Memorandum from the Environmental Services
1. ESA welcomes the opportunity to contribute
to this inquiry as the sectoral trade association representing
the UK's waste and secondary resource management industry, a sector
contributing £5.0 billion to the UK economy (about 0.5 per
cent GDP). Our Members provide integrated solutions to waste across
the full spectrum of biological, mechanical, physico-chemical
and thermal treatment and processing options, and are consistently
achieving more sustainable waste management practices.
2. It may be helpful in the context of this
inquiry, which is linked to the Environmental Audit Committee's
previous inquiry and of the responses made to that earlier inquiry
by both the Energy from Waste Association (EWA) and ESA, to note
that EWA merged its activities with those of ESA on 3 September
3. We welcome the Environmental Audit Committee's
inquiry on a sustainable energy strategy and appreciate the Committee's
continuation of the work initiated in early 2001. Further to our
earlier submissions, we are pleased to be able to comment on issues
raised in this inquiry.
4. The PIU's Resource Productivity Report
stated that waste policy is the second biggest environmental challenge
facing the UK after climate change. The PIU noted that despite
improvements made both nationally and abroad, major concerns about
the unsustainable impact of continuing to emit greenhouse gases
at current global levels remain and that the impacts of climate
change caused by greenhouse emissions are likely to have "far-reaching
effects on all aspects of the world's environment, economy and
society". Reduction of such emissions has been identified
by the OECD as one of its "red light" environmental
issues, requiring urgent action and step changes in the way resources
are used and pollution is created.
5. The Government's commitment to the Kyoto
Protocol legally binds the UK to reduce emissions of greenhouse
gases to 12.5 per cent below 1990 levels by 2008-12. In addition,
the UK has a domestic goal of reducing carbon dioxide emissions
to 20 per cent below 1990 levels by 2010. The Government's focus
on climate change marks a significant change in its priorities
over the last 12 months. The Government's ambitious goals towards
achieving a sustainable energy strategy will rely primarily on
the development of substantial sources of new renewable capacity
and success can only be achieved if UK policy and legislation
support this development.
6. The Government's exclusion of the incineration
of mixed wastes from support under the RO prejudices achievement
by the UK of both its renewable and landfill diversion targets.
Assuming a three per cent annual growth rate in waste generation
and provided the recycling targets are met, an additional 455
MW from incineration facilities would have to be deployed by 2010
over and above the existing 200 MW in order to meet the targets
set out in Waste Strategy 2000. Under the current policy proposals,
less than half of this will be deployed.
7. DTI figures show that incineration of
mixed wastes with energy recovery generates 364g/KWh of carbon
dioxide from non-biogenic sources, while the UK average generation
mix produces 987g/KWh of carbon dioxide. Each KWh of generation
from incineration therefore saves 623g/KWh of carbon dioxide.
If incineration was able to meet its full potential by 2015 in
terms of the targets expressed in Waste Strategy 2000 and assuming
a growth in waste generation of 3 per cent per annum, a saving
of nearly six million tonnes of carbon dioxide per annum would
be realised, which equates to approximately 4 per cent of the
1995 carbon dioxide emissions.
8. The Government's support under the RO
for co-firing biomass in fossil fuel fired power stations, while
disqualifying biomass from eligibility for ROCs if co-fired with
mixed waste, is beyond comprehension. The latter process is a
cleaner and more stringently regulated process contributing to
climate change abatement. Government support for coal, a non-renewable
commodity, rather than waste, a renewable by-product will render
many biomass projects unviable, since feasibility is often dependent
on the ability to derive revenue from acceptance of mixed waste.
The biomass industry is thought to have accounted for 50 per cent
of new renewable capacity in 2001 under NFFO, but the Government's
current RO proposal will make this level of development unlikely
in the future. By limiting the maximum potential generating capacity
for renewable energy while incentivising a more polluting industry,
the Government's policy will result in unsustainable generation
of greenhouse gas emissions and weaken the UK's security of energy
9. ESA welcomed the Government's introduction
in March 2001 of the New Electricity Trading Arrangements (NETA),
which aim to promote competitive wholesale markets. We endorsed
the principles of NETA, whereby all generators should be rewarded
for value delivered but penalised for costs imposed on the system.
We are concerned, however, that since the introduction of NETA,
smaller generators have experienced reductions of 25 per cent
in electricity prices and figures of up to 40 per cent have been
quoted for incineration plants operating outside of the NFFO regime.
This is largely as a result of inherent flaws in NETA, which we
believe will reduce the deployment of renewables. We have advised
the DTI, in our response to its consultation entitled "Government
Response to Ofgem's Report to the DTI on the Review of the Initial
Impact of NETA on Smaller Generators", as to how NETA needs
to be modified to become a more cost reflective and efficient
market mechanism, recognising the environmental benefits delivered
to the system by all renewables.
10. ESA welcomed the NFFO Locational Flexibility
Order, which came into force on 30 December 2001. Our Members
are, however, experiencing difficulties with the Order in its
current form and the rigid manner in which Ofgem is applying the
rules. We realise that Ofgem's role is to regulate rather than
to promote the development of renewables. However, we are concerned
over the potential negative impacts of this Order on the commissioning
of new renewable capacity. Our Members have experienced difficulty
in transferring large NFFOs to smaller sites, changing within
technology bands and aggregating more than one NFFO contract onto
a single site.
11. ESA believes that the RO will struggle
to achieve the UK's 2003 renewable energy target and sees no prospect
of the 2010 target being met. Other technologies such as onshore
wind and landfill gas have a valuable role to play but these technologies
have only limited scope to provide new capacity and the Landfill
Directive will further reduce the future availability of landfill
gas. The Government is providing little support for emerging technologies
through an inadequate buyout price and insufficient capital grants.
Although some support has been made available for Research and
Development, this will make little difference to the ability of
the renewables industry to achieve the 2010 targets, although
it will be beneficial in terms of accelerating the development
of emerging technologies in order to meet future targets.
12. Emerging thermal technologies, such
as gasification and pyrolysis, may seem more attractive than mass
burn plants from a public perspective (due to their considerably
smaller volume throughput) but they have yet to be demonstrated
at a commercial scale for mixed waste streams and therefore some
uncertainty surrounds their environmental performance, reliability
and cost. The fact that these technologies operate at a much smaller
input is likely to mean that considerably more plants will be
needed to cope with likely waste arisings, which will require
the approval of a greater number of planning applications. The
financial outlay on such plants is also substantially higher,
demanding higher gate fees. Although these processes may in the
longer term, offer an alternative to conventional thermal technologies
for some waste streams, the appropriate proven performance references
are not yet available. ESA believes that the coming decade is
a period for these technologies to prove themselves capable post
2010 of making a worthwhile contribution to the UK's future renewable
13. In addition to incineration, there are
other sustainable energy processes, such as CHP, coalmine methane
recovery and carbon sequestration, that do not benefit from support
under the RO. ESA strongly recommends that, in order to capitalise
on the maximum possible capacity these technologies have the potential
to deliver, the Government develops a support mechanism such as
enhanced capital allowances to encourage their ongoing development.
14. ESA recognised that the Government may,
after 2004, wish to increase the landfill tax by about an additional
£20 per tonne achieved over a relatively short time period,
to help to close the gap between the cost of landfill and other
forms of waste and secondary resource management. This would align
the UK more closely with comparable EU Member States.
15. ESA believes that a tax on incineration
should be discouraged. In a context where the over-riding initial
priority is to achieve landfill diversion targets, there is logic
in reliance on the Landfill Tax as a fiscal driver. In any case,
exclusion of incineration of mixed wastes from the RO is effectively
a stealth incineration tax equivalent to £9 per tonne of
waste. This and the introduction of NETA compound difficulties
the energy from waste sector already faces and is not obviously
consistent with the commitment to energy from waste in Waste Strategy
16. ESA has seen little evidence of joined-up
working between parties. We are disappointed that whilst DTI appears
to understand commercial and environmental logic, DEFRA has been
heavily influenced by the anti-incineration lobby.
17. Ofgem is in a different position, having
primary responsibility as economic regulator for the electricity
industry. As such, it is required to act directly on Government
decisions and deviation from the rules or promotion of innovation
is not permitted. It is, however, important to ensure that Ofgem's
objectives are not in conflict with renewable energy development
and wider environmental objectives.
PIU ENERGY REVIEW
18. The development of a robust sustainable
energy strategy for the UK required the PIU Review on Energy Policy
to urge Government Departments to convey clear signals on their
long-term commitment to renewable energy policy and security of
supply. Instead, the Energy Review is somewhat unambitious and
its conclusions rather vague. For example, the PIU have ignored
the recommendation of the Royal Commission on Environmental Pollution,
for a 60 per cent cut in emissions by 2050 to avoid irreversible
Climate Change. It has not predicted where the UK should be in
2050 in terms of energy and emissions targets and fails to set
out how these should be achieved.
19. On the other hand, ESA feels it is wise
that the PIU have set a target for 2020 at no higher than 20 per
cent renewable energy. It is important that targets are realistic.
While we doubt, for the reasons stated above, that the target
of 10 per cent renewable energy by 2010 will be reached, momentum
may quicken beyond 2010 as emerging technologies develop and the
planning process improves.
20. ESA hoped that the PIU Review would
recommend the introduction of a support mechanism for the sustainable
energy processes ineligible for support under the RO, including
the incineration of mixed wastes, CHP, coal mine methane and carbon
sequestration. This was not mentioned in the Review.
21. Importantly, regardless of conclusions
and recommendations, the Energy Review opens up the debate on
the security and supply of energy, paving the way for consultation
and a White Paper on energy for the future.
15 RCEP report: Energy - The Changing Climate, June