Gate fees are key part of AD financial model

Gate fees are an important part of the financial model for most waste treatment facilities, and merchant AD plants are no exception.

Anyone who works around this sector of the industry is aware of the pressure on gate feesand publicity, such as the r3 report featured on letsrecycle.com last week and WRAPs annual gate fees report, contribute to a prevailing sense that they are falling, in some cases quite sharply.

However, some parts of the industry question whether the publicity reflects the real picture and many more are concerned about the effect these messages have on the nascent sector. Clearly there is much more competition in the organic waste treatment sector than there has been to date, and that capacity continues to grow. In such a market, you would expect gate fees naturally to fall.

There is, though, a significant caveat. Surveys which either concentrate on particular areas or try to aggregate information across the country to create a national picture can miss some fairly extreme regional variation. The organic waste treatment market is particularly susceptible to this: as the industry deals with material which relatively heavy and difficult to transport, competition only really exists where plants are close enough together.

Variation in gate fees

The anecdotal information which ADBA receives from its members suggests that there is huge variation in the gate fees received by plants in different areas. There is also concern that waste producers are starting to take unrealistic views on the short term future of gate fees, which significantly harms the ability of plant developers and operators to get the multi-year contracts needed to provide certainty to funders.

Jacqui MacCaig, director of RUR3 Environmental, who offer feedstock sourcing services to many AD plants across the UK, backs this up. Expectations of low and quickly falling gate fees are unjustifiable when landfill tax is so high. Waste producers need to be realistic about the costs of processing packaged and loose food waste in relation to higher landfill prices, and the quality of waste required in order to lower gate fees.

We need a step change in the way we approach waste treatment, starting with a ban on biodegradable waste going to landfill. Without that, we arent releasing new feedstock for AD plants – were just moving contracts from one to another.

Landfill ban

The principle case for a ban on biodegradable waste in landfill is clear: a society which properly values its resources should not be putting valuable organic material in the tip. Returning the nutrient content of organic waste to land will gain ever more importance as a driver in coming years. Phosphorus is a finite, dwindling resource which we need for food production, and artificial fertilisers are energy intensive and likely to continue to rise in price.

Clearly there is also an economic case for such a ban. Not only would it ultimately hope support farming and domestic food production, but it would also support the growth of the AD industry as a central part of our green economy. It should be complemented by a clear policy in favour of source segregating waste, in order to generate the most valuable products from all forms of recyclable material.

Organic waste represents around two thirds of the potential of an industry which could ultimately deliver over 10% of our domestic gas demand in constantly-generated, baseload renewable energy. The UK is a world leader in AD for waste treatment, with huge capacity to develop export markets and grow beyond the 35,000 jobs which could be supported domestically.

New measures

Existing Government financial incentives are based on renewable energy production rather than waste treatment, but their calculation of appropriate support levels does include gate fees. To support the early development of the industry without increasing the cost to

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ADBA

Government, measures to release more organic waste into the AD market are vital.

A ban on biodegradable waste to landfill, coupled with clearer support for source segregation, would realise real benefits in terms of resource management, renewable energy generation, and economic growth.