Waste-to-energy can help India deal with the not only the increasing garbage disposal problem, but also address health and economic issues. It provides a largely unexplored potential for the country´s development.
Today, most wastes that are generated in India, find their way into land and water bodies without proper treatment, causing severe water and air pollution. The problems caused by solid and liquid wastes can be significantly mitigated through the adoption of environment-friendly waste-to-energy (WTE) technologies that will allow treatment of wastes before their disposal.
WTE facilities reduce the quantity of wastes, generate clean energy from them, and greatly reduce pollution of water and air, displace need for fossil fuels, and avoid Green House Gas (GHG) emissions, thereby offering a number of social and economic benefits that cannot easily be quantified. In its primitive stage, this segment is attracting interest from both urban authorities and private developers driven by both need and desire. However, much requires to be done to convert the already overdue dream of ¨Swachh Bharat¨ a reality.
?Municipal corporation´s initiative towards implementing WTE and their approach towards partnerships with private companies The Central Government´s ¨Swachh Bharat Mission¨ underlines the urgent need of improving waste management scenario in India where public apathy towards proper waste disposal is a major hindrance.
In India, by and large, municipal authorities are providing solid waste management services. It is also estimated that the Urban Local Bodies (ULB) spend about Rs 500 to Rs 1,500 per tonne on solid waste for collection, transportation, treatment and disposal.
However, ULBs spend less than 5 per cent on final disposal of waste, which shows clear negligence. Landfill sites are exhausted and such ULBs do not have resources to acquire new land. Due to lack of disposal sites, even the collection efficiency gets affected. Further, these local bodies lack technical, managerial, administrative, financial resources, adequate institutional arrangements.
The urban sector in India requires huge investments in developing infrastructure for solid waste management. It requires new management models that promote efficient, effective and good quality basic waste management services on a sustainable basis. Such twin objectives can be achieved through well-conceived, structured and transparently-executed Public Private Partnerships (PPP) arrangements. Various instruments can facilitate development of such PPP Projects:
International PPP experience has shown cost savings and improvement in efficiency and effectiveness in service delivery mainly due to financial and managerial autonomy and accountability in private sector operations. Besides, it brings in new investment and better technologies.
Over the past decade, hundreds of new WTE facilities have been built in the European Union, Japan, China, and over 30 other nations where landfilling is regarded as environmentally undesirable, and energy and land wasteful.
Off late in India, private sector participation has been attempted in door-to-door collection, street sweeping, secondary collection, transportation, composting, power generation and final disposal of waste at the engineered landfill sites. However, the present capacity of municipalities in India to manage the privatisation process is extremely limited.
?Private company´s approach towards partnership with municipal corporations and their thoughts on the prevalent rules and policies in the segment.
?Rationale behind private companies opting for WTE ahead of other renewable energy segments and their approach towards municipal corporations.
With significant capital costs associated new technologies and tighter environmental compliances, higher operating costs associated with non-uniform waste characteristics and frequent maintenance needs, the cost of generated power from WTE plants is bound to be higher than other RE sources.
WTE technology is used extensively in Europe and other developed nations in Asia such as Russia, Japan, Singapore, and Taiwan. In developed countries, environmental concerns rather than energy recovery is the prime motivator for WTE facilities. Energy in the form of power, bio-gas or heat is seen as a bonus, which improves the viability of such projects.
In India too, though MSW-based WTE projects generate clean power, they are conceptualised to prevent externalities associated with the traditional waste disposal practices followed today.
- Tipping fees - paid by ULBs to the WTE facilities to process their waste. A common feature in most of the developed countries is that the entire waste management system is being handled as a profitable venture by private sector or NGOs with tipping fee for treatment of waste being one of the major revenue streams.
- Profitability - if the right technology is employed with optimal processes and all components of waste are used to derive value, WTE could be a profitable business. When government incentives are factored in, the attractiveness of the business increases further.
- Government Incentives - the Government of India has declared incentives for WTE projects, in the form of capital subsidies.
- Related Opportunities - success in MSW management could lead to opportunities in other segments such as sewage, industrial and hazardous waste. Depending on the technology used for energy recovery, eco-friendly and ¨green¨ co-products such as charcoal, compost, nutrient rich digestate (a fertilizer) or bio-oil can be obtained. These co-product opportunities will enable the enterprise to expand into these related products, demand for which are increasing all the time.
- Emerging Opportunities - with WTE becoming important priority, opportunities exist for companies to provide support services like turnkey solutions. There could be significant international expansion possibilities for Indian companies, especially expansion into other Asian countries.
Under the MSW (Management & Handling) Rules of 2000, all Class I cities have to provide proper treatment and disposal facility for MSW. According to the 2011 census, 468 out of total 4,378 cities are considered Class I, meaning that the population exceeds 100,000. These cities alone contribute to more than 72 per cent of the total MSW generated in urban areas. [Source: Improving Solid Waste Management in India: A sourcebook for policy makers published by World Bank]
As per the National Environmental Engineering Research Institute (NEERI), India produces about 38 million tons of MSW annually. Per capita waste generation in major cities ranges from 0.20 kg to 0.6 kg. Generally, the collection efficiency ranges between 70-90 per cent in major metro cities, whereas in several smaller cities it is as low as 50 per cent.
As per the Department of Economic Affairs, Ministry of Finance, per capita waste generation is increasing by about 1.3 per cent per year. With growth of urban population ranging between 3-3.5 per cent per annum, the annual increase in overall quantity of solid waste is assessed at about 5 per cent.
Among the four geographical regions in India, northern India generates about 30 per cent of all MSW generated in India. Among states, Maharashtra, West Bengal, Uttar Pradesh, Tamil Nadu and Andhra Pradesh generate the highest amount of MSW. Energy recovery from urban and industrial wastes is in its nascent stage of development. There is a potential to recover 2,556 MW of power from solid waste, of which only about 250 MW has been exploited, according to MNRE.
There are structural, policy related, regulatory and commercial aspects which are to be addressed to encourage WTE projects in India.
PPP related aspects
- In India, though ULBs themselves are unable to process the collected MSW in a scientific way, unfortunately they prefer negative tipping fees (royalty charges) from the private developer who ventures to develop scientific waste processing facility. They require proper capacity building to protect viability of WTE projects. (insert infographic)
- ULBs require baseline studies; price determination either through a regulatory or independent process and standards of quality built into the SBDs (Standard bidding documents) would provide the necessary contractual commitments or ensure a non-discriminatory bid process.
- Quantity and quality of waste: There is conspicuous lack of accuracy regarding estimation of MSW quantity and characterisation. It poses a serious problem in technology assessment and feasibility studies. (insert table)
- There is a need for single window clearances: SBDs and MCAs facilitate the bid process by ease of approval by departments, but also have the national and international best practices built into it.
- While several states have an infrastructure fund, a dedicated urban fund for technical studies, bid process management, VGF, and long tenor loan for the urban sector could act as enablers for such projects.
- While policy and regulatory issues are stressed, a critical issue is the capacity building of the ULBs and urban development agencies for PPP. Most often the absence of capacity is the greatest impediment to PPP.
- Need for a separate demand creation, RPO: As highlighted before, the cost of electricity generated from such WTE will be higher than alternate sources. However, they are justified considering avoided environmental externalities. Power tariff comparison will be imprudent. This has to be ratified by creation of separate market for WTE projects in the RPO obligations, similar to what was done for solar projects in the past. Ministry of Power, has recently proposed to ¨earmark up to 0.5 per cent of RPO for WTE projects in the states where such wastes are available¨ in the amendments to Tariff Policy 2006.
- Lack of long-term tariff visibility: Due to lack of visibility in the tariff for 20-25 years (i.e. life of WTE projects), lenders find it difficult to assess financial viability. This becomes a hurdle in funding the project for its debt on reasonable interest rates and delays construction work. Consequently, it percolates into higher capital costs and results into higher tariffs. Guidance on generic tariffs would be very useful in this regard.
- Delay in regulatory process: Unlike other RE resources (like wind, solar, hydro, etc.), WTE projects have obligations associated with its fuel (MSW). ULBs typically give only 24 months to the developer to start processing of MSW in its facility. Such projects take about 20-24 months to get constructed. However, lack of tariff visibility delays the financial closure and construction of the facility.
- Absence of/inconsistency in regulations: Many state regulations do not have provisions for or provide clarity on tariff or tariff determination related and other commercial issues pertaining to WTE projects. Moreover, it has been observed that in some states, the State Electricity Regulatory Commission (SERC) directs the project developers to sign a PPA/LOI with the utility before filing of the tariff petition before the SERC. While on the other hand, the utility refuses to sign a PPA/LOI citing absence of tariff visibility owing to absence of generic tariff for MSW-based projects in the state. Such lack of clarity results in significant delay in starting regulatory process for tariff determination leading to further cost escalations.
Techno commercial issues and suggestions
- Reluctance by discoms for PPA: State discoms tend to remain reluctant to buy relatively costlier WTE power, ignoring the larger role of WTE projects. In this context, proposed amendments in Tariff Policy mandating state distribution licensee to procure power from all the WTE plants in the state is a welcome move.
- Pooled account: With reluctant state discoms, the only stakeholder who can rescue such projects is the ULB itself. ULBs themselves are large consumers of power and being the stakeholder, they appreciate the larger purpose of WTE projects. However, their power consumption is scattered among multiple establishments and hence creates procedural bottlenecks in getting permission for Open Access from distribution utilities. Therefore, for WTE projects, stakeholder municipalities can be considered as a æpooled account´ for the purpose of Open Access if the incumbent discom is not willing to sign PPA itself. Further, ULBs should be exempted from levy of cross-subsidy surcharge as a promotional measure.
The relaxation of ¨No Transmission Charges¨ and ¨No Transmission Losses¨ for the use of ISTS network as provided to solar power projects shall be extended to WTE projects as well.
To realise the untapped potential of more than 2 GW from WTE projects, road blocks on structural, policy and regulatory aspects need to be removed. Standardisation of bidding documents, capacity building of ULBs and expediting approvals will help in faster PPP implementation. Inter-ministerial coordination between the Urban Development and Power Ministries is the key. Policy driven push for creating separate market for WTE power through RPO and timely tariff visibility will protect viability of WTE projects. Distribution utilities and regulators need to recognise the larger purpose of WTE projects and encourage commercial sale of power from them.
Case study 1 : Biomass Supply Chain Mechanism (Paddy Straw)
Step 1: Harvested crop is baled using mechanized balers Per Baler : 10 jobs per day X 60 days (Harvest Season)= 600 man days
Step 2: Paddy bales are transported to collection centers per Tractor Trolley:
6 jobs X 60 days = 360 man days
Step 3: Paddy bales are stored at fuel collection centers storage, stacking loading unloading: 20 jobs X 60 days=1200 man days
Total man days: 2,160 man days per unit baler (for 12 MW Biomass
Based Power Plant)having 125 Balers
= (number of balers x total man days)/365 days
=(125 X 2,160) / 365
=740 green jobs / day
Source: Punjab Renewable Energy Systems Pvt. Ltd. (PRESPL), Bermaco Group
Case study 2: Biomass Supply Chain Mechanism (Cotton Stalk)
Step 1: Uprooting of cotton stalk from farm field per 3 acre: 10 jobs per day x 180 days (harvest season) = 1,800 man days
Step 2: Processing/shredding of cotton stalk per shredder: 6 jobs x 180 days = 1,080 man days
Step 2: Transportation and storage to storage centre/plant per tractor trolley: 8 jobs x 180 days = 1,440 man days
Total man days: 4,320 man days per unit shredder (for 13 MW biomass based plant) Average jobs created due to biomass (cotton stalk) SCM mehanism for biomass plant having 120 shredders
= (number of shredders x total man days)/365 days
= (120 x 4,320)/365
= 1,421 green jobs/day
Source: Punjab Renewable Energy Systems Pvt. Ltd. (PRESPL), Bermaco Group
Authored by Umesh Agrawal, Associate Director, PwC India and Nimish Vora, Manager - Energy & Utilities, PwC India