In yesterday’s Prime Time, Paul Cunningham revealed that there is a break clause in the contract between DCC and Covanta. The write-up is here, and it is about as informative as the broadcast.
Under certain, unspecified conditions, either party is free to walk away tomorrow. Not having seen the contract, I can only guess that a ministerial campaign against government policy is not among those conditions.
Does this change the calculus of the desirability of incineration of Poolbeg? Two arguments have not changed. We’re still in breach of the landfill directive, and the alternatives to incineration are expensive and will take a long time to plan and build. Two other arguments would change their importance. We may need to pay less compensation to Covanta, but the signal “Ireland: Closed for business” would be louder.
It may of course be that both parties have invested so much already that they have no desire to walk away.
Cue the green trolls.
UPDATE: The Dublin City Council says that RTE’s report is incorrect. IWMA says the taxpayer will pay 2 billion euro for the incinerator.
45 replies on “Poolbeg: New spin”
Maybe things are more complex.
It might suit DCC to reach this stage having fought valiantly, but forced under political pressure to start new negotiations…
I don’t buy this closed for business crap.
If the contract has been honoured whatever the potential outcomes, Ireland is open for business, and covanta may want better legal services in the future.
So if contract has termination provision at 36 months and a party terminates under that provision. Then the contract has been honoured and the project has ended. Don’t see how that sends out a negative message.
I think your piece has made a very good argument for the contract to be disclosed in full so that all the spin can end and the debate can take place in the proper context.
DCC’s stonewalling regarding the status of the contract and any negotiations regarding a new contract are quite harmful.
@Richard
Can you give us any figures for your allegation that we are in breach of the landfill directive?
Why would one pay any compensation at all if the contract has a long stop date?
Ireland would be better off without an expensive incinerator from Covanta.
—
J&V
@J&V
The landfill targets came into force this summer, and the official waste figures will not be released for a while.
There are three predictive models of waste volume and composition. The ESRI model is the most responsive to economic growth, and it shows that we are in breach despite the recession. By implication, the other two models show the same. So, the consensus forecast is that we’ll breach the target.
Not having followed the project from its inception, I am very curious to know the reasons for picking Poolbeg as a site for an incinerator serving the Dublin area.
Apart from reading the EIS, is there a short answer to this?
I agree that our trash problem persists and must be dealt with, but building an outsized incinerator in the city centre, and committing to pay extra to the operators in the event of a shortfall in rubbish production is not the solution.
I’d rather see it scaled down to a more appropriate size than currently planned. This project is massive (and expensive) overkill.
@ Ger
Poolbeg is hardly the city centre… It’s about the same distance to Westmoreland Street (as an arbitrary ‘centre’) as Rathmines is.
@ Donal,
Managers may have originally thought that there would be less political opposition from locating in Poolbeg, given that there were already significant heavy-industry type facilities down there (ESB, glass bottle, waste water, etc), than in a greenfield-site where strong local objections would be inevitable.
What managers probably didn’t anticipate was Dublin South-East’s upsetting habit of being represented at the cabinet table (Ruairi Quinn 1992-97, Michael McDowell 1999-2007, John Gormley 2007 – date). That has upped the ante considerably as local politicians are pretty-much duty-bound to oppose the incinerator.
@ Marcus,
well it’s an entirely subjective thing, but I would consider Rathmines fairly central in its own right.
I’ll do my trollish best.
I’m pretty neutral on incineration (having said that waste reduction by regulating the packaging industry and supermarkets would of course be more efficient) if part of the contract is public access to real-time, neutrally-calibrated, data-streams from sensors for dioxins etc. at the top of the stack. Covanta and Mr. Tol no doubt favours self-regulation and occasional inspections by and under-resourced EPA.
I have to wonder what skin Mr. Tol has in this game, or is it just a vendetta against our esteemed Minister of the Environment. Who deserves all he gets and more.
@Richard
I have no issue with incineration but what is your opinion on the “put or pay” clause?
If it’s a viable operation there should be no need for this. Or any risk to the tax payer.
Tim
@Cormac
If so, the managers who chose this site, lack imagination.
ESB and waste water are part of networks – with fuel for the ESB power stations being delivered by by sea or by pipeline.
As far as I know, waste has to be delivered by truck.(Somebody is bound to tell me that in Vienna, trucks do not sully Hundertwasser’s waste incinerator/districit heating plant http://de.wikipedia.org/wiki/M%C3%BCllverbrennungsanlage_Spittelau) As the southern leg of the Eastern ByPass was not built (the Dublin Port Tunnel is based the last effort to build that), I can only imagine people fear of continuous streams of HGVs going through residential areas – something I sympathise with greatly following the success of the DPT in removing HGVs from the residential and educational district in which I live – Drumcondra.*
I doubt that waste can be delivered any other way. It looks as though I will have to look at the EIS – if I can find it on some web-site or other.
In doing so, I will be curious to see what alternative sites were considered.
Too late now, but during the early 1990s campaign against closing the Allenwood (peat-fired) power station in Co. Kildare, I did observe that it would have been a good site for an incinerator. Apart from generating electricty (no extra grid needed), the waste heat could have been used for greenhouse crops on the nearby cut-away bog.
*Now if only the NTA would insist on a different congestion-charging toll scheme, people from the central business district and SE Dublin could use the DPT to access the Airport.
@Donal:
“I doubt that waste can be delivered any other way.”
It could be delivered by barge (as some other O Brolchains could attest) via the Royal, Grand and Liffey, and by coaster from other ports. Yes, more expensive and slower, but reduces the number of trucks.
bjg
Cue the green trolls.
I see plenty of scraping of the barrel in this post to argue why this scheme just *has* to go ahead – so I see Mr. Tol’s feud with the Greens over literally everything they propose continues. Did a Greenpeace member knock over his ice-cream cone when he was a boy?
Is the ESRI still doing work for DCC on this? Richard declined to answer that question in the previous incinerator thread. It seems like something which an ethical person might disclose as a conflict of interest, if it is the case.
@Richard
“So, the consensus forecast is that we’ll breach the target.”
This may be your consensus but it is not ours. We understand from today’s reports that black bin waste in Dublin is down 54% between 2007 and 2009. It will drop further this year.
The Dublin landfill tonnage in 2007 was 582,000 tonnes and we estimate that 2010 will be around 220,000 tonnes.
You stated that the ESRI model is the most responsive to economic growth (sic) (did you mean decline?)
Could you put our estimates into your model and tell us would you still forecast a breach of the landfill directive?
—
J&V
PS We debate the issue on its merits – we don’t troll.
“Cue the green trolls.”
A charming invitation to debate, even if “troll” doesn’t mean what you seem to think it means.
Might I invite you in turn to take a look back at this earlier article and respond to the questions on how you were able to make such definitive assertions on the decision of the Competition Authority?
@Ryano
Don’t hold your breath, Mr. Tol never defends his interventions.
@Pope Epopt
Incinerators are innocent if well-run. Close monitoring is key. Such data are in the public domain per Aarhus.
@J&V
You’re no trolls. You stay on topic and you argue on merit.
@ Ryano
Could he have ment Tol’s?
@Richard
It’s funny that you say ‘new spin’ when it is you that not willing to change your view after this new information has come to light
Your argument was, the contract is signed, there is no point complaining, there is nothing we can do now (sorry I’m too lazy with a couple of guinness down to go back and quote you verbatum, will do later if you dispute this).
It is clear now that there may be a break clause that can be used. There has been a huge number of changes since 2007 that may enable DCC to enact the clause legitimatly, the main one being the fact DCC cannot garrantee the supply of waste because they no longer control the waste of Dublin City when they thought they did.
Of course we still can’t be sure because we haven’t seen the contract.
“if well-run.” Indeed.
I quote from that redoubtable organ, the South Wales Echo:
The Aarhus convention is a worthy statute, but we in Ireland also have a fine (and fined) tradition of not implementing European environmental law, until dragged into court. Ireland and Switzerland were among the last to ratify it in Europe, and I am not aware of any real-time data feeds to which, we, the public have access. For instance water quality results have to be dug for in county council web sites and are several weeks out of date before they see the light of day. Perhaps Mr. Tol can point me to an example of a publicly accessible real-or-near-real-time feed.
The Irish Times account of DCC’s statement responding to the RTE report makes two main points:
1) That DCC has substantial sunk costs in the incinerator project.
2) That DCC would be liable for sunk costs (some? all?) at the joint venture company.
These two points seem consistent with the core assertion of the RTE report – that the contract with Covanta could be terminated or renegotiated from Sunday, without compensation to Covanta.
The RTE report states:
“The Poolbeg incinerator contract was signed and became operative on 4 September 2007.
“It specifies that certain conditions must be met within a 36-month period.
“If these conditions have not been met, the contract stipulates, the ‘parties may exercise their rights to terminate this agreement’.”
Correct me if I’m wrong, but the council is the offending party here – state intervention has meant that it can’t uphold its end of the contract. Why, then, would Covanta be willing to dissolve the contract on terms overwhelmingly beneficial to the council?
@ Richard Tol
I suggest that you are wrong on many of your points. Your waste projection model cannot tell whether or not we’ll meet the Landfill Directive targets. I’ve looked at your conclusions and they assume that there will be no growth in the recycling rate from 2008, despite the fact that the local authorities and the waste industry are now rolling out the brown bin for both commercial and household customers. This will surely divert several hundred thousand tonnes of BMW from landfill and you have ignored it completely.
Your household waste growth projections for Ireland are between 3% and 4% per annum after 2012, when the equivalent figure was 0.65% during the Celtic Tiger boom years. The EU average for household waste growth over the last few years was 0.4%. I have no faith in your model and consequently no faith in your expertise in the area of wastes management.
According to the EPA, we were 280,000 t/a short of the 2010 Landfill Directive target in 2008 and the brown bin alone is likely to bridge that gap by next year. In addition, waste volumes have fallen by somewhere between 10 and 30% since 2007. If we miss the target this year, it won’t be by much. We should certainly meet it next year and in 2012, with the introduction of Indaver’s 200,000t/a incinerator at Carranstown and the development of up to 500,000t/a capacity for Refuse Derived Fuel capacity at six existing Mechanical Treatment plants (Panda, Greenstar, Thorntons, Mr. Binman, Greyhound and Oxigen) and at least one new one (AES).
You state that the alternatives take a long time to build, but you are not close enough to the waste sector to see that the alternatives have been progressing quietly in the background. The companies that I mentioned above will have 340,000 t/a RDF production capacity available this year. with at least a further 160,000 t/a to follow over the next 2 to 3 years. With the collapse in construction, C&D waste processing capacity requirements have reduced dramatically and this has freed up space and equipment at existing facilities for MBT operations. Hence the rapid growth in RDF production capacity.
The development of biological treatment capacity is also progressing well and while not as quick as RDF production, it’s a lot quicker than development of new incinerators. For example, Acorn Recycling built a 45,000 t/a composting plant in Tipperary with a construction period of 10 months. Panda, Greenstar, Thorntons, AES, Mr. Binman and many others have planning permission for additional biological treatment capacity and I expect that these plants will be ready before the Poolbeg Incinerator is constructed.
I don’t wish to sound anti-incineration. I work for a consultancy that supports many incineration developments around the world and the technology is superior in some ways to the alternatives, but inferior in other ways. I have also carried out consultancy work for the IWMA in relation to the Poolbeg project, but the points above are factual rather than my opinion.
In conclusion, Ireland can comply with the Landfill Directive targets without Poolbeg, but personally I believe that a properly sized Poolbeg incinerator developed on a purely merchant basis is the best option for the country. A smaller plant (200Kt/a-300kt/a)without a ‘put-or-pay’ clause would compete fairly with the alternatives and offer no threat to recycling and no threat to the ratepayers in Dublin and the taxpayers of Ireland.
If DCC plough on out of pure stubborness, they are condemning Dublin to 25 years of losses, currently running at €62m per annum and likely to rise under the Covanta contract. I’m surprised that the ESRI are so unconcerned about this risk of €2bn losses over the 25 years of the contract.
@Conor
You may want to study the addendum to the Gorecki report. It deals with the data and projection issues you raise.
There is a great opportunity for you here. We just had two papers published in the international literature. Showing us wrong is a sure publication.
@Richard
You still haven’t addressed the “Put or Pay” clause in this contract.
A commercially viable entity should not need this.
Let Covanta compete for the waste and not sign up taxpayers or DCC for any possible shortfalls that arise.
If they remove this clause then i’d go and cheerlead the project.
Regards,
Tim
@Tim
That’s water under the bridge.
@Richard
If I recall correctly, Gorecki’s Addendum stated quite arrogantly that our analysis was ‘inferior’ to the ESRI’s model. Our analysis was based on evidence rather than theory and your ISus model contradicts the evidence.
In 2008, you predicted that MSW arisings in Ireland would rise by c.3.5% that year. In 2009, you revised this downward to growth of 1.2%. the actual figure recorded later that year was -5.1%. You were wrong by 6.3%, despite the fact that you were looking back at the previous year. How can you be so arrogant about your future projections.
You may have noticed that your client, DCC, decided not to use your projections in the 2009 Annual Progress Report for the Dublin Regional Waste Plan, published in January 2010. They used growth rates for household waste that were about half of your projected growth rates, when using your data would have better suited their case. RPS produced that document, so you now have RPS, SLR and Eunomia all recognising that the ESRI’s projections are over-blown. It’s not just me that has found fault with your analysis, it’s three of the biggest waste management consultancy companies in the UK and Ireland.
@Conor
Superficial comparisons of forecast and observations reveal nothing about a model.
@Richard
Your model has ignored the National Waste Prevention Programme and has assumed that household waste will grow in line with GDP. I suggest that one is an oversight and the other is contrary to overwhelming evidence from Ireland and Europe.
The National Strategy on Biodegradable Waste 2006 assumed that the NWPP will impact on waste arisings by between 3% and 6%.
The EU average growth in household waste over the past c.10 years has been 0.4% per annum. Your projection is 9 to 10 times higher. This is not a superficial observation.
@Conor
“Your model has ignored the National Waste Prevention Programme and has assumed that household waste will grow in line with GDP.” Both statements are false.
“The EU average growth in household waste over the past c.10 years has been 0.4% per annum.” So? Our model is calibrated to data from Ireland.
@Richard
I should have chosen my words more carefully. Your model has complicated workings and my comments related to the conclusions rather than the workings. You have projected GDP growth of 3% to 4% per annum from 2012 onwards and your forecast for household waste growth is between 3% and 4% per annum from 2012 to 2025.
Household waste generated in Ireland in 2003 was 1,704,844 tonnes. In 2008, the figure was 1,677,338 tonnes. It’ll be lower again in 2009 and 2010. If you look at the trend from 2002 you should flatten out 2006 as this was an anomolous year. The trend was as follows:
2002-2003 +1.5%
2003-2004 +1.4%
2004-2005 +1.1%
2005-2007 +0.8% (over 2 years)
2007-2008 -5.1%
If you consider that these growth rates were experienced during a period of boom and associated major immigration and the National Waste Prevention Programme was only getting started, how can you expect growth rates of 3% to 4% in the future?
@ Conor, great analysis.
I can’t see this link between GDP and waste growth that the ERSI see. How, for example, will the increase in the value of pharma/chem and food exports from Irleand (that may cause GDP growth) result in people producing more waste. Populatoin growth and disposable income are more relevant to waste growth, and if the ERSI think these will grow by 3-4% per annum between 2012-2025 they are seriously deluded.
Anyway, it’s a mute point, because I wouldn’t trust the ERSI’s GDP forecaste anyway. I have no formal training in economics, and I could see the bubble was going to burst back in 2007.
As for the BMW landfill targets I have already explained on a related thread that the EPA are capping the BMW going to landfills by ammending there licences.
With regard biological treatment capacity Conor, you’re forgeting to mention numerous other plants that are in the process of animal by-products validation or are just completing construction/expansion such as OD recycling, Barna, Enrich, Waddocks, McGills, Miltown. This capacity will be on stream in next few months. These coupled with the ones you mentioned mean their could even be excess capacity, and as you say if not additional capacity can be brought on stream very quickly.
Right now there is plenty of capacity which is evidenced by the fact that average gate fees have fallen from about €80 per tonne to €65 per tonne or so in the last 18 months.
@ Richard,
You haven’t addressed Tim’s question with regard the ‘Put or Pay’ clause.
You said on a related thread that you supported (the law doesn’t) the ability of the LA’s to direct waste collected by private waste companies to a particular facility under certain circumstances. What circumstances/conditions would these be? Can you please make some attempt to engage in meaningful debate other than dismissing the topic?
We had this discussion with regard projected waste growth back in March (31st) where I referenced and quoted the SLR report. This was your response
”@Sam
SLR is just wrong about the assumptions in ISus and how it is used”
And that was that,
I then made my usuall arguments about why the BWM targets are not as problematic as many think to which you replied
”@Sam
There are policy aspirations, as always, but the only policy in place, at present, to make a serious dent in BMW-to-landfill is the incinerators”
Then again you did post this on the 1st of April
@Sam
I answered Tim’s question above
I addressed your issue with directing waste and BMW in previous threads: There are economies of vertical integration. The Landfill directive applies to landfills.
@Richard
“Superficial comparisons of forecast and observations reveal nothing about a model.”
True, but a model that does not predict trends correctly should tell the researcher there is something wrong with their model or assumptions. Particularly if the model gives time derivatives of the wrong sign; it should set off alarm bells. Empirical observations will always trump models and approximations.
On a different note, it is great to see you highlighting inconsistencies and down right idiocies in some of the green’s policies.
@PwngA
In this particular case, the waste forecast is conditional on the economic forecast. We got the latter wrong.
@ Richard,
Why impose vertical intergation. As I said before, why not allow a range of business models. Many will collect and process, some collect only, some process only.
The idea that DCC should decide the solution for all facical. How profitable has their business been over the last few years?
Revised EPA waste licences apply to landfills
@Sam
You’re setting up strawpersons.
@Richard
Thank you for your frank response. The limitations of any model can only be tested with data, which is much easier in my case; I don’t have to wait a number of years for results, and I try to deal with closed systems.
Do you have any plans to revisit your previous work, or are there more pressing/important concerns to be dealt with? It would be interesting to see how the current trends in waste demand alter your projections.
@Conor If your figures are right, and you make a strong case, Richard is correct in saying you should try to publish them. Waste management is very important and critical analysis is needed to minimise policy mistakes (directed at the gov. not Richard) and ill-judged decisions.
@PwngA
We’re working on new projections at the moment, to be released later this year.
interesting discussion.
@ Ricahrd
Just to clarrify where the IWMA €2 billion number derives from.
as our analysis base we used the public accounts posted on the web for the combined four councils. Based on what the combined entities collect in waste charges from Households and Commercial enterprises and compare to what it costs them to run this service – in 2009 they have a deficit of approx €59 million and in 2010 they predict to have a deficit of €63 million. These numbers do not include costs / charges for street sweeping or litter managment or enfocrcemnt issues which we all undersatnd as public service items. So the defecit referred to only relates to ‘commercial waste activities’ or sectors where the councils compete against commercial operators. Interestingly most of this deficit relates to excessive costs for landfill mgt that should have been well catered for over the the full life of the facilities. Based on loosing this amount of money on-going for the next 25 years, plus €120 million commited to date in Poolbeg and finally adding in an estimate €10 – €20 million as the annual deficit due to being unable to meet the Put-or-pay clause you arrive at a potential €2 billion, cost to the tax payer / rate payer.
And right now I cannot see any reason why our predictions may be any more incorrect then yours!
wow, losing 59 million, while still ripping off its customers. That’s DAA territory