Average contracted and gate fee prices for food waste have shown a steady decline over the last two years largely due to more AD plants coming online, industry sources have told letsrecycle.com. Average gate fees have fallen by as much as £50 per tonne since 2013 to a rate of £18-£40 per tonne today.
However, there seems to have been a more pronounced drop in recent months, with several operators reporting that a number of businesses are offering gate fees at or below £20.
One site operator told letsrecycle.com that gate fees of around £10 per tonne were not uncommon, while another suggested that in some cases AD operators were even offering to take in food waste for free in order to feed capacity.
The number of AD facilities in the UK rose from 68 in 2011 to 140 in 2014. And, a report by Defra in February forecast that AD capacity will increase fourfold by 2017, with around 200 plants likely to be online (see letsrecycle.com story).
The growth in the number of plants comes alongside austerity pressures on local authority budgets which may mean fewer new food waste programmes will be rolled out, although there are plans for more schemes in London.
The sector is also seeing the water industry develop plants and it has a relatively low cost base because it has easier access to land and technological experience with the treatment of sewage.
[testimonial id = “233” align=”right”]
Food waste is the largest feedstock for AD, although liquid materials from commercial food producers and processors have also become common. Currently, of the 9.9 million tonnes of total capacity in the AD sector, an estimated 2.3 million tonnes of capacity is for the treatment of food waste from domestic and commercial sources.
The Organics Recycling Group (ORG) of the Renewable Energy Association (REA) said that it had received reports from members that gate fees for food waste had been “falling quite sharply”, which it attributed to a combination of increasing AD capacity and local authorities seeking lower prices from firms to process household food waste.
ORG technical director Jeremy Jacobs told letsrecycle.com: “It is very important that from an investment perspective that if AD operators are horizon-scanning that they know where the Feed-in-Tariff and other incentives are – and where the feedstocks are.
He added: “It is very much about proximity because hauling food waste is very expensive.”
Mr Jacobs also called for measures in England such as mandatory local household food waste collections and a landfill ban on biodegradable waste.
Mr Jacobs said: “Upwards of six million tonnes of food is still going to landfill, so we need mandatory drivers to make sure food waste is collected by local authorities in the UK.”
Charlotte Morton, chief executive of the Anaeobic Digestion and Bioresources Association (ADBA), confirmed that gate fees “continue to fall” and called for government action to encourage more segregated food waste collections which would increase recycling and generate energy.
According to ADBA, only half of local authorities in England offer food waste collections.
She said: “Clearly the absence of segregated food waste collections policy in England is constraining the operation and development of food waste plants. Gate fees continue to fall with increasing competition and the industry will not be able to grow further without central government taking action to ensure households and businesses have the opportunity to recycle food.”
Harry Waters, commercial director at Agrivert, said that he was aware of some companies dropping their spot gate fees for food waste very low.
However, he said that while Agrivert and other companies with longer term contracts and more efficient AD energy plants were protected from the scrap over food waste feedstock, the industry could see some businesses leave the sector over the next year or two.
Mr Waters said: “It is certainly the case that because a lot of capacity is coming online very quickly a lot of people are scrapping around for waste.
“Personally I don’t think that is sustainable because plants need to make a profit. To offer very low gate fees you have got to be very efficient at producing energy, and not all plants are, which will make them unprofitable.”
This, he said, would eventually even out the market, but warned: “The next two years could be a bit of a bloodbath as companies cannot keep losing money.”