Memorandum submitted by Inetec (Bio 34)
INDUSTRIAL FOOD WASTE TO RENEWABLE ENERGY
A BACKGROUND TO THE COMPANY AND OUR CURRENT
PROJECT PIPELINE WITH A COMMENTARY AND ON PLANNING AND REGULATORY
BARRIERS
1. COMPANY BACKGROUND
AND CURRENT
PROJECT PIPELINE
Inetec has in the last five years, developed
a unique technology solution for the processing of packaged food
waste originating from industrial scale food producers, mass caterers
and mass retail. The technology offers very distinct advantages
over alternatives and this is now proven by early reference contracts
with two blue chip UK companies; specifically Greencore plc and
Greggs plc. The company is actively closing contracts with Northern
Foods and Tulip and is actively securing other waste feed through
a regional network of waste contractors.
The technology (see www.inetec.co.uk) is described
as abrasive drying. Water contained within food (both outside
in sauces etc and inside within animal and vegetable cells) is
removed to a very low level. The technology is physical rather
than biological in nature. This allows processing of widely varying
waste and large batch to batch differences without problems. In
developing the technology literally 1000's of test runs have processed
feed wastes as different as supermarket waste, chicks, cow stomachs,
stage offal, fish, airline waste, bakery waste, raw pastry, oil
laden sludge, DAF sludge from effluent plants and many others.
The technology has been developed via two commercial
operations, the first at a Greggs' bakery where it has processed
bakery waste and shop return and the second on a pedigree chicken
hatchery where it processes rejected eggs and dead chicks.
Inetec continues today with two quite separate
sales propositions. The first sees an on-site solution to a client's
waste problem on the client's site. Here Inetec aim to process
waste to a powdered bio-fuel and then use relatively low cost
conventional combustion equipment to convert the waste to steam
(or other) energy which is returned to the client. An example
of a project in build is for Ethnic Cuisine who produce Chinese
ready meals for Marks & Spencer.
The alternative which is proving particularly
successful is to take food waste without segregation to Inetec's
own processing plant. The ability to accept waste without segregation
and with its packing materials is essentially Inetec's unique
selling feature. This has lead to three important enabling contracts
with Greencore, Greggs and shortly Northern Foods.
In response to established sales and continuing
marketing, Inetec's plans now extend to the construction of a
national network of 10 plants throughout the UK. The dimension
of this business is as follows:
Total no of plants 10
First plant Immingham (NE Lincs)
Next five plants Manchester, London,
Bristol/SE Wales, Derby, Northampton
Capacity 200 tonnes/d food waste including
packing
200 tonnes/d food contaminated packing
Total capacity 10 x 400 = 4000 tonnes/d
1.4 million tonnes/yr
These large operating plants seek to use the
biomass prepared in the Inetec process and convert this to synthetic
gas and then to largely (usually more than 90%) renewable electricity.
Once again the scale of the planned projects is described as follows:
Each plant 21 MW electricity generated
from biomass
5 MW additional electricity generated from thermal
energy by-product
Total generation: 260 MW
Renewable generation: 234 MW
Total investment: £300 million
The status of the project is as follows:
First plant: Initial waste capacity
now sold
Project funding secured subject to planning
Planning to be submitted September 2006
IPPC permits to be submitted August 2006
Start of construction February 2007
Start of operations December 2007
Next four plants: Submission of planning
2006
Start of construction—phased 2007 to 2008
Start of operations—2007 to 2008
Completion: 10 plants operating approximately
2008 to 2009
In order to exploit the market opportunity and
bring together the Inetec technology with energy conversion technologies,
a special purpose vehicle, EnCycle has been formed.
In order to develop this project in the private
rather than public sector the team has had to overcome a number
of difficulties:
As a result of the commercial dynamics of the
food production sector, clients have been unwilling to contract
for prolonged periods as is the case for municipal waste. In response
Inetec/EnCycle has had to develop innovative forms of contract
with these clients which we view as part of our intellectual property.
In similar fashion Inetec/EnCycle have had to
rise to the challenge of guaranteeing projects against relatively
weak balance sheets. Again the team has had to rise to this challenge
by a combination of methods including innovative use of project
insurances.
In short Inetec/Encycle are on the verge of
submitting planning (September 2006) and starting the first build
in February 2007.
2. PLANNING AND
REGULATORY BARRIERS
In developing the business literally from a
new start Inetec have had a variety of positive and less positive
experiences driven in differing ways by Government.
EQUITY—Firstly it is important to state
that Inetec has received sustained investment support from Finance
Wales, the investment arm of the Welsh Assembly Government who
own approximately 1/3rd of the Inetec business today.
GRANTS—Secondly, Inetec trades in an Objective
1 area and has received or won a number of important grants to
support research and development, business infrastructure and
product demonstration. Not least are 2 SMART awards.
LEGISLATION: LACK OF STABILITY AND U TURNS—A
key element of many innovative business plans is Environmental
legislation. This forms an early cornerstone supporting investor
confidence. Often the legislation demands innovation in itself
or drives innovation by causing a price escalation in a market.
In Inetec's case it was working on the pending
implementation of the EU Animal By-Products Regulation 1774/2002
and at that time had raised some £3 million against the Inetec
technology and its plans to exploit a legislation driven market
place.
Under market pressure, government in the UK
felt it impossible to meet the original deadlines of this European
regulation and sought and obtained a derogation to the end of
December 2005, thus allowing 12 or more months extended time for
compliance.
This action in itself lent weight to the fact
that the legislation would be implemented by the revised date,
albeit 12 or more months late.
Under various further pressures from a number
of European governments, the regulation so far as it applied to
our sector, was subsequently withdrawn entirely as a legal requirement
leaving the Inetec technology, its pricing, its submitted contracts
and its investors all in turmoil.
Suffice it to say that it took some 12 months
to recover Inetec's prospective clients, to submit new commercial
offers which essentially had to compete with landfill, and to
substantially regain a market position. Amongst many losses in
this period was an entire round of equity investment.
The response of UK government and of DEFRA was
simply that the next piece of legislation (the Landfill directive)
would "catch" the waste practice, and this would in
some way recover the situation. The reality of this is that the
landfill regulations require waste to be pre-treated prior to
disposal and that such requirement will be phased in, presumably
from Oct 2007. There remains no clarity of either the true
timescale for implementation or indeed what would and what would
not constitute pre-treatment. Suffice it to say that there is
widely varying opinion from DEFRA who state it would "need
to be meaningful", through to industry associations who say
it is likely to be trivial.
It should be relatively easy to appreciate that
the U turn on the original legislation followed by more than 12
months without subsequent clarification seriously damages the
position technical innovation companies such as Inetec.
Legislation is a great economic driver underpinning
investment and innovation; however when it fails in this way,
the net effect is precisely the opposite, essentially restricting
innovation, causing businesses to fail and damaging investor confidence.
3. PLANNING AND
PERMITTING—TODAY'S
BARRIERS
Having moved to a position of commercial based
competition essentially against truck and dump landfill, Inetec
is now faced with a plethora of legislation.
Inetec's problem is not so much the legislation
itself, but the timescale and cost of meeting necessary approvals.
The following arguments are put forward for consideration in that
they portray the problem and state or imply a possible solution:
General—projects such as Inetec/EnCycle's
make a contribution to key government targets including reduction
of landfill, climate change and renewable energy. However movement
toward change is now more hindered by "standard" regulation
and procedure rather than any incentive to change. There is surely
room to suggest that these very serious targets demand a more
innovative approach from government and in key places a new resource.
The key areas can be expanded upon:
Planning—response to request for scoping—prior
to any planning application being duly made, it is common practice
to seek from the planning authority an opinion concerning the
issues in planning which the developer need to address. It is
Inetec/Encycle's experience that the speed of response at this
stage is so slow that that it is virtually akin to the speed of
the planning process itself. It seems that whilst due process
is followed, the planning officials excuse themselves whilst waiting
on statutory consultees (English Nature by way of an example)
and the consultees seem to be under little if any obligation at
all. The perception is that development is bad and needs to be
restricted and controlled. The reality is that global warming
and renewable energy needs far more urgent attention with all
organisations playing their part in a far more workmanlike way.
The same principles apply throughout and can
include the planning permission itself, the PPC license and the
grid connection all of which run into remarkably long timescales.
Eg PPC seven to eight months and grid connection 12 months.
Additionally the interplay of the various agencies
causes increased delays in obtaining some of the incentives offered.
For example, the interplay of DEFRA and the Treasury with regards
to administering ECAs appears to extend the timescales for granting
such benefits and also enforcement and interpretation of the regulations
is often punitive. Similar issues are evident when looking at
the qualification process for ROCs.
Repeated Application From A Zero Base—A
further feature of the planning and licensing process is that
each project seems to Inetec to start from a zero basis as if
no similar project had ever been implemented and each plant seems
to be considered as if no plant had ever been built before. By
way of example the scoping position of a planning authority could
easily be established before a developer ever proposes a project.
This would allow an immediate opinion on traffic, air pollution,
nature, visual impact, building levels, flooding etc to be given.
Equally the licences seem to be considered individually
rather than generically and each officer begins that consideration
from largely the same starting point.
If for instance the UK is seriously going to
adopt a renewable energy based industry, then it must be resolved
how the impetus of this industry can be released, albeit with
proper planning and management etc. rather than the current stranglehold
of regulation, planning and process.
Inetec wishes to stress that this document is
not intended as criticism of any individual. Inetec does however
believe that change is needed in current processes and that Inetec
and similar organisations can only dramatically impact upon quite
serious government targets if such change is enabled.
Inetec awaits with great interest, the recommendation
of the Select Committee and above all else, the implementation
of changes which will allow swift and appropriate processing of
licence and planning applications.
Inetec
July 2006
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