Heathrow Expansion: Lakeside Energy from Waste Ltd

Delegated Legislation (Committees) – in the House of Commons at 4:58 pm on 17th May 2018.

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Motion made, and Question proposed,That this House do now adjourn.—(Wendy Morton.)

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor 5:00 pm, 17th May 2018

We have just witnessed a wonderful debate on International Day against Homophobia, Transphobia and Biphobia that showed both passion and insight into the modern world. I am equally passionate about that subject, but this evening I wish to talk about the Lakeside Energy from Waste plant in my constituency. I am grateful for the opportunity to address the House on this important issue.

Lakeside Energy from Waste is not just a local energy provider in Windsor; it is an establishment of local, regional and national significance. I have concerns about the plant’s viability and longevity if the third runway should go ahead at Heathrow, or even if it is threatened that the third runway should go ahead at Heathrow, and I will explain why.

The Lakeside Energy from Waste facility is situated on the proposed site of the third runway at Heathrow. The plant is the largest facility of its kind in England and has been in operation for just six years. The cost of relocation is estimated at between £500 million and £700 million and, from what I can see, with all the potential delays and all the other issues surrounding it, the cost could well run to as much as £1 billion. Those are large sums of money.

The site is of local significance because of the number of people it employs—around 300, plus others—so it provides local jobs. Regionally, it deals with 450,000 tonnes of waste each year, which is more than the non-recyclable waste produced in a year by the people of Birmingham and Manchester combined. It is a major national plant.

Some 90,000 tonnes of waste come from west London, 45,000 tonnes of waste come from south London and 30,000 tonnes of waste come from Surrey. Lakeside’s impact is one of national significance because it deals with 40% of the country’s hazardous waste, much of it medical waste. Seventeen NHS trusts, 500 GP surgeries and other medical establishments rely on Lakeside Energy from Waste.

The plant also provides electricity to the grid, powering up to 50,000 homes in the area, and of course Slough Borough Council enjoys the fruits of its labours in providing services to Lakeside Energy from Waste. I will not name the exact figure for commercial reasons, but a very large sum of money is taken in business rates by Slough Borough Council.

Mr Dhesi was keen to be here for this debate, and he wants me to say that it is clear to him that the jobs and the economic and environmental benefits of Lakeside Energy from Waste are incredibly important to Slough Borough Council and the local area. He points out that 4% of UK waste is processed through the plant. Like me, he is concerned that there will be a detriment to the local area unless there is a clear and orderly plan, with clear responsibilities, for a replacement plant if the third runway goes ahead. My right hon. Friend Justine Greening, who spoke so passionately in the previous debate, has been consistent and clear in asking the Government about who is responsible for ensuring the continuity of service if the third runway goes ahead and if the deadline for replacing the plant is missed.

My first concern is that, if the facility is demolished and not replaced—if there is a gap in service—the effects locally, regionally and nationally will be enormously harmful due to the inability to process the levels of waste that it is contracted to process. The second problem lies in the timeline for Heathrow’s decisions about the third runway, because a replacement plant must be in place before the current plant is decommissioned to avoid a break in operations. Relocating the plant will take a minimum of five years, including one year alone for planning permission, three years for construction and another year for decommissioning the current plant. We can see how tight the timeline is, and the consequences will be enormous for waste processing if there is any gap in operations.

All that makes Heathrow’s target of having a new runway operational by 2023 pretty much unachievable as things stand, and that assumes there will be no objections to people having an incinerator and a waste processing plant located near their homes. As Members of Parliament, we know that there is always an enormous number of objections from local residents whenever a new operation of this nature is promised. As far as I can see, no sites for new incinerator and waste processing plant have been identified, so it is hardly surprising that I am concerned that a site may not be available.

The delays and uncertainty are undermining the fantastic business that Lakeside Energy from Waste represents. How will it be possible for people to sign long-term contracts with the plant if there is uncertainty about its future? I am sure that that is having enormous consequences for its operations. Given that the relocation costs are perhaps likely to be in the region of £1 billion—the current estimate is £500 million to £700 million, but it could run towards £1 billion—that is an enormous amount in the context of the overall cost of developing a third runway.

Where is the money coming from? Airline charges are currently £22.53 per passenger, and rather than Heathrow Airport Ltd conjuring up the money to relocate the plant, passengers will bear the risk of the debt repayments on any secured loans and of ensuring a return on shareholder equity. Having the customers pay the enormous costs of something that does not necessarily benefit them directly does not seem like a good way to proceed with a national project of this nature. If Heathrow Airport Ltd raises the landing fee per passenger, it will probably have to go up to around £30 or £31, making Heathrow the most expensive airport in the world at which to land. If we are looking to become a more competitive nation, particularly as we head towards Brexit, it does not seem a good idea to proceed with a project that causes enormous challenges for waste recycling and processing and creates a white elephant when it comes to the price.

When considering the plant’s relocation, Heathrow’s financial viability is also called into question. As I said, the cost of relocation looks like it will be about 5% of the cost of the entire project. Looking at the gearing ratio of assets against borrowing, Heathrow is in a parlous position, so I worry that it will not be able to afford to proceed in the first place. We have become incredibly concerned because Thames Water’s gearing ratio is 81%, and it has been told that it must be reduced.

In 2012, the Civil Aviation Authority said that the National Air Traffic Services gearing ratio should be restricted to just 65%, yet Heathrow’s gearing ratio is already at 87%, before it has even begun the third runway project. If it goes ahead, Heathrow’s gearing ratio will end up somewhere around 91%. This is very worrying. Were I an investor, I would be worried, but as a Government I would be even more worried. As a user of the services of Lakeside Energy from Waste, I would be exceptionally worried that this would create enormous troubles for me, with a lack of continuity in waste processing.

Overall, my main concern is that there could well be a lack of continuity of service for waste disposal. I am also concerned that Heathrow’s viability in coming up with the money to finance the relocation of the operation, particularly without a site having already been identified, is in question.

I have two core questions for the Minister; he will have heard them before, but I want to reiterate them. First, will the Government confirm that they unconditionally accept the Transport Committee’s recommendation that

“a condition of approval”— for the third runway—

“be specified in an updated” national policy statement

“that provides the Lakeside Energy from Waste plant with equivalent recognition as the Immigration Removal Centres and that the replacement of its facilities be accounted for” in the development consent order process?

Secondly, is there a way in which the Government can guarantee that there will be no break in service? If they maintain that

“the planning and costs of moving the Energy from Waste Plant would be a matter for the airport to take forward with the owners of the site”,

I fear that that responsibility may well be placed on a private limited company, when we are talking about a waste processing plant that is an asset of national significance. Although I hope this will not be the case, let us say that it turns out that Heathrow Airport Ltd is responsible for relocating the plant; who then is going to pay for the necessary local infrastructure—the roads and perhaps even some rail—for the heavy goods vehicles that will need access to the plant?

In summary, I have huge concerns. It is no great secret that I think the third runway is a bit of a mistake. I hope the decision will be changed at some point. In the meantime, I simply emphasise this: if we are going to have one more runway, would it not be far simpler, greener, less costly and, more importantly, quicker to proceed with the runway at Gatwick, which would not encounter these problems? Even the Government’s updated figures show that Gatwick gives a better net present value than Heathrow. A third runway at Heathrow would affect 2.2 million people more than they are affected today, and perhaps 300,000 people would begin to experience significant noise.

The Government have an opportunity to change their mind. When it comes to Lakeside Energy from Waste operations in Colnbrook, I urge the Government and the Minister to think carefully about continuity and who is responsible for this national asset, which provides such good services to the NHS, local authorities and others.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London) 5:13 pm, 17th May 2018

I congratulate my hon. Friend Adam Afriyie on securing this important debate about the effect on Lakeside Energy from Waste Ltd of the Government’s preference for a third runway at Heathrow. I shall address my hon. Friend’s specific points shortly, but wish to begin by providing the House with some general context.

As my hon. Friend will know, the Government announced in October 2016 that their preference for delivering much-needed additional runway capacity in south-east England was a new north-west runway at Heathrow. The Government also set out that they would be taking this preference forward through the development of a national policy statement.

In terms of process, the Government have consulted twice on a draft airports NPS, and the second consultation closed on 19 December. The Transport Committee completed its scrutiny of the draft airports NPS on 23 March this year. I wish to take the opportunity to thank both the Committee for its important and timely work and the tens of thousands of members of the public who responded to our consultations. We are currently giving careful consideration to the Committee’s 25 recommendations and all the consultation responses. The House will appreciate that, during this time of careful consideration, I am not able to discuss either the merits or content of any final airports NPS; or the Government’s response to the consultations or the recommendations from the Transport Committee. Subject to that consideration, I can reassure my hon. Friend that we are on track to publish and lay before Parliament any final airports NPS in the first half of this year. It can then be debated in both Houses and will be the subject of a vote in this House.

Turning to the Energy from Waste plant itself. It is clear that should the north-west runway go ahead, it will result in the loss of the jointly owned Viridor and Grundon Lakeside Energy from Waste facility at Colnbrook, near Slough. The Lakeside complex houses a municipal waste incinerator as well as a high-temperature incinerator for clinical and other hazardous waste. The site handles 420,000 tonnes of waste annually, primarily taking waste from a number of authorities, including Slough, Reading, Wokingham, Bracknell and the West London Waste Authority. The site reportedly generates 37 MW of electricity to National Grid.

The high-temperature incinerator primarily provides a waste disposal service to NHS trusts and GP practices. In addition, the Metropolitan and Thames Valley police forces and the UK Border Force use the same facility for the safe disposal of contraband and controlled materials. Lakeside is one of five clinical waste incinerators in the south-east and London regions of comparable capacity. The incinerator at Lakeside has a capacity of 10,000 tonnes, of which 5,200 tonnes were in use in 2016.

In 2016, the Royal Borough of Windsor and Maidenhead, for example, did not send any municipal waste to the Lakeside Energy from Waste plant. More than 33.5 kilo tonnes of mixed municipal waste was sent instead to the Ardley Energy from Waste plant in Oxfordshire. In terms of clinical waste, Windsor and Maidenhead sent more than half a tonne of clinical waste to the Lakeside clinical waste incinerator. However, it is noted that the majority of Windsor and Maidenhead’s clinical waste—some 1.5 tonnes—was processed at Hillingdon Hospital.

In addition to the Lakeside site, expansion at Heathrow would affect a number of large businesses and facilities such as the British Airways headquarters at Waterside, a large number of airport hotels and the immigration removal centres. The draft NPS is clear that immigration removal centres play a vital role as part of the infrastructure, which allows the Government to maintain effective immigration control and to secure the UK’s borders. Continuous provision of the immigration removal centres at Heathrow is necessary. This approach, which is different from that taken for other large-scale businesses, was taken as immigration removal centres are strategic assets, providing nationally critical infrastructure. The Government believe that it is necessary to require that these be replaced, without interruption of service.

The Airports Commission concluded in its 2015 final report that it would be “necessary” to replace the Lakeside Energy from Waste plant if the HAL scheme was preferred. In its consideration for the site, it noted that, while not of national importance, the site played a significant role in regional and local waste management and had a valuable capability to process clinical waste and other contaminated material.

In reviewing the Airport Commission’s recommendation for the plant, the Government explored its role in UK waste management and energy plans across Departments, as well as seeking confirmation of any regulations or Government policy that would require the plant’s replacement.

Both the Department for Environment, Food and Rural Affairs and the Department for Business, Energy and Industrial Strategy assessed that the loss of the plant would not impact the UK’s ability to meet environmental targets on either a regional or a national basis. For these reasons, it is the Government’s view that the Lakeside Energy from Waste plant is neither a strategic energy nor a waste asset, and with no regulatory or policy reason to replace the plant it would not be appropriate to mandate that it should be replaced. The Government have therefore taken the view that should the north-west runway scheme go ahead, it should be considered in the same way as other commercial property acquisitions and be treated as a commercial negotiation between the owners and the airport.

Any applicant will need to undertake a commercial negotiation with the owners of the plant to determine compensation. We understand that the site operators are working with Heathrow Airport Ltd and the relevant local and regulatory authorities to replace the facility on a like-for-like basis at a suitable nearby site in the event that any airports NPS is designated and the airport operator proceeds with an application for development consent.

In the revised draft NPS, the Government recognise the role of the plant in local waste management plans. This was changed to ensure that any applicant should make reasonable endeavours to ensure that sufficient provision is made to address the reduction in waste treatment capacity caused by the loss of the Lakeside Energy from Waste plant. Analysis into both NPS consultations and the TSC recommendations continues. During this process, we will continue to review the plant’s status within any final airports NPS.

I thank my hon. Friend for raising this important debate. I appreciate that many Members of this House will have views on airport expansion, and I can assure them that they will have an opportunity to debate any final airports NPS.

Question put and agreed to.

House adjourned.