Defra’s withdrawal of PFI credit "poor government on many levels"
Post Date: 26 February 2013
Criticism is mounting of Defra's decision to withdraw waste PFI credits from local authorities for energy-from-waste projects, with CIWM's Steve Lee calling it “an example of poor government on a number of important levels".
Funding was withdrawn for three projects that were being procured by the Merseyside Recycling & Waste Authority, a partnership between North Yorkshire County Council and City of York council, and one between Bradford and Calderdale councils.
£65m of funding was withdrawn from a project to develop a £1.4bn waste park and incinerator at Allerton in Yorkshire. The news was received as "a complete surprise" by the council, who had previously been repeatedly assured that support would be forthcoming.
“To be informed now, after the granting of planning consent and the decision of the government not to call in the planning application for a public inquiry, that the funding commitment is being withdrawn is frankly baffling and disappointing," said county councillor John Weighell.
The project in Merseyside involved £90m in PFI credits being used to support development of a facility that would treat 450,000 tonnes of waste per year. The previous week it had just appointed a preferred bidder.
£62.1m in PFI credits was withdrawn from Bradford and Calderdale Council for a project to build a facility that would process up to 193,000 tonnes of waste per year. Cllr Andrew Thornton said that: "Defra had been involved every step of the way. The government had not given us any indication that these PFI credits would not be available". Construction was due to start in just a few months.
A Defra spokeswoman said: “This does not necessarily mean the three projects will stop. That will be a decision for the Local Authorities concerned.” But Defra did acknowledge that the move would impact on the affordability of the projects and would "significantly reduce" the likelihood of them going ahead.
When PFI funding was withdrawn from seven projects in 2010, only three of them went forward.
Last week, the Environmental Services Association, which represents companies involved in energy-from-waste, issued a statement criticising the decision, which was echoed yesterday by the Chartered Institute of Waste Management (CIWM).
CIWM's criticism is potentially the more damaging because the organisation professes to be technology neutral. It said that the decision created investor uncertainty, had possibly wasted millions of pounds of investment spent so far, and was "cavalier" at a time when "exports of waste-derived fuel continue to rise", and there are repeated warnings about "energy shortages and the UK's growing reliance on energy imports".
Defra itself has justified the decision on the basis that it estimates that England is 93% likely to meet landfill diversion targets under the European Landfill Directive, even if none of the affected projects proceed, indicating that the decision was based on considerations of waste management alone, rather than energy generation.
CIWM's chief executive, Stephen Lee, called it: “An example of poor government on a number of important levels. Firstly, it is an inefficient and inappropriate way to manage the delivery of essential infrastructure - the three local authorities involved were clearly caught by surprise. By creating confusion and uncertainty, it is also likely to damage investor confidence in an industry that already faces challenges in attracting the necessary funding.
“The move also serves to highlight the government’s lack of vision and ambition. It would appear that the aim is for England to meet the bare minimum landfill diversion required by the Landfill Directive, and no more".
He called it "short term thinking," which "fails to take into account the fact that landfill diversion and other EU waste targets are likely to be raised in the next couple of years," adding that it indicates that "Defra’s confidence in its projections, and the lack of any margin for error, could be seen as cavalier".
He also said that it "flies in the face" of Defra's own calls for a "joined up approach to resource management.
"EfW may not just a better alternative to landfill for non-recyclable waste, but also a useful source of home grown energy while another government department makes up its mind on our future energy policy,” he said, referring to DECC's handling of the Energy Bill.
The ESA’s director of policy, Matthew Farrow, had earlier called the decision "deeply disappointing... Removing credits at such a late stage in the procurement process has potentially wasted millions of pounds’ worth of time and money, both for the local authorities involved, and also for the bidders participating in complex PFI processes.
"ESA’s firm view is that this decision will have the knock-on effect of undermining private sector confidence in public procurements and will raise the political risk associated with these types of project."
The Defra spokeswoman said: "We are investing £3.6bn in 29 waste infrastructure projects. This will reduce the amount of waste sent to landfill, promote recycling and stimulate economic growth".
Story: David Thorpe, News Editor