Student

Tutor Hand-in Date

Andrew Turner Dr. Tim Cockerill th 10 December, 2012

CID 00745689

Waste To Energy SEF03 IS LOCALISM POURING COLD WATER OVER ANAEROBIC DIGESTION?

IS LOCALISM POURING COLD WATER OVER ANAEROBIC DIGESTION? 1. Introduction EU directives mean Britain must meet renewable energy targets (source) and divert less of its organic waste to landfill (source), a commodity that in any event is fast running out (source). Anaerobic digestion (AD) facilities are therefore an attractive proposition as they transform this waste into potentially valuable by-products and renewable heat or, more usually, electricity. As has been observed in the UK and other countries for the cases of solar and wind power, policy support for the development of any nascent renewable technology is crucial (Lipp, 2007) and this extends to providing the framework and support to de-risk new plant, ensure reliable funding streams and offer policy stability into the future. The government wishes to encourage AD (source DECC, Defra strategy) but within a general policy agenda that promotes private enterprise and localism whereby power is devolved outwards. This raises the question of whether these two objectives can productively coexist.

2. Anaerobic Digestion The previous government invested resources into policy and regulation at the national level to encourage AD energy-to-waste facilities. WRAP1, a government-funded not-for- profit company comprised of business and government representatives, was set up in 2000 to, amongst other things, promote AD. Regional Development Agencies (RDA) were created and these along with the Environment Agency, local authorities, and the

Figure 1 The UK waste delivery landscape in 2007 (source: Defra)

1 Waste and Resources Action Programme

private waste treatment sector, promoted waste-to-energy (Figure 1) and provided support and co-ordination to the sector. Additionally, work by Zglo et al (ref) has shown that with the current array of support measures, gate-fees and off-take sales, LCOE2 for AD can be less than for any other generation technology, renewable or otherwise (Figure 2) and its lack of intermittency also sets it apart from other renewable generation techniques. 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 - 2007 2008 2009 2010 2011 Figure 2 Levelised cost of electricity generation Figure 3 UK electricity generation from for different technologies. anaerobic digestion plants (ex sewage plant). Source: Zglobisz et al, 2010 after Gross et a l, 2007 Source: Dukes Now, whilst the number of plants and capacity is very low (particularly when excluding the fixed-resource sewage processing plants which have utilised AD for some time) it has been growing fast over the past few years (Figure 3). The future for AD seemed pretty bright. 3. Cuts and the Localism Bill This landscape changed markedly in 2010 in two ways: the incoming government pledged not only to be the greenest government ever (source) but also swingeing public sector cuts; and the introduction of The Localism Bill (source HM Govt). Concerned that, For too long, central government has hoarded and concentrated power (source), this bill set about reducing red tape. This amounted to abolishing the RDAs, cutting WRAPs annual funding immediately by 30% and by a further 10% to 2015 (Resource) and using the Bill to devolve planning authority heavily to local authorities who themselves have had their budgets cut by 13.3% in real terms (IFS). Considering again the waste delivery landscape of 2007 (Figure 1) it is clear this had significant impact. Whilst this is taking place, financial institutions, following the debt crisis of 2008 and beyond, are severely constrained in their lending ability. There is no research in the literature that examines
2 Levelised Cost of Energy

GWh pa

the effect on the additive effect of these factors but it is suggested that it downgrades the prognosis for AD. Obstacles exist for AD plant development like any other investment and the likely impact from these effects is explored next. 4. Obstacles AD plants fall broadly into two categories: local community-based e.g. factory or on- farm. The latter tend to be small; for example Trantner at al (year) suggest from farmers surveyed that only around 3.5GWh p.a. of electricity generation (or 0.001% annual UK use) is possible via this route. Of more interest are larger plant run by private waste management companies such as Veolia. Large urban sewage treatment plants have been using AD for decades (Defra strategy) although their valuable expertise is locked-in and constrained behind old process. Like any other profit-seeking endeavour, waste companies seek to invest where risk is low and returns high. A stable policy landscape, low LCOE and access to finance are required. In the current dearth of capital financing, the government recently made steps in the right direction in 2012 with the launch of the Green Bank which can offer mezzanine financing to de-risk senior debt and thereby make less riskier project costs more attractive to banks. Central government has also provided financial support with a generous two ROCS3s incentive for every MWh of electricity generated (source) and a gate-fee driver from the 64/tonne landfill tax in 2012 (source HMRC), motivated by the EU landfill Directive (source). But price is not the only driver for private investors (Gross et al)). Zglo (source) argues compellingly that the combined obstacles of finance, administration and risk in waste-to-energy are so great that without support from RDAs they may be practically insurmountable; and the RDAs have been abolished. The by-products from AD are the potentially valuable commodities of biogas and a digestate that may be used as bio-fertiliser but both require reliable market development to reveal their value to investors. Some progress has finally been made here by WRAP and the government with the PAS100 standard (WRAP) for bio-fertiliser, even if this only amounts to feedstock quality assurance. It seems likely that more work needs to be done here to develop these new markets and thereby reduce plant off-take risk, e.g. raising a levy against peat-based alternatives. But without well-funded, co- ordinated public-sector engagement this remains a challenge. Whilst central policies and financial support are in place to support AD, there is still policy uncertainty feeding investment anxiety, such as the National Waste Management Plan delayed by a further 18 months to the end of 2013 (source Defra review progress). Regardless, even after deciding to build a new plant, prospective operators must submit to a planning landscape whose priority is local empowerment and not waste energy plant.
3 Renewable Obligation Certificate, worth around 41/MWh (Nov 2012, source: E-Roc)

5. Planning Localism conceptually revolves around the devolution of central power to emboldened local communities. Within the Localism Bill, local authority planners gain more power over the approval process for AD plant; however, with their budgets cut and support from abolished RDAs and WRAP removed, they are poorly equipped to exercise this. The bill dictates they must accommodate any locally generated referenda relating to an application process where, excepting community-conceived schemes, NIBMYism generally always wins out over national energy priorities. This leaves local planners underfunded, under siege and under supported; and, when in doubt, it seems likely that their default position will be to decline new plant applications. Indeed the ESA4 in its report notes that only two of its members 14 AD plant applications have been approved since 2008 (source ESA). It seems that the momentum of increased capacity reported above (Figure 3) does not consist of much medium or large-scale plant, something the government desires and which the industry has since 2008 been keenly doggedly pursuing (Figure 4), but apparently with little progress.

In addition to these planning hurdles, prospective plant operators must, if they wish to take advantage of economies of scale and larger plant over 50MW, submit their proposal for additional central government approval. From this it is inferred that, despite its avowed commitment to decentralise authority, the government indeed recognises and responds to the need for centralised management of strategic waste infrastructure. This is further illustrated by the Bills requirement of a duty to co-operate (source Planning advisory), which requires neighbouring authorities to assist each other in strategic planning for near- or cross-border plant, essential for example for wide collection of organic feedstock; although given the budgetary and external support limitations
4 Environmental Services Association

Figure 4 Biomass electricity plant over 50MW capacity operational, under construction, in planning or announced as of early May 2010. Source: Environment Agency

mentioned above it is questionable how productive this co-operation might be. Therefore, there is recognition from government that strategy beyond local level is required but it is at odds with its localism agenda. More research is required into these relationships and their impacts. Considering smaller community- or local industry-based AD initiatives, Walker et al (ref) suggest community-based renewable energy projects require a holistic and evaluative approach to succeed; but this costs time and money, which the co-ordinator, by default now the over-burdened local authority planner, is ill-equipped to provide; and so small new plant approvals are also at risk, albeit probably less so, and their increased number may be in despite of, rather than because of, government policy. 6. Conclusion Localism and public sector cuts are making investment into new AD plant difficult and are undermining government efforts to promote the sector. Planning issues for plant operators become more onerous when local planners are empowered but given fewer support resources, with the abolition of the RDAs being the most significant of these. The situation is made worse by a localism agenda which values decision-making by local people whose default response is likely to reject waste plant in their back yard. Co- ordinated organic waste collection and distribution is problematic given lack of central or regional support and islanding of local authorities; even when they are mandated to co-operate strategically they have no support and reduced funding. Small plant such as farms and factories are more likely to overcome local planning if they are contained or driven by a local community, but the energy potential from these are dwarfed by that of larger plant and have only a small role to play in the energy mix. If the government is serious about AD then it must provide central and regional support to de-risk the development of this new sector. Otherwise, localism and cuts are a toxic mix for AD.