Get ready for a post-PFI waste landscape
In the aftermath of PFIs, we are likely to see a dramatic reshaping of the relationship between the state and the private sector, says Chris Williams
For several decades, there has been a serious need for the UK to invest in improving and expanding its waste management infrastructure. More sustainable facilities are required to boost reuse and recycling; both to maximise the value of rubbish produced and to divert as much as possible from landfill.
The urgency of this issue was emphasised in the Associate Parliamentary Sustainable Resource Group’s (APSRG) report this September, which stated how £8bn is required by 2020, for the UK to stand a chance of meeting its EU and domestic landfill diversion targets.
Yet it is unclear how the industry can lock down finance to deliver such goals at this time. Given current policy and regulatory uncertainty, falls in bank lending, and the decline of the Private Finance Initiative (PFI) and Private Public Partnership (PPP) schemes, the climate is tough for developers who are trying to secure sufficient funds for their projects to take off.
PFIs have not been successful in incentivising new projects to come on board and be operational in time to meet local waste management needs. Their excessively rigid and convoluted legal framework has gridlocked many promising developments – many of which have been delayed by over three years, simply through box ticking and waiting for the finances to fall into place.
Given that local authorities require rapid solutions for dealing with municipal waste, accompanied by relatively short term, flexible contracts, these kinds of slow pipeline solutions are clearly unsuitable. Limitations in UK planning regulations have inhibited growth and the consolidation of an effective, joined-up UK infrastructure.
The existing legislative framework encourages planners to favour primary stage waste management technologies like MRFs, which has often led to secondary-stage technologies to be seen as competitors to existing projects, rather than as complimentary schemes.
A new approach is required to attract greater, more flexible investment in waste management projects, and to reset planning priorities to achieve a more integrated solution. The first step would be to amend planning legislation to offer more support for emerging sustainable technologies.
Mirroring the APSRG’s suggestion that the Government establishes a coordinating committee, rooted in the Cabinet Office, with cross-departmental, agency and public body representation – a central Government support team could be set up to help overcome issues of short-sightedness in the planning process. This team could provide strategic advice for individual councils.
In the aftermath of PFIs, we are also likely to see a dramatic reshaping of the relationship between the state and the private sector. There will be a growing reliance on large scale, privately financed merchant developers to deliver the environmentally friendly solutions needed – both on a commercial and industrial basis, but also at the municipal level, as merchant developers will be in a stronger position to offer local councils the flexible contracts they want, at competitive rates.
Yet policy clarity is needed to outline which renewable technologies will receive more or less Government support for the energy that they produce. Only then will private financiers have the assurances they need to confirm their investments, properly enabling the industry to take off. In cases where local authorities wish to build their own facilities, we may see councils opting to raise their own bonds to facilitate finances.
Innovative green bonds at the council level could allow people and businesses to invest in new energy from waste plants, receive dividends from their operations and, through a greater level of community buy-in, raise demands on projects to deliver efficiently and on time.
The future economic landscape is in desperate need of smoothing over with greater legislative clarity from the Government. If we can get this swiftly, developers will have the opportunity to meet the demand for growth of sustainable infrastructure in a post PFI world. Without it, the path ahead is a bumpy one.
Chris Williams is managing director at Green Energy Parks
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