In the wake of publication by the ESA on residual waste capacity in the future, Stuart Hayward-Higham, technical development director for Suez UK, gives his thoughts on the need for policy progress with regard to capacity.
So, another report on the residual waste capacity Gap in the UK has been published. This time, a report on reports, for the ESA by Tolvik Consulting, themselves a trusted advisor to investors and developers in the waste flow and prediction world.
Of course, what followed was the inevitable debate and noise played out in the media with commentary from organisations supporting, contending, or seeking to give context to the results.
The ‘not again’ feeling from some in the sector was palpable and not unexpected, given the feeling that this report on reports might have been definitive, might have come out with ‘the’ answer and bring the debate to end. Unfortunately that was always going to be an unreasonable and, to an extent, an unwanted outcome.
Why I hear some shout in exasperation, why can’t we agree a number and move on?
For SUEZ this very debate is vital to the industry and regulators and policy makers, it’s vital that we explore the variables and influences that might move the envelope of outcomes and help everybody understand the market and its sensitivities.
As a start, the Tolvik report presents an understanding of the outcomes of the various reports that have been published, or summary outcomes of other reports that were not published publically. The graph above clearly presents this position. Six reports were reviewed and their national modelling scenarios included. Of the six reports considered only two presented outcomes that show over- capacity in one of their scenarios, leaving nine scenarios that present outcomes of under capacity.
Yes I hear some shout, but what about RDF exports and their influence on the scenarios? Well yes, the graph most telling to me does not include RDF exports. RDF exports are not evenly distributed nationally, in fact nearly half of all exports come from the Wider South East region of the country and, as such, if included in a national model, will skew the understanding. SUEZ itself only presented one national picture scenario, one that represented our view of the sum of all of the regions and one that was the outcome of the mix of policy, economic and supply and demand criteria that exist in 2017.
We spent far more time modelling at a regional level where we mixed different recycling outcomes with capacity and price points that gave up to ten different scenarios for each region. We are able to show the impact of higher recycling policy in Wales where RDF is far less important than in the South East where it contributes to a much greater extent. Let’s not forget that the industry builds local and regional facilities, not national ones.
So what should waste-watchers draw from the SUEZ Mind the Gap 2017-2030 report, or the Tolvik report, or any other published reports now and in the future? Certainly we would urge thinking regionally and not nationally; looking at the philosophy of the scenario modelling to understand how reasonable it is against the known facts of the day; understanding that this is a supply and demand market and price and accessibility to treatment options will be essential to the modelling.
If analyses do not consider price points, together with other options, then they are missing a major influence on the outcome. In our own report, for the South East zone for instance, we looked at two recycling scenarios (business as usual and a “push” target). We looked at three scenarios of export capacity access (business as usual and two models of increased overseas capacity availability). We looked at two gate fee price points that might influence the mix of domestic and export commercial attractiveness.
We balanced these against the probability of new projects being developed that could service the region, using various commercial criteria to determine likely success of deployment and commercial viability. We also included a view of overseas policy on commercial position modelling, for instance, the expected new Swedish tax on all residual waste (domestic or import), or potential Brexit export cost changes (direct through export levy costs or indirect through increased administrative burden costs etc.)
This last point drives out one of the most important factors to consider in a supply and demand market. If the market approaches an under/over capacity tipping point, prices will soften, proposed project viabilities will decline and new capacity deployment will reduce and ultimately stop if the projects are uneconomic. The system is, in effect, self-limiting unless disruptive technologies or solutions come to market and they should always be part of your consideration, as should a change in the policy environment.
We at SUEZ, the ESA and many other industry members have been calling for policy definition in England for many years, not because we have nothing else to do, or because we are waiting to invest further, but because the current English policy landscape is not fit for purpose to support a market which will serve multiple-generations and could continue, if properly supported, to deliver significant long-term social benefit.