We’ve now had over two years of the Green Investment Bank (GIB), enough time to evaluate how green its intervention in the waste sector has been. It’s no surprise that the answer is ‘not very’, but much more interesting to ask why.

Back in July 2014, the Environmental Audit Committee called on the GIB to support the circular economy, at the same time calling on government to ‘ensure that its policies for recovering resources and generating energy are aligned and are consistent with the waste hierarchy’.

I suppose that, case by case, the GIB can be said to be applying the waste hierarchy – it hasn’t invested in a landfill site yet. But its overall investment portfolio isn’t that of an organisation striving to apply the hierarchy as a priority.

Going on the record

Aside from a couple combined heat and power (CHP) plants that will run on waste wood, the bank has invested – directly or through fund managers – in 12 waste projects. Of those, four are anaerobic digestion (AD) plants. The other eight are thermal treatment projects, although the Derby, Allerton and Levenseat facilities sort a small percentage of input material for recycling.

These 12 projects yield a total of 2.3 million tonnes per annum of treatment capacity. Of this, three per cent is for recycling, 11 per cent for AD and 87.5 per cent thermal energy from waste (EfW). In financial terms,
out of investment to date of £300 million, almost 90 per cent is in projects that are mostly or wholly EfW. The numbers would be further tilted towards EfW had the Norfolk incinerator project not been pulled by the councils involved.

By contrast, nothing has been invested in ‘recycling-only’ projects. February’s launch of a £50-million Recycling and Waste (RAW) fund for ‘smaller-scale, innovative, recycling and waste projects’ might help the GIB break its recycling duck, but it won’t substantially change the balance. So, why is its focus on the not-so-green end of the waste hierarchy?

They say that if your only tool is a hammer, all problems look like nails. For an investor with £3.8 billion to commit to infrastructure, problems that need dollops of funding, like residual waste infrastructure, look most pressing. Many incinerator projects were seeking investment when the GIB was established, while
others found themselves needing finance when Defra pulled their PFI credits. But might the GIB’s portfolio rebalance towards projects further up the waste hierarchy in future?

Leave the capital

It seems questionable, absent some major changes outside the bank’s control. If you want to do environmentally-sound things with waste, then generally it’s not capital you need. The most benefit comes from waste prevention, which typically requires work on product design, communications, or incentives, not infrastructure.

The GIB is already involved in the AD sector and seems to have a pipeline of future projects. Even so, access to capital is currently less of a limiting factor for AD than securing feedstock. Unless an AD plant can demonstrate reliable access to feedstock, investors (however green) are unlikely to be impressed with the business case. But few cash-strapped councils are making the small capital investment for separate food waste collections, despite the possibility of substantial savings on residual waste.

There are similar issues with recycling infrastructure: unless capture is increased, there simply won’t be much need for extra capacity. Indeed, if more material is collected in separate streams, the demand for capital investment in recycling could diminish.

Thermal treatment is the only capital-intensive part of the waste sector, and the one whose supply of feedstock doesn’t depend on other agents changing how they collect waste.

Working on the margins

I don’t doubt that the GIB is trying to make the UK greener, but you can only assess whether an EfW project will be environmentally beneficial if you understand the energy it will effectively displace over its lifetime. Unfortunately, the GIB has failed to grasp how to estimate this. As a result, it is investing in projects that will actually hold back progress on emissions.

GIB staff have told me that their approach to incinerator GHG emissions is aligned with that in the planning inspector’s report in the Javelin Park Incinerator inquiry, which led to Eric Pickles overturning the local planning committee’s decision to block the development. The report’s section covering greenhouse gas emissions (paragraphs 1020-1037) is, frankly, a bit of a mess, and reinforces my view that this issue should be dealt with, once and for all, outside of the inquiry context.

The GIB follows the Javelin Park planning inspector in wrongly thinking that over a facility’s life, avoided emissions attributable to electricity generation should be assumed to remain constant. However, decarbonisation of the electricity grid means the net emissions associated with an EfW plant gradually worsen (all else being equal), and the incinerator’s performance eventually ends up worse than that of landfill. In the Norfolk planning inquiry, I advised that this crossover point would occur roughly halfway through the plant’s expected life: with each passing year, the climate change performance of EfW gets worse.

Notes and queries

The Javelin Park Planning Inspector wasn’t quite right to say: ‘The assumption in the model that the electricity exported from the appeal proposal would displace that otherwise produced by a Combined Cycle Gas Turbine [CCGT] should not be criticised. This is what [Defra’s “Energy from Waste: a Guide to the Debate”] identifies as the current standard comparator since this is the marginal technology choice if building a new power station.’

Admittedly, the guide contains a footnote that says: ‘A gas fired power station [CCGT] is a reasonable comparator as this is the most likely technology if you wanted to build a new power station today.’

I spotted this in the first version of the guide and raised it with Defra officials.
I was told that the footnote had been written in a ‘non-technical’ way and that while CCGT’s emissions were roughly aligned with the current marginal level, ‘of course this will evolve over time, as will I suspect the footnote’. Emissions are changing considerably; the footnote, though, remains much as before, and continues to lead to misunderstandings, even though it goes on to say: ‘When conducting more detailed assessments the energy offset should be calculated in line with DECC guidance using the appropriate marginal energy factor.’ This is clear, and directs readers to DECC guidance and a set of data tables that project marginal CO2 emission factors through to 2100. The marginal generation figure for 2010 was indeed 0.349kg CO2e/kWh – similar to the expected output from CCGT. However, it falls away quickly over the next decade, and by 2027 is 0.171kg – leaving most EfW investments looking far from green.

Indeed, if you look at the main text of ‘Guide to the Debate’, rather than the footnotes, you read that ‘while electricity-only plants may be beneficial over their planned lifetimes, the carbon benefits would be expected to be least in the final years, when decarbonisation of the grid is most likely to have occurred’.

It is hard to read this as consistent with the view that CCGT is the marginal source of energy displaced throughout a facility’s life. Discussions with the GIB confirm it is making the same error by reading the annual carbon intensity figures in the DECC data tables as constants for a facility constructed in a given year.

As a result, the GIB is supporting projects that are rapidly becoming the least favourable option for waste management in terms of carbon, and the most carbon-intense source of electricity in the UK. Such an institution hardly merits the label ‘green’.

Before committing millions of pounds to projects with dubious credentials, the GIB could easily check its interpretation of the guidance, as I did, with the people who wrote it. Since I was told my interpretation is correct, they’d presumably find their interpretation is wrong. The GIB would then be forced to recognise that the large investments it has made in the waste sector are not green ones.

This article is a version of one that originally appeared on the Isonomia blog. For more, visit www.isonomia.co.uk