an 85/15 debt equity formulation using a special purpose vehicle. A wide range of commercial banks are willing and able to arrange, underwrite and lend into waste project financings. Similarly, due to the relatively recent removal of Crown Immunity and increased emission control standards, the hospital waste sector may provide some opportunities for technology companies to provide energy improvement equipment and flue gas cleansing for existing plants. Other opportunities may exist with intense energy users such as operators of cement kilns or paper mills and companies with substantial heat loads (chemical producers, for example) who are seeking alternative sources of energy to operate their plants. These plant operators are showing interest in the potential for energy from solid recovered fuel (SRF) from the industrial and municipal waste sectors. Cement kiln operating companies in the UK include Cemex, Lafarge and Castle Cement, while Ineos Chlor, amongst others, has indicated interest in using SRF as an alternative feedstock to gas. Processes that use waste or treated waste as their feedstock require the combustion gases to be subject to the Waste Incineration Directive. In this respect there is considerable potential for growth in these sectors for alternative technologies. Equity for projects comes from industrial, financial or private equity providers. Industrial equity, available from major waste management companies, is linked directly to their participation in projects. Investment capacity is potentially augmented by finance available from private equity markets. This generally involves the acquisition of waste management companies as well as investment in companies set up to deliver specific projects. Recent examples of private equity activity include Montagu Private Equitys acquisition of Cory and Terra Firmas acquisition of WRG. With the increase in UK Landfill Tax and the excess of demand over the supply of waste treatment capacity, companies are exploring what are known as merchant projects the provision of waste treatment capacity not underpinned by long-term contracts. The fact that companies are willing to take the risks themselves, without the security of guaranteed long-term contracts, is an indication of the scale of demand. Defra encourages a mixed economy of financing and procurement approaches, depending upon the asset type. Large single asset treatment and disposal infrastructure can be project financed with or without PFI credit support. In some instances, 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). However, small, low value infrastructure (household waste recycling centres, materials recycling facilities, civic amenity centres, and landfill) is best financed in one of the following ways:
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on the balance sheet of a waste management contractor through grant funding from an authoritys use of its own resources by use of Prudential Borrowing by a local authority

Principal clients in the UK are local authorities (Collection and Disposal Authorities) and waste management companies. For long-term waste treatment contracts, the local waste disposal authority usually contracts out to the private sector. A large EfW facility incorporates a number of different technologies in association with the main combustion process. A broader range of services and expertise is offered in the UK as local and foreign technology specialists work in partnership in this area of work. For example the foreignbased expertise of the main combustion process technologist and the local waste operator may work well together to improve the efficiency of their technology. The best opportunities for suppliers of specialised separate items of equipment for flue gas scrubbing or waste sorting, or separation and preparation equipment, may be gained by approaching the leading UK waste management companies or electricity generating companies. Such companies may require new equipment if their EfW facilities or power stations were constructed before current legislation (eg the Waste Incineration Directive and its related guidance, Pollution Prevention and Control legislation) imposed stricter emissions control limits.

Prudential Borrowing allows authorities to borrow for capital investment and is one of a number of funding mechanisms available for waste infrastructure procurements. In considering whether to use Prudential Borrowing, authorities are required by regulation to adhere to the Prudential Code developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) as a professional code of practice to support authorities in making their decisions. Further guidance is available in the consultation document: Prudential Borrowing - Frequently Asked Questions, available from WIDP.

Photo courtesy of Waste and Resources Action Plan (WRAP) 14

Photo courtesy of Waste and Resources Action Plan (WRAP) 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 companys 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 government money to local authorities to help them meet the costs of a contract. In all other respects a Waste PFI is a commercial financing arrangement, using well recognised project financing techniques. Defras PFI credit allocation criteria can be viewed at: www.defra.gov.uk/environment/waste/localauth/funding/ index.htm Last year Defra set up the Waste Infrastructure Delivery Programme (WIDP) which brings together the project delivery activities of Defras Waste Implementation Programme, 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 chance to submit an application for credits in a fair and transparent process. The two-step application process consists of Expressions of Interest (EoI) followed by Outline Business Cases (OBC). The latest round attracted EoIs from nine projects and it is particularly encouraging to see more authorities working collaboratively. The deadline for authorities to submit EoIs for the fourth and final planned round is April 2008 There could be opportunities in the current contracts for assistance with improved technologies (e.g. flue gas cleaning as required by legislation) or for ancillary treatment processes to improve efficiencies. Where contracts are in procurement there may be opportunities to participate either individually or in consortium with other partners. And with pending or future contracts there will be greater opportunities because the local authorities in question have not yet sought or received tenders or expressions of interest from technology providers and/or waste management contractors.

Leicester Project
In response to a Public Finance Initiative (PFI) tender award, Biffa plc, a long-established waste management company, was asked to meet stringent environmental performance criteria for the management of household waste in the City of Leicester that did not require 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 rotating eight-metre mill containing 50 tonnes of cannon balls that reduce and homogenise the material. The homogenised waste then passes through trommels, magnets, eddy currents and screens to create 20,000 tonnes of rejects to landfill, 40,000 tonnes of organic rich solids and 40,000 tonnes of derived fuel floc. The organic solids pass to an integrated anaerobic digester that generates 8,000 tonnes

of methane which is then burnt in gas engines to produce 1.5 megawatts of electricity. Heat is re-circulated, while residues are used as a soil conditioner in reforestation and coal mine renewal projects. The fuel floc is currently used as a coal substitute in cement kilns but could feed a new gasifier being commissioned by Biffa in Spring 2008 to produce hydrogen/CO syngas as a fuel feedstock. The plant was completed in 2007 at a cost of 20 million.
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Future projects
Future PFI contracts in the UK are likely to be focused on the larger back-end treatment and disposal plants such as energy from waste and mechanical biological treatment (MBT) facilities, as these are more suitable for project financing. Smaller front-end infrastructure can be financed using Prudential Borrowing, or local authorities own funds, or by arranging for waste management contractors to finance projects from their own balance sheets.
Local authorities electing to apply for PFI credits will be encouraged to work in partnership with neighbouring councils while those seeking mechanical and biological treatment technology will need to demonstrate how they will dispose of the resulting solid recovered fuel (SRF). Particular priority will be given to combustion solutions that involve combined heat and power (CHP). The increasing cost of fossil fuels is causing industrial intensive energy users with existing heat loads to consider converting gas fired CHP to solid fuel firing using SRF. Some local authorities have developed or are planning MBT capacity whose SRF residues are an ideal feedstock for CHP plant. Industrial hosts would not want to take untreated municipal solid waste onto their sites but will consider an engineered fuel product like SRF; while for a local authority access to a reliable, long-term SRF disposal route turns an MBT plant into a total waste management solution. The Governments response to the Renewables Obligation (RO) Banding Review consultation published on 10 January 2008 sets out a number of measures aimed at providing additional support to the energy from waste with CHP provisions already contained in the RO, including the 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.

Summary
The UK is the ideal market in which to invest. The escalating costs of waste disposal, regulatory and legislative framework and an energy from waste sector requiring 9-11 billion investment over the next 12 years make a compelling case for investors, plant manufacturers, technology providers and waste management companies to enter and expand the market.

Why the UK?

Global leadership on climate change, and global leader for the carbon market Size of the waste market Number 1 recipient of foreign direct investment (FDI) in Europe (2nd globally behind the USA) Range of waste solutions required Globally competitive business environment Focus on combined heat and power Highly skilled, creative, adaptive and productive workforce Opportunities to partner with energy intensive users London recognised as the centre of global finance Market confidence driven by government commitment and strong policy frameworks

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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

Next steps
UK Trade & Investment would be delighted to work with you to investigate opportunities in the UK market. With unrivalled local access and knowledge, UK Trade & Investment can offer overseas organisations the support and contacts they need to establish a presence or expand in the UK quickly and efficiently. Working in partnership with the 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:

National Association of Waste Disposal Officers www.nawdo.org National Industrial Symbiosis Programme (NISP) www.nisp.org.uk Waste and Resources Action Plan (WRAP) www.wrap.org.uk Technology Strategy Board www.berr.gov.uk/innovation/technologystrategyboard/

Industry bodies
Renewable Energy Association www.r-p-a.org.uk/home.fcm Chartered Institution of Wastes Management www.ciwm.co.uk Environmental Services Association www.esauk.org Combined Heat and Power Association www.chpa.co.uk Energy from Waste Association www.energy.rochester.edu/uk/ewa Composting Association www.compost.org.uk Resource Efficiency KTN www.resource-efficiency.org Integrated Pollution Management KTN www.ipm-ktn.com

Provide access to industry networks and centres of excellence. Make introductions to sector leaders and business contacts, including arranging visit programmes. Provide information on the UK business environment including taxation and comparative cost analysis. Help find land, property and sites and provide guidance on issues such as planning. Provide information on the UK labour environment including recruitment, retention and training. Offer information and advice on UK grant schemes aimed at encouraging investment and job creation in specific industries and specific areas of the UK. Provide access to UK and European programmes supporting technology and process transfer. Assist with regulatory issues. Make introductions to UK legal experts in employment law, contracts, work permits, immigration and unions. 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

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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