Select Committee on Environmental Audit Appendices to the Minutes of Evidence


APPENDIX 4

Memorandum from Brightstar Environmental

1.  INTRODUCTION

  1.1  Brightstar Environmental (Brightstar) is a subsidiary of Energy Developments Limited (EDL), and the owner and operator of a new non-incineration resource recovery technology known as Solid Waste and Energy Recycling Facility (SWERFTM).

  1.2  SWERFTM incorporates an Advanced Conversion Technology (ACT) as defined in the Renewables Obligation based on pyrolysis and gasification. Its front end separation process removes the recyclable components from the waste stream prior to thermal treatment, which results in the conversion of only the residual organic fraction or renewable biomass into energy.

  1.3  Brightstar was pleased to make a written submission to the EAC on this subject in February 2001 and supplements that submission with this response.

2.  SUMMARY OF SUBMISSION

  2.1  Brightstar wishes to update the Committee on its views in respect of the Government's approach to renewable energy generation and the economic and regulatory framework for the development of emerging renewable energy technologies.

  2.2  It considers that only through a unified and sustained approach to renewable energy generation will the Government be able to encourage the creation of a diverse and commercially viable renewable energy sector. Further, the ability of the renewables sector to contribute substantially in the long term will be very much dependent on how willing the Government is to give a strong lead now.

  2.3  Since our response to the EAC last year, we have been pleased to see that the Renewables Obligation Order now recognises ACT technologies for processing waste such as that offered by Brightstar as distinct emerging processes for inclusion in the Obligation. We believe this support will be instrumental in encouraging development of new ACT processes, with their significant environmental and electricity supply benefits over traditional energy from waste (EfW) technology.

  2.4  This policy decision aside, there remain a number of entry barriers that are considered to inhibit the take-up of such ACT technologies. These are dealt with more fully below, but in summary they are:

    —  Removal of barriers to entry in the waste market which provides the basis for ACT delivery namely:

      —  Overcoming contractual difficulties with the local authorities ie the waste customer, being able to promote and utilise new innovative technology;

      —  Providing clear guidance and a joined up approach across government departments and agencies to strategy.

    —  Removal of barriers to entry in the energy market:

      —  Providing longer term security for ACT eligibility under the RO;

      —  Overcoming imbalancing issues under NETA and the potential exemption of renewable energy generators from these balancing requirements thereby removing the "power" of big players to determine share of ROCs;

      —  Ensuring that renewable energy generators are only liable for shallow interconnection rather than taking on excessive liabilities for electricity infrastructure upgrades.

    —  The urgent need to overcome significant barriers to development through the planning and permitting process, by implementing a system to ease the difficulties in securing consents, and ensuring that there is reasonable and consistent approach to licensing and regulation.

  2.5  A key focus of this EAC inquiry is the extent to which current developments in government, and existing and proposed policy reflect "joined-up" thinking between the departments involved. This is a major area for any company seeking to deliver new technology into a new market and it is our belief that this joined up thinking has yet to emerge.

3.  THE ROLE OF ENERGY FROM WASTE IN RENEWABLE ENERGY GENERATION

  3.1  The Government has stated its intention to derive a minimum of 10 per cent electricity production from certified renewable sources by 2010. Energy from waste (EfW) is one sector with the potential to add significant new capacity, and the distinct recognition of emerging ACT technologies within the Renewables Obligation illustrates the Government's willingness to develop this source.

  3.2  It is however crucial to note that in general EfW projects focusing on MSW as the fuel supply are waste rather than energy driven. As a result it is important to consider some of the main barriers to entry on the waste as well as the energy side of the business to facilitate new energy generation projects. This a key area where there appears to be a failure in "joined-up" thinking across government departments.

4.  BARRIERS TO ENTRY IN THE WASTE MARKET

  4.1  One of the key underlying difficulties as a new entrant into the waste market, even as a build owner and operator, is that local authorities are unwilling to contract their municipal solid waste (MSW) for innovative or emerging technologies due to the perceived underlying technology risks. Their responsibility is to secure the disposal or treatment of waste on a continual basis, and as such can be unwilling to take up technology without a proven track record even though they have no direct financial risk.

  4.2  To counteract the above, it is common for local authorities to require significant guarantees and warranties on performance. Such conditions are often unaccommodating of new technologies, and for smaller companies these are generally impossible to provide. Having invested heavily to develop new technology, such further onerous requirements will be seen as disincentives to developers, and thus discourage future investment in emerging technologies.

  4.3  To help overcome these issues there is a necessity for more technology demonstration projects, however government incentives have lacked the flexibility to accommodate new processes like ACT, which has lead local authorities to favour instead established disposal methods like incineration.

  4.4  With local authorities now needing to find new technological solutions to meet national waste management targets, there is now a clear potential for ACT. But with a lack of political clarity and direction on how these targets should be met, together with an underlying instability of recycling markets, the difficulties and barriers in introducing new integrated waste management techniques are no less overwhelming to companies seeking to invest in emerging technologies.

5.  BARRIERS TO ENTRY IN THE ENERGY MARKET

  5.1  Whilst viability of projects rely heavily on reliable access to a waste stream for processing, the need to secure attractive and long-term power purchase agreements for the sale of generated electricity is still of major importance. Obtaining a satisfactory power sales contract remains a condition precedent to the commencement of any long-term obligation under a waste processing agreement. Whilst the inclusion of ACT in the RO will significantly assist in meeting this objective, several issues on the energy side still need to be addressed.

  5.2  Prime amongst these is the RO mechanism itself with its apparent lack of long-term security for the sale of energy from ACT. Established practice in the UK for waste disposal contracts is generally to provide a contract with a term of 15 to 20 years. With revenue from power sales being of similar importance for ACT facilities as gate fees, obtaining secure contracts for the sale of electricity generated for this period is also crucial. Whilst the Government has no plans to reduce the scale of the RO, without guarantees of how long support under the RO will be available, investor confidence in ACT projects will continue to suffer. Confidence would certainly be boosted by a stronger message from the Government on the likely duration of support.

  5.3  It is worth noting that incineration had the benefit of the support process under NFFO which ran for several years providing secure contracts for 15 years. Until such time as ACT can be considered to have achieved the same status, it should remain eligible for support under the RO, and using the example of incineration under NFFO, 15 years should be a minimum term for support.

  5.4  The other main issue that is facing new renewable energy generation is in respect to the impact NETA is having on small embedded generators and the impact of the imbalancing charges. We are aware that this issue has recently been tackled by OFGEM and we are hopeful that the reforms recommended will assist those small generators penalised in the early NETA period.

  5.5  Secondly, under the current framework is an ongoing concern over the costs of electrical interconnection and the major barrier this can prove to the delivery of new projects. We strongly advocate that small scale renewable generators be liable for shallow interconnection costs only, rather than carry the burden of infrastructure upgrades and deep interconnection liability. Renewable energy projects by nature are on the borderline of commercial viability. Any major additional costs for interconnection will constitute a significant barrier to development. If ambitious renewable energy targets are to be set the system infrastructure must be able to accommodate the new entrants that are vital to their delivery.

6.  PLANNING AND PERMITTING

  6.1  This remains one of the fundamental hurdles to be overcome by developers and remains an area where governments and regulatory bodies are failing to work together and failing to assist the process.

  6.2  Planning permission is becoming an increasingly problematic, controversial and highly political area, where numerous applications experience significant and unreasonable delays and often failure. Without doubt developers will be less inclined to submit for proposals unless there is a good chance of success. In reality this means fewer applications resulting in fewer projects.

  6.3  The area of waste management appears to be one of the most contentious areas, brought about primarily through opposition to landfill and incineration, which now seems to extend to cover all proposals which consider waste. It is hoped the current consultation on reform of the planning system will address this, but co-ordinated action on the current wave of projects is also needed to ensure they are not lost through unnecessary planning obstacles.

  6.4  It is our belief that the DTI should become far more involved in the development process for smaller scale power generation projects. The present level for DTI determination of 50 MW is no longer appropriate given the size of most new renewable energy projects. If the Government is serious about new generation capacity and is serious about sustainability and national waste targets, then it must become more proactive in the decision making process. The issue of central determination over local control must be tackled head on otherwise the planning system will gradually swamp and cripple the developer.

  6.5  A further major concern lies with the permitting or licensing of new facilities. This is particularly relevant with ACT projects which rely on waste for its fuel supply and as such are permitted by the Environment Agency under the new Integrated Pollution and Prevention Control (IPPC) licensing system.

  6.6  It appears that this is an area where there is a real lack of a joined up approach. Whilst there is an apparent wish by government to see the encouragement of new technology, there appears to be a lack of flexibility by the Environment Agency in the interpretation and enforcement of national and European legislation. This is at odds with most other EU states where a more flexible and reasonable licensing regime is implemented to encourage new technology. This is becoming a serious barrier to progress but one that could easily be addressed by the DTI and DEFRA working co-operatively.

7.  THE NEED FOR JOINED UP THINKING

  7.1  As an operator of emerging technology in an uncertain renewable energy market, Brightstar believe there is an urgent need for sustained and consistent Government action to stimulate both the waste and renewable energy industry, and work to overcome the barriers faced by new technologies. The above issues amply demonstrate the lack of a joined up approach and the industry is desperately in need of evidence that this will be forthcoming.

  7.2  The division of responsibility between DEFRA, the DTI and now the DTLR for waste and renewable energy policies is causing confusion in the market place. Whilst strategies for waste management are encouraging the development of new environmental solutions that maximise recycling and resource recovery, policy for the encouragement of renewable technologies is moving against this. A Sustainable Energy Agency will assist the Government in achieving the needed unified approach, and facilitate it to deliver fully its targets for sustainable development and environmental improvement.

  7.3  We believe that ACT technologies offer significant environmental and electricity supply benefits over traditional incineration technology. The use of ACT over incineration is being looked upon favourably by local authorities and environmental advocacy groups as it offers a more efficient technology, delivers higher standards of environmental performance, and can be provided at a community scale to meet local planning and environmental objectives. It is this market need for smaller more environmentally acceptable plants which has created a significant demand for ACT in the UK to which developers are trying to respond.

8.  CONCLUSION

  8.1  Brightstar wishes to see a strong and dynamic renewables sector from the belief that this kind of environment is the best way of delivering on the promise that renewable energy generation offers. If ultimately all forms of renewable energy need to demonstrate their economic viability independently in the mass electricity generation market, the role of government now is to put in place the foundations on which the private sector can deliver.

  8.2  The Renewables Obligation is a key means by which it proposes to do so, but this is not the sole means by which the private sectors needs are met. There are many other barriers that need to be overcome in order to see the full encouragement of the technologies on offer. ACT is one technology area already singled out as being able to deliver significant new capacity. However, being generally a waste driven technology there are other key issues that need to be addressed and as such a joined up approach of government and regulators is essential to achieve its delivery. ACT offers benefits in delivering sustainability and in making significant contributions to meeting the Government's waste and energy targets. As such, a more considered approach from government to encourage its delivery is needed.

January 2002



 
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