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'