Update on transitioning to renewable energy-from-waste and the challenges for UK designers
In our previous article, we looked at the challenges facing designers in the energy-from-waste (EfW) sector. Since then, and putting aside the impact of COVID-19, it is fair to say that the UK’s growth in this sector has slowed considerably. But that is not due to a lack of appetite for investment. This article looks at the recent EfW deals which have been struck, the future for EfW projects in the UK, and the challenges which building designers face.
In 2020, we saw three significant infrastructure deals with:
- KKR’s £4.2 billion acquisition of Viridor (which owns 12 EfW plants) from Pennon Group
- First Sentier Investors £995 million purchase of a 50% share in two EfW plants and
- Macquarie’s continued joint venture with EfW operator Covanta.
Clearly, there remains serious interest in the EfW sector. That is not surprising given the stagnated recycling trend in the UK and the projections that there will be more waste to deal with and an increased demand for incineration and EfW facilities and potentially highly lucrative opportunities.
However, against that backdrop of significant interest and investment, EfW projects remain challenging and high risk and there are a number of complexities which continue to affect deliverability, including contractors’ lack of familiarity with the technology involved and a lack of in-house expertise to deliver these projects. As a result, we have seen a number of well-known UK contractors exiting the market in recent years. Interserve, being the most high profile contractor to have departed, having reported eye watering losses over a number of EfW projects.
The main challenge for building designers is that their design is dominated by the specialist process plant designers (usually highly specialist manufacturing companies based overseas) which is outside their control. This can cause real problems, particularly where contractors have failed to fully appreciate that their agreed programme is conditional on receiving accurate data about the process plant. Without that data, the building designer (often through no fault of its own) can be left second guessing aspects of the process plant, which critically impact the building design. That, in turn, can result in major changes and delays further down the line.
It is also worth noting that there was a rush to enter into engineering, procurement and construction (EPC) contracts because of the expiry of the governments renewables subsidy for EfW plants and the requirement for projects to be commissioned by 2020/2021. As a result, there was probably a lack of due diligence and this exacerbated the programming problems mentioned above.
In summary, it is clear from the recent infrastructure deals that EfW will continue to play an important role in the future. In order for building designers to guard against the risks identified above, they should ensure that the process plant and building design are fully aligned (ideally, the performance of their services should be linked to accurate and timely information from the process plant designer). Designers should also satisfy themselves that the EPC contractor has a good track record of delivering this type of project and that the process plant is being designed/manufactured by reputable companies who have successfully delivered in the past.
Read other items in Construction and Engineering Brief - May 2021
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Related item: The impact of transitioning to renewable energy-from-waste projects – problems for UK designers