Select Committee on Environment, Food and Rural Affairs Written Evidence


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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