Assessing the costs of meeting Scotland's zero waste targets: report

3: Methodology

Introduction

3.1 This section gives an overview of the methodology, the model, data sources and highlights some of the main assumptions made.

Modelling Overview

3.2 The overall approach adopted in the research was to construct a spreadsheet based model that took Scotland's Municipal Solid Waste ( MSW) targets and the historical MSW data from SEPA to accurately forecast the waste streams to 2025.

3.3 The waste infrastructure required to process future waste flows was then calculated by:

• Firstly identifying the existing waste infrastructure and capacities in each of the Waste Strategy Areas ( WSA).
• Secondly, estimating the shortfall between existing capacity and future waste flows for each of the WSAs.
• Finally, calculating the additional infrastructure needed to meet forecasted demand for each of the WSAs.

3.4 These WSA estimates were then aggregated to give the national picture. From this, the associated costs and benefits were derived.

3.5 The key elements of the model are described below.

Waste Streams

3.6 Before the capacity of waste infrastructure could be calculated, it was first necessary to examine each of the MSW streams that were subject to waste management targets. There were four such waste streams, measured in tonnes per annum, and they conformed to standard SEPA municipal waste data conventions. The four waste streams examined were:

• Recycling
• Composting
• EfW / Incineration
• Landfill

3.7 These four waste streams formed the principal elements for the modelling of municipal waste in Scotland for this study.

Waste Model Schematic

3.8 The SQW Waste Model developed for this research project comprised of four inter-related components (modules) that combine to deliver the key objectives stated in section 2. The structure of the waste model and how its component modules fit together are illustrated in Figure 3-1. The main inputs and outputs from the model are also shown.

Figure 3-1 SQW Waste Model Structure

Source: SQW Energy

Waste Stream Forecast Module

3.9 Before calculating the infrastructure required to meet government targets, it was necessary to establish how much of each waste stream would be produced in any given year out to 2025. This was done by modelling the four individual waste streams in the "Waste Stream Forecast Module" (see Figure 3-1).

3.10 Using SEPA annual historic data (2002 to 2009 ¹⁷) at a national and local authority level, Scotland's waste profile was modelled up to and including 2009 to show the waste flow of the four distinct waste streams. The future waste streams were then modelled for each of the six scenarios shown in Table 3-1.

Table 3-1 Waste Forecast Scenarios

Scenario Number	Description
Scenario 1a. Do Nothing (With Landfill Fines)	Continue at 2008/2009 levels of municipal waste processing and at present cost levels. No change in waste streams. The appropriate landfill fines are imposed.
Scenario 1b. Do Nothing (No Landfill Fines)	Continue at 2008/2009 levels of municipal waste processing and at present cost levels. No change in waste streams. No landfill fines are imposed.
Scenario 2. EUWFD Only	Meet all EU statutory obligations (only) such as the Waste Framework Directive and the Landfill Directive (e.g. landfill targets for 2010, 2013 and 2020; and 50% recycling/composting by 2020), but not the Scottish Government targets.
Scenario 3. EUWFD & SG Targets (50/20)	Meet all EU statutory obligations and all Scottish Government targets. This scenario assumes a 50/20 split between source segregation and residual waste to meet the 70% recycling and composting target.
Scenario 4. EUWFD & SG targets (60/10)	Meet all EU statutory obligations and all Scottish Government targets as per scenario 3 except this scenario assumes a 60/10 split between source segregation and residual waste to meet the 70% recycling and composting target.
Scenario 5. EUWFD & SG Targets (65/5)	Meet all EU statutory obligations and all Scottish Government targets as per scenario 3 except this scenario assumes a 65/5 split between source segregation and residual waste to meet the 70% recycling and composting target.
Scenario 6. EfW cap by 2018	Meet all EU statutory obligations and all Scottish Government targets as in scenario 3 except that EfW reaches its 25% cap earlier in 2018.

Source: SQW Energy

3.11 Scenario 1a and 1b presents the 'Do Nothing' option as a datum to illustrate the implications of continuing in a 'business as usual' manner with no change in procedure or to the costs of dealing with municipal waste. Scenario 1a includes any landfill fines imposed for missing targets, while Scenario 1b does not take into account landfill fines. Scenario 2 highlights the minimum required to comply with EU statutory obligations only and avoid any penalties. Scenario 3 demonstrates what is needed to meet all EU statutory obligations and achieve the targets set down by the Scottish Government. Scenarios 4, 5 and 6 show variations on Scenario 3.

3.12 Scenarios 2 to 6 are concerned with meeting EU and/or Scottish Government targets. The principle drivers of the waste stream forecast are the following targets, which in order of precedence, were applied as follows:

• EU landfill directive targets for BMW;
• EU Waste Framework Directive 50% recycling and composting by 2020;
• SG no growth in total municipal waste arising beyond 2010;
• SG Recycling and composting targets (40% by 2010; 50% by 2013; 60% by 2020; and 70% by 2025);
• SG No more than 5% municipal waste to landfill by 2025; and
• SG 25% EfW cap for municipal waste.

3.13 Given these targets, and the order of precedence in which they need to be achieved, the waste forecast to 2025 that meets all EU and Scottish Government targets effectively becomes a series of simultaneous equations that need to be solved. An example of the output results from the Waste Stream Forecast Module is shown in Figure 3-2.

Figure 3-2 Example Output of Waste Stream Forecast Module - Meet all EU and SG Targets

Source: SQW Energy

Waste Process Module

3.14 As shown previously in Figure 3-1, the waste stream output from the Waste Stream Forecast Module feeds into the Waste Process Module. The Waste Process Module is shown in Figure 3-3 and models the physical process of the waste streams taking account of major technology processes, plant efficiencies and the major losses of material from the waste management process - primarily moisture.

Figure 3-3 Waste Process Module

Source: SQW Energy

3.15 The Waste Process Module enabled the overall efficiencies and throughputs of the different waste processes to be determined. In addition, it allowed the impact of different process paths to be visualised and quantified, demonstrating the interaction between them, e.g. if additional EfW is installed then it has the effect of 'pulling' feedstock through an MBT reducing waste reclaimed through source segregated activities or sent direct to landfill/incineration.

3.16 Plant performances were set to reflect a range of factors including the equipment efficiency, downtime, maintenance and waste throughput, e.g. it was assumed that EfW had a load factor of 80% and an efficiency of 60%.

Waste Infrastructure Capacity Module

Current Infrastructure

3.17 Estimates of current infrastructure were drawn from SEPA's National Waste Capacity Report for Scotland ¹⁸, published in 2009, and giving data for 2007. This is the most up-to-date and comprehensive overview of waste infrastructure in Scotland.

3.18 The SEPA data was adjusted in two ways:

• For mixed use sites, and
• For incineration/ EfW capacity

3.19 The SEPA data includes a class of infrastructure titled "multiple activity" where a site has more than one kind of waste treatment infrastructure in place. SEPA issues a blanket licence for these and the capacities of individual elements of the site (for instance, the capacity to process composting) is unrecorded. For some WSAs these mixed use sites are a major element of their infrastructure, and to ignore them would be to give a misleadingly small estimate of Scottish waste infrastructure.

3.20 We therefore used SEPA's report on the number of activities in Scotland to identify those units "concealed" in mixed use sites and applied national averages (based on stand-alone units in SEPA's reporting) to arrive at estimates of total waste infrastructure capacity for Scotland.

3.21 Civic amenity sites, metal recyclers and transfer stations were grouped together to give estimates of recycling capacity.

3.22 The SEPA reporting for Incineration/ EfW infrastructure was not used. These items of infrastructure are both large and expensive and we were concerned not to skew the results by including infrastructure that was not relevant to the analysis (for example, the SEPA data includes a 750,000 tonne incineration plant in the Dumfries & Galloway area that handles only wood waste, not municipal waste ¹⁹). In addition, there are a number of EfW plants about to come on stream whose inclusion will have a significant impact on waste infrastructure requirements. We therefore updated the SEPA data to include EfW plants that have been announced and excluded those plants that do not use MSW based on our own investigations.

Future Additional Infrastructure Required

3.23 Infrastructure capacities for 2007 were used as the starting point for the infrastructure analysis. These were obtained from SEPA²⁰ and gave infrastructure capacities by local authorities, Waste Strategy Area and the national level. Solving the infrastructure requirements for Scotland as one entity led to an over simplistic solution where 'theoretically' one large piece of infrastructure could have served all of Scotland's needs. To solve the infrastructure requirements for each local authority also led to an over simplistic solution, where each local authority needed at least one of each type of infrastructure, where in reality they would have shared with neighbouring local authorities.

3.24 It was therefore decided to solve the infrastructure requirements based on the WSAs as laid out in SEPA's National Waste Capacity Report for Scotland 2007. Although the WSAs have some flexibility in how they operate 'cross-border', they offer a rational optimisation for the solving of Scotland's infrastructure requirements. In reality, some local authorities will continue to function as WSAs whilst others may work with other authorities and partnerships. WSAs will continue to evolve as they have since WSAs were first introduced to form the National Waste Plan (2003).

3.25 It is not an aim of the research to choose what specific types of waste management technology should be invested in by local authorities, i.e. not to choose winners, but only to identify what categories of infrastructure must be in place to be able to deal with the forecasted waste streams. We therefore grouped the waste infrastructure into the following categories:

• Landfill
• Aerobic Composting
• Anaerobic Composting
• EfW
• MBT/ MHT
• Recycling (transfer stations, amenity sites, bring, etc.)

3.26 The decision on what mix of technologies best meets waste targets ultimately lies with the local authorities who have responsibility for managing the municipal waste stream.

3.27 The Waste Infrastructure Capacity Module takes the forecast waste flows for each WSA and compares these with existing infrastructure to identify shortfalls in processing capacity and the years in which these would occur. The following issues should be noted:

• Landfill. No requirement for landfill was developed. At a national level, there is assumed to be sufficient capacity to meet requirements - however, at a WSA level, some WSAs are forecast to use up their existing landfill.
• Mechanical Biological Treatment ( MBT). Currently no MBT infrastructure exists. The waste process module assumes that to reach national objectives, a proportion of recycling, composting and feedstock for EfW will need to come via the MBT as residual waste. The assumption is that a WSA requires the installation of MBT where:
  • the proportion of recycling and composting as a percentage of total waste approaches 50% (60% for scenario 4 and 65% for Scenario 5). This represents the use of source segregation approaching its limits ²¹, or
  • the requirement for feedstock for EfW becomes substantial.

Under either of these conditions, a residual waste stream is introduced and a requirement for MBT infrastructure is created.

3.28 Where a shortfall in capacity was identified, the gap was addressed by adding additional infrastructure bases on a table of standard values for different types of infrastructure ( EfW, composting etc.) and different scales (small, medium, large). The additional infrastructure specified was of a scale sufficient to close the identified shortfall and to provide additional capacity for the WSA over the next few years.

Cost Benefit Analysis Module

Introduction

3.29 The Cost Benefit Analysis ( CBA) module takes the waste stream data and infrastructure capacity information as inputs, and provides estimates for:

• The type and capacity of new infrastructure required to accommodate forecast waste flows, over and above existing infrastructure;
• The cost of the new infrastructure for each WSA and the years in which it is required;
• The collection costs ²² for source segregated and mixed waste for each WSA;
• The processing costs for each waste stream based on the mix of units available in each WSA;
• The cost of any penalties resulting from exceeding EU limits on landfill;
• The benefits arising from each waste stream; and
• Net Present Cost over and above current funding levels to 2025.

3.30 The CBA does not account for non-market benefits (externalities) and deals purely with the market economics of waste.

3.31 These estimates are then taken forward into a Net Present Cost analysis, based on a Green Book compliant calculator ²³, and applying a discount rate of 3.5% to yield a final Net Present Cost for these investments. The NPC calculator brings together the estimates for each WSA area of collection and processing costs, off-set by any benefits. The current known level of spending by local authorities (some £404 million per year) is included as income, to allow the total additional costs of each scenario to be identified.

Infrastructure costs

3.32 Infrastructure costs have been estimated based on real-world examples of similar infrastructure (these are given in Annex C). These sources have also been used to estimate the average capacities of such infrastructure. These give an estimate for the total required investment in new infrastructure but, in practice, a buyer of such infrastructure would be able to more closely tailor the capacity, and therefore the cost, of an infrastructure investment to local requirements. In addition, some infrastructure may also benefit from other waste streams such as Industrial and Commercial for EfW. Capital costs of infrastructure are assumed to be spread over the lifetime of the unit. Therefore, for infrastructure brought on in 2025, there would be ongoing capital costs beyond 2025 which are therefore not included in the CBA.

Waste collection costs

3.33 Waste collection costs have been estimated by drawing on two sources:

• WRAP's Kerbside Recycling: Indicative Costs and Performance Technical Annex (June 2008) ²⁴ which gives average costs for urban and rural waste collection under a variety of waste management regimes
• The Scottish Government's Urban Rural Classification 2007-2008 ²⁵

3.34 The Urban Rural Classification was used to estimate the urban and rural population for each local authority area (for this purpose, population in remote small towns were classified as "rural") and then the balance between urban/rural population estimated for each of the Waste Strategy Areas ( WSA).

3.35 An average of the WRAPKerbside data for urban and rural authorities was then applied to each of the WSAs to give a figure for refuse and for recycling collections. For recycling, a waste management regime of refuse collection once a week and recycling collection every two weeks, using two boxes and kerbside sort, was assumed, reflecting the waste process module requirement that as much waste as possible be source segregated. Total waste collection costs could then be estimated by calculating the volume of refuse and recycling passing through each WSA in each year. Moving to an alternate week refuse collection would present another cost saving.

Processing costs

3.36 Processing costs were estimated primarily by drawing on the 2002 Defra Strategy Unit report Delivering the Landfill Directive: the role of new & emerging technologies²⁶ which gives a comprehensive overview of waste processing costs, including taking into account the impact different sizes of infrastructure have on waste processing costs (larger units having a lower processing cost per tonne).

3.37 The costs used are within the ranges estimated by the WRAP Gate Fees Report, 2008 ²⁷.

3.38 A base cost of £55, including landfill tax was assumed for 2009. This was increased by £8 per tonne per year until 2013 (£87/tonne); thereafter it remained steady until 2025.

3.39 These figures were then adjusted to bring them into line with the Scottish Local Government Financial Statistics ²⁸.

Financial benefits

3.40 The benefits arising from the processed waste were estimated by applying the following assumptions.

Recyclates

3.41 Recyclates were valued at £26 per tonne. This estimate was based on a four year average and a tonne of municipal waste yielding ²⁹:

• Paper & cardboard - 18% by weight
• Plastics - 8% by weight
• Glass - 7% by weight
• Scrap metal - 5% by weight

3.42 The value of these waste streams was estimated by applying the four-year average for waste materials provided by WRAP³⁰. The Cost Benefit Analysis assumes that the market for these materials remains steady, even as the volume of recyclates increases over time.

Composting

3.43 The value of compost was assumed to be £3.50 per tonne. UK estimates for the value of compost vary from £2.50 to £5 per tonne ³¹, however there is discussion as to the quality and marketability of the compost produced through the various processes available to those treating organic waste.

3.44 Again, it is assumed that the market for composting products will remain steady as the volume increases.

3.45 It is assumed that all composting, including anaerobic processing, is used to derive composting products. Given the investment, it would however be possible to derive biogas from anaerobic processing.

Energy from Waste

3.46 Energy from Waste plants generate electricity and heat from burning waste. It is assumed that each tonne of waste burned gives rise to 0.7 Megawatt hour ( MWh), at a wholesale price of £45 per Megawatt ( MWh). Each tonne of waste put through an EfW plant is therefore valued at £31.50.

3.47 Energy produced from burning biomass is eligible for support from the Renewable Obligation Certificates ( ROCs) regime where it is deemed a good quality system. Currently this is worth an additional £50 per MWh. From an operator's perspective (whether public or private) this is a major incentive to invest in Energy from Waste, however from a national government perspective this is effectively a subsidy. We have therefore included estimates of benefit both with and without ROCs ( Annex B).

3.48 An additional potential benefit from Energy from Waste plants is achieved by using the excess heat produced to warm homes and buildings. However, this requires a developed district heating system which is largely absent in Scotland. This benefit has therefore not been included although it is noted that this is a current requirement when applying for planning permission and licensing for EfW.

Landfill

3.49 Landfill can be tapped for biogas and used to generate electricity. The prevalence of infrastructure to capture biogas varies, as does the yield of biogas per tonne of waste and the efficiency with which this is captured.

3.50 It is assumed that one tonne of waste yields 120 m3 of methane which is captured at 16% efficiency ³². Each cubic metre of methane is assumed to yield 2 kWh ³³ of electricity.

3.51 Applying the same estimate of £45 per wholesale MWh, each tonne of landfilled waste would produce £10.80 of electricity.

Additional benefits

3.52 In addition to the market benefits of recovering useful materials from the waste stream, or capturing energy from its disposal, the processing of waste also has the potential to reduce the environmental impact of waste.

3.53 In addition, the Cost Benefit Analysis module also estimates the national contribution to the reduction in greenhouse gases of the different scenarios, based on the work of the U.S. Environmental Protection Agency and their WAste Reduction Model ( WARM). Within the study budget, it was not possible to include the UK equivalent model, WRATE; however, any future research may wish to further investigate the emissions implications of these different scenarios.

Data Sources

3.54 The project methodology depended on the availability of suitable secondary data. The scope of the study did not allow for primary research with those organisations involved in collecting, processing or disposing of waste. Where possible, the research team have sought to supplement secondary data with consultations with relevant stakeholders. The robustness of the study's estimates therefore depend on the quality and extent of the available data.

3.55 The base data for the analysis is drawn primarily from SEPA with additional data from Audit Scotland, The General Register Office for Scotland, Scottish Local Authorities and WRAP. Where no data was available, appropriate assumptions were made in agreement with Scottish Government and CoSLA representatives.

3.56 An email survey was carried out with all 32 local authorities in Scotland to ascertain their own future waste forecasts and infrastructure plans to meet the targets set by the EU and Scottish Government.

3.57 Existing infrastructure data was sourced from SEPA. Table 3-2 shows a summary of the Scotland's existing waste infrastructure (2007).

Table 3-2 Total number of operational waste management sites in Scotland by site type 2007

Site Type	Number
Anaerobic digestion plant	1
Civic amenity site	132
Composting site	11
EfW plant / Incinerator	8
Landfill (open)	52
Landfill (restoration)	21
Metal recycler	138
Multiple activity site	157
Other treatment plant	55
Pet cemetery/crematorium	7
Transfer station	223
Total	805

Source: SEPA

3.58 In undertaking this study, the following gaps in existing infrastructure data were found:

• Multiple Activity Sites - SEPA was unable to disaggregate the capacity of different types of infrastructure (e.g. composting and recycling, or landfill and recycling) where two or more types of infrastructure exist on the same site;
• There is no data available on the lifespan of existing infrastructure or when it may need to be replaced;
• There is no data available on the types of recycling that can be supported at recycling sites, only the overall capacity; and
• At the time of the study, the latest infrastructure figures were for 2007.

3.59 There is only limited data available in the public domain as to the capital costs of new infrastructure, this appears to be due to:

• Infrastructure already in place has a relatively long life, the addition of new units of infrastructure has occurred less frequently historically than is expected to be the case in future;
• New developments being undertaken by the private sector, where capital costs are commercially sensitive;
• New developments taking place under the Private Finance Initiative, where capital costs are included under the total cost of the contract to the public sector; and
• New technologies, such as MBT and AD, are only now being commissioned.

3.60 Collection costs were sourced from WRAP. This data was given for both urban and rural areas, and estimates for each WSA area were adjusted by each WSA's proportion of urban and rural population

3.61 The Scottish Local Government Financial Statistics for 2007-08 show that the actual total expenditure was:

• £198 million for collection
• £206 million for waste disposal

3.62 The use of the £404 million assumes that existing spending can be redirected to new forms of collection and disposal without incurring any penalty or time lag. In practice, local authorities may be tied into contractual arrangements, or may not themselves be able to reduce the costs of specific costs of collection or processing at the same pace as demand is being reduced, and as a result cannot reallocate funding as flexibly as is assumed. In that event, the overall costs of Scenarios 2 to 6 would rise.

Assumptions

3.63 The study was a desk-based exercise, and therefore limited to the information already in the public domain. In attempting to forecast infrastructure requirements, the study team were therefore limited by a number of factors:

• The data on the size and cost of units of infrastructure had to be derived from those developments that were already in the public domain - in future standard costs and size of units of infrastructure may change;
• Capital costs of infrastructure are assumed to be spread over the lifetime of the unit. Therefore, for infrastructure brought on in 2025, there would be ongoing capital costs beyond 2025 which are therefore not included in the CBA.
• The unit sizes used are based on those already commissioned - in practice a commissioning authority could elect to purchase a 60,000 tonne unit say, rather than a 40,000 or 80,000 tonne unit, which would better meet their anticipated needs;
• There are indications from consultees that future deployments may be of a larger scale than at present, bringing greater efficiencies and reducing costs;
• Waste Strategy Areas ( WSAs) may not be the most appropriate geography to deliver certain types of infrastructure - it is possible particularly large or expensive units of infrastructure would be shared between many authorities; and
• Multiple activity sites - the SEPA data on which these estimates are based does not disaggregate sites where there is more than one type of infrastructure. We have therefore had to estimate the size of different types of infrastructure on these sites, and their real capacities may be somewhat larger or smaller.
• Recycling - the SEPA data does not specify what types of waste material can be handled at different sites. The assumption in the Cost Benefit Analysis is that the sites can handle all potentially recyclable materials. Where this is not the case, additional investment will be required in practice.

3.64 Due to the complexity of the analysis, some assumptions were necessary to allow the waste models to be built. Table 3-3 lists some of the main assumptions.

Table 3-3 Waste Modelling Assumptions

Baseline Assumptions
Only municipal solid waste ( MSW) is considered.
Financial years are used (e.g. April 2007 to March 2008).
Local Authority Biodegradable Municipal Waste ( BMW) to landfill targets up to 2009/2010 are per the Scottish Government allocations.
Local Authority BMW to landfill targets from 2011 to 2020 are based on equal reductions to all LAs in accordance with the EU directive.
Approximately 63% of waste sent to landfill is BMW.
On average twice as much waste is recycled as composted, i.e. Recycling to Compost ratio is 2:1.
No effect on waste from economic cycles is assumed.
Total Waste Arising remains flat beyond 2010.
The 25% cap on EfW applies to incineration, gasification, plasma and pyrolysis.
Existing infrastructure is taken to be that infrastructure which was operational and registered according to SEPA's 2007 National Capacity report.
The reduction in landfill targets is straight line between target years.
The 70% target for recycling and composting cover all recycling and composting materials, both source segregated and residual.

Source: SQW Energy [n.b. any increases in landfill tax after 2013 (as announced in the March 2010 budget) will impact on the costs presented, particularly 1a and 1b where more waste is landfilled]