Wen Bin Lim, Director, APAC Head Renewable Energy, KPMG in Singapore
Edwin Yuen, Senior Infrastructure Finance Specialist at the Global Infrastructure Facility, World Bank in Singapore*
Ananda Ram Bhaskar, Deputy Chief Executive Officer (Environmental Protection) & Director-General of Environmental Protection Division, National Environment Agency
But many are learning that it takes more than the granting of licenses to create economically and environmentally sustainable WTE solutions. In this article, we look at a number of Southeast Asian markets to identify both new projects and barriers to adoption. We also provide several tips to help governments and planners in the successful development of their WTE initiatives.
WTE technologies convert non-recyclable waste into usable forms of energy. The heat from the combustion of waste generates superheated steam in boilers, and the steam drives turbogenerators to produce electricity.
Waste management has become an imperative given that most cities are running out of landfill sites - the traditional method of disposing waste. With increasingly limited land availability and the steady growth of cities, governments need to implement effective and sustainable waste management solutions including WTE technologies.
WTE is only one part of a comprehensive, waste management plan,” says Edwin Yuen, Senior Private Sector Operation Specialist at the Asian Infrastructure Investment Bank. “Projects should begin with waste minimization as a public policy, followed by waste recycling and WTE incineration, and ending with the remaining ash delivered to local landfills.”
WTE systems provide a highly valued source of renewable energy, but perhaps the greatest benefit of WTE today comes from its ability to convert waste into ash, reducing by up to 90 percent the volume of waste going to landfills.1 This reduction in waste can also help contain the amount of methane emissions from landfills with decomposing organic materials.2 These issues are especially important in Southeast Asia, where the urban population is projected to rise to nearly 400 million by 2030,3 requiring significant investments to cope with the rapid increase in garbage. In some areas such as Singapore, the relative lack of land for landfills is also a key factor in adopting WTE solutions.
WTE is one of several imperatives for sustainable waste management. WTE systems can be an effective supplement to fossil fuel-based power sources while also reducing landfill requirements in urban environments, generating renewable energy and producing revenue for municipalities and governments.
Projects should begin with waste minimization as a public policy, followed by waste recycling and WTE incineration, and ending with the remaining ash delivered to local landfills.
WTE technology has been developed and implemented for decades. The most robust technology is 'moving grate, mass burn' technology featuring a moving grate that burns Municipal Solid Waste (MSW) on a grate travelling from a feed shaft to the ash pit. The moving grate technology does not require pretreatment or sorting of MSW, allowing it accommodate large quantities and variations of waste composition and calorific value. The technology has been used for over a century, with a proven track record of operation for mixed MSW treatment.
Between 2003 and 2011, at least 106 moving grate incineration plants were built worldwide for MSW treatment.4 One of the world's largest moving grate incineration plants was installed in Singapore by Mitsubishi in 2000, providing a capacity of 4,300 tons per day (tpd) of waste.5
A wide range of technology solutions for WTE ─ some already used in developed markets ─ is expected to be implemented in Southeast Asia in the years to come. 'Fluidized bed' is a cleaner and more efficient technology for converting waste to electricity, but the process needs a more uniform waste size to operate, making it more complicated and expensive compared to moving grate systems. 'Gasification' plants use plastic and organic solid waste in a chemical conversion process that creates and burns sythesis gas at high temperatures.
The Asia-Pacific WTE market is projected to grow at an annual rate of over 15 percent and reach a value of US$13.66 billion by 2023.6 Tapping into this market is a variety of commercial banks, multilateral development banks, financial sponsors, and private equity firms. In general, financial equity is less available in emerging markets but more common in developed markets such as Australia.
Public Private Partnerships (PPPs) are a favored development strategy in the region. In Singapore, the NEA develops WTE facilities both on its own and through private sector developers under a PPP structure, according to Ananda Ram Bhaskar, Deputy Chief Executive Officer (Environmental Protection) & Director-General of Environmental Protection Division at Singapore's National Environment Agency (NEA).
In a typical PPP structure for WTE projects, the developer undertakes the development of the project under the Design-Build-Own-Operate (DBOO) model. In the DBOO model, the developer secures its own financing and builds, owns, maintains and operates the WTE facility to meet the contracted WTE capacity over the lifespan of the facility, which is about 25-30 years. WTE facilities require significant upfront investments and developers and their financiers require assurances from the government agency commissioning the project that enables the investment to be recovered over time.
Yuen points out that any development strategy involves the basic economics of how a WTE facility makes money. Along with government incentives, WTE is based mainly on two sources of revenue. The first source is a gate fee charged when municipalities, businesses or other organizations deliver their waste to the facility for disposal. The second source is the generation of electricity that is sold to local power grids. (End products of WTE incineration like ash represent a third but smaller source of revenue.)
Yuen explains that the gate fee is driven by the volume of waste, and electricity sales are driven by the heat produced. This fact, in turn, can influence the business model of the WTE project. The more waste that is combustible, like plastics, paper or wood, the hotter the furnaces burn and the higher the caloric value (CV) produced. The more non-combustible waste, like bricks or glass, the lower the CV. This mix determines the facility's revenue streams.
In addition, safety regulations require that the facility is designed for a certain thermal capacity. If the percentage of combustible waste is too high, the CV value will be above the designated level, and the operator will have to reduce the amount of waste going through the facility. This reduces gate fees. However, if the CV is too low, the facility generates less electricity that it can sell.
“The single biggest challenge for WTE,” says Yuen, “is to balance the right CV and quality of the waste to optimize both waste volumes and electric sales.”
Currently, there are 10 waste-to-power plants or trial projects across the 10 member states of the Association of Southeast Asian Nations, including developments in Singapore, Thailand, Indonesia, and Vietnam.7
Not surprisingly, China is a major player in the region, marketing waste-to-energy technology developed over the years for its domestic WTE plants. China had 7.3 gigawatts of energy production across 339 power plants in 2017.8 This is expected to grow to 10 gigawatts and 600 plants by 2020.
However, Japan runs a close second in exporting its expertise and technology. The country has 380 waste-to-energy plants nationwide, and almost a third of the country's refuse—incineration facilities turn garbage into electric power.9 In some ways, Japan is taking a more aggressive approach than China by offering combination packages that include WTE backed by a range of services such as waste sorting, waste reduction, personnel training, and recycling. Hitachi Zosen, JFE Engineering, Mitsubishi Heavy Industries and other Japanese exporters are expected to join consortia to bid for plant orders in Southeast Asia. As of mid-2019, Japan has pursued agreements with Vietnam, Indonesia and the Philippines,10 and the Japanese ministry has set aside 2 billion yen (US$18.49 million) in its fiscal 2019 budget to support field surveys and other pre-bid activities.
To give a sense of the range and volume of WTE activity in Southeast Asia, we can note the following projects and initiatives now in play:
Singapore has long been a regional leader in WTE development. Bhaskar shares that Singapore aims to reduce the average daily amount of waste sent to Semakau Landfill by 30 percent, or from 0.36 kg/capita in 2018 to 0.25 kg/capita by 2030. Currently, the country's solid waste disposal infrastructure consists of four WTE plants: Tuas, Senoko, Tuas South and Keppel Seghers Tuas Plant (KSTP), in addition to the Semakau Landfill. In the country's upcoming WTE-based Integrated Waste Management Facility (IWMF), treatment facilities for multiple waste streams will be catered for. To be developed in phases, the first phase of the IWMF will be capable of handling 2,900 tpd of incinerable waste; 250 tpd of household recyclables, 400 tpd of source segregated food waste and 800 tpd of dewatered sludge from the future Tuas Water Reclamation Plant (TWRP), which will be integrated with the IWMF to form the Tuas Nexus.11 The Tuas Nexus allows synergies to be derived from the water-energy-waste nexus and improve energy and resource recovery efficiencies and enhance land use optimization for Singapore.12
Indonesia is moving forward on plans for 12 WTE plants, starting with auctions for three WTE projects in 2019/20 ─ one in the West Java capital of Bandung and two more in Banten -- Tangerang and South Tangerang.13 Similar plants are set to be developed in Jakarta, in the South Sumatra capital of Palembang, the West Java city of Bekasi, the Central Java cities of Semarang and Surakarta, Bali's capital city of Denpasar, East Java's capital of Surabaya, South Sulawesi's capital of Makassar and North Sulawesi's capital city of Manado. All 12 waste-to-energy plants are expected to be completed in 2022 and produce 234 MW of electricity.
Thailand has established subsidies and tax incentives for various WTE plants that include incineration, gasification, fermentation and landfill gas capture.14 The country has also set 500 MW as the target for WTE in the new Power Development Plant 2018-37, which represents 30 percent of total renewable energy resources by 2037.15 The tentative feed-in tariff given for the WTE plants is THB3.66/kWH.
Vietnam is attracting investor interest from China, Japan and other countries. Several municipal authorities have accepted WTE plant projects and called for investment from different economic sectors. Ho Chi Minh City Municipality has released a set of criteria for investing in WTE projects that can process domestic waste up to 9,300 tpd. The government has set a high electricity purchasing price for WTE up to USD10.05 cents/kWh, which is even higher than prices for wind and solar power.
Malaysia will have its first WTE plant in operation in June this year.16 Located in Tanah Merah, Negeri Sembilan, the project is planned to handle 1,000 metric tons of solid waste daily and to produce 20 to 25 MW of electricity to power 25,000 households.
Australia now has its first WTE project, the 400-ktpa Kwinana facility currently under construction. More than 30 proposed WTE projects are also under consideration, including a AUD300 million facility in Ballarat and a AUD400 million facility at Swanbank west of Brisbane.17
In some ways, Japan is taking a more aggressive approach than China by offering combination packages that include WTE backed by a range of services such as waste sorting, waste reduction, personnel training and recycling.
Southeast Asian countries have a number of public policies to encourage and support WTE projects. For example, the Indonesian government has declared WTE plant projects as national strategic projects. To achieve a viable risk structure for WTE projects, however, initiatives will require close coordination and cooperation among multiple government stakeholders, including the state utility as an off-taker of electricity, municipalities for a supply of waste, and land sites to achieve a bankable PPP structure that ensures stable, predictable cash flow for the WTE plants.
Consistency and quality of waste is also a key risk factor to lenders and investors. Many emerging economies have limited waste-sorting processes and regulatory requirements to separate different types of waste. Furthermore, Southeast Asian waste can have a significant amount of “wet” waste that includes food waste which is harder to burn, provides a lower caloric value, and can vary in waste type and quality from year to year. For incineration plants, this means a fluctuation in electricity output and revenue uncertainty.
In addition, WTE plants produce ash that needs to be disposed of safely, usually in landfills that are lined with barriers to prevent ground water contamination.
Whether incineration, and waste to energy, is a net positive, can depend on the efficiency of the process, and the energy mix that waste to energy is replacing. The newest incineration plants have far better pollution and dioxin filters to protect the environment and human health. That technology will require governments in emerging markets to make additional investments for products and resources.
Yuen suggests a number of key steps to consider when launching a WTE initiative. Project planners should gauge how much WTE capacity is needed and then plan a pipeline of projects to support this capacity. This support should include waste collection logistics and quality in the way that waste is collected and processed. Economic feasibility should be based on affordable gate fees and electricity fed-in tariffs if applicable.
At every stage, the project should be marketed and explained to the general public, including a full description of the challenges and benefits of WTE technology. Finally, planners should incur full buy-in by the local municipal and national governments to help ensure the long-term support and viability of the project.
Municipal governments can leverage skill sets from the private sector in implementing WTE projects with state-of-the-art technology. Financing is available, along with long-term, predictable-quality waste contracts that help ensure reasonable tipping fees. Power-offtake contracts can include tariff levels that support the commercial viability of WTE projects. Singapore and other countries in the region are setting the right benchmark in this regard. Successful projects can serve as a template for other countries in the region.
* Edwin has recently joined the Asian Infrastructure Investment Bank in Beijing as a Senior Private Sector Operations Specialist.
Many emerging economies have limited waste-sorting processes and regulatory requirements to separate different types of waste.