Defra pulls PFI credits from Veolia incinerator

The Department for Environment, Food & Rural Affairs (Defra) has pulled £115.3 million of private finance initiative (PFI) credits from Veolia Environmental Services’ New Barnfield waste incinerator after finding EU landfill diversion targets will be met with England’s existing infrastructure.

On 26 March 2009, Defra announced that it would award Hertfordshire County Council £115.3 million in PFI credits to help build a £200-million incinerator (with the remainder of the investment being covered by the private sector) that would run over a period of 25 years.

However, after estimating that England’s current waste infrastructure would be ‘sufficient’ to meet the EU’s 2020 landfill diversion targets, Defra announced today (17 October) that it will withdraw the funding.

A Defra spokesperson explained:
“Defra’s responsibility is to ensure public money is used appropriately, and as we expect to meet EU landfill diversion targets with the existing infrastructure we now have in place in England, we cannot justify continuing to fund this project.”

Speaking after the announcement, a Veolia spokesperson said: “We are very disappointed that Defra have chosen to withdraw PFI credits from the Hertfordshire waste infrastructure contract.

“This shortsighted decision will increase the UK's reliance on landfill to treat our residual waste and will not help to grow the circular economy. Veolia believe that Defra's decision points to a lack of government support for new waste infrastructure, green investment and jobs, and fails to address the 17 million tonnes of waste that currently goes to landfill.”

The spokesperson added, however, that the decision had “not affected Veolia’s belief that an in-county treatment solution for Hertfordshire is needed”.

Terry Douris, Cabinet Member for Waste Management at Hertfordshire County Council, commented: “In light of the Secretary of State’s decision not to grant planning permission to Veolia, the decision to remove PFI funding is not a surprise. However, it is still hugely disappointing as we were told throughout the process that we made an excellent case for government funding for a new facility in Hertfordshire which would improve our waste disposal infrastructure and reduce costs to taxpayers.

“This decision doesn’t change the need to find a long-term solution for dealing with Hertfordshire’s waste. Over 275,000 tonnes of household waste collected annually by local authorities isn’t recycled. We know it is not practical to keep sending waste to landfill, and we can't recycle everything, so we need a sustainable and affordable alternative.”

The county council is considering next steps in relation to the Veolia contract and the future of Hertfordshire’s waste disposal. This will be discussed by Highways and Waste Management Panel on 4 November before a decision is made by Cabinet on 10 November.

Veolia incinerator plans undecided

The future of Veolia’s New Barnfield incinerator now looks bleak, as the PFI decision comes just months after the Department for Communities and Local Government (DCLG) refused to grant planning permission for the energy-from-waste (EfW) plant.

Despite Hertfordshire County Council’s Development and Control Committee granting planning permission for the 380,000-tonne energy-from-waste plant in October 2012, the decision was called in for public inquiry in January 2013 over claims that the council had ‘casually dismissed’ 6,300 responses opposing the project over health and environmental damage fears.

In July of this year, it was announced that the Secretary of State for Communities and Local Government Eric Pickles had rejected the plans, predominately on the grounds that the proposed site would have been built on green belt land. (Pickles has now amended the National Planning Policy for Waste to ensure that green belt land is protected from waste developments.)

Writing to Veolia on behalf of Pickles in July, Julian Pitt from the DCLG stated that due to the size of the building, (the estimated volume of which would have been 585,000 cubic metres (m3), ‘almost 20 times the volume of the existing buildings’) ‘there would be substantial actual harm to the openness of the Green Belt’.

However, Veolia responded in August by saying that it was to appeal the decision in the belief that “current policy and law [had] been misapplied”.

It has confirmed that it will continue with its legal challenge despite the PFI withdrawal, with a hearing expected to be held in December.

The Veolia project is the latest waste incineration project to be affected by a Defra U-turn. To date, the government body has withdrawn support from PFI waste projects run by:

All of these waste projects had funding withdrawn for the same reason as the Hertfordshire incinerator, in a move that was welcomed by some commentators as a long-overdue removal of public subsidies for incineration, though was clearly a blow to those that had funding taken away.

Indeed, many have been critical of Defra’s award of PFI credits in the past, with an inquiry into Defra’s handling of three private finance initiative (PFI) waste projects finding earlier this year that the government department ‘failed to exercise good judgement’.

The House of Commons Committee of Public Accounts argued that Defra had been ‘unacceptably slow to intervene in projects that are struggling to deliver the required waste management infrastructure leading to delays and incurring extra costs’ and that funding agreements for the early PFI waste deals were 'poorly drafted' and 'too lax', as they required payments to be made even though some of the key assets planned have not been built.

Find out more about the proposed New Barnfield incinerator, the threat of incinerator overcapacity in the UK or Defra’s withdrawal of other PFI contracts.

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