Action needed now to secure waste plant investment

Urgent action is needed to secure the 8 billion investment needed in waste infrastructure for the UK to meet its 2020 landfill diversion targets.

That is the message in a report published today (September 6) by the Associate Parliamentary Sustainable Resource Group, (APSRG) which calls for a new cross-departmental committee to be set up to provide investors with certainty over the direction of waste policy.

In the report, entitled Rubbish to Resource: Financing Waste Infrastructure, the group also calls on government to use the planned Green Investment Bank (GIB) to encourage private sector investment in new waste infrastructure.

The report, which has been published after a seven month inquiry on waste finance, advocates action because of what it says are a number of barriers hindering the investment needed for the UK both meet and exceed landfill diversion goals. It also says the action is needed to ensure the UK manages it waste sustainably and effectively.

In particular, it identifies public spending constraints, the inherent risk in developing waste infrastructure and uncertainty in policy and regulation as the issues preventing investment.

Actions

And, it calls for a number of actions to be taken by government, including:
– The establishment of a co-ordinating committee, based in the Cabinet Office but including representation from departments, agencies and other public bodies involved in waste. This would provide investors with greater certainty over policy stability and co-ordination;
– For government to ensure the financial incentives that are available to waste projects, such as the Feed-in Tariff provide certainty to developers and investors, for example by being set high enough and remaining constant;
– Using the GIB to issue a product to de-risk the development of commercial and industrial (C&I) waste capacity that encourages the building of merchant or joint local authority/C&I waste plants;

It also calls on councils to explore whether they can off-take more risk also known as third-party revenue, from the sale of energy for example which the report claims will speed up the delivery of new waste projects and deliver better value for money.

Financing options

And, it outlines measures which need to be taken to widen the range of financing options available. These include:
– Encouraging the development of stronger links between the private waste sector and real estate investors, landowners and developers which could help to release capital for projects at lower cost. As part of this, waste processing should be classed as industrial use in the planning system;
– Government using the GIB to provide mezannine debt to reduce the risk to senior debt lenders involved in new projects. Under mezannine debt, the senior debt lender is paid when the first cash stream from a project becomes available;
– The GIB should also be used to encourage greater private equity contributions to drive the development of merchant waste facilities.

Outlining why action is needed, the chair of APSRG inquiry, Labour MP Dr Alan Whitehead, said: Without confronting and overcoming these significant barriers it is highly unlikely that the necessary infrastructure capacity will be built. As a result, in a few years we could be facing a real crisis in Britains capacity to deal with its waste stream. Urgent action is therefore required.

His sentiments were echoed by Labours Shadow minister for environment, food and rural affairs, Jamie Reed MP, who said: More infrastructure is needed to deal with our waste, not only so we can use this valuable source of energy and materials, but also, so that we avoid paying millions of pounds in landfill tax and EU fines.

CIWM

The Chartered Institution of Wastes Management (CIWM), which is one of the reports sponsors, particularly highlighted its emphasis on the role of the Green Investment Bank.

CIWM chief executive Steve Lee said: Resource efficiency and waste management are an integral part of sustainable development. If our industry is to deliver maximum value to the low carbon economy in the form of both recovered materials and energy, we need new and better collection and processing infrastructure.

The delivery of this strategically important infrastructure needs to be properly planned for and creating the right investment landscape is essential to achieving this.

He added: The GIB has an important role to play in stimulating this agenda and building market confidence. CIWM is pleased to see tangible proof of progress with the appointment of an Advisory Group that has the necessary breadth of experience, including in the waste field, but there are a number of important issues that must be addressed if the GIB is to make a genuine contribution to creating a green economy.

ESA

The report was welcomed by the Environment Services Association, whose director of policy, Matthew Farrow, said government should pay careful attention to its recommendations.

The Government talks about moving waste up the waste hierarchy, but needs the waste management industry to invest billions of pounds to make this happen. Yet the hangover from the credit crunch coupled with the inherent complexity of many waste infrastructure projects means that the capital markets are unlikely to come up with this money unaided, he said.

This report has some important ideas for how the Green Investment Bank could help unlock private investment, for example through underwriting the risk attached to commercial/industrial waste inputs. The Government should give the report careful attention.