Horrors of SERC

It's three years since the Localism Bill was proudly unveiled by Communities Secretary Eric Pickles. It would, he said

“herald a ground-breaking shift in power to councils and communities overturning decades of central government control and starting a new era of people power “ . 

There was a lot more of the same sort of populist guff....

Six months earlier, South Glos councillors had turned down an application from SITA to build an incinerator – sorry, waste-to-energy facility – sorry, Severnside Energy Recovery Centre - at Hallen, three miles north of Avonmouth. It was much more than a NIMBY decision; the area was already overcommitted to waste treatment plant over and above the local need, and the West of England councils were committed to a 'dispersal' strategy to reduce distances that waste must be carried . [Since then, our councils, with that unlikely Local Hero Gary Hopkins at the fore, have abandoned incineration altogether and gone for more advanced technology, along with then innovative food waste colections which are both proving themselves well . Gary survived the Evening Post vilification treatment. Lets hope Daniella Radice is equally resilient ].

But SITA now saw a commercial opportunity to burn as much as half the industrial and commercial waste produced in the West of England area. They appealed to the Secretary of State against the South Glos. decision. In 2011 there was a planning inquiry, at which Mr Pickles' Inspector took the SITA side. Pickles duly overturned the local councillors' decision. So SITA got their permission, but, in the absence of the local customers they'd described in their appeal, they still had nothing to give investors the confidence to put up the cash.

Incinerators need an assured flow of waste to burn – so the operators build in contract terms so that their customers must pay dearly for any shortfall in supply. Who cares that that obstructs any new measures to reduce waste or divert materials for recycling? If local authorities, desperate to avoid landfill taxes, commit to paying out £1.4 billion to burn waste by open combustion in an incinerator for 25 years; well, it's a proven if primitive technology, and financiers are keen to put up the capital with such low risks and high prospective profits. That's the theory.

Having had no more luck selling disposal contracts to local businesses than it had with the West of England local authorities, SITA cast its net wider. In west London it found a consortium of 6 underperforming and unambitious boroughs that were still sending high levels of waste to landfill, and were pretty low down the recycling tables. A deal was done. The incinerator would be built at Hallen as that champion of localisation, Pickles, had ruled; the waste to feed it would now come from the bins of Ealing, Brent, Hounslow, Richmond, Harrow, and Hillingdon.

Of the incinerator outputs, some would be the stack emissions, mostly drifting across North Bristol; some would be 'bottom ash'; some would be highly hazardous fly ash. Some of the heat would generate electricity for the grid, but unless neighbouring customers could be found for the bulk of the waste heat, that would just be dissipated to atmosphere.

Even given the deal, the promise of a cast iron long-term contract, and the profits and low risks that go with it, it seems that investors still didn't exactly queue up waving their cheque books.

Enter the Green Investment Bank. Set up about the same time as Pickles was banging on about the virtues of small government and local decision making, the GIB is supposed dip into its £3.8 billion to back 'green' projects in offshore wind, energy efficiency (especially the 'green deal') , or waste reduction/treatment where its “capital, knowledge and reputation make the difference that enables a project to be successfully financed“.

The GIB must be struggling, what with investors pulling out of offshore wind and the controversy over the big energy companies 'taxing' consumers with what Cameron reportedly dismisses as 'green crap'. It's been putting money into such bizarrely ungreen projects as converting Drax from coal to biomass – wood pellets imported from the forest clearance in the USA. Apparently that's a net reduction in local CO2 emissions, so it qualifies.

At Hallen, the GIB has put £20 million into SERC. As their press release put it, “GIB will invest £20 million of the senior debt alongside a lending club of Credit Agricole Corporate & Investment Bank, Bank of Tokyo-Mitsubishi UFJ Ltd, Sumitomo Mitsui Banking Corporation and Mizuho Bank. Equity will be provided by SITA UK, Japan's ITOCHU Corporation and Scottish Widows Investment Partnership.”

Thanks to them, and Mr “where there's muck there's brass” Pickles, household waste with plenty of recyclable materials still in it will be rail freighted from London to be burned here, in an area where our more progressive local authories have already found ways to recycle more, to pollute less, and to keep it local.

Happy Christmas.

...and more PFIffle

Looks like there's yet another high risk element in the bid for PFI backing for an incinerator. The PFI pot itself is drying up.

The Guardian reports on a leaked NHS memo revealing government warnings of a 'capital desert' in PFI credits for new ventures. As 'none of the banks have any money or are likely to have any for a few years, the absence of a 'plan B' is going to cause a real problem.'

Odd, that. Back in October I asked Mark Bradshaw if there's a 'Plan B' in case his own PFI bid fails. Evidently not. They'd just expect to pay a further £84 million to get the same scheme from taxation - although that scheme is selected solely because it's the one most likely to get bank funding!
.................

While all this PFIffle is going on, the West of England has thoughtfully launched a CONsultation into how best to allocate land to deal with the sub-region's waste.

Option B, with waste management spread over 8 smaller sites - is the one preferred by environmentalists.

WoE makes it very clear that its own choice is for Option C, the one with a big site at Avonmouth that happens to be just the right size for a great big incinerator. And if you doubt their sincerity, judge them by the fact that they've already bid for the cash, months before March 12th deadline for public comment.

PFIffle

The big thing claimed for the Private Finance Initiative (PFI) is that it gets local authorities off the hook of putting big money into high risk projects. Instead, the private sector takes on the risks (and as we all know, that's what they're good at!)

Successive governments have been so enthusiastic about this that they give councils and health authorities big incentives to go down the PFI funding route. I suspect it's because it shows up better in the national books if capital funding comes from the private sector - even if, as generally happens, the public finish up paying far more for an inferior product.

Now, it's that risk element that intrigues me. The controversial bid to seek PFI funds for a waste incinerator at Avonmouth should rest on the premise that the private sector bears the investment risk. In practice, the whole choice of preferred technology rests on the fact that the banks won't risk their money on anything else but this sure-fire cash cow - fed by public cash in the form of 25-30 years of contractual gate fees, with penalty clauses for any shortfall in waste delivered. Negligible risk for the banks. Every risk for the public - especially if consumption and waste rates go down, or recycling rates rise. Not to mention the mind-boggling costs of setting up the deals in the first place.

Given, too, that the banks' new found reluctance to lend is now having to be shored up by government guarantees against loss, the whole case for PFI is shown to be doubly flawed - high risks are transferred the public at both local and national level.

We've been set up. Look at it from a council treasurer's viewpoint, and PFI still offers government (i.e the nation's taxpayers') cash to offset against locally raised capital. Attractive, eh? But all it means is that we're paying through taxation for PFI schemes nationwide, instead of just paying locally for local schemes. For councils the choice might look easy - but for individuals we'd all be far better off without PFI. We'd have far better waste disposal too.