In June 2015 New Power spoke to energy from waste companies about taking a broader role, providing flexibility and other services to the local power grid. Our report:
What more can the energy from waste (EfW) sector do to help manage the energy sector in transition?
On the face of it, there are possibilities. The sector provides 2% of the UK’s power and that could increase to 6%, so it is a small but identifiable proportion of the whole. In general the projects are thermal, or use processes like gasification that are – in theory – dispatchable. That could mean this relatively small scale fleet of plants may have high potential to provide the flex that complements wind and other weather-dependent renewables, including balancing local networks.
But talking to the companies involved, it’s clear that the picture is more complex.
The industry is just a few years from its origins in landfilling and simple disposal, and for most the overriding concern is still treating waste.
The economics reflect that reality. In the past, typically 70% of EfW income has arisen from gate fees paid by local authorities or other clients for waste disposal (driven by the need to avoid landfill taxes) and just 30% from the offtake power contract. And although that is shifting slightly in favour of energy, the impetus is all about throughput. Companies want to process waste as fast as possible.
Evolving fuel supply
Energy from waste plants are in the unique position of being paid to consume their fuel. But if that is the upside of waste, the downside is that the long term aim of policy is to “reduce, re-use and recycle” the fuel supply away. The EU is working on a “circular economy” package that could set targets in the UK of recycling up to 70% of all waste, and energy from waste is both low down the waste hierarchy and generally unpopular in the areas where plants will be sited.
However, the industry is relatively relaxed about those ambitious targets, believing that no matter how much can – and should – be achieved towards reducing waste, there will always be some material, such as increasingly complex packaging, for which the choice is energy from waste or landfill. In fact, the UK currently exports refuse-derived fuel (RDF) to energy plants on the continent – seen in Whitehall as both the loss of a UK resource, and carrying and environmental and carbon burden that would not be incurred if the waste was used locally.
The industry is getting to grips with evolution in funding model as well as fuel supply.
Over the past decade most of the largest new projects have been those dealing with municipal waste and although these have relatively simple incineration technologies at their core, the financing and permissions process has been onerous. Funded under the Private Finance Initiative or Public Private Partnership arrangements they have long-term – 25-year – contracts with local authorities to provide the fuel waste. Viridor, for example, completed four such projects last year. But that funding model has come to an end and new projects will have to be taken forward under “merchant” arrangements, with shorter term contracts for accepting waste, adding uncertainty to funding arrangements, and possible use of other sources such as commercial and industrial waste.
Energy from waste plants come in almost as many forms as their fuel, from simple incineration to anaerobic digestion, gasification and emerging technologies like pyrolysis.
They can be operated flexibly – but that flexibility is focused on managing the treatment of waste flows that can vary throughout the year. One operator told New Power that municipal waste streams can have more organic material like grass cuttings in the winter, and more packaging in winter – with short lived variations like wrapping paper around the christmas period. And plants that operate as combined heat and power have to flex if the heat requirement changes.
Can this variability be used by the energy industry? Steve Brown, operations director at FCC Environment UK, is one who thinks there is a distinct possibility that EfW plants will play a more flexible role in the way they supply energy. He has a close eye on the energy market and FCC is one of few EfW operators that bid and won contracts under the new Capacity Market. He admits the company “came to that late in the process. We thought we had to be in it to protect our wholesale price, because the risk is it will take out volatility and potential upside from the market”.
Brown says despite the imperative to keep waste treatment rates up, EfW plants can flex. “Steam can be distributed to the condenser system where plants have bypass systems that enable you to continue to treat the waste” while electricity generated is reduced. That applies most easily to plants using simple burn for municipal waste. But although more advanced technologies like gasification have less ‘give’ in the process, he agrees with my suggestion that the heat could be diverted to a flexible heat network or store.
He says increasingly the industry has to think of waste as a fuel and pay more attention to the energy part of the equation. Changes in the electricity market – notably the increased potential for negative pricing – will drive EfW companies in that direction, he says, although it will depend on how PPAs are structured. “Negative prices will harm us because project economics are based around both waste and energy income streams.” In any case, he can see that the system will need more variable sources as the mix changes.
“In terms of load following and other services, like voltage stabilisation, I think energy from waste can play a part, especially as it is embedded in the local network,” he says. But “there would have to be the right financial mechanisms in place, and we still have to perform the service of treating the waste”.
Nevertheless FCC wants increasingly to be seen as an energy company where waste is the fuel, rather than a waste company. UK chief executive Paul Taylor says that within the debate over the circular economy “the role of energy needs to be considered. It is a key element and its profile needs to be raised”.
FCC will not be the only waste company taking more account of its energy business. Viridor’s new chief operating officer Paul Piddington has joined the company from RWE, where he previously headed the biomass and cogen businesses within Innogy. Alan Cumming, the company’s engineering director, has come from EDF Energy’s nuclear business. He sees the link between power and heat provision as key to using the resource most effectively. Pointing out that Viridor’s Scottish plants have been required to link with district heating schemes, he told New Power he saw a future of small projects within communities. For them, he said, it’s “a predictable source of power and steam. That’s the energy we want to harness”. Cities increasingly see such projects as a way to manage their own energy, he said, adding that “when it is used locally you can keep the carbon footprint down”. Viridor is also working with Highview on a pilot energy storage installation in Kent, a project that won an £8 million grant from Decc.
The profile of EfW is changing. Waste throughput will always be its dominant concern, but the right incentives could give plants a financial interest in using their ability to flex to provide energy services as well as waste treatment.
In our follow-up report in 2016 the situation had moved on – slightly:
At last year’s world waste to energy summit, the discussion was mostly about waste and securing the feedstock (see above). This year there seemed to have been a sea change. There was a dedicated session on the role of energy from waste (EfW) plants in decentralised, often city-based, energy systems and the opportunity to provide energy services was clearly on the agenda for EfW operators.
There seemed to be two reasons for the change in attitude – both driven not by the electricity produced from plants but by the waste heat available. New EfW plant construction is winding down as plants built under the now-ended Private Finance Initiative and Public Private Partnerships come on line, and they said there is a much tougher investment hurdle to build further plant on a merchant basis. But interest had turned to finding markets for heat supply from plants that had now become familiar parts of the local landscape.
“Viridor is actively looking for customers for heat from the company’s energy from waste plants.”
Ian MacAulay, chief executive of Viridor, said he was actively looking for customers for heat from his company’s energy from waste plants where they did not already exist. “We don’t take enough heat off,” he said, “it’s not economically viable to build a network [as retrofit] but how can we bring [industrial and commercial] heat users to the facility?”
He said he had had interest from greenhouses, direct offtakers such as breweries and airports, large schools and data centres that would use the heat for cooling. “There has been hesitancy, I’m not sure [potential customers] believed the plant would happen. Once they are built and accepted we can push it a stage further,” he said.
The second impetus behind the interest in heat has come from cities that host EfW plant, for whom renewable electricity production is seen as a diffuse, national benefit. On the other hand, heat supply can be a local benefit and directly address fuel poverty.
For example, for Glasgow’s City Energy company, a heat network was an important local benefit from a new EfW plant under construction. Its concern was to ensure that local facilities and social housing operators could tap into the heat.
As for electricity, John Ord, business director for thermal power and energy networks at MWH, told delegates that EfW plants were missing out on revenue. “The waste sector is ideally placed to provide the right size solutions” to help solve energy-management problems in local grids, he said.
Noting the need to manage power export around Triad or network red periods, he said that although mass burn plants had little flexibility, EfW plant using anaerobic digestion (AD) could arbitrate short-term on-site waste storage and power pricing. He said: “Changing the time at which you generate can have a massive improvement on your bottom line.”
Plants that could work around on-site gas levels “could see a 5-8% increase in revenue with no physical changes”, he said.
He also pointed out that different waste plant could offer different grid services, such as frequency reserve or demand response. Technically, plants using AD could offer similar services to CCGTs at local level, he said.
He called for distribution network operators to provide more information to prospective projects about points of connection that would bring the most system benefits.
For many EfW companies whose revenues have traditionally been dominated by waste throughput, the idea that turning generation up or down could be profitable has been a long time gaining acceptance, but Ord sparked interest from the audience.
Meanwhile, companies that had started as landfill operators were looking again at those sites to see what extra energy services could be provided. Viridor’s MacAulay, for example, said that his company was working on a large cryogenic storage system at one of its landfill sites.
Using waste heat from existing gas engines, already used to generate power from methane tapped from the landfill, he said he expected the project to provide responsive power “more efficiently than pumped storage”.
And we could still Grab some easy wins on heat
The EU’s view: making more from less in energy from waste
Plans for an “Energy Union” across the EU include waste to energy. Speaking at ReThink’s Waste to Energy Summit in May, Jorge Diaz del Castillo of DG Environment said at that by the end of next year the EC aims to produce to a communication specifically on this energy source. The emphasis will be on producing more energy from less waste and “exploiting technology to the maximum”.
The Commission has several lines of approach.
- It will consider how to optimise processes. For example it will make use of research on “best available technologies” on incineration already under way.
- It will assess the real potential contribution of advanced technologies like gasification and pyrolysis, which Castillo said “have been criticised as being not as efficient as it looks”. He pointed out that the EC had research and development funding of “€6 billion up for grabs for energy projects” between now and 2020 and that would support the necessary research.
- The Commission will do a so-called Swot (strengths, weaknesses, opportunities, threats) analysis on the fuels used in energy from waste, such as RDF and SRF. “We’ll see what fuels are most interesting from a technical point of view”, he said.
- Potential synergies will be explored between EfW and energy intensive industries that may have suitable waste materials available and a need for heat or steam.
- The Commission will aim to make the use of the EU’s network of energy from waste facilities more efficient. Some have overcapacity and few have heat loads, and “we can make use of them in a more efficient way,” Castillo said, noting that although generally the EU would aim for local use of the waste, it was recognised that transporting it may be more efficient.
- Finally, the Commission would re-examine the waste hierarchy to clarify the role of energy from waste. That would include asking when it was justified to depart from the hierarchy for certain waste streams. He mentioned for example low grade wood and plastic, or food waste that could be used in AD plants.