10.10.2013 21:51
Time Out:
For Waste to Energy in Europe
Europe has traditionally been the
largest Waste to Energy (WtE) technology market in the world.
A recent market survey has found that the Waste to Energy business in
Europe is currently taking a small break. The technology market will not be
able to continue its recent boom in the years to come and operators are facing
overcapacities. What does the future hold and could EU legislation help drive
the market again?
by Mark Döing
Europe has traditionally been the largest Waste to Energy (WtE) technology
market in the world. Even in the past five years, it accounted for nearly 60%
of the worldwide investments in WtE plants. Despite the Chinese capacity boom
and the large Japanese WtE asset, Asia only accounted for something more than
30% of these investments, while North America accounted for 9%. These were the
findings of ecoprog's market study 'Waste to Energy 2013/2014'.
In mid-2013, approximately 520 WtE plants were operational in Europe. They
were able to treat around 95 million tonnes of municipal solid waste (MSW) and
commercial waste per year. Over the past five years, the European WtE capacity
grew by an annual treatment capacity of 19 million tonnes (24%). In the same
period, 73 new WtE plants were commissioned, while only eight older facilities
were shut down. All in all, Europe saw a steady and strong growth of WtE
treatment capacities for more than 10 years.
Nevertheless, in the next five years this market will drop to 65 new plants
with a capacity of 15 million tonnes. Europe's WtE asset will continue to grow,
but the speed of this growth will slow down. Investments in new facilities are
forecast to decrease by 12%. After 2015/2016 especially, the European market
will take a break from the rapid growth of the recent years.
Landfill directive: The driving force
The major reason for both developments, boom and break, is the Landfill
Directive, which the European Union agreed upon in 1999. This regulation
specified a higher standard for landfill sites burying MSW. Many existing sites
were not able to meet these standards. The Directive thus led to the closure of
thousands of older landfills and dumpsites all over Europe.
Even more important, the Directive stipulated a time schedule for reducing
the amount of biodegradable waste being sent to landfill for each EU member
state. For example, the Netherlands was obliged to reduce the amount by weight
of biodegradable MSW by July 2006 to 75% of the 1995 figure. By 2009, this
percentage must have been reduced to 50% and by 2016 to 35% of the 1995 amount
by weight.
In fact, the Directive bans the landfilling of 'untreated' MSW – even if it
does not precisely say what exactly 'treatment' means. However, despite some
confusion, the Landfill Directive is still a unique piece of legislation in
which different countries have agreed to reduce or even ban the landfilling of
MSW. In doing so, it became an incredible market driver for both material
recycling and energy recovery.
The first WtE boom started in the early 2000s when the first waste
economies in Central Europe prepared to meet the EU standards in 2005. Among
these countries were Austria, the Netherlands and Germany, with the latter
being the largest economy in the EU. Ultimately, the landfilling of MSW has
more or less stopped completely in these countries.
As late as 2010/2011, however, the countries in Central Europe realised
that their installed treatment capacity would be insufficient to implement the
Landfill Directive in 2005. They thus planned, constructed and commissioned
additional plants.
Meanwhile, in Germany and the Netherlands particularly, too many WtE
facilities were constructed within this boom phase, which today is causing
overcapacities.
Other countries needed more time to implement the European legislation.
Northern Europe was the next region to introduce the Landfill Directive.
Finland, Norway (which is not an EU Member States but has agreed to adhere to
EU legislation), Ireland and the United Kingdom changed their national
legislation pushing forward material recycling and energy recovery.
These countries choose different instruments for adopting the legislation.
Some, such as the UK, introduced a landfill tax and thus increased the cost of
landfilling. Others, such as Germany, decided to put a complete ban on
landfilling MSW that had not been treated in a WtE facility or a mechanical
biological treatment (MBT) plant.
Southern Europe
Contrary to the initial plans, however, not all countries implemented the
guidelines of the European Union on time. In Southern Europe especially,
countries such as France, Spain, Italy and Greece, are still sending a
substantial portion of their MSW directly to landfill. These countries have
thus not yet evolved into major markets for WtE technology.
Besides a high proportion of landfilling, Spain, Italy and France are
currently also constructing a large number of MBT facilities. These countries
have a long tradition of composting household waste that is sometimes used as
the basis for some of the different MBT technologies being applied. It remains
unclear whether these countries will reach EU standards – or to what extent RDF
power plants will have to be constructed for the output of the MBT plants in
the long term.
Within the next few years, no essential investments can be expected in the
Southern European countries. The poor economic situation of the states
significantly hinders large new investments. Additionally, the EU has not
sufficiently increased its pressure to implement EU legislation. Should the EU
pile on the pressure in the coming years, new markets for the construction of
waste incineration facilities might emerge in these countries. So far, however,
there are no signs that indicate such a development.
Eastern Europe
Instead of Southern Europe, the first Eastern European member states that
had joined the EU in 2005 are developing their waste treatment infrastructure.
However, the situation varies significantly from country to country.
In Estonia and Lithuania, facilities are operational or under construction
with capacities that will likely saturate the small markets they will operate
in. Larger markets such as Poland and the Czech Republic have created the legal
preconditions for developing treatment capacities, or are in the middle of
doing so.
In Poland especially, several projects are at different stages of planning
or implementation and first tenders have been awarded in Poznan, Krakow and
Konin.
By contrast, the lack of pressure from the EU to implement the respective
legislation, combined with waste treatment fees that are often too low, is
preventing the construction of WtE plants in other Eastern European countries.
While they may apply for EU funds for the investment costs, these are far from
being enough to cover the operation costs of a plant.
The Big Picture
All in all, European WtE capacity is still growing. However, the new
markets in Eastern Europe will not be able to compensate the formerly strong
markets in Central and Northern Europe. Large parts of the comparatively
dynamic UK market have also already been awarded. Hence, when the UK market
also starts to become saturated, the construction of new plants in Europe will
slow down significantly.
Nevertheless, the European WtE market will bounce back. Despite the
currently slow development, Southern and Eastern Europe will have to implement
the EU Landfill Directive as every other country has. This results in a large
potential for the construction of new WtE facilities. Additionally, from 2020
on, more and more existing plants will be in need of modernisation.
Traditional markets such as Germany and Switzerland have already
transformed from construction markets into service and modernisation markets.
Thus, even though the European WtE construction market may take some time out,
its long-term perspective remains positive.
Operations & Export Markets
Unlike the technology market, the market for operating WtE plants has been
difficult in some countries over recent years. In Southern European countries
especially, the economic crisis since 2008 has led to decreasing volumes of
waste, particularly from commercial sources. However, due to long-term
contracts, often based on bring-or-pay agreements, the effects of this
development were moderate.
In other countries, such as Germany and the Netherlands, the WtE boom since
2009/2010 has resulted in large overcapacities. In both states, WtE operators
suffered from declining gate fees.
On the other hand, the current lack of waste treatment facilities in the UK
has led to an export boom that became a hope for WtE operators in the
Netherlands and, probably, in Germany as well. Since April 2013, the landfill
tax in the UK amounts to £72 per tonne of municipal waste. It was already
determined to increase to £80 in 2014 and a further increase is being discussed.
As there are no sufficient waste treatment facilities yet, it has become an
alternative to export pretreated waste. In 2010, UK waste and recycling firm
Shanks was granted the first approval to export processed municipal waste as
Refuse Derived Fuel (RDF) for disposal in other countries. In 2012, the volumes
exported from England and Wales increased to almost 900,000 tonnes.
The Dutch WtE market in particular benefits from the UK RDF exports. The 12
Dutch incineration plants utilised almost 700,000 tonnes (about 80%) of RDF
exported by the UK. In 2012, almost every Dutch plant acquired waste from the
UK.
One reason for the large export share of the Netherlands is its favourable
position in terms of logistics. The Netherlands is not only close to the UK,
but many Dutch plants are also located in or close to harbours, such as the
plants in Rozenburg and Wijster. As all UK exports have to be transported by
water, these locations are very advantageous.
Furthermore, compared to the other European states, the gate fees in the
Netherlands are low and in some cases amount to considerably less than €50 per
tonne. This price structure creates opportunities for exports even if their
transport costs are higher.
The most important reason for the low gate fees in the Netherlands is the
fact that there is still are overcapacities amounting to at least 1 million
tonnes per year - despite the shutdown of a plant in Rotterdam for capacity
reasons in 2010. Furthermore, the Dutch plants are very energy efficient in
comparison to the other European plants and revenues in the energy business are
thus high.
UK exports are also going to other countries such as Denmark, Germany or
Latvia. However, their market shares are low compared to the share of the
Netherlands.
It is uncertain to what extent these exports will develop. They will
probably increase further in the next two to three years. However, by 2017,
around 20 new WtE plants with a total capacity of around 4.6 million annual
tonnes will be commissioned in the UK. Additionally, MBT plants with capacities
amounting to 2.5 to 3 million annual tonnes will be developed – although it
should be noted that not all of the MBT plants can be considered to provide
capacities additional to incineration plants, as both can in some cases be used
in combination.
A recent report prepared by consultants, AMEC for the UK's Chartered
Institution of Wastes Management found that the UK exported almost 868,000
tonnes of RDF/SRF to Europe in 2012 Growth of imports of European WtE operators
UK waste management companies expect that sufficient capacities could be
realised by late 2017, and the maximum duration of many export contracts with
plants in the Netherlands amounts to around five years. In case of further
delays in municipal tenders in the UK, or technical problems of individual
projects, bottlenecks might last longer – to 2020 and beyond.
Survey Findings
In an industry barometer conducted by ecoprog together with the
Confederation of European Waste-to-Energy Plants (CEWEP), the European umbrella
association of WtE plant operators, in spring this year, 85% of the operators
stated that the amount of imported waste in their plants has not changed so
far.
It is questionable whether the exported amounts from England and Wales will
in the near future be large enough to increase the price level of gate fees in
countries such as Germany. After all, the increasing UK export amounts also
face the increasing import demands of countries such as Sweden and Germany,
where residual waste is declining due to increased material recycling - amongst
other reasons.
The Swedish operators especially aim at increasing imports to 1.6 million
tonnes annually following the construction by Norway, from where it had
traditionally sourced RDF, of its own waste to energy facilities.
Other incineration markets are currently booming particularly on the basis
of individual plants. Apart from the Dutch incineration plants, this holds true
for favourably located sites, for instance in Hamburg in Germany.
Mark Döing is general manager ecoprog, a German, a consultancy in the energy
and environmental technology sector.
For further information on the market survey 'Waste to Energy 2013/2014'
visit: www.ecoprog.com
