27 March, 2014
Legal News & Analysis – Asia Pacific – Australia – Energy & Project Finance
On 18 March 2014 the NSW EPA released its long awaited Energy from Waste Policy Statement (the Policy). It sets the policy framework for Energy from Waste (EfW) facilities in NSW, and provides some certainty to those interested in pursuing EfW projects. However, the questions which will determine if projects proceed are: how practical is the Policy from a commercial point of view, and how much will it help overcome regulatory hurdles in getting projects off the ground?
Outline Of The Policy
The Policy recognises that EfW can form a positive part of an integrated waste management, but still prefers avoidance and resource recovery, where possible. EfW facilities will be contingent on demonstrating that they represent the most efficient means of dealing with the waste.
EfW facilities will fall within two categories – those that use pre-approved “eligible waste fuels”, and those that use a
different waste fuel.
If a plant proposes to use “eligible waste fuels”, there are fewer hurdles to overcome, provided that a resource recovery exemption has been granted. However, such EfW facilities will still need to confirm that there are no practical reuse opportunities for the waste and meet required emissions standards.
Those not using “eligible waste fuels” will have to demonstrate that they will satisfy international best practice in areas such as process design and control, emission controls and monitoring, arrangements for receipt of waste and management of residues. There are also technical criteria and thermal efficiency criteria to be satisfied for these EfW facilities. Additionally, such EfW facilities will need to meet specified resource recovery criteria, which limit the proportion of each waste stream that can be used for EfW facilities.
EfW facilities will also need to be net-positive, in that they generate more energy than they consume.
Commercial Drivers
A key factor in the economics of proposed EfW facilities will be the limited waste streams that can be used as fuel, due to the requirement to demonstrate that there are no higher-order uses for the waste (combined with the resource recovery criteria). This is likely to increase input costs. However, the EPA has been clear that the reason behind this is to ensure that EfW does not detract from reuse and resource recovery.
Costs in connecting to the electricity grid, together with variations in electricity demand and prices may impact on EfW facilities, if the sale of power forms a significant portion of the business case for the facility.
Additionally, regulatory difficulties will also impact the commerciality of EfW projects.
Overcoming Regulatory Hurdles
Despite the Policy, EfW facilities will still be subject to the normal development application process, as well as the need to obtain any required environment protection licences. EfW facilities will likely qualify as “State Significant Development” under the Environmental Planning and Assessment Act 1979, meaning the Minister for Planning will be the consent authority. In practice, this means that the Department of Planning and Infrastructure will be carrying out day-to-day assessment and management of the development application process. In addition to planning and environmental approvals, approvals will be required to put energy back into the grid, which can also be a complicated process.
Community perception and attitudes will also be key. While Councils are unlikely to be the consent authorities for most EfW projects, they will still be important in managing community attitudes and perceptions.
For facilities using “eligible waste fuels”, a resource recovery exemption must be obtained. While this removes one of the hurdles under the Protection of the Environment Operations Act 1997, obtaining the exemption, and complying with it, may still be complicated processes.
Conclusion
The Policy is a positive step forward for waste management in NSW, as it provides clear principles and criteria for those considering EfW projects.
Councils and other waste suppliers and generators will need to consider if EfW presents an attractive offering in their integrated waste strategies and, if so, will need to work together with industry to overcome commercial and practical hurdles. For industry clients considering constructing EfW facilities, securing a consistent, long-term waste stream to supply the fuel upfront and ensuring that relevant criteria are met will be crucial.
While there have been mixed comments regarding the commerciality and practicality of the Policy from those in industry, time will tell whether the Policy is a wasted effort, or the kick-start that was needed for EfW projects in NSW.
Nicholas Brunton, Partner, Henry Davis York
Gavin Shapiro, Henry Davis York
Homegrown Energy & Project Finance Law Firms in Australia