Select Committee on Environmental Audit Appendices to the Minutes of Evidence


APPENDIX 3

Letter to the Clerk of the Committee from Peter T Jones, Director, Development and External Relations, Biffa Waste Services

  Biffa Waste Services is the largest waste management company operating in the UK—it is the largest wholly British owned waste management company and can justifiably claim to be the most diverse in terms of its spread of interest in industrial/commercial and domestic collection, landfill, liquid waste stream and specialist hazardous waste management systems. The company has a turnover of £550 million at a current annualised rate and is also in the top three waste management companies operating in Belgium. We are a wholly owned subsidiary of Severn Trent Plc with over 110 operating centres throughout the UK. We handle 12 million tonnes of material, which is treated, landfilled or recycled on behalf of our extensive customer base exceeding 58,000 in the public, commercial and industrial sectors.

  Our interest and qualifications relating to this subject area are broadly twofold:

    (i)  Our current and historic landfill activities result in us sitting on reserves of methane of between 8 million and 9 million tonnes (which will be released over the next 40-50 years).

    (ii)  Our current activities handle 12 million tonnes of waste product arising from the economy each year of which around 60 per cent is of high carbon content and capable of being used for biomass/energy linked activities. Addendum notes A and B at the end of this submission amplify the background to these calculations.

  At the heart of our submission is the suggestion that we—and similarly placed major landfill operators in the waste sector—have the potential to play a key part in the Government's Renewables Strategy, most obviously in the context of current generation capacity associated with existing landfill operations and—in the longer term—as actual or potential major players in moving biomass around within the UK economy for energy related objectives. In the latter case significant investment in logistics and energy conversion infrastructure costs will form a key part of our sectoral forward thinking.

  Turning to the specific areas on which you wish to focus:

The impact of NETA and the Renewables Obligation

  As a non intermittent generator we have probably suffered less than intermittent producers but since NETA came in in April last year our revenue benefit has dropped by around 40 per cent. Our expectation is that this will be restored when ROCs become available leaving us with a net premium to the pool of around 10 per cent by summer 2002. These figures relate to around 5 megawatts of output from our total of circa 85 megawatts. The introduction of the RO has resulted in us bringing forward investment in an additional 15 megawatt capacity which would otherwise have lain dormant since the returns would otherwise be non existent.

  We would suggest that either the regulator has to take a different approach on renewables or some other non regulatory body outside Ofgem needs to consider the renewables market as a separate entity and tailor the market regime differently. Logically this would be embraced within the Carbon Trust and fundamental decisions are needed as to whether the price premia approach is better or worse than offering upfront investment incentives to cover start up costs to introduce capacity. The NETA regime—in short—produces a competitive market structure for electrical unit pricing but it adds huge disincentives for new start, new technology, small scale initiatives offered by renewable energy. Banks, major plcs and venture capitalists have little or no motivation to support entrepreneurial initiatives.

Grants and policies to support renewables

  Our involvement in the electrical market is in part driven by alternate objectives with regard to environmental compliance on reduction of methane emissions from landfill sites driven as part of the IPPC regime applying to our core landfill business. However, it occurs to us that there are opportunities to streamline the current range of policies and support mechanisms, or at least consolidate these with one single body. In part the current multiplicity of arrangements is driven by the wide variety of technologies involved—each with different drivers in terms of trade-offs between cost of fuel source (energy crops) or cost of capital (wind and PV). The mixture of special exemptions for SME accelerated depreciation, New Opportunities Fund access, exemption from CCL result in 20 or more separate funding sources inevitably leads to confusion, poor communication or lack of take up when compared to the simplicity of the NFFO arrangements. We would suggest that now is the time to take stock of the whole energy supply and demand profile in the UK and apply serious cost benefit analysis to the amount and quality of funding flows needed to stimulate demand reduction or supply expansion from renewables. Leaving the system as it is will merely create further obfuscation.

  As we commented above, the logical place to consider this would be in the Carbon Office, (probably utilising enhanced capital allowance programmes linked to an agreed formula) developed across all rival technologies allowing for factors such as capital intensity, net carbon absorption capability, reliability and offset benefits (for instance where a technology is part of a derived demand for materials from other carbon reduction or environment enhancement initiatives—such as biofuel straw or coppicing in relation to flood management or biodiversity programmes).

Joined up working

  It is not difficult to criticise Government on the grounds of being non joined up—not difficult simply because Government seems to organise itself around "audience groups" which fail to take account of the fact that those audience groups are not operating in isolated boxes—thus DTLR links itself to local government and the regions, DTI to industry, health service to the sick and DfEE to the educated, etc Government has to recognise that these arbitrary boundaries are at best irrelevant to and at worst destructive of implementation of significant cross cutting issues such as quality of life, waste, energy and security of employment are not catered for by simplistic boundaries that now need more fundamental review.

  More specifically the energy/carbon issue is dogged—like waste—by a dislocation of authority and responsibility with regard to planning and "permits to operate".

  Similar but different conflicts operate between DTI and DEFRA with regard to what we suspect is a failure to understand the linkages between future strategies for the use of the countryside and its implications for carbon management in the economy. We would also like to have seen more sophistication in the argument with regard to the exclusion of direct burn energy from waste from the renewables tradable permit regime. We are not critical of the exclusion of mass burn incineration from access to those tradable permits, however, and would argue instead for a separation of treatment between large scale mass burn technologies and the more sophisticated specialist systems (which are moving towards the gasification, zero emission type process technology). We are operating in conjunction with the latter type systems (which create less than 5 per cent ash) because quality control is applied to the pre-sortation of waste input streams. Such quality control does not apply to mass burn EfW plants consuming upwards of 200,000 tonnes of material each year on an indiscriminate throughput basis where output ash levels are between 30 per cent and 35 per cent. The burden of the latter plants—in terms of ash generation, carbon nitrogen fluxes in the incineration process (per tonne of waste handled) and their general ability to block out more sustainable focused technologies in specific geographic zones means that they should be treated differently—but nevertheless benefit as part of a renewables energy framework strategy.

  To this end we are seeking to commit around £300,000 of Landfill Tax funds to a number of studies considering these issues. The first is a project already underway with the National Society of Clean Air (NSCA) looking at the overall gaseous and mass balance fluxes associated with different types of direct burn incineration technology whilst the second is a proposal to the Institute of Biology to undertake a study of month by month biomass arisings in UK Plc from all identified agricultural, industrial, commercial and domestic waste streams. We believe such studies would seriously inform Government, NGOs and the general public as to the actual and theoretical capacity of biomass to contribute to an understanding of renewables energy in this country and—based on sound facts—provide a lead in to a more sensible debate with regard to the planning and technological implications at regional and local level (in the context of the 20 Twh renewables targets by 2020).

  We would have preferred these types of initiatives to have been developed in the framework of a strategic plan under the administration of bodies such as the Carbon Trust—it is certainly clear that the existing unnatural delineations established by Government ministries have in the past—and would in the future—make such studies virtually impossible by the nature of the cross boundary work involved. A copy of our letter to the Institute of Biology is appended for information and clarification. We would point out that such strategic studies need to be taken in the context of the 20 per cent Renewable Obligation and—more important—the way in which that obligation can be delivered whilst at the same time moving electricity supply in the UK from a centralised to a partially decentralised grid.

The PIU review and the strategy

  We support the PIU's central scenario that deep cuts in greenhouse gas emissions by 2050 are both necessary and possible—of the order of 50 per cent on current levels. At the moment, however we seem to be in a position where there is no consensus at expert level as to how this can be achieved and the priorities whereby an implementation plan can be developed—both in terms of supply and consumption. That debate needs to be opened up from the innovative work of the PIU as a matter of urgency so that producers and consumers of energy in the economy can see the implications within the following contexts:

    —  Feedstock fuel provision;

    —  Energy efficiency and demand reduction;

    —  Regions;

    —  Technologies;

    —  Phasing; and

    —  Communication.

  The PIU report is a good first start. Its impact will be negated, however, if the process of developing the above strategies continues to be parcelled out in the current arbitrary way across different ministries, each of which appears to have only narrow sectoral "audience" perspectives when delivering it with concurrent lack of internal knowledge exchange.

February 2002



 
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