THE PROPOSED INCINERATOR AT KING’S LYNN
Chris Edwards, February 2011SUMMARY AND CONCLUSIONS
The focus of this report...
The focus of this report is on the incinerator plant proposed for King’s Lynn by the Norfolk County Council. The King’s Lynn plant was to be the second of two waste treatment plants planned for Norfolk. The first one was planned for Costessey, a few miles west of Norwich but was abandoned after considerable opposition not least from the owner of the site who refused to sell the land to the Council. Now the NCC is left with the King’s Lynn plant.According to the Independent of 28 December 2010, the King’s Lynn plant is one of about 80 incinerator plants planned across the UK. This compares with about 25 already in operation (see the map in the Independent).
Why the ‘dash for ash’?
Incinerators have become attractive to Councils for two reasons -First the landfill tax. Councils are paying a higher and higher tax each year to dump the waste not recycled into landfill sites. In 1996, the Government introduced a landfill tax but it was from the 2007 Budget that the landfill tax was sharply increased. By 2010/11 it had been increased to £48 per tonne and by 2014/15 it is scheduled to be £72 per tonne. The landfill tax was introduced in the context of a directive from the EU issued in 1999 which set limits to the Biodegradable Municipal Waste (BMW) which could be landfilled. Under the directive, by 2013 BMW going to landfill sites in the UK must be less than half that in 1995
The second reason is bribes from the government. In 2007, the Treasury (through the Department for Food and Rural Affairs or Defra) set aside £2 bn for PFI credits for waste treatment projects. PFI is short for Private Finance Initiative. Under the PFI, private companies build waste treatment projects such as incinerators and then charge the Councils for burning the waste. PFI was started under the Major government but was pushed much harder by the Blair and Brown governments. It has mostly been used for building hospitals and schools but in 2007 it was extended to waste treatment projects. In October 2010, credits were withdrawn from seven projects on the basis that they were not needed to meet the 2020 landfill targets set by the EU directive. Unfortunately the King’s Lynn incinerator was not one of the seven.
Under the Defra PFI scheme, if the incinerator at King’s Lynn goes ahead as proposed, Norfolk County Council will be paid £6.794 million per year for the 25 years of the PFI contract. The preferred bidder for the KL incinerator is a joint venture between a British company, Cory and a US company, Wheelabrator. The shareholders of Cory-Wheelabrator will put up very little capital themselves but stand to make a lot of money from the project.
PFI or Profits From Incinerators...
The capital cost of the incinerator is estimated at £150 mn but 85% (or £128 mn) of this will be financed by ‘senior’ fixed interest capital. This means that Cory-Wheelabrator will put up only about 15% (or £22 mn.) of the total in the form of ‘blended equity’ (subordinated debt and equity capital). I estimate that they will make a profit of more than £17 mn per year on this investment (for more details, see table 2 in section 7 of the main report).At the time of writing this report (early February 2011), the next step is the final contract and financial close for the preferred bidder. The Council is eager to get these done by April 2011 otherwise it is possible that Defra will withdraw the PFI credit. Following the financial close, the NCC anticipates that a decision will be made by the NCC’s Planning Committee in October 2011 followed by a four month period for Judicial Review and the discharge of planning conditions. This would allow site work to begin in February 2012.
This timetable is perhaps optimistic given that it took 15 years to get planning consent for the incinerator at Riverside in East London due to come into operation this year (2011). This 585k tonnes per year incinerator will be operated by Cory.
The other bit of the joint venture (Wheelabrator) is a subsidiary of Waste Management Inc., a US-based company. Wheelabrator is reported to operate 16 incinerators in the USA but very few incinerators have been built in the USA over the past 15 years, so Wheelabrator has been searching for new markets, particularly in China and the Pacific Rim. In 2007 it was reported that Waste Management Inc., had paid out US$457 mn to settle a shareholder class action suit for accounting fraud.
What does West Norfolk get from the incinerator?
As noted, if the King’s Lynn incinerator goes ahead, Cory-Wheelabrator stands to make a very high rate of profit from the project. By contrast, what do the residents of West Norfolk get? A few jobs and significant pollution.In response to allegations of pollution, a County Council spokesman says; “we have relied upon the assurances of government departments and independent agencies including Defra, the Health Protection Agency and the Environment Agency that well-run modern energy from waste plants are safe” (Eastern Daily Press, December 16, 2010). However in Parliament on November 30, 2009, the Health Protection Agency admitted not having conducted health studies around incinerators. A report saying that incinerators were safe, was published by Defra in 2004, but it should be noted this report was heavily criticised by the Royal Society and that it was written by Enviros, the core activities of which include obtaining planning permission for clients to build incinerators (see EDP, December 16 2010)
So the allegations of significant pollution from incinerators continue to be made and are serious enough to warrant the cancellation of the incinerator at King’s Lynn.
What is the gain to Norfolk County Council?
In response to this the NCC will say; this is all very well but if we don’t go ahead we will have to face having to pay a tax on the waste going to landfill (the Council paid £11 mn in landfill tax in 2010) and we will lose the PFI credit from the government. The Council claims that it would lose £8.1 mn per year, if the incinerator is not built. £6.8 mn of this would be the result of the cancellation of the PFI credit. The remaining £1.3 mn is the difference between the landfill tax and gate fees for about 170k tonnes of waste and the payment to Cory-Wheelabrator for incinerating the 170k tonnes.The gain to the Council of £8.1 mn is just over a third of the payment to Cory-Wheelabrator. This might seem to be a generous margin but it is highly likely that the cost to the NCC of incineration will rise between the preferred bidder stage and the financial close. The Revised Outline Business Case built in an allowance for an escalation of capital costs of 32% and of operating costs of 20% (see section 8 of the main report). Thus by the time the incinerator comes into operation, the gain to the Council could be wiped out.
However the major reason for cancelling the incinerator would be the pollution and the threat to health of the people of West Norfolk. The incinerator should be cancelled and it should be done before the final contract is signed. If it is cancelled after the final contract is closed, it seems that the Council will have to pay up to £20.5 mn in compensation to Cory-Wheelabrator (see section 8 of the main report).
What are the alternatives?
It is clear that there is an incentive for local authorities to reduce the volume of BMW going to landfill so as to reduce the landfill tax payable. They can do this by one of three ways; reducing the amount of waste, by increasing recycling of the waste and by treating the waste (but not necessarily by using incinerators).There is scope for reducing the waste per head in Norfolk. It has been declining over the past nine years but Norfolk’s record is poor compared to the best ten councils in the UK. In 2008/09, Norfolk’s waste per head was 474 kg compared with about 300 kg for these ten councils.
When we look at recycling, the same argument applies – there is room for improvement. The NCC’s recycling rate has more than doubled from 20% in 2004/05 to 43.5% in 2009/10 but in the same year the ten best councils achieved rates of between 55% and 62%. Furthermore it needs to be noted that these percentages of the ten best councils in the UK are slightly below the averages in Germany, Belgium and the Netherlands.
If the waste per head could be reduced to the level of the best councils the total household waste in Norfolk would be cut by 140k tonnes per year. And by raising the recycling rate to match the best of the councils in the UK – namely to 60% - the household waste going to landfill would be reduced by a further 50k tonnes per year. This ‘cut waste/raise recycling’ strategy would be more than the total of household waste intended for the incinerator.
The danger of an incinerator is that it is likely to discourage the cutting of waste and the raising of recycling. Under a contract for incineration, the Council would be committed to paying for a certain tonnage to be treated. Pressures against recycling would increase as has happened elsewhere. For example, in March 2010, East Sussex County Council was refuting suggestions by Lewes Liberal-Democrats that its recycling policy was being restricted to ensure that enough material was supplied for the incinerator at Newhaven (section 9).
The cut-waste/raise recycling strategy would mean that a total of a little over 100k tonnes would go to landfill. This would meet Norfolk’s landfill allowance of about 113k tonnes in 2015 but not the allowance for 2020 of 78k tonnes. A second alternative to treating the waste at an incinerator is to export it to other incinerators or waste treatment plants. The Cory-Wheelabrator bid allows for Cory to treat up to 151k tonnes between April 2011 and March 2015 at its Riverside incinerator in southeast London. But of course exporting the waste to avoid pollution is hardly a moral solution.
So far we have two alternatives; first, the reduce waste/raise recycling strategy; second, the exporting of waste from the county. A third alternative is to treat some of the waste but not through an incinerator.
There are other technologies. One is Advanced Thermal Treatment (ATT) (gasification and pyrolysis); a second is a Mechanical Biological Treatment Plant combined with Anaerobic Digestion (MBT/AD).
The first (ATT) was rejected in the Revised Outline Business Case on the grounds that it lacked a UK track record whereas a company (Plasco) that expressed an interest claims that they felt that the NCC only wanted an incinerator right from the start so that they never bothered to bid. Plasco claims that their charges to the NCC would be less than half those from Cory-Wheelabrator’s incinerator.
The second alternative technology (MBT/AD) was considered in the Outline Business Case (OBC) of April 2008 and chosen as the preferred option over and above an incinerator. But less than a year later, in February 2009, it was said by the Revised OBC to be more expensive than an incinerator (see section 9 of the main report).
According to the NCC, the sticking point arising from the MBT/AD process is the compost-like output (CLO) which is produced. CLO is used as low-grade compost in France, Italy and Spain, but in the UK the current regulations preclude the use of CLO from mixed waste sources for any agricultural land. The important phrase here is mixed waste sources – my understanding is that if the waste (and particularly food waste) is collected separately (as is now happening in Norwich), then the CLO would be usable as compost.
But even with CLO going to landfill, the MBT/AD process would meet the landfill targets. Furthermore, the MBT/AD process provides more flexibility in the system, a point emphasised by the Environment Agency in a 2009 report.
What should happen now...
The NCC should immediately cancel the incinerator and switch to either a MBT/AD or plasma gasification plant.To put pressure on the Council, the Treasury should withdraw the PFI credit for the incinerator. This would make it unprofitable. The Chancellor, George Osborne, is reported to have signed a petition against an incinerator in his constituency in Cheshire saying that it posed a threat to the environment and people’s quality of life (Independent, 28 December 2010). In addition, when in opposition, he said that; “Labour’s PFI model is flawed and must be replaced” (see section 5).
These are two good reasons for withdrawing the PFI grant; and cancelling the PFI grant would mean the end of the incinerator planned for King’s Lynn. MAIN REPORT
1. The plans for an incinerator at King’s Lynn.
The focus of this report is on the incinerator plant proposed for King’s Lynn by the Norfolk County Council. The King’s Lynn plant has been one of two waste treatment plants planned for Norfolk. These two plants are referred to as Contract A and Contract B in the Revised Outline Business Case of February 2009 for the King’s Lynn plant (Revised OBC Feb. 2009, 53). I return to these two Contracts in section 4 but first a few words about the Norfolk County Council and its waste and about the landfill tax payable on Biodegradable Municipal Waste (BMW) going to landfills.
Norfolk County Council is the Waste Disposal Authority (WDA) for the seven Waste Collection Authorities of the County of Norfolk (Revised OBC, Feb, 2009, 5). The seven are Breckland Council, Broadland District, Great Yarmouth Borough Council, King’s Lynn and West Norfolk Borough Council, North Norfolk District Council, Norwich City Council and South Norfolk Council.
The focus of this report is on Municipal Solid Waste or MSW even though it is less than 30% of the total waste in the County. Much larger amounts are produced by businesses (through construction, demolition and mineral extraction (NCC Oct. 2010, 5). Over 90% of MSW is household waste (Revised OBC, Feb. 2009, 13). In 2010/11, MSW in Norfolk was expected to be about 395k tonnes compared to 988k tonnes of Commercial and Industrial (C&I) waste and 105k tonnes of waste imported from London (NCC, Oct 2010, 102). Of this total of 1,488k tonnes, about 798k tonnes went into landfill in the County (NCC Oct 2010, 103). All imported London waste is assumed to be landfilled (NCC Oct 2010, 104), but presumably this is inert waste and presumably Norfolk does not incur any costs for it.
2. Landfill tax and the LATS
Putting waste into landfills has become increasingly expensive for the County Council. In 2009/10, Norfolk’s waste recycling percentage was 43.5% and expected to rise to 47% in 2011/12 when kitchen waste collection services (for composting/Anerobic Digestion) are expected to be expanded by the district councils (NCC Oct. 2010, 103). This means that at present (end-2010) something like 200k tonnes of active (biodegradable) municipal waste is being landfilled in the County. The NCC has four strategic landfill sites (Revised OBC Feb 2009, 11) and 150 closed landfill sites. Three of the four sites are reported to be active – these are at Aldeby, Blackborough End and Edgefield (LetsRecycle.com website 24 Jan 2008, 2 – accessed in October 2010). In its Waste Strategy, the Council states that “current permitted non-hazardous landfill sites are likely to be sufficient to provide capacity until the end of 2023/2024” (NCC, Oct 2010, 6). The boundaries of the Waste Collection Authorities, the location of contracts A and B and the location of the active landfill sites are shown in the map on page 9 of NCC March 2006 (CD)
The landfill sites at Aldeby and Blackborough End are operated by Waste Recycling Group (WRG) and the one at Edgefield is operated by NEWS (NCC March 2006 (A), Appendix 1, 15). In the current financial year (2010/2011), the tax levied by the UK government on active (BMW) waste going into landfill sites is £48 per tonne (plus VAT). The tax on inert waste is £2.50 per tonne (plus VAT). The UK government announced in the Budget of 2010 that the tax on active waste is due to rise by £8 per tonne every year so that in 2013/14 the tax per tonne will be £72 (Defra.gov.uk website accessed on December 1 2010). In addition to these taxes, the NCC pays a fee (a ‘gate fee’) to the contractors for operating the landfill site. In 2007 the average gate fee for landfill sites in the UK was £21 per tonne (WRAP 2008)
It is clear that getting rid of rubbish is expensive. The waste management cost has risen from £21 mn in 2000/01 to £26 mn in 2004/05 (NCC March 2006 (CD)) to £27.9 mn in 2008/09 and to a budgeted figure of £36.5 mn in 2010/11 (NCC 2009, appendix 6). This rise in cost of 50% over 10 years is much faster than the rate of inflation in general and is due primarily to the landfill tax.
A landfill tax was first levied by the UK government in 1996, a little before a Directive from the European Union issued in 1999. This Directive was intended to be translated into domestic legislation by July 2001 (Defra website accessed on Dec.1 2010). In fact the Directive was not implemented in England and Wales until the middle of 2002. The Directive set demanding targets to reduce the amount of active (biodegradable municipal) waste going to landfills. The targets set were;
- By 2010 to reduce BMW landfilled to 75% of that produced in 1995
- By 2013 to reduce BMW landfilled to 50% of that produced in 1995
- By 2020 to reduce BMW landfilled to 35% of that produced in 1995
A landfill tax was first imposed in the UK in 1996 by John Gummer, the Conservative Secretary of State for the Environment. But it is in recent years that the tax has been increased sharply. In 2006/07 the tax was £21 per tonne on active waste and £2 per tonne on inert waste. The following year the tax on active waste was increased to £24 per tonne and in the 2007 Budget it was announced that it would increase by £8 per tonne in 2008, 2009 and 2010 so that by 2010/11 the tax would be £48 per tonne (ukbudget.co.uk website 2007 accessed on 4 Dec 2010).
The sharp increase in the landfill tax followed the EU Directive. In addition, in April 2005, the UK government also introduced a Landfill Allowance Trading Scheme (LATS). Under this Scheme, local authorities were allocated a landfill allowance for BMW so as to meet the national targets under the Landfill Directive. However if an authority is using less than their allowance they can sell or bank them into the following year. Authorities can also borrow forward or buy allowances. But if any authority runs out of allowances it is penalised to the tune of £150 per tonne (LATS 2005 1, 4).
Defra has provided an electronic calculator called M-BEAM (Mass Balance Estimator and Allowance Manager) to help local authorities make their trading and allowance decisions.
So we have a tax levied on each local authority for active waste going to landfills plus allowances set for each local authority with local authorities liable to penalties for exceeding their allowances. According to a review of the LATS, it is the tax which has been the driving force behind reducing the BMW going to landfill (Defra Sept. 2010, para 3.3)
Norfolk’s LATS allocation in 2005/06 was 236k tonnes compared to an actual BMW tonnage of 171k tonnes (total MSW in 2005/06 was 428k tonnes). However the LATS allocation to Norfolk was scheduled to decline to 148k tonnes in 2010/11 and to 78k tonnes in 2019/20 (NCC March 2006 (A), 31 and 44).
3. Avoiding landfill tax – reduction in waste, recycling or incinerating?
It is clear that there is an incentive for local authorities to reduce the volume of BMW going to landfill so as to reduce the landfill tax payable. They can do this by one of three ways - reducing the amount of waste, by increasing recycling of the waste and by treating the waste (eg by incineration).
The volume of MSW has been declining in recent years. The figures for England, the Eastern Region and Norfolk are shown below.
It is clear that the volume of waste has been falling in England and the East since 2006/07 but in Norfolk the total has been dropping since 2001/02. It is clear that the figures need to be related to population changes but it is also clear that the amount of waste per head is considerably lower in some local authority areas. In its statistics, Defra identifies ten councils which had a waste collection per head of between 284 and 306 kg per head in 2009/10 (Defra website). This compares with a waste per head figure for Norfolk in the same year of 474 kg (calculated from 404k tonnes of MSW and a population of 853.4k - Norfolk Insight website).
A second obvious way in which the amount going to landfill can be reduced is by recycling. The NCC owns or leases 19 household Waste Recycling Centres and Norfolk is claimed to be the fourth best county in the country for recycling dry materials like glass, paper and cardboard (Revised OBC, Feb 2009,16). As stated above, Norfolk’s household waste recycling rate was 43.5% in 2009/10. This compares with just over 20 per cent in 2004/05 (NCC March 2006 (A), 20).
Some people might think that Norfolk has gone as far as it can but this is far from the case. In 2009/10 the top ten local authorities in the UK achieved rates of between 55% and 62% for the reuse/recycling/composting of household waste (Defra website).
Furthermore it needs to be noted that even the best of the local authorities in the UK do not have a particularly good record compared to a number of other European countries. In 2007, the recycling/composting rate in Germany was 64%, in Belgium 62% and in the Netherlands 60% (letsrecycle.com website – accessed on November 16 2010).
It is clear that Norfolk could and should be able to achieve a much higher recycling rate and there may be scope for reducing the amount of waste if the political will was there. I return to these points later.
4. Back to Contracts A and B
As the map above shows, Contract A was for a residual waste treatment plant to be located at Costessey, a few miles west of Norwich. This project reached the final stages of a contract (see Revised OBC, Feb.2009, 27) but the contract never went through because the landowner refused to sell the land for the project after being alerted about the polluting effects of an incinerator. The Council then switched to a Mechanical Biological Treatment (MBT) plant of 150,000 tonnes annual capacity. The facility would use a mechanical-sorting technology to remove recyclable materials like metal, before biodegradable material undergoes a “dry anaerobic digestion” process and subsequent aerobic digesting phase to produce a stabilised organic ‘compost-like’ material (Lets Recycle, 24 Jan 2008, website – accessed on Oct 27, 2010).
Planning permission for the switched Contract A was awarded in October 2007 and David Beadle, managing director of Norfolk Environmental Waste Services (NEWS) stated that “We firmly believe that MBT is the most effective, viable and environmentally friendly way to deal with Norfolk’s waste. This project represents a huge opportunity to be at the forefront of waste management in Europe” (Lets Recycle 24 January 2008 website). The MBT plant was apparently abandoned because of rising costs and NEWS was reportedly merged with the Council’s services company (NORSE). NEWS was reported to have made a loss of £173k in the year of the MBT bid partly because of the £435k cost of bidding for Contract A (Lets Recycle 24 January 2008 website).
And so it seems Contract A has died a death.
This leaves the Council with Contract B. Contract B is for an incinerator to be built at Saddlebow, King’s Lynn. The project is described in Norfolk County Council’s Big Conversation as “a state-of-the-art power and recycling plant on the Saddlebow industrial estate in King’s Lynn that will burn left over waste and produce cheap electricity and more materials that can then be recycled” (NCC (BC), 2010). The proposed incinerator will be a Combined Heat and Power (CHP) incinerator next to a gas power station and a newsprint paper mill (Revised OBC, Feb 2009, 23) (see the plan below).
The gas-fired power station already exists and planning permission was obtained for the paper mill in December 2007. Production at the paper mill was to commence in September 2009 (Revised OBC, Feb 2009, 23).
(This map is from page 54 of Revised OBC, Feb 2009)
It is proposed that the incinerator will be a Private Finance Initiative (PFI) project so an explanation of PFI is needed.
5. PFI – a short guide
What is PFI? Essentially the PFI is a scheme where an asset is financed by the private sector. In the case of schools and hospitals, they are then rented to the education authority or NHS. In the case of waste treatment, the company financing the plant charges the local authority for each tonne of waste processed. This is called a unitary charge.
A good example of a PFI project is the Norfolk and Norwich University Hospital (NNUH). The NNUH was built between 1998 and the end of 2001 at Colney, a few miles west of Norwich. The hospital was financed by a company called Octagon Healthcare. This is a so-called Special Purpose Vehicle since separate companies are set up exclusively for PFI projects. The hospital is rented to the Hospital Trust (and therefore the NHS) under a contract which extends to the year 2037.
PFI should perhaps stand for Profits For Investors since the profits to the companies involved have been immense. Most of the money for the NNUH was raised by Octagon Healthcare through fixed interest loans with very little money coming from the shareholders. By the end of 1998, the shareholders of Octagon Healthcare had invested as little as £1.325 million. And yet in the year ending 31 December 2003, dividends paid to these investors totalled £11 million, more than eight times the capital invested. And there were still profits to come from the remaining 30-plus years of the contract.
Why the high profits? Has the private sector been so much more efficient than the public sector would have been? Doubtful, because the hospital would probably have been built by a private sector company even if financed by the public sector. So the difference is the form of finance.
This has the effect of doubling the cost since the cost of capital to the private sector is double that of the public sector. Why? Partly because the private sector has to pay a higher rate for fixed interest debt but also because of the high rate of profit accruing to the equity shareholders of the company. The latter is illustrated by looking at Innisfree Limited, a shareholder in Octagon Healthcare and a company heavily involved in numerous other PFI contracts. The annual rate of return on the funds of shareholders in Innisfree Limited over the ten years between 1998 and 2008 was more than 200%!! (see Edwards June 2009, 73).
The very high rate of return to equity shareholders on PFI contracts means that the private cost of capital has been about double that of the public sector. This means that hospitals built through PFI contracts have been at least twice as expensive as they would have been had they been financed through the public sector. Thus the rent paid by the Hospital Trust to Octagon Healthcare is about £30 million a year. This is almost three times what it would have been had the hospital been financed by the public sector.
But if I am right about the higher cost, why has PFI been so widely used in the UK? How did this come about? Why were the Blair/Brown governments so keen on PFI that now over 650 PFI contracts have been signed and the amount due to be paid on them by the public sector amounts to more than £267 billion (Monbiot, Guardian Nov. 23, 2010)? Quite simply the Labour Governments wanted to keep the investments in hospitals and other bits of infrastructure off the government’s balance sheet.
Why did it want to do this? Because Gordon Brown as Chancellor had set a target of public debt to national income of 40% - very much lower than the debt/income percentages of France, Germany, USA and Japan.
In an interview in November 2009, George Osborne, the then Shadow Chancellor had sought to distance his party from the excesses of PFI by blaming the Labour Government for its misuse. He said that; “Labour’s PFI model is flawed and must be replaced. We need a system that doesn’t pretend that risks have been transferred to the private sector when they can’t be… “ (The Observer, 15 November 2009). Six months later, in May 2010, George Osborne announced that the role of the new Office for Budget Responsibility will include examining the cost of outstanding PFI deals.
In the meantime, PFI continues to be the form of finance proposed for the incinerator at King’s Lynn.
6. PFI and the incinerator – stages to the present. Not only is the Government making PFI allowable for waste treatment plants but it is also providing subsidies to local authorities to make PFI more attractive. The subsidy is in the form of a PFI credit. By contrast, public sector finance in the form of a loan from the Public Works Loan Board is available only for small, low risk assets (such as Land and Household waste recycling centres) and for assets of less than £20 million (4ps August 2008, 1).
This is in spite of the fact that the rates on PWLB loans are only about 0.1% to 0.3% above the rate at which the government can itself borrow in the bond markets (4ps August 2008, 6). This means that such loans are half as expensive as private sector capital provided through the PFI.
Thus whereas loans from the public sector carry an interest rate of a little under 5% a year, the cost of capital on PFI loans is invariably more than 10% a year. The proposed incinerator provides evidence of this. The two short-listed bidders for the King’s Lynn incinerator were Cory-Wheelabrator and Amey-Cespa and the post-tax cost of capital for both their bids was between 10% and 11% a year (NCC, November 2 2010, A80 and A120). In spite of this, the Government guidance states that “.. private finance is viewed as likely to be the most appropriate method of funding for large residual waste infrastructure …” (4ps August 2008, 7)
In 2007, the Treasury allocated the Department of Environment, Food and Rural Affairs (Defra) £2 billion for PFI credits (Defra October 2009, 5). These have been administered in four rounds. However in October 2010 (as part of the Spending Review) PFI credits were withdrawn from seven projects (Defra website). Defra stated that “We have concluded that we must withdraw the provisional allocation of credits from seven projects, on the basis that, on reasonable assumptions, these projects will no longer be needed in order to meet the 2020 landfill diversion targets set by the European Union” (Defra website, 20 Oct 2010).
Norfolk was not among these seven and continues to retain its provisional allocation of PFI credit for the King’s Lynn incinerator. The PFI credit on offer to Norfolk is a grant of £6.794 mn a year over the 25 years of the likely contract. This totals £169 million. It is often said that the PFI credit is worth £91 million. This is arrived at by discounting the £6.794 million for each year at a rate of interest of 5.5% pa. Presumably this (5.5%) is judged to be a little above the rate at which the government itself can borrow. PFI credits are awarded to authorities primarily to deliver increased diversion of biodegradable municipal waste (BMW) from landfill and preferential consideration is given to capital projects which focus on residual treatment plant only, including, but not limited to, Energy from Waste, Mechanical Biological Treatments and Anaerobic Digestion (Defra, August 2007, 2,3).
The Friends of the Earth document on PFI (FoE August 2008) states that; “PFIs are complex as every last detail has to be worked out at the start of the process so that the contract can be produced. As a result, using PFI to finance a waste infrastructure project adds about two years to the timescale. This time allows for the following steps to be taken”. FoE then details a number of stages.
These, with the dates applicable to the King’s Lynn incinerator, are;
Expression of Interest (EoI) (submitted to Defra by the Local Authority) (An EoI for contract B was submitted to Defra in July 2004 and in September 2004, Defra invited the County Council to develop an Outline Business Case (OBC) for PFI support. However in February 2005, it was decided that progress to an Outline Business Case should be delayed until there was increased certainty about Contract A (Revised OBC Feb. 2009, 26). The second EoI was submitted in 2007 as part of Defra’s PFI Award Round Three (Revised OBC Feb 2009 37).
Outline Business Case (OBC) (submitted to Defra by the Local Authority) (completed in February 2009; much of my analysis in this report is derived from the Revised OBC. The appendices of the Revised OBC have been made available to the public after some delay and in response to a Freedom of Information request. They were initially withheld on the grounds of ‘commercial confidentiality’ and even now some of the information in the appendices is blacked out.
An invitation to tender published in the Official Journal of the European Union (OJEU).
A tendering process followed by the selection of the preferred bidder (completed in November 2010). The NCC met with 16 firms in December 2005 and January 2006 to test the level of interest in contract B. A further round of soft market testing was held in November and December 2007 with 12 companies (LetRecycle.com website 10 March 2008). In 2009, four companies were shortlisted by the Council (NCC, 2 November 2010, 3). In April 2010, two shortlisted bidders were approved, namely AmeyCespa and Cory Wheelabrator (NCC 2 Nov. 2010, 3). The meeting of the Cabinet at the Council to select the preferred bidder was held on November 8, 2010. The preferred bidder is a joint venture between Cory Environmental Management Limited (CEML) and Wheelabrator Technologies Inc. (WTI). Each will have a 50% share in the Special Purpose Vehicle, Norfolk Resource Recovery Limited (NCC 2 Nov 2010, A121)
The Awarding of the Final Contract (to be completed by NCC)
The Final Business Case (FBC) (submitted to Defra by the Local Authority) (to be completed by the NCC)
It is worth noting that Norfolk County Council (as owner of NEWS) decided that it would not bid for Contract B – either alone or as part of a consortium. This followed concerns from Defra that a local authority-owned company would not allow commercial risk to be transferred (LetsRecycyle website; 24 Jan 2008). In February 2008, NEWS was transferred to Norse (a joint holding company involving NPS Property Services Ltd, Norfolk County Services Ltd., and subsidiary companies (Revised OBC Feb 2009, 12)
Following the selection of the bidder, the next stage will be the award of the contract to the preferred bidder. The Council aims to complete this contract award in March 2011 (NCC, 2 Nov 2010, 4). The Council is eager to get the financial close by April 2011 since, apparently, Defra has warned the Council that it might lose the PFI credit if it failed to deliver financial close by April 2011.
The timescale for the Cory-Wheelabrator option proposes a decision being made by the NCC’s Planning Committee in October 2011 followed by a four month period to provide for Judicial Review and the discharge of planning conditions. This would allow site work to start in February 2012. This is described as a tight but achievable timescale for planning condition discharge (NCC 2 Nov 2010, A106). The bid offers an option of providing an interim service of incineration through the Cory-owned plant at Riverside in southeast London. I understand that the plant is nearing completion. The service would be provided between April 2011 and March 2015 for 151k tonnes in total at £128.50 per tonne (indexed to the Retail Price index) (NCC, 2 Nov 2010, A119).
7. The PFI incinerator – and profits to Cory-Wheelabrator.
In the Revised Outline Business Case of February 2009, the capital cost of the Cory-Wheelabrator incinerator was estimated at £127 mn for a contract capacity of up to 155k tonnes a year (Revised OBC, Feb 2009, 5 and 61). By 2010, the capacity had changed to 168k tonnes of contract capacity plus another 100k of third party waste, with the capital cost being raised to £150 mn (NCC 2 Nov 2010, A85). The bottom ash from the incinerator would be transported by lorries to the south side of the site where it would be processed by Ballast Phoenix. Cory-Wheelabrator states that Ballast Phoenix would guarantee 98% recycling of the bottom ash (NCC 2 Nov 2010, A 86).
Some details of the anticipated financing of the incinerator were given in Appendix K of the Revised OBC. That appendix states that the finance will be provided by 85% of ‘senior’ fixed interest debt and by 15% of ‘blended equity’ (‘subordinated’ debt and equity or profit-sharing capital). This is a very high gearing of fixed interest to total capital and quite typical of PFI projects. As we shall see, this high gearing means that the project will be very profitable indeed to the profit-sharing shareholders of Cory and Wheelabrator.
Appendix K of the Revised OBC stated that the “unitary charge is set so that the SPV achieves a blended pre-tax equity IRR of 15%” (page 180, Revised OBC February 2009). SPV is the acronym for Special Purpose Vehicle, the company set up for the PFI project and IRR stands for Internal Rate of Return. The unitary charge is the charge to the Council for each tonne of waste processed. In the Revised OBC this was given as £95 per tonne in one of the many spreadsheets of Appendix K1.
In fact my estimate of the rate of profit is very much higher than 15% per year. My estimate is as follows;
the operating costs of the facility are said to be £11.8 mn per year in appendix K of the Revised OBC of Feb 2009 (calculated from the details on page 177 of the Revised OBC). These costs apply to the capacity of 155k tonnes set out in the Revised OBC. In fact the latest capacity is for 268k tonnes but the operating costs are given as £12 mn a year (NCC 2 Nov 2010, A85). To this we need to add landfill costs of about £3 mn per year (estimated from Appendix K1 of the Revised OBC)
the major source of revenue to the incinerator will be the payment from the Norfolk County Council for the processing of the waste. In the Revised OBC, this was given as £95 per tonne but in more recent documents it is given as an annual average of £23.5 mn over the 25 year life of the project (NCC 2 Nov 2010, A119) which, for 168k tonnes, is equivalent to £140 per tonne. In addition, there will be income from the 100k tonnes of third party waste and the plant is described as being capable of exporting about 20.4 MW of electricity to the grid when operating in ‘power only’ mode (that is not in Combined Heat and Power Mode) (NCC 2 Nov 2010, A86). The average gate fee to the Council is about £140 a tonne. If the 100k tonnes of third party waste were to be processed at the same rate, the annual income from that source would be £14.0 mn. To this we need to add the revenue from electricity sales. This can be estimated at £3.7 mn a year (see Box 1 below for details).
Box 1 Estimated electricity sales from the incinerator.
The revenue to Cory-Wheelabrator from the sales of electricity is estimated as follows; 20.4 MW capacity * 365 (days in the year) * 24 (hours in the day) * 60% (assumed efficiency) = 107,000 MWH a year. The wholesale price of electricity in early December 2010 was averaging £60 per MWh (see Financial Times website of 1 Dec 2010 accessed on 7 Dec 2010) but the price assumed in appendix K of the Revised OBC was £35 per MWh (see page 178). 107 MWH at £35 per MWh gives a revenue of £3.7 mn a year. This estimate is likely to be on the low side, first because of the low efficiency (60%) assumed and second because of the low price (£35) assumed.the total operating costs are £15 mn per year. The total revenue is £41.2 mn. Thus the operating profit is £26.2 mn. This would represent a return on the £150 mn capital cost of about 19% a year.
However the return to equity shareholders would be very much higher because of the high financial gearing of the project. As stated above, 85% of the capital or about £128 mn will be financed by ‘senior’ debt. The interest rate on this is given in appendix K of the Revised OBC as 4.81% per year. Here, for simplicity, this is rounded up to 5% per year. The remaining 15% (or £22 mn) of the capital comes from ‘blended equity’ (debt which is subordinate to the senior debt plus equity or profit-sharing capital.
The figures are summarised in Table 2 below.
The annual profit is shown to be £17.2 mn per year on capital of £22 mn. This is a rate of 78% per year.
Admittedly the rate of profit may be less than this once the interest on the construction period is deducted. However it is likely to be much higher than the 15% per year estimated in the Revised OBC.
Certainly the rate of return to pure profit-sharing capital is likely to be enormous. In Appendix K1 of the Revised OBC, the dividends to pure equity capital were estimated to total £56 mn (over 25 years) on an equity investment of £165,000 (a little over 0.1% of the total capital). So (according to Appendix K1 of the Revised OBC) we have the equity shareholders receiving £56 mn in dividends over the next 25 years. This is more than than 300 times the capital put in. With a return to profit-sharing capital of this magnitude, PFI might be said to stand for Profits From Incineration.
Because of the high profits, Cory and Wheelabrator shareholders will doubtless both be pleased if the project goes ahead. But they are also likely to be pleased for other reasons.
In Cory’s case, the reason is that it took 15 years for them to get planning consent for their incinerator at Riverside in southeast London. The 585k tonne a year incinerator plant is reportedly due for completion at the end of this year (2010). The plant will be operated by Cory (LetsRecycle.com website 14 January 2008 accessed on Dec 2 2010). This is described as one of the longest and most high profile planning processes for any waste project in the UK (Cory website – accessed on 2 Dec 2010)
Wheelabrator is a US-based company being a subsidiary of Waste Management Inc. which was formed in 1968. Wheelabrator will be pleased to get the project completed because the market for incinerator plants in the USA has been slow in recent years. Wheelabrator operates 16 plants in the USA, but the market is reported to have dried up.
The most rapid growth in the incineration industry in the US was in the 1980s. In 1980 the US was burning 1.8% of its solid waste but by 1990 that had grown to 15.2% in 1990 (Greenspun.com website (The Deadly Incinerator) accessed on 10 Nov 2010).
As a result of the slow market in the USA, Wheelabrator has been seeking new markets in China and the Pacific Rim (Greenspun.com website) and in 2009 it purchased a 40% stake in Shanghai Environment Group Co Ltd (Wikipedia website on Waste Management, Inc. accessed on 25 Nov 2010).
Waste Management Inc. has been the centre of a number of court actions in recent years. In 1987, it was accused by the US government of violating anti-trust laws. In 1998 it merged with USA Waste but since then has been involved in a case of fraud which took almost ten years to conclude. In 2007 it paid $457 mn to settle a shareholder class-action suit and the Securities and Exchange Commission (SEC) fined WM’s external auditor (Arthur Andersen) US$7 million for their role in the fraud (Wikipedia website). The LA Times reported in 2005 that “it had settled an accounting fraud suit against four former executives at Waste Management Inc., the world’s largest trash haulier, for US$30.87 million” (LATimes website, Aug 30 2005 accessed on 25 Nov 2010).
In January 2011, it was reported that the “Attorney General, Martha Coakley [of the state of Massachusetts] is investigating Wheelabrator Saugus, the waste incinerator responsible for burning trash from 15 North Shore cities and towns, for alleged environmental violations, including the discharge of hazardous chemicals into the air and water” (Boston Globe, January 4, 2011).
8. The PFI incinerator - gains to the Norfolk County Council?
It is clear that with the cancellation of the waste treatment plant at Costessey (‘Contract A’), the County Council was faced with a rising bill for landfill fees and especially landfill tax. The minutes of a meeting at the NCC on 2 Nov 2010 reported that the landfill tax paid by the Council costs £11 mn. and that this figure would rise by £1.8 mn a year until 2015 (NCC 2 Nov 2010, minutes, 3).
If the incinerator is not built, the County Council claims that it will lose something like £8 mn a year. How does this arise? Let’s look at the figures for the first planned year of operation for the incinerator, that is 2015/16.
In that year, the amount to be paid in a unitary charge to Cory-Wheelbrator for waste incineration is estimated as £22.0 mn. This compares with payments in the form of landfill tax and gate fees for 170k tonnes of £23.3 mn. Thus the savings to the Council in 2015/16 would be £1.3 mn. But in addition, the Council would receive £6.8 million from the PFI credit making a total saving of £8.1 mn (NCC 2 Nov 2010, A123).
This is why the PFI credit is so important to the project. If the project does not reach financial close in this financial year (2010/11), the PFI credit may be withdrawn. Without the credit, the gain is less than 6% of the cost, a small margin. In February 2009, the Outline Business Case built in an allowance for a rise in costs for the incinerator between the Final Business Case and financial close. The allowance was for 32% in capital costs and for 20% in operating costs (Revised OBC Feb 2009, 63, 64). This might seem adequate but PFI projects have a poor record for rising costs, particularly in the closing stages. As the National Audit Office put it in October 2009; “Value for money is most at risk during the final stages of negotiations, when negotiation is with a single preferred (or final) bidder and competitive tension is at its weakest” (NAO, October 2009, para 5.8).
Norfolk County Council has driven itself into a cul-de-sac since if it goes ahead it will continue to face immense opposition. But if it does not go ahead, it could be liable to pay up to £20.5 million in compensation to Cory-Wheelabrator (NCC 2 Nov 2010, A124). Breakage costs following planning failure are listed as bid development costs (£5.5 mn), bank arrangement fees (£4.8 mn), planning costs (£1.5 mn), sub-contractor breakage costs (£1 mn) and other financing costs which increase from £0.5 mn in May 2011 to £8.5 mn in September 2012. In total these costs increase from £12.8 mn in April 2011 to £21.3 mn in September 2012 and compensation for them is capped at £20.5 mn (NCC, 2 Nov 2010, A116)
PFI projects are not cheap and they do not come cheap. They are always surrounded by a swarm of highly paid accountants, lawyers, etc. Even the County Council, since 2004, has had a team of advisers supporting this project. These include Sharp Pritchard (legal), Ernst and Young (financial), Enviros (technical), March (insurance) and Mott MacDonald (planning). The current estimated cost of internal and external support to the procurement is £2.5 mn. (Revised OBC, Feb 2009, 49, 50, 56).
9. What are the alternatives (if any) to an incinerator?
The first and most civilised alternative is to reduce the amount of MSW going to landfill sites. This is best done by a dual ‘reduce/raise’ policy.
The ‘reduce’ refers to taking steps to reduce the MSW in the County. The present waste per head in the county is 474 kg. If this were reduced to match the top ten local authorities in the UK it would be 300 kg per head. This would be equivalent to a total MSW of 258k tonnes instead of the present (2009/10) 404k tonnes.
The ‘raise’ refers to the recycling/composting rate. At present the Norfolk County Council achieves a rate of 43.5%. If this could be raised to match the best of the local authorities in the UK, it would be 60%.
Combining these, the MSW going to landfill would be reduced to 103k tonnes. This compares with landfill allowances for Norfolk of 148k tonnes in 2010/11 and 78k tonnes in 2019/20. Such a combination would meet the landfill allowance (of about 113k tonnes) in about 2015 but not in the later years.
Such a policy would be in stark contrast to the assumptions set out in the Revised Outline Business Case. In that, the total MSW was assumed to rise at roughly 1% a year over the next 30 years and the recycling rate was assumed to rise to 55% by 2020 (Revised OBC Feb 2009, 14, 22). The combined effect would be that 214k tonnes would go to landfill in 2019/20 more than double that of the reduce/raise policy.
A major problem of going ahead with the incinerator project is that it is a disincentive to achieving lower waste and higher recycling targets since waste will be needed to feed the incinerator. In March 2010, East Sussex County Council refuted suggestions from Lewes Liberal Democrats that its current recycling credits scheme is limiting the amount of waste that can be recycled in the county in order to ensure enough material for the energy-from-waste facility at Newhaven (Letsrecycle.com website 19 March 2010 accessed on 4 Dec 2010)
Similarly an article in the Independent on Sunday (1 August 2010) reported that in Hampshire, where Veolia operates three incinerator plants, a shortage of municipal waste has already led the company to vary the plant’s planning conditions to allow them to process more commercial waste and, potentially, import waste from outside the County. Only one of the county’s 14 local authorities recycles food waste – the rest is incinerated.
The same Independent article reported that that there is overcapacity of incinerator plants in Germany and the Netherlands.
It is not surprising that there are warnings that having an incinerator in an area can discourage the reduction of waste and the recycling of waste. An illustration of this is a tale of two Edmontons reported in an article by Greenpeace in 2001. The recycling rate in Edmonton, Canada (where there is no incinerator) was reported to be 70% whereas in the London Borough of Enfield (home at Edmonton, to the (then) biggest incinerator in England, the recycling rate was a mere 6%. Greenpeace added that the recycling rate in Sheffield (which has the worst incinerator in England) is even lower – at less than 5% (Greenpeace 2001, 5)
Clearly then a second alternative to an incinerator (but much less desirable than the reduce/raise policy) is to export some of the waste to other counties.
A third alternative is to use a different technology. There are a number of contenders and many are looked at in the Outline Business Case. The two closest options seem to be Advanced Thermal Treatment (ATT) (gasification and pyrolysis) and Mechanical Biological Treatment together with Anaerobic Digestion (MBT/AD). These options were looked at on pages 30 to 33 of the Revised OBC.
The conclusion of the Revised OBC was that “…ATT may not be the optimum solution for Norfolk given its lack of UK track record and the apparent unwillingness of funders to invest in such technologies” (Feb 2009, 33).
A further conclusion was that; “Despite the public perception implication of an EfW solution, such technologies continue to achieve planning consents and are demonstrated to work both operationally and commercially in the UK. As such, an EfW solution is a viable one to be considered for Norfolk provided planning risks can be adequately mitigated” (Revised OBC Feb 2009, 34)
About MBT/AD, the Revised Outline Business Case stated that; “The risk assessment demonstrates that an MBT solution with an AD facility does offer a feasible solution for Norfolk given the potential for energy recovery. In terms of deliverability risk it should be assumed that the CLO [Compost-Like Output] is sent to landfill due to the lack of apparent end market at this time; however the solution would still benefit from energy recovery through the process and reduced biodegradability of the landfilled material” (Revised OBC Feb 2009 34)
And so the most attractive choice was seen to be between the EfW (Incinerator) and the MBT/AD process. On this basis the Revised Outline Business Case did a cost comparison of the two. The figures are as set out in table 3 below.
This is the conclusion of the Revised Outline Business Case of February 2009. However it is important to note that in the Outline Business Case produced only ten months earlier (in April 2008), very different conclusions were reached. In that OBC, the preferred option was a MBT/AD plant. It was seen to be cheaper than an incinerator (EfW) and was best in terms of global warming (see OBC, April 2008, 6). The costs as set out in the OBC are set out in Table 4 below.
If we compare tables 3 and 4, we find that the capital costs of the EfW have been reduced by £18 mn between the OBC of April 2008 to the Revised OBC of February 2009 and they have been reduced by £13 mn for the MBT/AD option. Furthermore whereas between the OBC and the Revised OBC the revenue for the EFW has been reduced by £8 mn, that for the MBT/AD hs been reduced by £32 mn. The major change is in the landfill costs. In the OBC, the landfill costs for the MBT/AD were only greater if none of the Compost-Like-Output (CLO) was marketed. In the Revised OBC, this is the assumption that is made with all CLO going to landfill at a cost of £137 mn (up by £34 mn on the OBC estimate). Almost half of the landfill costs consist of an active landfill tax payable (see Appendix E1 of the Revised OBC) even though it is likely that the CLO would not be subject to such a tax.
It is clear that a controversial aspect of the MBT/AD process is the compost-like output (CLO) which is produced. In 2004, waste treated CLO via MBT was sent to landfill in Austria, to incineration in Germany and was used as a low grade compost in France, Italy and Spain. In the UK the current regulatory position precludes the use of CLO from mixed waste sources for any agricultural land (Env. Agency 2009, v).
However when food waste is collected and processed separately (that is, no longer from mixed waste sources), the resultant output can be sold on for agricultural use. A further, less desirable option is to mix CLO with higher calorific value waste and burn it.
But even if this is not the case and even if all the CLO goes to landfill, the MBT/AD process would be LATS-compliant. Furthermore the MBT/AD process would provide more flexibility than the EfW plant, a point made by the Environment Agency when it stated that “MBT is a key element in national strategies for the diversion of BMW from landfill and that, unlike incineration, it provides flexibility in the system, which is important in those member countries where the system will have to undergo widespread changes in the amount and quality of residual waste that is dealt with” (Env. Agency 2009, iv).
Given this advantage and given its higher recycling rate for metals (Revised OBC Feb 2009, 38), it is perhaps surprising that the Norfolk County Council changed its preference over ten months between the OBC and the Revised OBC and switched to the EfW (incinerator) from the MBT/AD process.
Presumably the reason for this is the lack of a market for the CLO from the MBT/AD process, but it is worth noting that in the OBC, it was stated that “…. should an end market for CLO not be realised, the solution would still benefit from energy recovery through the process and reduced biodegradability of the landfilled material” (OBC, April 2008, 33).
It seems that the County Council changed to the option, the incinerator, because it was more simple with clearer costings. However, the simplicity may prove to be illusory and expensive if it is blocked at the planning stage.
10. Conclusions; the crazy present system.
The conclusion of this report is that policies on waste collection and disposal in this country badly need rethinking.
It is a crazy system when there is a financial deterrent to landfill disposal in the form of a landfill tax imposed on the top tier (the Waste Disposal Authority, in this case, the Norfolk County Council) and yet there seem to have been few, if any, incentives for recycling for the second tier (the Waste Collection Authorities or WCAs), although it is true that, at last, the Norfolk County Council is now supporting local councils with a £72 per tonne incentive for kitchen waste collections (NCC, 2 Nov 2010, minutes, 2,3).
It is a crazy system when the Government is prepared to pay a local authority a grant – effectively a bribe – to adopt an incinerator which will be highly polluting, will make a lot of money for the private sector and which may well discourage recycling. In this context it is worth noting that the EfW solution would fail to meet recycling/compost targets in 2020 (OBC April 2008, 38).
It is a crazy system when no agency is doing a cost-effectiveness analysis to compare the all the costs of the different options. This cost comparison should include the following;
the costs of campaigns and research to reduce household and industrial waste and to promote recycling; the costs of transporting waste;
the cost of landfill in terms of handling and the effect on global warming through greenhouse gas emissions (carbon, methane, etc);
the cost of other pollution in the form of dioxins and tiny but dangerous particulate matter. For incinerator pollution, see Paul Connett’s talk in King’s Lynn November 15 2010, Greenpeace 2001, Greenspun.com website, Professor Vyvyan Howard’s website and numerous other sources.
This cost comparison is what Defra should be doing. It is crazy that the Norfolk County Council is being bribed through a PFI credit to select a waste disposal scheme which will be polluting and at the same time line the pockets of Cory-Wheelbrator shareholders.
What is the cost of that pollution? We don’t know for certain. But just give an idea, the health impact of man-made particulate air pollution experienced in the UK in 2007 was estimated to cost between £8 bn and £20 bn per year. This is thought to be an underestimate since it only took account of mortality and excluded morbidity (EAC 2009/10, 11). But using these figures gives a cost per head (for a UK population of 60 million) of between £130 and £350 per year, or an average of £240 per year. Even if the incinerator produced this average effect, and even if the population of West Norfolk directly affected by the incinerator was only 40,000, the cost of this pollution would amount to an average of £240 times 40,000 = £9.6 million per year. This is more than enough to counter the £8 mn. estimated gain to the Norfolk County Council.
This is the sort of calculation that a central body should be doing, not a retired academic. And having done such a calculation, Defra should be...
promoting financial incentives for recycling/composting; and,
promoting research on different waste treatment technologies It may be that these are underway. If they are, there is not much evidence of them in public. Instead what we have is a system where the Norfolk County Council is looking at a polluting incinerator from its own, narrow financial viewpoint. This is the craziness of the proposed incinerator at King’s Lynn.
REFERENCES
Defra August 2007; Criteria for securing waste PFI credits, Department for Environment, Food and Rural Affairs (Defra)
Defra October 2009, Waste Private Finance Initiative (PFI) – frequently asked questions (FAQs)
Defra Sept. 2010; Summary of responses to the consultation on meeting EU Landfill Diversion Targets in England; 18 March – 10 June 2010
EAC (Environmental Audit Committee), 2009/10; Air Quality, Fifth Report of Session 2009/10, H of Commons
Edwards C 2009; Private Gain, Public Loss; the Private Finance Initiative and the Norfolk and Norwich University Hospital.
Env. Agency 2009; Review of Current European Practice of MBT compost-like output use, Science Report, Environment Agency
FoE, August 2008; Private Finance Initiative (PFI) funding for waste infrastructure, Friends of the Earth.
4Ps August 2008; Waste Infrastructure Delivery Programme (WIDP)
Greenpeace 2001; Pollution and health impacts of waste incinerators
LATS 2005; A Beginners Guide to the Landfill Allowance Trading Scheme (LATS), Defra website
NAO October 2009; Private Finance Projects, a paper by the National Audit Office for the House of Lords Economic Affairs Committee
NCC March 2006 (CD); Joint Municipal Waste Management Strategy for Norfolk; Core Document(CD), Norfolk County Council
NCC March 2006, (A); Joint Municipal Waste Management Strategy for Norfolk; Appendices (A), Norfolk County Council
NCC 2009; 2010-13 Supplement to the County Council Plan 2008-11, Norfolk County Council, no date given but probably 2009
NCC, Oct. 2010; Norfolk Minerals and Waste Development Framework; Core Strategy and Minerals and Waste Development Management Policies Development Plan Document 2010-2026, Norfolk County Council, October
NCC (BG) 2010; Big Conversation, Consultation on Expenditure Cuts (undated, but probably September 2010)
NCC, Nov 2, 2010; Waste PFI contract – Preferred Bidder Appointment; report by the Director of Environment, Transport and Development (ETD) to the ETD Overview and Scrutiny Panel (item No 8 and Minutes)
NCC, Nov 30, 2010; Waste Disposal back on Cabinet Agenda, Norfolk County Council website accessed on 20 Jan 2011
OBC April 2008; Outline Business Case for PFI credits for Phase Two of the Residual Waste Treatment Project, Norfolk County Council, April 30
Revised OBC, Feb. 2009; Revised Outline Business Case for PFI credits for the Residual Waste Treatment Plant, Norfolk County Council, February 10, 2009
WRAP 2008; Comparing the cost of alternative waste treatment options, Waste and Resources Action Programme (WRAP)
. Chris Edwards is a Senior Fellow at the University of East Anglia. His email address is
. 585k tonnes means 585,000 tonnes. For brevity, throughout this report, k is used to signify a thousand
. A k in this report denotes a thousand and so 395k tonnes means 395,000 tonnes.
The annual rate at which the Government could borrow through long-term bonds averaged 4.8% between 2000 and 2008.
The cumulative discount factor (at 5.5% pa) over 25 years is 13.4 and 13.4 multiplied by 6.794 = 91
. However it was reported in October 2010 that a UK company (Advanced Plasma Power – APP) has formed a joint venture to dig up a giant landfill site in eastern Belgium and to recycle half the rubbish and convert the rest into electricity (Guardian 11 Oct 2010)