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The Jonas Blog : Too much or too little?

10th October 2015

One of the sad things about this great industry is that we cannot agree on some of the basic facts. This lack of clear and consistent information makes investments, generally needed from outside the industry, difficult to justify. When investors seek assurances on data assumptions, there isn’t any, there are only conflicting opinions. The result is that the investment goes elsewhere, somewhere they can agree the basic facts, and our industry loses out on vital investment.

The big question is, why? Why are views so different? Are we all incompetent? Or is there more to it?

Well the answer is yes, there’s more to it. It doesn’t just stem from a history of insufficient data, as is so often blamed in this field. What must be understood is that any forecast that attempts to predict whether we are heading for an over or under-capacity of residual material treatment is not based simply on how much residual combustible material there is and the existing infrastructure.

It’s calculated using a whole array of sensitivities, from how much material will arise from household, commercial and industrial sources, how well people and businesses will recycle, how we will add up all that recycling, what new recycling avenues will become available for currently non-recyclable material, what the composition of the material will be like, what new legislation will come in, the impact of a circular economy – and that’s before you consider which plants will get built and which ones will actually work. This flexible interpretation creates a disparity in opinions.

The good news is that if we take individual models and separate out the demand (combustible residual material) and supply (energy recovery capacity) we are able to cross-compare the various commentators’ models far more easily, rather than just looking at the end result. When you do this for supply forecasts for operational energy recovery plant capacity in 2020, they are not too dissimilar in capacity, so at least there is some agreement amongst the forecasts.

It seems the differences, then, lie with demand; how much material will arise, how much of it will be residual and then finally how much of that residual material will be combustible?

At Viridor we have looked at real data to assist in our understanding of how the market will shape up going forwards. Unlike some, we cannot expect residual combustible material levels to continue to fall at the same rate they did during 2008 and 2009 – that would suggest the UK is heading for a triple dip, chase-the-tail, down-the-well recession for the next five years. In fact, what we have seen is a plateauing out of the quantity of combustible material. Between 2012 and 2014 the combustible residual material market only fell by 4.0%, whilst between 2007 and 2009 the fall was 29.0%.

Whilst landfill inputs have continued to fall, the material itself hasn’t disappeared. There is a big difference between landfill input decline and landfill diversion and what we have seen over the last couple of years is predominately landfill diversion.

Here at Viridor we have studied our markets continuously, and over the years, as we grew so did the scope of our research. Now, as one of the top three recycling, resource and renewable energy business in the UK, our market research looks at the national, regional and local infrastructure. We have tracked and monitored over 200 energy recovery projects over the course of the last five years. For some, we’ve done this all the way through from proposal to operation, for each one considering and reconsidering development status, consents and permissions, management team, fuel supply contracts, financial backing and our own views.

It is Viridor’s conclusion that of these 200 or so projects, by the start of 2020 only 60 will have become fully operational. They will have a combined consented capacity of 15.5m tonnes and that’s before you consider actual throughput capabilities and annual availability.

This has led us to support the view that there is an undercapacity in infrastructure to treat residual combustible material produced within the UK.

We see there being an under-capacity in domestic ERF capacity of c.7.9m tonnes in 2020 and a total market under-capacity of 4.4m tonnes, and that includes for export at 3m tonnes (although we are some way off that at the moment) and co-incineration by cement kilns at 0.5m tonnes.

People will always quote whichever publicised model they want to be true; it’s not based on careful consideration and judgement of the facts and figures presented but on plain and simple bias and opinions. Next stop recycling infrastructure…

And that’s how you write a waste article without once using the word w… Oh darn, so close.

Jonathan Lewis, Development Officer, Viridor
Chris Jonas, Director of Business Development

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