Comparing the cost of alternative waste treatment options

Transcription

1 Gate Fees Report, 2011 Comparing the cost of alternative waste treatment options Introduction WRAP s fourth annual Gate Fees Report presents a summary of gate fees for a range of waste treatment, recovery and disposal options. The indicative gate fees reported here are based on survey information from local authorities, MRF operators, compost facility operators, waste management companies (WMCs) and other market intelligence. The aim of this report is to disseminate information on gate fees, thereby increasing price transparency and, through improving the flow of information, enhancing the efficiency with which the waste management market operates. Providing local authorities with this market information will assist them in making informed decisions regarding waste treatment and disposal. This survey of facilities and local authorities covers England, Scotland, Wales and Northern Ireland. Local authorities and waste management companies were contacted during December 2010 and January Landfill site Summary information on gate fees Treatment Grade / material / type of facility Median 1 Range 1 MRF All to 85 Contracts starting in 2010 or later 4-30 to 63 Organics Open-air windrow (OAW) 24 6 to 51 In-vessel (IV), food & garden waste to 82 Anaerobic digestion (AD) to 64 Landfill Gate fee only to 55 Gate fee plus Landfill Tax to 111 EfW 3 Pre 2000 facilities to 79 Post 2000 facilities to 97 MBT to UK wide figures, regional estimates appear elsewhere in the report 2 At the time of the survey the standard rate of landfill tax was 48 per tonne, it increased to 56 per tonne on 1 April Incineration with energy recovery 4 Information from local authorities in the survey. 5 Includes survey information from local authorities and information from Defra on planned EfW facilities in procurement through PPP/PFI.

2 02 WRAP Gate Fees Report, 2011 Gate fees in context Reporting summary gate fee information, as we do here, is for two main reasons: it protects the commercially sensitive nature of the individual responses surveyed; and it provides a simple, accessible resource to the waste industry and local authorities. However, caution must be exercised when taking the typical gate fees reported here out of context for the following reasons: considerable variation in gate fees exists for similar treatment/disposal options within and between regions/ countries; the gate fee information does not take into account collection costs; the gate fee information for individual treatment options may not be directly applicable in instances where multiple services are being procured, for example, a service that combines a MRF with MBT or a service that includes collection together with EfW; and the precise terms of individual contracts, in particular relating to the allocation of key operational risks, vary significantly across facilities and directly influence gate fees. Moreover, it should be noted that long term local authority contracts procured through PFI or PPP with Defra and HM Treasury guidance are structured quite differently from other contracts, therefore, such gate fees may not be directly comparable. Key findings Gate fees for similar waste management options vary substantially both across and within regions. For example, spot and contract gate fees can differ depending on spare capacity and local market conditions (markets are localised to some extent by haulage costs). Indeed, the factors which determine specific gate fees at a particular facility are complex, ranging from the size of the facility, the nature of and the duration of contracts to technology, the age of a facility and the way in which revenues from the sale of recovered materials are shared. Notwithstanding these variations, the summary information from the survey indicates that: Median gate fees for waste recycling options are substantially lower than those for waste disposal routes. For organics treatment facilities, open-air windrow (OAW) median gate fees are lower than those for anaerobic digestion (AD) and in-vessel composting (IV). These, in turn, are lower than median gate fees at mechanical biological treatment (MBT) facilities. The median AD gate fee for separate food waste is lower than the median IV gate fee for food only, but is comparable to the IV gate fee for mixed food and garden waste. Landfill gate fees including the landfill tax are broadly comparable to gate fees for EfW and MBT. Compared to last year s gate fees report: The cost of disposal to landfill including the landfill tax has increased. Gate fees at MRFs have fallen substantially. Many local authorities surveyed are not paying gate fees or are receiving net revenue for their recovered materials. For AD facilities, the median gate fee is substantially lower by around 13 per tonne. OAW gate fees are little changed, as are IV gate fees for mixed food and garden waste. An AD facility

3 WRAP Gate Fees Report, Gate fees by waste management option Material recovery facilities Gate fees at MRFs have fallen substantially since last year s survey. In many cases, local authorities reported that they are not paying gate fees or are receiving net income for their recovered materials (Chart 1). Market intelligence suggests that for many deals struck in 2010 or later, local authorities are being paid per tonne for their recovered materials. The decline in gate fees reflects additional MRF capacity in the market and (at the time of writing) buoyant recovered material prices. Gate fees in Scotland, Wales and Northern Ireland are notably higher than those in England. The aim of this study is to raise price transparency and, through improving the flow of information, enhance the efficiency with which the waste management market operates. Open-air windrow composting OAW gate fees are more or less unchanged compared to last year s report. Median OAW gate fees in England and Scotland are lower than those in Northern Ireland and Wales. In England, the median OAW gate fee is higher for London and the South West compared with other areas. In future, gate fees are expected to remain at, or around, current levels. Competition is exerting downward pressure on gate fees but operators have little scope for reductions owing to tight margins. Feedback from some operators noted that their focus may shift towards generating additional value from output materials. Table 1: Gate fee information for MRFs All to 85 Contracts starting in 2010 or later 4-30 to 63 Chart 1: Net gate fees paid at MRFs 6 number of local authorities to 0 0 to to to to to to 60 > 60 6 Net of materials revenue and haulage. All survey responses Table 2: Gate fee information for OAW composting facilities UK 24 6 to 51 England to 51 Northern Ireland to 37 Scotland 24 6 to 47 Wales to 32

4 04 WRAP Gate Fees Report, 2011 IV composting gate fees Table 3: Gate fee information for IV composting facilities Food waste to 66 Mixed food and garden to 82 waste Garden waste 34 6 to 45 IV gate fees for mixed food and garden waste are little changed compared to last year s survey. Separate food waste attracts the highest IV gate fee, the lowest IV gate fee being for separate garden waste. Operators of IV facilities anticipate growing competition from other treatments options, notably AD. Operators also mentioned competition for garden waste from shred and spread operations. At the time of the survey, operators hoped to see the regulatory framework tightened so as to put more pressure on such activities. AD gate fees Table 4: Gate fee information for AD facilities Food waste to 64 The median AD gate fee for food waste is substantially lower (down by 13 per tonne) compared to last year s survey. The median AD gate fee for food waste is lower than the IV gate fee for separate food waste but is comparable to the gate fee for mixed food and garden waste at an IV facility. Several operators questioned indicated that they felt that AD gate fees might fall further. However, as the AD industry is still relatively young this finding is based on quite a small sample and so does need to be treated with some caution. Key factors expected to affect future gate fees were: Landfill availability of feedstock and the increasing number of facilities, some of them expected to be large scale; and additional revenue for energy and heat (making the ability of technology to deliver heat and power a key factor). Table 5: Gate fee (excluding tax and haulage) for landfill facilities UK to 55 England to 36 Northern Ireland to 41 Scotland to 55 Wales to 43 Median landfill gate fees (excluding tax and haulage) are down slightly compared to last year s survey. However, the cost of disposal to landfill including the landfill tax has increased. Median gate fees at landfill sites in Scotland and England are lower than those in Wales and Northern Ireland. Operators noted the highly competitive marketplace for landfill. Some commented that they were reducing gate fees to maintain tonnages coming into their sites. Feedback If you wish to comment on these findings or take part in the next WRAP gate fees survey, due to begin in November 2011, please gatefees@wrap.org.uk or call (note that existing participants do not have to re-apply).

5 WRAP Gate Fees Report, EfW (Incineration with energy recovery) Gate fees for incineration (with energy recovery) vary by, amongst other factors, capacity and the age of the facility. As in our previous gate fees reports, existing older (pre 2000) facilities tend to have lower gate fees than newer (post 2000) facilities. Defra information on facilities with sizes ranging from 200kt to 300kt indicates that gate fees are comparable to those in the current survey for post 2000 facilities. Larger facilities (350kt-450kt) may offer lower gate fees but feedback from WMCs suggests that while scale economies between facility size and the gate fees exist, they are limited. WMCs interviewed also noted that the landfill tax has been a key factor in allowing incineration with energy recovery to compete more keenly with landfill. MBT facilities The wide range of facility types and the variety of treatment processes to which the label of MBT is attached makes it difficult to provide an analysis of gate fees. The quality of the MBT output has a significant impact on the gate fee, as low quality process residues may attract a higher rate of landfill tax. Other major influencing factors on MBT gate fees are the SRF market, recovered materials prices, the feed in tariff and the allocation of contractual risk. Table 6: Gate fee information for EfW facilities Survey responses 7 Pre 2000 facilities to 79 Post 2000 facilities to 94 Sourced from Defra 8 Post 2010 facilities (capacity 200kt-300kt) to 97 Post 2010 facilities (capacity 350kt-450kt) 9 65 n/a 7 Information from local authorities surveyed. 8 Information from Defra based on planned incineration with energy recovery facilities currently in procurement through PPP/PFI. 9 Range not provided for the 350kt-450kt facilities due to the small sample size. Table 7: Gate fee information for MBT 10 facilities Survey responses to These gate fees take into account costs associated with disposal of process residues including fuel/srf and revenues from the sale of recovered materials. Factors expected to influence the market for MBT in future were increases in the landfill tax and developments in market prices for MBT outputs (metals, plastics, SRF). Feedback from WMCs indicated that the latter may lead to lower gate fees or an increase in the use of reward share mechanisms in future contracts. While steps have been taken to ensure its accuracy, WRAP cannot accept responsibility or be held liable to any person for any loss or damage arising out of or in connection with this information being inaccurate, incomplete or misleading. This material is copyrighted. It may be reproduced free of charge subject to the material being accurate and not used in a misleading context. The source of the material must be identified and the copyright status acknowledged. This material must not be used to endorse or used to suggest WRAP s endorsement of a commercial product or service. For more detail, please refer to our Terms & Conditions on our website - Waste & Resources Action Programme July 2011 The Old Academy 21 Horse Fair Banbury, Oxon OX16 0AH Tel: Fax: info@wrap.org.uk Helpline freephone