Profu’s 2016 Bränslemarknadsdagen (Fuel Market Day), Sweden

I had the pleasure once again this year of presenting at Profu’s 2016 Bränslemarknadsdagen (Fuel Market Day) near Gothenburg in Sweden. The informal day brings together around 100 representatives from the waste to energy and bioenergy sectors in Sweden and Norway to discuss developments in both energy and fuel markets. At the meeting Profu shared their annual analysis of the sector which showed that in the last 12 months there has been an increase in average gate fees for RDF imported from the UK of around 20% (from SEK 350 to SEK 430). This is consistent with the general pattern in the UK RDF export market of costs rising over the same period by around £8/t. But two themes dominated discussions this year. The first, was, unsurprisingly Brexit. Aside from a degree of disbelief that the UK had really voted to leave the EU (and the corresponding impact on the exchange rate) there was real concern as to what Brexit might mean for RDF trade between the UK and Sweden.  The answer is, of course, “nobody knows”. In our view it seems unlikely that the UK Government will directly target the trade (other than, possibly, in the unlikely event of an EfW over-capacity in the UK); but it could always become caught up in wider trade discussions. Similarly, it is difficult to see how it would be in the economic interests of the Swedish government to restrict fuel to facilities at their core of their district heating network.However that leads neatly to the second theme – namely the announcement in June that the Swedish government is considering the (re-)imposition of an incineration tax as part of further steps to increase resource efficiency and to reduce the use of non-renewable energy sources. Unlike the Netherlands when it introduced its EfW tax in 2015, the Swedish government’s brief discussion document does not highlight a potential need to “protect” imports – rather it identifies the specific issue of EfWs being constructed in Sweden recently with a focus primarily on imports and as a result “there is a large excess capacity of waste incineration in Sweden”.  This would seem to suggest that protecting RDF imports is not a priority. The formal response is to be prepared by June 2017. The imposition of any incineration tax in Sweden has the potential to significantly impact on its international competitiveness. Were the tax set at the same level as Netherlands (€13/t) then the recent gains in average gate fees for RDF imports in Sweden could well be wiped out. For Sweden to remain competitive with Netherlands and Germany gate fees could, if the tax were implemented, be forced down to around SEK300.Some potentially uncertain times are therefore to come for Swedish EfW operators.Author:  Adrian Judge