Nov. 12 (Bloomberg) -- U.K. trash collectors, fighting rising landfill taxes, plan to burn enough rubbish to fuel power stations with the capacity of two nuclear reactors, a potential damper for electricity prices.

The U.K. may be able to incinerate about 15 million metric tons of waste a year, producing between 2,000 and 3,500 megawatts of power and heat, according to Pennon Group Plc’s Viridor unit and Montagu Private Equity LLP’s Biffa Ltd., which are building energy-from-waste generators. The plants would be able to satisfy about 5 percent of peak electricity demand, or 4.5 million homes.

The incinerators may help replace the oldest coal-fired stations at a lower cost than building wind turbines or atomic plants, providing cheaper energy for consumers and squeezing earnings for utilities including Electricite de France SA and E.ON AG. Opponents including environmental group Friends of the Earth say the trash should be recycled.

“Pretty much every waste-management business in the U.K. wants to become more energy focused,” said Rob Winchester, a London-based partner at accountant Ernst & Young LLP. “There is demand for about 20 big energy-from-waste plants across the U.K. which aren’t there at the moment or in the development phase and I’m convinced they will come through.”

Earn Cash

The developments will allow companies to earn cash from both collecting the trash and generating electricity. They may also save Britain’s government from fines that law firm Norton Rose LLP estimates will be as much as 500 million pounds ($827 million) by 2020 if the country fails to meet European Union targets to reduce landfill waste.

Including construction and operating costs, the plants may generate electricity for about 30 pounds a megawatt-hour, according to Taunton, southwest England-based Colin Drummond, Viridor’s chief executive officer. Electricity capacity from onshore wind turbines costs about twice as much, he said. EDF, planning to build at least four U.K. reactors, estimates the cost of a nuclear plant at 45 pounds a megawatt-hour.

U.K. baseload power for the year starting April was at about 41.45 pounds a megawatt-hour as of 2:27 p.m. in London. The price peaked above 90 pounds a megawatt-hour in mid-2008 and dropped as energy demand and fuel prices weakened. Baseload electricity is delivered around the clock.

Manchester Plant

Viridor is building a 120-megawatt waste-fueled heat and power plant, the U.K.’s biggest, at Runcorn near Manchester. The total cost of the project, which will be constructed in two phases, is about 450 million pounds. Covanta Holding Corp., a U.S. developer of waste-to-energy plants, wants to build the 70- megawatt Brig y Cwm waste-fed power station near Merthyr Tydfil in southern Wales.

Energy and Climate Change Minister David Kidney gave permission on Nov. 4 for Peterborough Renewable Energy Ltd. to build an 80-megawatt plant burning waste and organic matter. Biffa has plans for at least two energy-from-waste facilities.

To succeed, the companies need to overcome opposition from environmentalists who say incinerators detract from recycling opportunities, and local residents wary of potential pollution from the plants.

Recycle or Burn

“We view incinerators as unnecessary, expensive and actually damaging to the climate,” Michael Warhurst, a senior resources campaigner for Friends of the Earth, said in a telephone interview from Cambridge, eastern England. “If you recycle materials it is much better for the climate than incineration.”

Friends of the Earth said Oct. 7 that Britain sends to landfill or burns materials worth more than 650 million pounds a year that could be recycled, saving 19 million tons of greenhouse gases a year.

Developers say the energy-from-waste stations will reduce emissions by cutting the volume of garbage in landfill sites, which give off methane, a more-potent greenhouse gas than carbon dioxide. For every ton of trash burned, almost 1 ton less of carbon-dioxide equivalent is released into the air due to avoided pollution from land disposal, fossil-fuel power generation and metals production, according to information on Covanta’s Web site.

A majority of U.K. waste-industry officials, about 70 percent, say the country won’t meet a 2013 European Union target to reduce landfill, and planning decisions are the biggest impediment to building facilities that handle the waste, according to a survey by Norton Rose. The targets stiffen again for 2020 and Britain is increasing tax charges for sending municipal trash to landfill to encourage waste-reduction, recycling and the use of waste as fuel.

Industry Survey

The survey published Sept. 24 was of 60 “senior” people involved in the waste industry, Norton Rose said.

The savings from avoiding landfill-tax payments and charges to use the dumping sites “makes most treatments, recycling and other forms of waste management, commercially viable,” according to David Savory, director of environment and external affairs at Biffa. The rising costs are also making incinerators more likely to be used for industrial and commercial waste as well as domestic refuse, he said.

“Waste has to be seen by the business as a resource,” Savory said. The company has a strong focus on recycling, from which “there will always be some residual materials left over, and we believe that the best way forward is to treat those materials in such a way as to recover energy from them.”

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

Last Updated: November 12, 2009 09:52 EST