B P Collins - Are things going round in circles...successfully?

The Business Magazine and solicitors B P Collins invited sector experts from our region to gather at Gerrards Cross to discuss environmental issues, and answer the pertinent question: Are things going around in circles . . . successfully? Journalist John Burbedge reports the Roundtable highlights

A green ‘circular economy’ is everyone’s desired environmental objective – an economy where resources go full circle; an economy where precious resources are captured, recycled, remanufactured and reused to become goods for our tomorrows.

Instead, too often today, we still adopt a linear economy – taking resources out of the ground, turning them into products that last from minutes to a few years, then discarding them by putting them back into the ground as landfill.

Achieving a circular economy is no easy task, but we are making progress, was the Roundtable consensus.

How are we doing, and why is it so difficult to achieve?

Matthew Farrow from the Environmental Industries Commission estimated the UK was currently recycling around 40% of its waste. “We have come a long way. It was only around 10%, 10 years ago. But, we can’t claim to be a genuine circular economy until we are getting towards 70-75% recycling, with non-recyclable waste going to modern energy from waste (EFW) plants to create a benefit to our economy.”

Even so, he placed the UK “respectably mid-table” when compared to Europe, with Germany and Austria leading recycling at about 60%.

He explained that, against a commercial background of global competition and individual interests, the challenges facing the circular economy still revolved around three main areas:

Product design

Designers need to make sure that their conceptual designs encompass the full lifespan of a product – including its re-use. “Too often final usage is not a key factor in the design brief, which concentrates on functionality, marketing appeal and manufacturing costs.”

Technical concerns

The capability levels of material recycling facilities (MRFs) to reclaim different materials needed to be taken into account.

Consumers

Can we change the way that consumers buy, use and dispose of their purchased products?

“So, we have to approach our supply chains in a very practical way and understand that we need the right incentives and networks in place to achieve change,” said Farrow.

Stephen Roscoe pointed out that it was awkward to make comparisons with other nations, because Germany, for example, did far more incineration than the UK, and others used different criteria for assessing recycling.

In the UK, he noted, most large companies were already engaged with recycling, largely for corporate social responsibility (CSR) reasons. “The problem for the waste industry is that we are now engaging with the whole supply chain in a way that we have never done before. We have to help them understand that there are ways of returning resource materials back to them.”

Dealing with mixed materials in volume was still a complex task, which could be helped by supply chain waste-separation at source. Waste operators were providing appropriate facilities, but separation remained a difficult task, particularly for different plastic wastes.

“It would be really nice to be able to give the plastics back to manufacturers, but currently it is such a novel concept for them that it is difficult to find someone to speak to credibly.”

“It’s a shame because we should be trying to recycle materials rather than just recovering the energy through a thermal solution.”

Farrow noted that recycling presentations at conferences were often made by the same large consumer-facing big brand companies. "That’s OK, they have an additional CSR need to be seen to be doing the right things, but are we getting through to the smaller companies who don’t have that CSR need, who are simply focused on margins and survival?”

Such upbeat presentations could give an exaggerated sense of sustainability in the UK, he felt.

“We are not at a stage yet where enough investors or consumers mark you down if you are not being sustainable.”

Money will make the message go round

Eco-preneur Sean Reel remarked: “There is a great motivator out there called money that will drive behaviour. But, there is a problem. You get marketing and CSR teams saying a circular economy with a recycling facility in every store is great, but then you get the retail operational guys saying ‘Over my dead body'."

The balance was between the marketing perception and the real cost to the business. “Change is happening, but how can we engage more consumers? Ultimately, they change the retailer’s attitude.

“We can push, but consumers can pull, and their voice will be louder, with social media one medium that will make the change greater and more widely heard.

“Now there are campaigns building and hopefully the mix of a social media platform and the recovering UK economy will drive change.”

Roscoe mentioned a Grundon “reverse vending machine” initiative providing a points-reward scheme for every can deposited. “The thing is it personally rewards individuals for recycling.”

Carrot or stick?

B P Collins solicitor Diane Yarrow regretted that such incentives were needed. There has always been a section of the consumer base who recycle as a matter of principle, and do not need to be motivated to do so, but “Can you change consumer behaviour more generally and effectively without rewarding them for making the change in behaviour? I don’t think you can.”

Roscoe noted Greenredeem points-reward schemes had seen recycling rates jump upwards in some local authorities. “So, I think change can be achieved.”

Andrew Hillier: “I suspect that you will reach a certain percentage of householders who want to do it and then you get the remaining percentage who will be really hard to change. That’s where we need to look at incentives and fresh ideas. Sadly, at the end of the day, the true incentive for take-up will be financial.” Once all the green-minded consumers had been fully engaged, taxation, law or incentives would be the only answer, he believed.

Roscoe felt there was a distinction between consuming households and businesses. “Householders are somewhat divorced from the true cost of waste disposal, whereas businesses have to pay directly for their waste bins and have the impact of Landfill Tax (LT) on what they don’t recycle.”

The increasing role that regulation could play

Roscoe: “I find it distressing that England is falling behind Scotland and Wales for landfill bans on things like food waste.” DEFRA is still doing the sums on feasibility, he added, but such bans were ‘no-brainers’. “Until these bans come, I don’t think you will stimulate smaller businesses to change. Unless there is a clear financial driver, the pressures of everyday business are such it will be difficult to persuade small businesses to pay the additional costs for recycling.”

Simon Copping: "Increasing LT has been a main driver for several years but is there an issue at the municipal end with householders sorting their rubbish? Is there enough money going into that to incentivise households and make that a reality, or are we seeing that slow down in the past few years?"

Roscoe highlighted that a lot of private money was invested in Anaerobic Digestion (AD) of food waste, having been supported by government Renewables Obligation Certificate (ROCs). “There is a good AD business model there if you can incentivise households to work better with AD waste plants.”

Copping: “At least we have not yet gone down the ‘pay to put it in the bin’ route."

Farrow acknowledged that such taxation would bring a solution, but stressed that few governments would risk the political storm of what would be seen as a recycling ”stealth tax”.

If the Government was determined to meet EU recycling targets, how long could things go on before such enforcement action was required, queried Murray.

Farrow noted that the Scottish and Welsh governments wanted to be seen to be as green as possible, whereas in coalition England senior ministers don’t want to risk a radical waste policy. “Provided we can meet our EU targets on waste – 50% recycling by 2020 – then No 10 will feel their main objective has been achieved, and the current projections are that we will just scrape over that line.”

Problems with the Energy Bill and partially inflated lilos

The new Bill should help, but it may not, said Farrow. The problem is the new Bill has become so complex that even civil servants were unsure on some matters. “Everything about the Government’s Green Agenda has revolved around changing market frameworks and setting targets, but it is now incredibly difficult to forecast how the market will respond to all these incentives, such as feed-in tariffs.”

While the industry players wanted clarity, certainty and stability to formulate their long-term investment strategies, he feared the Government might frustrate them by tinkering with its energy policy at the first sign that the market was not reacting as predicted.

Reel: “It seems the Government always end up with unintended consequences.” With any new taxation, regulation or incentives, it was human nature to seek out the opportunities and best personal positioning. “Maybe new schemes should be better market researched before the Government tells the market: We’ve changed things.”

Commercial property lawyer Michael Larcombe highlighted energy performance within properties, noting that some investors, such as landlords, tend to be conservative business people by nature. “Many have set ways of valuing property and assessing income streams. The last thing they want is different things coming along and affecting the balance. Occupiers similarly will tend to resist changes in their lease arrangements.”

David Murray asked if occupiers really take notice of Energy Performance Certification ratings (EPCs).

Larcombe admitted large CSR-aware corporates did, but interest and awareness in EPCs quickly fell away as the size of company dropped.

The Roundtable agreed that property energy efficiency would become more important in future and some buildings might get blighted due to their low performance ratings.

Reel: “Some of the Green Deal offerings are fine, but landlords will simply do the numbers and the best option will prevail.”

Larcombe mentioned that in 2018, energy ratings will be linked to the ability to let buildings, potentially leading to a whole range of unintended consequences. “The economy is like a partially inflated lilo. The Government jumps on one part to squash a problem and another area pops up elsewhere.”

Market reform needed: Power of the Big Six

There was agreement that the energy market did need reform. “It’s not delivering low carbon, cheaper energy and energy security very well at present, and those are the three things you want from the market,” stated Farrow.

The Labour Party’s recent bold proposals to freeze energy prices and abolish Ofgem, should they be elected, were met with Roundtable scepticism and doubt of their effectiveness.

Hillier highlighted the overbearing influence of the Big Six energy suppliers. “Essentially they keep the UK lights on, and there is little the Government can do that does not involve them. Schemes may come up that seem like good ideas, but frankly if the Big Six say ‘No’ there is little that can be done to force them to change their minds.”

He noted that British Gas was set to miss a government target by almost 30%. “In theory they can be fined 10% of their global turnover, but will that happen?”

Comparing the UK wholesale price of energy with other European countries, Reel queried: “Are we paying a premium for our energy because of the structure of our market?” He suggested a split wholesale and retail market similar to the banking sector or even to follow the phone and broadband multi-supplier market model. “The Big Six would remain dominant but not as dominant.”

Hillier felt trying to reduce core fossil-fuel prices would be nigh impossible, so there was a need to ensure competition from other energy sources such as EFW plants, solar or wind power.

“There is actually more deployment now of solar PV, with solar farms going in all over the country, far more than in 2010 when the feed-in tariff was introduced at a high level. Feed-in has incentivised the establishment of the industry. And the Government does listen more and tries to engage at an earlier stage, but the fundamental problem is still the Big Six.”

NIMBY-ism: Alive and well, and living in Britain

Copping: “We tend to look at power in terms of electricity, but we also have a heat-use issue. We constantly talk about building new houses but the developers are not incentivised to build them to incorporate district-heating schemes, for example. We talk about biomass and EFW plants but the big issue is how to use their heat offtake. They are often built in the wrong place because nobody wants a plant near their home."

“That’s nobody in this country,” Roscoe retorted.

Copping agreed, noting the lack of NIMBY-ism in other European countries, one reason he suspected that the UK did not have “a system that allows us to efficiently use some of the waste disposal activities that we incentivise people to undertake.

“Lots of waste technologies would be more efficient if they had an outsource for their heat. Heat transfer to electricity and then its power use, is not the most efficient way of doing things.”

Yarrow mentioned that it always surprised whenever proposals to make use of the “waste heat” for local community benefit are met with scepticism and resistance. “Logically such schemes make perfect sense, but in addition to the financial barriers, the legal hurdles in planning and property terms can seem insurmountable; public/local business support or interest needs to change first, to get behind such schemes/proposals and accept them as a great idea."

Roscoe commented that Grundon’s EFW facility at Lakeside off the M25 near Heathrow was only now beginning to get serious interest from local entities about use of its surplus EFW heat in order to lower their energy consumption – despite the facility being opened in 2010.

Often EFW facilities had been built “as far away as possible from where you can actually use the heat, and that’s because of NIMBY-ism and negative perceptions involved. So all that potentially useful heat simply goes up into the atmosphere.”

Roscoe also mentioned a proposed EFW facility, planning to supply its heat to a nearby prison, which met objections that the development would infringe prisoners’ human rights.

Hillier provided evidence that some developers were now considering district heating and EFW facilities as part of their new schemes. “It’s all about getting it right at the planning stage, particularly with newbuild, both in the commercial and residential sectors.”

Roscoe said NIMBY-ism was “alive and well and fuelled by localism, legal aid and bad science. A local opposition group, all funded by Legal Aid, had pursued four requests for a judicial review on one of our planning applications, yet it had successfully gone through the local democratic process. We finally got past the judicial hurdle two years down the road and started doing things at the site. It’s just crazy. We spent £250,000 on lawyers, after we got the planning permission, and we won’t get that money back.”

Are renewables making good headway?

Murray queried if such sources were viable competitors yet for our traditional energy supplies.

Farrow mentioned that wind farms could produce 15% of UK energy requirements on a good windy day. “That’s impressive, but you have to have back up for less windy days.”

Roscoe provided figures revealing that UK electricity generation from renewable energy in 2012 totalled 41,258GWh, representing 11.3% of the UK supply. Of this energy, wind constituted almost 47%, solar PV 3%, hydropower 13% and biomass energy 37%.

Copping: “The opposition to solar and wind energy has always been lack of land on our crowded island, but technological advances have improved the efficiency of panels and turbines. The UK now has the largest offshore wind farm in the world (the 630MW London Array) with many more sites in the planning and construction phase, supporting the view that offshore wind seems the obvious route to go.”

Roscoe however spoke about “scary numbers” connected with renewable energy production. Even turning over the nation’s whole agricultural crop to biomass generation would not have a significant impact on UK electricity supplies. A 4km-deep ring of wind turbines all around the UK coast would only produce between 10-20% of UK demand. 5% of our UK land mass dedicated to solar PV would produce less than 30% of our future demand, he stated.

“There is no prospect in the future of us being entirely dependent on just renewable energies.”

Farrow suggested the way forward was to reduce demand while also increasing the supply of low carbon energy sources. Technology advances were helping with energy efficiency he added and smart-metering would boost usage awareness. Depressingly however, he had heard that despite today’s fridges being vastly more energy efficient, total household electricity used for refrigerators dropped by only 4% – as consumers increasingly bought larger or more fridges. Worryingly, if energy were made cheaper, people might simply use more of it, he commented.

Roscoe: “It has got to cost more if you want to go green.”

Reel stated: “Those who can afford it will have cheaper energy because they will buy efficient solar panels, proper insulation, heat recovery units etc and save money that way. Fuel poverty is a real issue that both society, business and government need to focus on. Those who can least afford it will be impacted the most by energy price rises.

“Fuel poverty will become a real problem because the underlying cost of energy is going to double in the next ten years.”

Can new technologies save the day?

Investor and eco-preneur Reel was hopeful. “Some of the technologies I’ve seen coming through will in future resolve some of today’s problems, for example, with mixed waste plastics.” The range and rates of recycling recovery had become much greater over the years as technology advanced, he highlighted.

Roscoe: “But, the low-hanging fruit is now gone, and so we do need new technologies and procedures for separating these other materials.”

Reel said progress was forthcoming: “There are good businesses out there, assisted by business incubators and mentoring schemes. That’s the great thing about this country. It will always innovate, but we must capture and accelerate it better.

“We also have to match technological change with consumer behavioural change or we will end up like the Germans just burning everything.”

Yarrow noted that:“The key for any new technology is tipping the balance, such that the cost of recovery is less than the cost of traditional disposal.”

Copping pointed out that waste innovation didn’t have to be a new gadget or process. It could be established technology, but used better. He mentioned landfill gas extraction engines, developed in the 1990s, being used far more cost-effectively – admittedly within an industry encouraged to invest by incentives. “AD and biomass gasification are not new technologies; the issue here is about controlling the feedstocks coming in.”

Is nuclear still under a cloud?

The Roundtable broadly accepted that not enough decarbonisation could be achieved through renewables alone, so nuclear had to be another energy option.

Farrow: “One nuclear power station represents an awful lot of wind farms or solar panels. It’s not clear whether we can decarbonise our energy supply without nuclear, but it does seem that the politics and the economics are getting harder every year.”

Roundtablers remarked on how nuclear development companies had dropped out of the market over the years, leaving EDF as virtually the sole provider in Europe. Also, the image of nuclear had been badly hit by Japan’s Fukushima disaster, Germany’s change of energy policy and the growing costs of creating nuclear facilities – all casting a cloud over nuclear as an option for the UK.

But what else is there, asked Copping, if NIMBY-ism, planning difficulties and lack of investment were already hampering the growth of wind, solar, tidal, EFW, district heat and shale gas alternatives? “We are not making it easy for a mixed energy solution."

Yarrow also noted that the other challenge to nuclear development in the UK was that the nuclear skillbase now lay outside the UK with our engineering talent exported to other countries, partly due to such energy development having moved out of national favour.

The same ‘generation gap’ had occurred with coal-mining technology and skills following the shutdown of UK pits, said Copping. Ironically, experienced UK miners, often near retirement, were now helping the global industry.

Could shale gas fracking be a UK energy solution?

Although oil use is in decline, if the UK were aiming to replace its oil dependency with shale gas by 2020, Reel estimated that more than 10,000 UK drilling points would be needed. “That’s a lot of NIMBY-ism to get through.”

Copping agreed, but said shale gas extraction, despite being tarred by the emotively named ‘fracking’ process, could actually be a viable energy resource forming part of the UK’s future energy solution.

“Shale gas has had a huge effect on US energy prices which has the potential to reduce global gas prices and dominate energy markets for the foreseeable future.

“So, the UK options are to leave it in the ground and buy it in from abroad, or exploit our own UK shale gas. Eastern European countries are already exploring shale gas as it potentially provides a relatively cheap gas supply and provides increased energy independence and security. The only real conflict is the fracking process itself. One wonders if that concern is more about shale gas reducing energy prices and slowing down the development of renewables, or whether it is really about the shale gas recovery process.”

Farrow felt there was no reason not to do fracking in the UK as part of a mixed energy solution. His concerns were also that shale gas could make things “too easy for the next 20 years and people would give up on renewables” and that NIMBY-ism and environmental or planning issues would unduly hamper development of the industry.

Copping noted that evaluation of concerns about shale gas extraction revealed a focus on noise, traffic and infrastructure worries with groundwater contamination being “about 11th or 12th on the list.” The media publicised fracking as an environmental issue, but in reality local concerns were simply about the introduction of something new into an area. “I think a more informed media would help the debate.”

It is also perceived as a large-scale ugly industrial process, which actually would not be the case in the UK, noted Farrow. “When you drive near Wytch Farm oilfield you don’t see it, but you cannot miss Didcot Power Station when driving in South Oxfordshire,” Copping added.

Hillier felt shale gas should be viewed as a windfall for the nation, taking the pressure off renewables and allowing innovators to develop the right technologies for the future. “It could see us over a period of transition.”

Roscoe: “We need to do it because I cannot see nuclear coming over the horizon any time soon.”

Copping added a word of caution: “What you have got in the ground is potential, what you get out is reality. I believe we should proceed with shale gas extraction, while at the same time pushing the development of renewables.”

What can the Government do to help?

Farrow suggested:

• A revised look at the Green Tax debate. “The Government is desperate for income and simple fiscal measures can be very effective in driving markets. Increasing LT makes sense, for example."
• Cross-party consensus on fiscal and energy policy would help companies plan long term.
• A smartmeter roll-out would promote energy efficiency.

Hillier agreed that cross-party consensus “for the sake of the nation, as we had in the 1940s, 50s and 60s,” would be beneficial. ”If you are going to change energy markets for important national reasons then you have to make fundamental decisions and stick to them.”

Roscoe said planning reform was the essential need. “It’s so frustrating to get anything done. We have become a nation that says ‘NO’ to everything.”

Farrow: “Up to the 1970s people liked infrastructure. It was seen as post-war regeneration that the country needed, I suppose. But then attitudes started to change, until now communities tend to be suspicious of any new infrastructure. The problem is that any infrastucture investment is based on forecasts, eg waste arisings or travel demand projections, so it is always possible for intelligent objectors to put forward a plausible case against the proposal. How you get out of this vicious circle I don’t know.”

Copping agreed that infrastucture development was an issue. “But, while the public broadly views infrastructure in terms of transportation of people, we see it as including the energy provision network overall, and currently renewables are not being designed to link with our existing infrastructure.”

Reel suggested:

• Making waste management a mandatory part of the school curriculum. “All school children should visit a waste management facility to see what happens when they throw something away – hopefully in a bin.”
• Providing better incentives to promote energy-use change.

Larcombe agreed: “The right incentives are not there for the right people. Planning is also a nightmare, not helped by the overuse of social media with everyone talking to each other all the time.”

Yarrow agreed that legal changes to the planning procedures would assist, ensuring that the process was redesigned to facilitate and not suppress or frustrate development. More broadly, Yarrow felt that achieving consumer engagement was essential either through education or incentives, but ultimately the current mindset meant that creation of energy policy would always come back to money.

Participants

Simon Copping: European business development leader from Golder Europe

Matthew Farrow: Executive director, Environmental Industries Commission

Andrew Hillier: Managing director and owner, Ice Energy Heat Pumps

Michael Larcombe: Partner, B P Collins LLP

Sean Reel: Director and ‘eco-preneur’, HiCap Networks

Stephen Roscoe: Technical director, Grundon Waste Management

Diane Yarrow: Partner, B P Collins LLP

David Murray: Managing editor and publisher of The Business Magazine, chaired the discussion