6 February, 2018
Waste-to-energy (WtE) is a generic description for a process that takes waste, and combusts that waste to produce energy. The energy produced can take the form of electricity or steam (or both). WtE projects use a variety of types of waste and a range of combustion processes. They divert waste from landfill to generate low-emission electricity and are environmentally and economically sustainable.
This article considers the key revenue streams from WtE projects and the key risks which need to be addressed – either through government policy or contractual mechanisms – to make WtE projects economically viable.
In our first article, "Waste-to-Wealth Initiatives – Waste Projects",1 we provided an overview of waste projects, including WtE. In response to the positive feedback which this article received, we have taken the decision to devote three further articles to WtE. In our next article, we will consider specific policy settings in Asia Pacific, Europe and the Americas for WtE projects and the final article of the series will consider waste processing and treatment using other methodologies, including mechanical and biological treatment, material recovery, and organics recovery and processing.
What do we mean by waste-to-energy?
Waste-to-energy is a broad term (with the same meaning as "Energy-from-Waste"). We use the term to mean any process or treatment that takes waste and converts it into energy (for the primary purpose of producing electricity — or electricity and heat — for sale) using a thermal or biological technology. A variety of 'processes' are used, each of which is likely to have its own proprietary and intellectual property rights. Each of these processes tends to be referred to as a "technology".
Irrespective of the technology used, the same two outcomes result:
- reduction in the mass and volume of waste disposed of to landfill; and
- production of energy from the non-reusable and non-recyclable fractions of the waste stream.
Key waste streams
Waste is characterised in a variety of ways, with industry and regulators using common descriptions. These are: Municipal Solid Waste (MSW),2 Commercial and Industrial Waste (C&IW),3 Construction and Demolition Waste (C&DW),4 Events Waste,5 Green Waste,6 Organic Waste7 (including bagasse8 and biomass,9) Food Waste10, Hazardous Waste,11 E-Waste,12 Medical Waste,13 and Bio-solid and Slurry Waste14. Subcategories exist too: for example, MSW can be sorted in people's homes which enables recyclable waste to be separated out.
Figure 1 shows the various categories of waste types and which waste processes can be used for each type: Biological WtE and Thermal WtE, Organic Recovery and Treatment Facilities (ORF), Material Recovery Facilities (wet and dry MRFs) and Mechanical and Biological Treatment Facilities (MBT).
Figure 1: Waste types and how they may be treated
Please click on the image to enlarge.
WtE "technologies"
Thermal or Biological technologies
In broad terms, the technologies used to generate energy from waste take two forms15: biological16 and thermal17. "Biological" technologies use anaerobic digestion (AD), which requires a consistent type of organic waste and a highly controlled environment in which to produce and combust methane. The waste streams suitable for AD are limited (as noted in Figure 1 above) to Food Waste and Bio-solid and Slurry Waste. The overall energy output from AD is low in comparison to thermal technologies. Therefore, large-scale WtE projects predominantly use "thermal" technologies. These include:
- combustion of waste;
- gasification of waste18 (including close-coupled gasification, slagging and plasma); and
- pyrolysis of waste.19
Mass combustion
Combustion is the globally prevalent WtE technology. As a general statement, moving grate20 and fluidised bed21 technologies are the main combustion technologies used, with both having low emissions and high thermal efficiency.22
A WtE project using combustion technology, and taking large volumes of waste without any form of prior systemised sorting, separation or treatment is referred to as a "mass burn" or "mass combustion" WtE project. Some combustion WtE projects take waste after it has previously been sorted into different streams (perhaps with recyclable items removed) or shredded in some way: these are not mass burn projects. Mass burn does not: pre-sort to derive reusables or recyclables from the waste stream, blend or mix waste (other than by crane in the bunker), shred waste in preparation for processing and treatment, nor use RDF23.
Gasification
Gasification involves deriving synthesis gas (syngas) from waste in low oxygen, high temperature chambers, and then combusting the syngas24. The use of gasification as a WtE technology continues to be developed for large-scale WtE. In Japan, for example, there are examples of WtE projects using some form of gasification.
Pyrolysis
Pyrolysis involves deriving gas (and char or tar) from the sublimation of waste at high temperatures in the absence of oxygen, with the gas then being combusted. While pyrolysis WtE plants do exist, they are not as prevalent as mass combustion or gasification plants.
Sorting or treating waste before it is combusted
In jurisdictions with more developed waste collection systems, MSW is collected from homes and businesses using single or multiple bins, including using dedicated "recycling" and green bins (and perhaps food bins). The use of multiple bins is often referred to as "source separation" or "source segregation". Depending on the waste collection system, separated fractions of the waste stream can then be delivered to different waste projects; for example: recyclables to a dry MRF; organics to an ORF; and non-segregated MSW to an MBT facility or a WtE facility.
In addition to source separation, and again depending on the waste collection system being used, waste may be "pre-sorted" or "pre-treated" after collection.25 An MBT facility or MRF can be co-located with, or close to, a WtE facility (including being connected to it) or may be geographically separate, with a transport solution in place to deliver the pre-sorted waste to the facility.
The Waste Management Hierarchy (see Figure 2) promotes source separation or pre-sorting as a preferred policy outcome. While adding an MRF or MBT requires additional capital expenditure (thereby increasing the cost of a WtE project), it provides an outcome consistent with the Waste Management Hierarchy. This is particularly the case if waste is not source-separated in an effective manner or, indeed, at all (typically, because there is no recycling bin or because the bin is not used), in which case there may be a desire for pre-sorting at the WtE facility.
Whether or not an MRF or MBT is used will be a function of the additional cost26 and the revenue expectations from recovery of reusables and recyclables by pre-sorting. The revenue expected to be earned is a function of waste composition (critically, the proportion of the waste stream comprising reusables and recyclables), and the market for them. Recycling markets around the world have fluctuated immensely over the past decade and (in some cases) market appetite has disappeared.27 This can make revenue forecasting from the sale of recyclables difficult.
Figure 2: The Waste Management Hierarchy
Please click on the image to enlarge.
Procurement methodology
Variety of procurement methods
As noted in our "Waste-to-Wealth Initiatives – Waste Projects" article, WtE projects can be procured using a variety of different procurement methods. The simplest method is direct procurement under a D&C28 or EPC29 contract, with the procuring municipality (following operational completion of the WtE project) either operating the WtE project itself or contracting with the private sector to provide operation and maintenance services under an O&M30 contract. This direct procurement model is the prevalent model in China.
For the purposes of this article, we are assuming that the municipality is not procuring the WtE project directly under a D&C/EPC contract and operating and maintaining the facility by itself or under an O&M contract, but is instead contracting with the private sector to procure the WtE project under a BOO31, BOOT32, DBFOM33 (or DBOM), or PPP34 model.
Affordability for municipalities
A WtE project provides a waste processing service to municipalities. The affordability of such services compared to other forms of waste projects (or landfill) will be an overarching consideration for such municipalities.
Affordability is a function of competing calls on the municipal budget. Therefore, the ability of the municipality to charge its residents for services, or to obtain funding from other sources, is an important consideration.
In some jurisdictions, municipal budgets have been insufficient to support waste projects, so other government entities have had to implement policies to allow WtE projects to be developed. Examples of such policies include the introduction of a feed-in-tariff (FiT) regime35 or a mandatory renewable energy requirement under which participants in the electricity industry are mandated to pay a FiT for renewable energy (at a prescribed price) or to source a percentage of their electricity requirements from renewable energy sources.
Project sponsor economics
For the sponsor of a WtE project (as well as the equity investors and, if project financed, the debt providers), understanding the source and amount of both revenue and costs (and, as such, net revenue) and the risks associated with generating that revenue and incurring those costs is critical. As we consider in detail below, the revenue stream from a WtE project is a function of the unit charge (per tonne or per MWh) and the quantity of waste delivered and electricity generated (and, as such, net revenue is a function of revenue less operating costs (including insurance), the cost of servicing shareholder loans and, if project financed, 36the cost of servicing loans from debt providers and the repayment of interest).
The greater the certainty of an assured revenue stream from a creditworthy municipality or private sector counterparty (as a supplier of waste or an off-taker of power, or both), then the larger the debt sizing can be, and the higher the gearing.
Key revenue streams
General background
As a general statement, there are two primary sources of revenue for WtE projects:
The above table is deliberately simplistic. In some jurisdictions, Offtake Revenue (typically through a FiT regime) is the only form of revenue, or it may generate a higher proportion of the revenue than the Gate Fee.
There may also be other revenue sources which fluctuate or which depend on the location and characteristics of the WtE plant. Debt financiers may discount, or even disregard, these other sources of revenue in the financial model for the purposes of sizing debt. Examples include:
Contracted and Merchant WtE Projects for supply of waste
In broad terms, WtE projects are developed as either:
- Contracted WtE Projects: under which the project sponsor contracts directly with a municipality or a number of municipalities, and the municipality/each municipality agrees to deliver waste for a long-term period, to pay a Gate Fee for the supply of the waste to the facility (or possibly not if the WtE project will earn sufficient revenue from energy sales), and to deliver waste on a firm basis; or
- Merchant WtE Projects: under which the project sponsor contracts with multiple non-municipal parties for the supply of waste to the WtE project (typically with waste supply contracts being for varying periods of time), with each supplier of waste paying a Gate Fee.
Whatever the ratio of Gate Fees to Offtake Revenue, the project sponsors will always be keen to match the time frames of a long-term obligation to supply all (or a high proportion of) the energy capacity of the WtE project and a long-term waste supply contract (or contracts), possibly contracting with the same entity as both a supplier of waste and an off-taker of energy.
Whether a WtE project is a Contracted or a Merchant WtE Project, energy (in the form of electricity generated and heat produced) is likely to be sold under a PPA (or a PPA and Steam Supply Agreement if heat as well as electricity is produced) at a price specified in the PPA, or into a market for electricity39 or to energy companies under, and at a price determined by, a FiT regime.
Location of WtE project
The geographical location of a WtE project will have an impact on its economics in two key respects. First, it will determine the sources, quantity and composition of waste supplied over time. Secondly, it will enable the stakeholders who are developing the project to consider and therefore determine (and possibly guard against) substitutability risk: i.e the risk that another waste project will substitute the service provided by the WtE project. This is a critical risk for Merchant WtE Projects as, irrespective of the basis on which energy is sold, waste is required in order to produce energy (and hence revenue for the project).
The substitutability risk of a Contracted WtE Project is a function of: (i) the catchment area of the municipality and the power (or statutory duty) of the municipality to collect waste from within that area and deliver it to the WtE project; and (ii) the terms on which the municipality is prepared to contract, including assurances that sufficient waste will be delivered to the WtE project. The substitutability risk on a Contracted WtE Project is likely to be best characterised as low or negligible if the relevant contract addresses volume risk effectively. Of course, the composition of waste arising in the catchment area and ensuring that municipalities are prevented from substituting that waste is a different matter altogether, and is a key "composition risk" issue, which we discuss further below.
The substitutability risk of a Merchant WtE Project is not a function of the catchment area of the municipality. Instead, the risk is whether the service being provided by the Merchant WtE Project (or a substitute for that service) can be provided by another provider of waste processing, treatment or disposal services at a lower price (or possibly at no cost in some jurisdictions). Whether a substitute entity is able to provide the service at a lower price will be a function of the cost of the service being provided by the Merchant WtE Project (compared to any substitute service, including landfill and transportation costs), the quantity and composition of waste available to be contracted (and in fact contracted) to the Merchant WtE Project, the contract term of the waste supply contracts, the Gate Fee (if any) and the Offtake Revenue.
Policy settings
Irrespective of whether a WtE plant is Contracted or Merchant, it is unlikely to be economically feasible or sustainable without the right policy settings.
In most jurisdictions where WtE projects are developed, policy settings inform and are vital to (and, in some cases, are the primary drivers for) the sustainability and certainty/security of revenue streams: i.e. ensuring that the Gate Fee is lower than landfill costs, and (perhaps) ensuring electricity pricing can compete with non-renewable energy sources. The policy settings "close the gap" to allow WtE projects to compete on price on a like-for-like basis with landfill and other energy sources.
The form and substance of policy settings will differ between individual jurisdictions and may include:
Key risks
All WtE projects are different, but key risks remain the same
As will be clear from the above, there is no universal blueprint for WtE projects. The "size and shape" of each WtE project will be influenced by a number of factors including:
- the identity of the municipality (or private sector supplier) procuring the services from the WtE project and, critically, the affordability of those services to the municipality;
- the terms (including the price) on which the counterparty for services wants to contract and its preparedness to provide security (e.g. parent company guarantees, letters of credit) if required by sponsors or financiers to support the counterparty’s contractual obligations;
- current and projected waste arisings and the historic and projected composition of such waste;
- the location of the project (including sources of additional waste within a transportation net revenue accretive catchment area);
- the opportunities (if any) for "embedded" power offtake;
- the shareholder structure for the project and the proposed approach to financing; and
- the policy and legal settings directly or indirectly relevant to the project and its forecast costs and revenues.
While the context of each WtE project is unique, there are certain key risks that need to be assessed on all WtE projects. Depending on the contractual arrangements (and risk allocation between the contractual counterparties including municipalities and private sector waste suppliers), these risks may have an impact on gross and net revenue (including as a result of revenue shortfall, increased costs, and liability for not accepting waste or for not supplying electricity). Two key risks relate to the quantity and quality of the waste material being supplied to the WtE facility, which we will now consider in detail.
Quantity of waste: volume risk
Broadly speaking, waste supply contracts require the municipality (or private sector supplier) either to deliver a stated quantity of waste or to deliver all waste arising within its area (or from stated activities within a stated area).
Under both a "stated quantity" and a "waste arising" contract, sufficient waste might not be delivered because the municipality (or private sector supplier) has the required quantity or sufficient waste arisings, but does not deliver in accordance with the contract (so-called "Non-delivery Risk"). Under a waste arising contract, volume risk also arises if the quantity of waste arising within the stated area is less than anticipated for reasons that are not attributed to the action/inaction of the relevant supplier (so-called "Waste Arising Risk").
Volume risk: risk allocation:
Non-delivery Risk: Under both stated quantity contracts and waste arising contracts, municipalities (and private sector suppliers) will assume the obligation to deliver the stated quantity of waste (whether by reference to minimum quantity or all waste that arises), and agree to compensate the sponsors if this is not delivered.
Volume risk on stated quantity contract: Under a stated quantity contract, the municipality (or private sector supplier) will take volume risk on the basis of being required to pay for the minimum quantity of waste it has agreed to deliver (whether or not it delivers that quantity), typically using a "deliver-or-pay" regime.
Volume risk on waste arising contract: Under a waste arising contract, the municipality (or private sector supplier) will want the WtE project to take and to process all waste arising within the stated area (or from the stated activities) for the term of the contract, but is likely not to want to have to pay to reserve capacity in the WtE plant to allow for a growth in waste arisings. For the project sponsor, volume risk on a waste arising contract has two elements: (i) certainty of a minimum quantity of waste to be delivered (and compensation if that quantity is not delivered or the relevant supplier delivers the minimum quantity but directs excess quantities to other facilities/landfill); and (ii) if the municipality (or private sector supplier) is not paying to reserve capacity, certainty of a maximum quantity of waste that may be delivered. These risks are dealt with in different ways across and within jurisdictions.
How to address volume risk?
We describe (at a high level) in the table below how volume risk may be addressed.
Offtake Revenue is affected by non-delivery of waste and waste arising shortfalls. While the project sponsor may seek to impose a liability on the municipality (or private sector supplier) for loss of Offtake Revenue in different scenarios (e.g. non-delivery of a stated minimum quantity of waste), it is possible that the municipality (or private sector supplier) will resist such liability.
Depending on the proportion of gross revenue derived from Offtake Revenue, the impact on a project sponsor of loss of Offtake Revenue will differ, and therefore it is critical that, both contractually and through practical mitigation strategies, the project sponsor is able to source additional waste and to recover the cost of doing so from the relevant municipality/private sector supplier to the extent that such municipality/private sector supplier has failed to comply with its supply obligations. Developing these mitigation strategies is something that the project sponsor will be doing in any event because it will need to understand how rejection of incompatible waste41 and the delivery of an insufficient volume of waste can be mitigated either by delivery of compatible waste from another source at the cost of the municipality (or the private sector supplier) or by itself sourcing compatible waste from another source at its own cost to ensure that sufficient waste is delivered to the WtE project.
Quality of waste: waste composition risk
Incompatibility risk
The composition of waste needs to be understood and addressed in the contractual relationship between the municipality (or the private sector supplier) and the project sponsor. The project sponsor will want to be able to reject any waste that it is not licensed to take (so that it complies with the law) or that is not compatible with the technology used, i.e. so-called incompatible waste.
For these purposes, the contract between the municipality (or private sector supplier) and the project sponsor will need to clearly define compatible and incompatible waste or so-called "on-spec" and "off-spec" waste (Compatible Waste and Incompatible Waste). Incompatibility risk becomes a revenue risk if the WtE project is not provided with sufficient volumes of Compatible Waste from the municipality (or the private sector supplier), or if it is not able to source sufficient volumes of Compatible Waste from another source on a timely basis (Other Source Waste).
CV risk
Even where waste is consistent with the WtE project's licence and is compatible with the technology used at the WtE project, the composition of the waste delivered will be variable and, critically, the net calorific value (NCV) of such waste will vary. As noted in the "Waste-to-Wealth Initiatives – Waste Projects" article, there can be a considerable range in the CV of MSW across, and within, jurisdictions. Each WtE project and its financial model is designed to reflect an assumed CV of waste delivered, processed and treated (CV bandwidth).
If the NCV of waste is above or below the CV bandwidth, the capacity of the WtE project to process and treat waste is affected, as is its thermal efficiency. CV risk is therefore a revenue risk to the extent that thermal capacity is reduced by the delivery of waste with an NCV outside the CV bandwidth, both in terms of the quantity of waste capable of being processed (affecting the number of tonnes in respect of which the WtE project receives the Gate Fee), and the number of MWh of electricity generated and the quantity of heat produced (which is the basis on which the WtE project is paid under the PPA, contract for differences or FiT).
Furthermore, if NCV impacts thermal capacity of the WtE plant this may result in the project sponsor being liable under a PPA or contract for differences if the WtE project does not deliver the quantity of contracted energy to the off-taker.
As with volume risk, there are a number of ways in which CV risk may be addressed contractually. The way in which a change in CV risk is addressed will tend to depend on the cause of the change in composition, the effect of that change on NCV and whether or not the municipality (or the private sector supplier) accepts CV risk.
Contractual options for addressing risk of change in CV
Conclusion
WtE projects provide a compelling alternative to landfill: as Figure 1 illustrates, WtE projects are able to process the broadest range of waste types of any waste project. The economic viability of WtE projects is, however, dependent on policy settings that allow WtE projects to compete on a like-for-like basis with landfill, and effective contractual mechanisms that address key risks, critically those relating to waste volume and waste composition.
Although each WtE project is unique, across the globe we have seen policy settings emerge, and applied as best suits each jurisdiction, and a range of contractual mechanisms develop to address key risks. The range of contractual mechanisms is responsive to each jurisdiction, and its policy settings, and specific features of each WtE project and the needs of its sponsors, financiers and waste suppliers.
Please click here to download the pdf of the InfraRead issue where this article featured.
In our next article, we will consider the policy settings in countries across Asia, Europe and the Americas. In so doing, we will outline how policies can be used effectively to underpin the sustainable viability of WtE projects.
1. See the March 2017 issue (Issue 9) of InfraRead and the April 2017 issue (Issue 18) of EnergySource.
2. Municipal Solid Waste is waste arising from human activities in urban environments (other than sewage and waste water).
3. Commercial and Industrial Waste is waste arising from commercial and industrial premises.
4. Construction and Demolition Waste is waste arising from construction and demolition work.
5. Events Waste is waste arising from entertainment and public events within municipalities, including music concerts and festivals, parades and sports events.
6. Green Waste is organic material from domestic "green" bins and the activities of municipalities (typically, parks and gardens and lopping and topping of trees).
7. Organic Waste is a generic term for any waste that arises from the human management of flora, including agricultural, forestry and husbandry.
8. Bagasse is organic material arising from sugar cane or sorghum production.
9. Biomass is organic material arising from agricultural, forestry and husbandry activities.
10 .Food Waste is organic material arising from commercial or domestic food preparation, which is increasingly being separated at source by households and commercial food outlets.
11. Hazardous Waste is waste that is potentially harmful to human health, animals, plants or the environment. Characteristics may include that the waste is explosive, flammable, poisonous, toxic, exotoxic or infectious, including hydrocarbon/water mixtures and wastes containing certain compounds such as zinc, lead and asbestos.
12. E-Waste is electronic waste including mobile phones, computers and other electronic appliances. Given the high rate of technological advancement and consumption of electronic goods, E-Waste is an ever-growing fraction of the waste stream.
13. Medical Waste is a generic term for waste arising from medical and pharmaceutical activities.
14. Bio-solid and Slurry Waste is human and animal waste matter derived from waste water processing or agricultural collection. This may be used in Biological WtE projects or in Thermal WtE projects to balance Net Calorific Value (NCV) and to maintain thermal capacity.
15. Arguably there is a third form of WtE Thermal technology, namely methane collection from existing landfill, and its subsequent combustion of methane to derive energy. Our view is that methane collection and combustion is better considered as part of a landfill strategy, rather than as a WtE project.
16. Biological processing and treatment involves anaerobic digestion (AD) and requires waste streams that are wet and of reasonably consistent composition (for example, Food, Bio-solid and Slurry Waste). AD is not suitable for the processing and treatment of MSW, C&IW, C&DW or Events Waste.
17. Combustion, gasification and pyrolysis are technologies which process and treat waste at high temperatures. The temperatures and oxygen levels differ for each technology.
18. Gasification of MSW occurs within a temperature range of 300 to 760 degrees Celsius.
19. Pyrolysis involves subjecting MSW to a temperature range of between 2,700 and 11,000 degrees Celsius to sublimate organic matter in the absence of oxygen. Pyrolysis differs from gasification in that gasification (including plasma) reduces the oxygen content of the feedstock while pyrolysis sublimates organic matter in the absence of oxygen.
20. There are four main types of moving grate technology: forward reciprocating, reverse reciprocating, roller and horizontal. A detailed consideration of each type is beyond the scope of this article.
21. There are three main types of fluidised bed reactor technologies: bubbling, circulating, and revolving. Again, a detailed consideration of each type is beyond the scope of this article.
22. Leading companies using combustion technology include Hitachi Zosen Inova, Martin GmbH, Keppel Seghers, Wheelabrator Technologies, China Everbright International, Babcock and Wilcox/B&W Vølund, and CNIM.
23. As noted in the "Waste-to-Wealth Initiatives – Waste Projects" article, RDF is refuse-derived fuel, sometimes referred to as process-engineered fuel (PEF) or solid or specified recovered fuel (SRF). Each of these fuels has limited/negligible organic content and is sometimes used to fire industrial facilities, including cement kilns.
24. Leading companies using gasification technology include Covanta, Hyundai, Viridor, Fortum, Mitsubishi Heavy Industries Environmental and Chemical Engineering Co. Ltd, Sembcorp, Suez Environment (SITA) and CISC.
25. Pre-sorting/pre-treatment can include use of a wet MRF to allow recovery of reusables and recyclables (and possibly the food/organic fraction) before processing the balance of the waste stream in an MBT, or use of a wet MRF or MBT facility before treatment of the residual fraction in a WtE facility.
26. The inclusion of pre-sorting at a WtE project will increase the capital and operating cost of the WtE project (possibly by up to a third) and as such may affect the affordability of the WtE project.
27. For example, the market for brown plastics in China has ceased, leaving some waste projects "short" of projected revenue from recycling of plastics.
28. Design and Construction (D&C).
29. Engineering, Procurement and Construction (EPC).
30. Operation and Maintenance (O&M).
31. Build Own Operate (BOO) means that the project sponsor builds, owns and operates the WtE project, and the municipality (or government agency, authority or corporation) contracts with the WtE project for the provision of services using the WtE project (i.e. the provision of waste acceptance, treatment and processing and, if the municipality is the off-taker of electricity, for the supply of electricity).
32. Build Own Operate Transfer (BOOT) means that the project sponsor builds, owns and operates the WtE project for the term of the BOOT contract, providing services to the municipality (or government agency, authority or corporation) and then transfers the WtE to the municipality (or government agency, authority or corporation) at the end of the term of the BOOT contract, usually at the option of the municipality, and typically for a nominal purchase price on the basis that the municipality has effectively paid for the WtE project through the payment of service charges.
33. Design Build Finance Operate Maintain (DBFOM) means that the project sponsor designs, finances, builds, operates and maintains the WtE project, and "hands over" the project at the end of the DBFOM term. Again, under the DBFOM contract, the municipality (or government agency, authority or corporation) may be the off-taker of the electricity produced, but this model may also be used to allow for delivery of waste to the WtE project (at no charge to the municipality) to enable the WtE project to generate electricity which it then supplies under a Power Purchase Agreement (PPA) or under the FiT regime.
34. Public Private Partnership (PPP, or P3) means that the private sector contracts with the municipality (or government agency, authority or corporation) to provide services to the municipality or to the public as users of the infrastructure developed by the project sponsor, with the project sponsor responsible for all associated DBFOM activities. In the context of WtE projects, the municipality (or government agency, authority or corporation) will have services provided to it in the form of waste acceptance, processing and treatment.
35. In our next article, we will consider which jurisdictions have FiT regimes, and their terms.
36. If a WtE project is project financed, for the project financiers the WtE project must be able to earn sufficient revenue to service debt and repay interest. It is important to note, however, that not all WtE projects are project financed.
37. To be distinguished from fly ash captured through the "air pollution control system" (a by-product of controlling emissions) which is hazardous and which must be disposed of to an appropriately licensed hazardous waste facility/landfill.
38. In many jurisdictions, the assumption for the purpose of the financial model will be that bottom ash is a residual material that needs to be disposed of to landfill. If the ash does not have to be disposed of to landfill, this will remove the disposal cost and improve the net revenue position of the WtE project.
39. If electricity is sold into an electricity market, the price paid for electricity will be determined by the price at which supply matches demand (for uncontracted capacity) or by a contract for differences (for contracted capacity).
40. Other revenue opportunities include bottom ash use, APCR use, char use (from pyrolysis) and sale of ferrous/non-ferrous metals and possible CO2 use in the context of greenhouse agriculture.
41. Incompatible waste is waste that the WtE project is not able to process or treat because it is not designed to process or treat that waste, or because it is not licensed to do so, and as such cannot do so lawfully.
For further information, please contact:
Michael Harrison, Partner, Ashurst
michael.harrison@ashurst.com
