Tuesday 24 August 2010

Costs of incinerator should be a burning issue

There has been no public scrutiny of the costs for planning and running the Poolbeg incinerator, write JOE MCCARTHY and VALERIE JENNINGS.

THE DEAL struck between Dublin City Council and Covanta for the Poolbeg incinerator is a closely guarded secret so the public has been unable to judge the value for money in this project.

We know from two previous mistakes – e-voting machines and the Westlink toll bridge – that the public has lost millions through bad deals struck by public servants making poorly-informed decisions.

There has been no public scrutiny of the costs for planning, building and running this incinerator. In 2007, without reopening the public procurement process, Dublin City Council brought Covanta into this public/private partnership (PPP) when the original consortium of DONG/Elsam withdrew. The council went ahead with an extraordinary contract with Covanta which commits the city to decades of payments whether or not the waste is actually available.

The private operator in a PPP is supposed to bear the risk, but in this case the council has removed the risk by giving financial certainty to Covanta via the 25-year municipal contract at a fixed gate fee for 320,000 tonnes per annum. Thus the people of Dublin are carrying the risk, not Covanta.

We have asked the council at open days, at the Environmental Protection Agency (EPA) and Bórd Pleanála oral hearings and via Freedom of Information requests for details of the original financial model and for details of the contract costings but the council refuses to divulge any details on the basis of commercial confidentiality.

Therefore the figures used in this article are our best estimates based on information that is in the public domain and our extrapolations. We would be happy to revise our calculations if Dublin City Council would reveal their actual figures.

Because we do not have details of the “put or pay” contract between the council and Covanta we have estimated a gate fee of €80 per tonne (this estimate is based on figures presented to the oral hearings). At €80 per tonne Covanta would be guaranteed €25.6 million per annum for the first 320,000 tonnes. This revenue is more than enough to make a profit for Covanta.

On the same basis, we estimate the likely penalties for the city council not meeting the “put or pay” clause to be in the order of €14.4 million per annum.

Because the plant is oversized at 600,000 tonnes Covanta will be free to offer the excess capacity at any marginal price it chooses. This could lead to undercutting of other operators. Recycling and mechanical biological treatment (MBT), which are more environmentally friendly disposal methods, would be undermined. This has already happened in US cities where Covanta is operating.

A presentation by Covanta to the Welsh government released under FoI reveals an offer by Covanta to operate a 600,000 tonne incinerator just like Poolbeg for a gate fee of £45 (€53) per tonne. An agreement signed in the US by Elbert County, Georgia, which names Covanta as operator of a planned incinerator the same size as Poolbeg, has a gate fee of just $25 (€20) per tonne.

Why has Dublin City Council apparently committed to a gate fee which is 50 per cent more expensive than the offer in Wales and four times the cost in Georgia?

The additional income to Covanta would be €8.64 million annually over the Welsh price or €19.2 million over the US price.

Then there is the question of revenue from the sale of electricity.

We estimate the electricity revenue from burning 320,000 tonnes to be €11.5 million annually and Covanta generally retains energy revenues from tip-fee type contracts, although again we don’t know what revenue sharing is agreed for Dublin.

Covanta’s extra income in Dublin, compared to Wales and the US, therefore appears to be between €20 million and €30 million annually. Over the 25 years of the contract Covanta could take between €500 million and €750 million in extra income in Dublin.

This is an astonishing amount of money. Cui bono? Certainly not the citizens of Dublin. We begin to see why US big business is leaning so heavily on the Irish authorities to get this project going before too many awkward questions are asked.

Incineration was selected in 1997 based on a flawed analysis. The margin by which incineration was chosen over MBT was just 19 per cent but several costs were omitted, including the cost of the land, the cost of disposing of ash and the cost of CO2 emissions.

The incinerator will produce mountains of bottom ash – 150,000 tonnes every year – and the city council proposed to export this ash from Poolbeg by ship for “recycling” in the UK or Denmark. The cost of transporting the bottom ash was omitted from the original analysis. The impact of handling and disposing of the bottom ash was excluded from both the Bórd Pleanála and EPA hearings.

If, as is likely, the bottom ash is to go to the new landfill at Nevitt in north Co Dublin the planning permission will have to be “rectified”, according to former assistant city manager Matt Twomey.

Bottom ash is an active material because of the heavy metal content and will need a waste licence before being exported or being dumped in landfill. The ash needs to be cured by allowing it to sit for weeks in the air before it can be tested for hazardous classification.

The costs of the ash handling, transport and land for curing have also been omitted.

The original analysis omitted the cost of disposal of fly ash which is toxic and needs specialised handling and disposal, usually in salt mines in Germany. Again the cost of transport was omitted.

The cost of the large quantities of CO2 produced by the incinerator was also omitted.

When all these costs are taken into account MBT is actually cheaper than incineration.

Dublin City Council is spinning about the likelihood of large fines. Fines for breaching the EU landfill directive have not been imposed anywhere and are unlikely to arise in Ireland. This is because the MBT plants already in operation suggest the 2010 target will be met. EPA guidelines on source segregation and regulations requiring the composting of food waste will help the country meet the targets for future years.

If the Dublin region had a number of smaller MBT plants there would be less distance for trucks to transport the waste, more jobs and more competition in the marketplace. This would provide better value for the residents and businesses of Dublin than one enormous incinerator monopolising the waste market. It would also mean that Dublin would not be stuck with an inflexible contract for 25 years, restricting any innovation in waste management.

This project was intentionally split into pieces, each requiring approval from a different authority. There is no proper cost benefit analysis for the overall project.

E-voting and Westlink turned out to be extremely costly to the Irish taxpayer. They were undertaken by the authorities without proper scrutiny of the costs – €60 million in the case of e-voting and €600 million to buy out the Westlink toll bridge. We need an opportunity to discuss the value for money of the proposed incinerator and the enormous costs and profits associated with it.

It is time for an independent, open inquiry into how this project came about, what the costs have been and what the financial consequences will be for Dublin’s citizens.

Joe McCarthy and Valerie Jennings are residents of Sandymount, Dublin. They previously campaigned successfully against the e-voting project.

Irish Times


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