Memorandum submitted by Shanks Group plc
INTRODUCTION
Shanks welcomes the Committee's inquiry and
is grateful for the opportunity to submit evidence.
Shanks is one of Europe's largest independent
waste and resource management companies and offers a wide and
often innovative range of waste management solutions within its
various collection, transport, recycling, treatment and disposal
services. The company is involved with a number of integrated
waste management contracts to supply waste management services
to local authorities.
Shanks has developed a solution which, through
investment in new recycling and recovery infrastructure, can achieve
a significant contribution to renewable energy targets and CO2
reduction, while still meeting the primary imperatives for local
waste management authorities ie the protection of public health
and protection of the environment.
This solution is based on the use of a Mechanical
Biological Treatment process (MBT) which along with kerbside collection,
civic amenity site management, and composting forms part of the
wider Shanks offering.
MBT is the generic term applied to a number
of different technologies that involve the mechanical-biological
treatment of municipal solid waste (MSW). Shanks uses a form of
MBT that uses the biodegradable fraction of MSW—essentially
anything that rots through natural bacterial action, as a source
of heat. Elevated temperatures within the mass of waste and sustained
airflow across and through it stabilises and sanitises the waste
over a period of 10-14 days as well as reducing the overall mass
by around 25%. The resultant, dried, "stabilate" material
can then be further processed to recover stones, glass and metals
etc to produce Solid Recovered Fuel (SRF) which has an intrinsic
economic value - thereby converting waste into an energy resource.
SRF is easy to store and transport and with
a calorific value approximately two-thirds that of coal, can be
used to replace fossil fuels in power generation It has been calculated
that power generation from SRF has the capability to provide as
much as 17% of the UK's electricity requirements. 372
SHANKS' RESPONSE TO THE INQUIRY QUESTIONS
B. FINANCIAL
COSTS AND
INVESTMENT CONSIDERATIONS
2. What are the main investment options for
electricity generating capacity?
A recent Oakdene Hollins study[369]
for the Institute of Civil Engineers and the Renewable Power Association
concluded that municipal and commercial and industrial waste streams
in the UK have the potential to produce up to 17% of the Country's
electricity by 2020. The creation of an SRF from the residual
fraction of this waste could be burned as a replacement for fossil
fuels to create electricity and/or a source of heat in the case
of a CHP facility.
What would be the likely costs and timescales
of different generating technologies?
— What are the likely construction
and on-going operating costs of different large-scale technologies
(eg nuclear new build, CCGT, clean coal, on-shore wind, off-shore
wind, wave and tidal) in terms of the total investment required
and in terms of the likely costs of generation (p/kWh)?
Cost/benefit comparisons between large scale
generation technologies on a "like for like" basis is
inherently difficult for a number of reasons, not least the complexity
of the energy markets and the effect of market mechanisms and
subsidies such as carbon emissions targets under the EUETS and
ROCs respectively.
In recognising these difficulties in making
meaningful conclusions and recommendations over the most beneficial
mix of energy generation capacity for the UK, the Royal Academy
of Engineering (RAE) commissioned a detailed study[370]
that was published in 2004 and which provides much useful and
relevant information in comparing the true "costs" of
various technologies, including renewables such as nuclear fission,
on and offshore wind, generation from biomass, and wave and marine
technologies. The findings take into consideration the actual
costs of building, maintaining and running facilities, using a
common financing model.
Whilst this report shows that non-renewable
generation including coal fired PF, coal fired CFB, gas fired
CCGT and the like provide the most cost effective option currently,
when the effects of carbon dioxide emission costs (at estimated
£30/t) are taken into account the differential between conventional
combustion techniques and the range of renewable options is significantly
reduced.
Unfortunately, the report does not provide detail
relating to advanced thermal treatment technologies such as gasification/pyrolysis
nor dedicated facilities for the combustion of SRF as a fuel feedstock,
nor interestingly, does it extend its scope to the consideration
of the relative merits of various fuel types which provide a positive
value for the generator rather than contribute to the operating
costs of the operation.
Shanks recommend that as an outcome of this
consultation further work is commissioned to extend the work on
generation from renewable sources, to a detailed appraisal of
generation from SRF and other waste derived fuels which may contribute
a positive revenue stream in terms of gate fee for the generator.
From its own work with developers of dedicated
facilities for the utilisation of SRF, Shanks estimate that the
indicative cost of electricity generation through such a plant
may be in the region of 4-6 ppkWh. This excludes benefit from
gate fees for supply of the fuel feedstock; this may effectively
reduce the cost of generation by 1-2 ppkWh.
These figures compare favourably to the costs
of the majority of other "renewable" technologies including
on and offshore wind generation and generation from biomass.
For reference, typical costs identified in the
RAE report for various types of renewable and conventional generation
are as shown below.
Source: The Cost of Generating Electricity, The Royal Academy of Engineering-March 2004.
Over what timescale could they become operational?
In Shanks' experience planning and permitting
of MBT plants should be achievable within approximately 18 months,
with construction requiring a further 24-36 months.
In terms of dedicated generation capacity to
realise the energy potential from the SRF from MBT facilities,
such timescales have yet to be defined as the first MBT facilities
are only now under construction in the UK. However, the difficulties
in overcoming the legacy of the UK's historic negative approach
to "Energy from Waste" plants in the planning arena
are well documented. The effect on timescales for development
remains to be seen but should not be too far removed from the
timeline for the establishment of the MBT facilities themselves.
Although SRF is essentially a renewable fuel,
associations with the material as a "waste" rather than
a resource continue to be made. Delineations between the use of
a manufactured fuel to create renewable energy and waste incineration
need to be made.
Is there the technical and physical capacity for
renewables to deliver the scale of generation required?
MBT technology is relatively new to the UK,
but has been used successfully in Europe (particularly in Italy
and Germany), for over a decade. Utilisation of the resultant
fuel is also well established on the continent to the extent that
that there are restrictions in place upon the disposal by landfilling
of material with such significant potential for energy recovery.
The physical capacity for this type of renewable
energy, in the context of self-sufficiency for the UK, will be
capped by the amount of suitable waste produced (currently in
the order of 27 million tonnes). As previously stated, the UK's
waste production should be sufficient to generate 17% of the UK's
electricity requirements in 2020.
If there is the capacity, are any policy changes
required to enable it to do so?
Shanks believe that there are two fundamental
policy barriers to developing the necessary capacity.
Whilst the biomass fraction within SRF is classified
as a "renewable" source of energy there is a perception
that SRF itself is a "second class citizen" in terms
of its continued treatment as a "waste" product for
the purposes of Waste Incineration Directive. Further, only where
energy is recovered from SRF in an advanced thermal treatment
process does the resultant electricity attract economic support
under the Renewables Obligation.
We acknowledge that the current RO review process
is supportive of a move towards a "waste neutral" position
for generation facilities using pure biomass, whereby any waste
inputs do not invalidate the accreditation of the whole facility
in terms of ROC eligibility. However this does not address the
issue of necessary compliance with WID which presents itself once
SRF type material is accepted as a feedstock.
Shanks firmly believe that SRF provides cost
advantage to power producers in the medium to long term although
this is currently insufficient incentive for power generators
to invest in this technology for a number of reasons, not least
the comparative surety of subsidies of other, albeit more costly
forms of renewable energy.
A mechanism to facilitate incentive for change
needs to be found if the potential for waste derived fuels is
to be realised, whether this be through a system allied to the
RO or another such similar mechanism.
3. What is the attitude of financial institutions
to investment in different forms of generation?
From Shanks' exposure to the markets, it would
appear that there is willingness to invest in renewable technology,
however there is uncertainty due to lack of clarity and consistency
in the Government's renewables policies.
21 September 2005
369 Quantification of the Potential Energy from Residuals
in the UK: http://www.r-p-a.org.uk/content/images/articles/RPA&ICEEfRW.pdf Back
370
The Cost of Electricity Generation, The Royal Academy of Engineering,
March 2004. http://www.raeng.org.uk/news/publications/list/reports/Cost_of_Generating_Electricity.pdf Back
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