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The thermal treatment market continues to be active in most western European countries, with increasing attention being paid toward energy recovery. But the long-term prospects for this sector will also heavily depend on competition from other technologies.
by Chris Hadley
Thermal treatment - involving the combustion of waste at high temperatures, typically in a dedicated treatment facility - has long been employed throughout western Europe as one of a number of options for the management of municipal waste. Although considerable discussion continues to take place about the benefits from the use of incineration and increasingly the recovery of energy from this process, thermal treatment remains popular with several national governments.
This article reviews some of the key developments that are currently taking place within the western European market. It presents an overview of the status of the market, including some of its key drivers and restraints, and discusses how the commercial side of the market is developing.
For the purpose of this study, municipal solid waste (MSW) is defined as a waste stream that broadly correlates with household and similar domestic/commercial waste arisings. It should be noted however that the definition of MSW varies around Europe.
A sizeable market
The western European market for the thermal treatment of MSW is considerable. Indeed the last two decades have seen an increase in the use of thermal treatment not only for the treatment and disposal of waste, but also for the benefits afforded in the recovery of energy. Frost & Sullivan investigations, contained within its recently published report, ‘Forecasts of the Northern Europe Municipal Waste Management Services Markets’ put the size of the market as 52.22 million tonnes in 2005 with a commercial value of US$6.05 billion (see Figure 1).
 Figure 1. Volume shipments and revenue forecasts for the western European thermal waste treatment services market, 2002-2012.source: frost & sullivan |
Both revenues and volumes have continued to expand since the beginning of the millennium as many European governments have opted to expand the use of this form of treatment. Volumes treated expanded by 12.5% between 2002 and 2005 with the value of the sector climbing by 11.5%. Long-term forecasts by Frost & Sullivan are also largely positive. Forecasts for 2012 put revenues up at US$7.50 billion while volumes to 57.86 million tonnes.
 Figure 2. Volume shipments and revenue forecasts for the western European thermal waste treatment services market by country/region, 2002-2012. source: frost & sullivan |
New technologies beginning to come on stream
Before looking in detail at the dynamics of the market, a word should be said about the technology currently being employed for MSW incineration. Traditionally the sector has relied on large-scale mass-burn incinerators. Typically these have been static-grate or rotary units. Recently more advanced fluidized-bed units have begun to be employed. Ultimately the choice is that of the operator. Most units constructed over the past decade offer energy recovery, enabling electricity or heat to be generated from the combustion process. Gasification units are beginning to be employed within the market, although at present they remain an emerging technology.
Political drivers
As was seen in Figure 1, the European market for the thermal treatment of MSW was already sizeable at the beginning of this decade. Yet recent years have seen a further push in the development of this sector with substantial new investment occurring in a number of European countries. Although the factors driving this current interest in thermal treatment vary on a country-by-country basis, those that are most significant are:
- policy commitments of national governments - Many national and regional governments are now looking at thermal treatment and associated energy recovery to provide a sustainable answer to waste management, not only in terms of meeting legislative requirements but also on the grounds of cost. France, Switzerland and Denmark are good examples.
- restrictions on the use of landfill - The impact of the EU’s Landfill Directive has increased the need to look for alternatives. Thermal treatment is one of a number of options being used.
- the impact of taxation - The use of taxation by many governments as a method for directing the waste market is making more expensive solutions such as thermal treatment more cost-effective than has historically been the case.
- rising MSW volumes- Although efforts are being made to minimize MSW arisings, volumes within Europe are typically increasing by 0.5%-1.5% per year and by much more in southern Europe. Additional capacity for the treatment of MSW is thus required in many countries.
Popularity of thermal treatment varies widely around Europe
An examination of individual European markets (see Figure 2) illustrates the popularity and recent growth in the use of thermal treatment. Based on current policy commitments in particular countries, projections for the future of these markets are also given.
Germany is by far the most important market on account of its large population and historical interest in this technology. The volume of MSW treated in 2005 was estimated at 16.5 million tonnes, equivalent to a market valued at US$2.48 billion. While recent years have seen thermal treatment come under pressure from other treatment methods, nevertheless there is evidence that the introduction of landfill restrictions in July 2006, brought in by TASi (Technische Anleitung Siedlungsabfall), will further stimulate the market with volumes rising to a projected 18.20 million tonnes in 2012 and the market to a value of US$3.1 billion.
Of the other countries in western Europe, France is the other significant market for thermal treatment. Again this is partly a reflection of its relatively large population as well as a historically proactive approach of the government and regional waste authorities towards the use of incineration. MSW volumes disposed via thermal facilities in 2005 are estimated at 12.50 million tonnes with a market valued at US$1.18 billion. Continuing efforts to develop this sector will see an increase in volumes to a projected 13.30 million tonnes by 2012 and a market of US$1.32 billion.
The three other European markets of note are Scandinavia (Denmark, Finland, Norway and Sweden), Benelux (Belgium, Luxembourg and the Netherlands) and Italy.
Although Scandinavia’s population may not be large, the importance given by certain governments, notably that of Denmark, towards thermal treatment and associated energy recovery has ensured this is an important region for thermal treatment. Current volumes are estimated at 4.70 million tonnes in 2005 or US$371 million, and are set to rise to 5.50 million tonnes and $446 million in 2012.
The importance of the Benelux is largely a reflection of the proactive stance of the Dutch government towards MSW thermal treatment. This has resulted in sizeable volumes for this region of 5.30 million tonnes for 2005 with a market valuation of $583 million. Further, slight increases in MSW arisings are expected to raise volumes to 5.50 million tonnes and $655 million by 2012.
The third market, Italy, is notable because of the recent growth that has taken place in the use of thermal treatment for MSW. Whereas only 2.73 million tonnes of MSW were treated in 2002, this had grown to 4.20 million tonnes in 2005 with a market valued at $504 million. Further growth to 5.00 million tonnes is projected by 2012 with the value of the market increasing to $675 million.
Although some national markets are by their very size limited because of the size of the population and consequently the amount of MSW generated per person, the UK and the Republic of Ireland (UK/ROI) and Iberia (Spain and Portugal) stand out as being especially underdeveloped at present. The UK/ROI in particular only consigned an estimated 2.75 tonnes of MSW to thermal facilities in 2005 giving a market valued at only $184 million. Although a projection of 3.20 million tonnes is given for 2012 under plans to expand this sector, this region is likely to remain underdeveloped.
 Figure 3. Average prices in the western European thermal waste treatment services market, 2002-2012. source: frost & sullivan |
Equally, Iberia is another small market, although one that has in recent years seen much faster growth than that in the UK/ROI. MSW volumes passing to thermal treatment were 2.66 million tonnes in 2005, with a market valued at $133 million. Further plans for the further expansion of this market set to raise volumes to 3.00 million tonnes in 2012.
Long-term prospects coloured by other methods of treatment
Although interest in thermal treatment remains strong throughout Europe, the market remains beset by a number of restraints. These vary in importance and can be summarized as:
- competition from other methods of waste treatment/disposal- The push being given towards the reduction of waste arisings is leading to a number of alternative methods being used for dealing with MSW. Moves to minimize waste arisings are having an obvious effect on the amount of waste able to pass on to thermal treatment. Equally, the growth in non-thermal mass reduction processes such as mechanical-biological treatment and composting is also attracting growing interest in many parts of Europe.
- NIMBY (Not in My Back Yard)- NIMBY remains an issue when it comes to large-scale waste projects as typified by the construction of thermal treatment facilities. Although much has been done to improve the image of such facilities, they are often viewed with some unease by communities.
- delays in implementing government policy- Translating government policies on the issue of waste, and indeed other environmental matters, can often be held up by the workings of regional and local governments in some parts of Europe. In the case of large construction projects such as thermal treatment facilities, financial and legal delays prior to the construction of the facility can be significant.
Pricing
Cost is a major factor in the treatment of MSW, with thermal treatment traditionally being a much more expensive option than, for example, landfill. Recently, however, there has been evidence that incinerator operators in some parts of Europe have been under pressure to decrease gate prices for thermal treatment because of competition from alternative methods of disposal as well as competition between the incinerator operators themselves. The result is that prices have fallen; they were slightly boosted only in 2005 by new restrictions on the use of landfill in a number of markets - see Figure 3.
Long-term forecast predicts a strengthening in gate prices, as for many other treatment/disposal methods. Indeed, with prices for alternative disposal routes such as landfill expected to rise much faster, current differentials between this and thermal treatment are set to narrow, making the thermal treatment option increasingly more attractive.
It is worth noting that, like prices for the thermal treatment of MSW, the prices for the treatment of hazardous waste have also fallen. Here, prices have been driven downwards by the emergence of low-cost treatment methods, most notably the use of cement kilns and the burning of certain hazardous waste streams in MSW units where the high calorific value of the hazardous waste stream can prove attractive. Competition too is a growing feature of this market helping to maintain prices at current levels.
A complex, competitive market
The role of thermal treatment facilities in the destruction of waste and downstream generation of heat/electricity has made the public sector the traditional owner/operator in the market. This is changing, however, with the private sector taking a greater role in the market. This is partly explained by EU legislation requiring the opening up of national markets, and partly explained by the need for public operators to share construction/refurbishment costs.
Despite such developments, municipality-owned companies continue to dominate the majority of the European market. Public-private ventures are proving popular in what can be considered as ‘emerging markets’ such as Italy and Spain. In some parts of Europe, notably France, the private sector already plays an active part in the operation of thermal treatment facilities, with names such as Sita and Onyx of note.
The future
As a method of managing municipal waste arisings, thermal treatment is expected to remain a popular choice for the foreseeable future. Benefits such as the ability of this method to reduce waste volumes while also offering heat or electricity continue to outweigh concerns over emissions.
However, competition from rival methods for the management of MSW is now a reality and, if anything, the coming decade will likely see thermal treatment at best maintaining its position in the market as opposed to making any further major gains. Offering a flexible approach to the management of MSW is currently viewed as attractive, with all European countries expected to continue to rely on thermal treatment to some extent as part of a sustainable approach towards municipal waste management.
Chris Hadley is an independent consultant specializing in environmental markets. He worked closely with Frost & Sullivan on the preparation of its recent review of the western European MSW market.
e-mail: chris@chrishadley.com
If you are interested in more information on ‘Forecasts of the Northern Europe Municipal Waste Management Services Markets (Code B836-15)’ please send an e-mail to magdalena.oberland@frost.com
