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infraread | Energysource 03 Apr 2017 Waste projects: Waste-to-wealth initiatives

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As populations grow and urbanise, the quantity of "municipal solid waste" arising also grows.1 With this growth, the environment is subject to greater environmental pressure from both contamination and emissions: a fair proportion of waste is not collected and is subject to open dumping (and possibly open burning). In addition, contaminants leach into water (both groundwater and coastal waters) giving rise to associated on-going health risks. 

In an urban environment, waste provides a resource that can be "mined" and otherwise used to avoid or reduce contamination and emissions – effectively an "urban ore body".2 In a rural environment, organic waste produced through agriculture and forestry (including bagasse and biomass) provides a resource – a "rural ore body". Borrowing the terminology used in the Eleventh Malaysian Plan (2016 to 2020), these urban and rural ore bodies can be mined for "waste-to-wealth initiatives". In recent times there has been a shift in the global language surrounding waste: it is now seen as a resource, rather than being considered as "garbage" or "rubbish". 

The World Bank has estimated that, by 2025, between 2.2 billion and 2.4 billion tonnes of municipal solid waste3 (MSW) will be generated annually by the world’s urban population.4 This figure may be conservative, given that some countries have already outpaced the 2025 projections.5 If the right mix of waste projects and diversion from landfill is achieved, this will reduce greenhouse gas emissions by well over a billion tonnes per year on current waste and MSW volumes, and considerably more as waste volumes increase. 

MSW can be: (i) used to produce energy (as fuel or feedstock for waste-to-energy (WtE)6 facilities); (ii) processed by mechanical and biological treatment plants (MBTs) to create organic compost material and to sort re-usable7 and recyclable8 "fractions" of MSW; or, (iii) sorted into re-usable, recyclable and organic fractions and processed using material recovery facilities (MRFs) or organic recovery facilities (ORFs) to derive and produce saleable materials. Ideally, WtE project technologies will sort and remove re-usable and recyclable materials from the MSW first, in a process known as pre-sorting: see Diagram 1 for further details. In some parts of the world, the higher calorific value fractions of MSW (having low or no organic content) are first processed into a solid fuel9 (FfW) for use by power or manufacturing facilities.  There is no single process for creating energy from waste, creating compost or sorting and processing the re-usable, recyclable and organic fractions, although certain methods are preferred globally. 

In this, the first of three articles, Michael Harrison, Richard Guit and Nick Stalbow provide an outline of waste projects in general. In subsequent articles, we will consider in greater detail WtE, FfW and MBTs first, and MRFs and ORFs second, in the context of key markets, including Asia Pacific, Africa, and South America (in each case by country). 

Waste volumes

The World Bank estimates that more than 40 per cent of the MSW produced by the world’s urban populations by 2025 will be produced in the Asia and Pacific region (which includes East Asia). 

Within the Asia Pacific region, China has the largest quantity of waste volumes and some of the most developed waste management systems. It is estimated that between 180 and 200 million tonnes per year of MSW is collected from the urban population in China. This equates to sufficient MSW to provide feedstock for nearly 900 average sized MBTs (with capacity for 225,000 tonnes a year) or up to 34510 average sized (i. e.50 MW) WtE facilities or, stated another way, 17,250 MW of electricity generation capacity. China’s current intention is that WtE facilities will treat 40 per cent of MSW volumes by 2020. According to the World Bank, by 2025, 1. 4 million tonnes of MSW will arise each day in China, equivalent to over 510 million tonnes per year. If these volumes of MSW are collected, the scope for the WtE industry in China is vast. 

It is estimated that Indonesia produces between 175,000 to 180,000 tonnes of MSW per day, or 64 to 66 million tonnes of MSW per year.11 The composition of this MSW is ideal for some waste projects.12 If all of the MSW arising in Indonesia were collected this would equate to 290 average sized MBTs or up to 115 average sized (i. e. 50 MW) WtE facilities or, stated another way, 5,750 MW of electricity generation capacity, equivalent to one sixth of Indonesia’s planned 35 GW expansion of installed capacity by 2019. 

The USA continues to be the world’s biggest producer of MSW (producing at least 260 million tonnes per year).13 While the USA has a considerable number of established waste businesses, it offers great potential for waste projects.14 For example, the US Energy Information Administration reported over 70 operating WtE facilities in the US at the end of 2015, using approximately 29 million tonnes of MSW in that year and providing approximately 2,320 MW of generation capacity (sufficient for a little under 2,000,000 homes): for the time being at least, the USA has the potential to be the largest user of MSW feedstock for WtE projects in the world. 

Europe15 produces approximately 240 million tonnes of MSW a year16 and has some of the most developed and diverse waste management systems in the world, including approximately 490 MBTs17 and 510 WtE facilities.18   

The waste management hierarchy

The development of waste projects directly achieves the re-use, recycling, MBT and WtE outcomes set out in the "Waste Management Hierarchy" (see Diagram 2) and, through diversion from landfill, reduces the quantity of waste disposal to landfill. 

The Waste Management Hierarchy is the touchstone for environmental legislative initiatives around the world: it provides an overarching statement of policy outcomes that are widely recognised. Further, this statement of policy outcomes has been applied in many legislative initiatives worldwide. 

Some legislative initiatives have underpinned the development of the MBT and WtE industries and, thereby, the achievement of and progression towards the Waste Management Hierarchy outcomes. Most notably in this regard, within the European Union, EC Council Directive 26 April 199919 was the catalyst for government sponsored initiatives and regulatory policy settings aimed at diverting waste from landfill and facilitating investment in waste sorting, processing and treatment alternatives.20  

Waste projects

Waste facilities are typically developed as "projects" aimed at delivering a solution in line with the Waste Management Hierarchy. 

Waste projects which achieve the policy outcomes of the Waste Management Hierarchy are as follows:

  • Organic Recovery Facilities (ORFs) which recover and process the organic fraction from green waste21 and other organic waste (including food waste and garden waste),22 but not from MSW. ORFs derive and produce organic products for agricultural use (effectively re-use), thereby diverting organics from landfill;23
  • Materials Recovery Facilities (MRFs) which recover re-usable and recyclable materials24 from the waste stream, including as part of a pre-sort to a MBT or WtE facility, thereby allowing re-use, recycling and reprocessing of resources, the production of FfW and diverting waste from landfill;
  • Mechanical Biological Treatment facilities (MBTs)25 which recover re-usable and recyclable materials from the waste processed (invariably MSW, often C&I Waste,26 and in some instances C&D Waste27) typically as part of a front-end pre-sort MRF, and process and treat waste in an aerobic or anaerobic environment, in order to separate, process and treat the organic fraction of the waste stream, thereby allowing re-use, recycling and reprocessing of resources, the production of PEF,28  RDF29  or SRF,30 the use of organic products, as well as diverting waste from landfill;31 and
  • WtE facilities (also known as EfW facilities) which use thermal technologies to burn waste or use gasification technologies to burn the gas produced by the waste (typically MSW, often C&I Waste, and in some instances C&D Waste and bio-solids32) thereby generating electricity (or producing power and heat on co-generation33), diverting waste from landfill,34 and reducing emissions. WtE facilities may or may not recover re-usable and recyclable materials from waste as part of a front-end pre-sort MRF.

Secondary waste projects

As noted above, MRFs (including as front-end pre-sort to MBTs and WtE facilities) may produce FfW. The FfW may be subject to further processing to allow for its use in industrial processes, most typically as feedstock to fire cement kilns. 

Policy settings are key for the development of waste projects

Background

Unless municipalities choose to develop waste projects simply because it is the right thing to do, broader policy settings are required to facilitate investment in the delivery of waste projects. 

In practice, these policy settings are most effective when they place a cost on landfill and place a value on the environmental benefit resulting from the waste project. It is critical for municipalities, and any central or provincial government, to consider the direct and indirect impact of a move away from landfill, including in some jurisdictions the impact on disposal scavengers. 

As we will note in our two subsequent articles, because waste projects need the right policy settings to be developed and to maintain viability, one of the key risks for waste projects - if not the key risk - is the risk of a change in the law (including a "timing out" of any law) which places a cost on landfill and/or attributes value to environmental benefits. 

Landfill

If one ignores the cost of environmental contamination, and the health consequences, of open dumping (and, in some jurisdictions, open burning and burying waste) open dumping35 is the cheapest way to dispose of waste. For waste projects to be developed in jurisdictions that currently allow open dumping, municipalities, as well as central and provincial governments, must make policy decisions prohibiting open dumping (and open burning) and move to a policy of controlled landfill36 and sanitary landfill37 (and in so doing place a cost on landfill), or impose limits on the use of landfill (and thereby stimulate a programme of new non-landfill waste infrastructure). 

As a general statement, for waste projects to be developed the cost of landfill needs to be such that waste projects are able to provide waste sorting, processing and treatment services at a price that is comparable with the cost of landfill,38 i.e. the levelling of the playing field. This may not be achieved by prohibiting open dumping and placing a cost on controlled or sanitary landfill. It may be necessary to place limits (caps) on the quantity of waste that can be landfilled at controlled or sanitary landfills, thereby making landfill capacity (airspace or void space) more scarce and, as a consequence, more expensive. A decision of this kind is unlikely to be taken at the municipal level and, as such, may have to be a central or provincial government level decision. If this is not sufficient to level the playing field, the imposition of levies or taxes on waste which is disposed of to landfill may assist39 but, again, this is likely to be a central or provincial government decision. 

It is likely that scarcity of airspace (or void space40) at landfill, in combination with a levy or tax on waste disposed of to landfill, will level the playing field. In some jurisdictions, ultimately landfill will be phased out completely, thereby forcing the development of waste projects: landfill can be phased out completely by either price signals (including levies and taxes) or through not consenting to new landfill sites. In other jurisdictions, the cost of developing new controlled or sanitary landfill may be regarded as prohibitive, as increasingly stringent licence conditions are imposed to ensure emission, environmental and health outcomes which are broadly consistent with an equivalent waste project. 

Renewable energy

In many countries in Asia, WtE (or EfW) projects (and renewable energy projects generally) are supported by feed-in-tariff (FiT) regimes.41  Typically, the government obliges a generator or transmission or distribution company to source renewable energy from renewable energy generators for a fixed price (which may escalate over time). This provides developers of WtE projects with revenue certainty for the electricity that they generate. 

In other countries, governments require retailers of electricity and large users of electricity to source from renewable energy sources a percentage of the electricity they sell. To underpin this requirement, the government issues renewable energy certificates to renewable energy generators and requires retailers to pay a penalty if they do not source the required percentage of electricity from these generators. The penalty may be avoided or reduced if the retailer surrenders renewable energy certificates. The cost of the renewable energy certificates is prescribed by legislation. 

In the context of a co-generation WtE facility (being a facility that produces heat and power), revenue may also be earned by the sale of heat (in the form of steam) to an industrial user.42 

Other policy settings

While placing a cost on landfill and placing a value on the benefits of renewable waste projects are key, they are not the only policy settings used to encourage the development of waste projects, or other environmentally-beneficial projects for that matter. 

Another option is to make a contribution to the cost of development of waste projects, for example in the form of grants or financing on concessionary terms, subsidies or concessionary treatment. In addition, international agencies (including the Asian Development Bank) may provide assistance.43   

In addition to this, local planning and development schemes can influence the type of waste project that is to be developed. For instance, local planning laws in many parts of the UK expressly rejected developing "incineration" or "mass burn" style WtE facilities. This was largely a legacy policy position from the 1980s when those plants were notoriously bad polluters. Consequently, many waste projects developed in the UK in the mid-2000s took the form of MBT plants – producing an SRF (which was then used as a fuel by WtE facilities in other locations). 

The policy objectives of diverting waste from landfill were still achieved by this type of project. 

Finally, in some jurisdictions companies undertaking waste projects are eligible for concessionary tax treatment. 

Importance of collection and segregation at source

Collection and delivery

Waste projects are facilitated by effective waste collection systems which enable the delivery of appropriate waste to individual waste facilities. This may comprise direct delivery to the waste facility or a network of transport routes and sites (transfer stations) used to consolidate certain wastes for onward transport to the waste facility. 

In many jurisdictions, the collection of waste is the responsibility of municipalities. In many other jurisdictions, the collection of waste is not an established practice and is regarded as expensive. 

With increasing urbanisation in many jurisdictions, the collection of waste by municipalities is a new activity for them, and the cost of doing so is a new cost, and a relatively expensive one. This new cost may be regarded as being outweighed by the environmental benefits of coordinated collection and management. 

Separation at source

At its simplest, "source separation" is giving households the ability to put their waste into different bins: organics (food, kitchen and garden), recycling (plastic and paper) and residual (everything else!). For some types of waste processing facility, segregation of the waste stream at source is very helpful. The strong preference of operators of MRFs and ORFs is for source separation, so that the re-usable and recyclable fraction of the waste stream is delivered to the MRF (dry MRF) and the organic fraction (food, kitchen and garden waste) is delivered to the ORF. In contrast, MBTs can sort and process deliveries of separated-at-source materials (e.g. plastics, metals, glass and cardboard) and unseparated-at-source materials. There is also a class of MRF ("dirty" or "wet" MRFs) which processes the re-usable, recyclable and organic fraction, although the compostable output has more limited application due to potential cross-contamination.44 Separation at source requires a multiple bin system and multiple collections and deliveries. These systems have higher running costs, which are ultimately borne by households. Consequently, they tend to feature in jurisdictions where developed waste collection and management system are well established. 

Re-usable and recyclable waste may be of value, and one-bin systems (which contain re-usable and recyclable waste) can be perceived as beneficial by some waste project operators, particularly if there is a front-end MRF which will allow separation of the re-usable and recyclable fraction for an MBT. At the end of the day, different processing technologies have different limitations in terms of what they can receive and process, and a tailored solution will be required in each case. 

Power of municipality to collect and quantity collected

One of the key risks on any waste project is the volume and type and, therefore, the composition of waste within the municipality’s catchment area. Will there be sufficient waste from the catchment area (typically, the geographic area for which a municipality is responsible) to justify the investment in the particular waste project? Sufficient volume is needed to reduce the cost per tonne of waste processed or treated, and to deliver the efficient operation of the waste project, particularly for WtE facilities. 

There are a number of dimensions to waste volume and supply risk, the first of which is whether or not the municipality with which the private sector developer is to contract actually has the power to collect waste and to deliver that waste to the facility. This is not always a straightforward matter. 

In those cases where the cost and risk of financing a waste project rests with the private sector, the waste project company (and its financiers) will be concerned to understand the waste volume risk of the municipality and, therefore, the waste supply risk to the project. This is relevant if the municipality chooses to procure the delivery of the waste project under a Build Own Operate (BOO), Build Own Operate Transfer (BOOT), Design, Finance, Build, Own, Maintain (DFBOM) or Public Private Partnership (PPP) delivery model: see Diagram 3 for a typical project structure for such an arrangement. If the municipality develops and pays for the project itself under a Design and Construction (D&C) or Engineering Procurement Construction (EPC) delivery model, the risk of insufficient waste volume within the municipality and, therefore, the number of tonnes supplied to the waste project, usually remains with the municipality. 

Other dimensions of waste volume and supply risk include the actual type and quantity (and, therefore, the composition) of waste generated within the area (and how this may change over time) and assumptions made as to the growth in that waste volume and, therefore, the waste supply over time (as it would be unusual for a waste plant to be sized without contemplating growth in waste volumes),45 and whether or not the private sector is being given exclusive rights to that waste. Each of these issues will be addressed in more detail in articles 2 and 3 of this series. 

Project participants

Waste projects are developed using a variety of project delivery models and, as such, can have different project participants. 

Municipalities may develop a waste project themselves, contracting with a D&C contractor or EPC contractor to deliver the project, and then either operate the project themselves or contract with an Operations & Maintenance (O&M) contractor to operate and maintain (and repair) the project. This tends to be the more prevalent model in China. 

Alternatively, municipalities may choose to contract with a private sector developer under a BOO, BOOT, DFBOM or PPP delivery model, as described above. These delivery models are the most complex contractually. (We will describe these models in greater detail in articles 2 and 3 of this series.)

Industrial companies may develop waste projects themselves, most typically a WtE facility (possibly using bagasse, biomass or another by-product of a primary industry and, in some instances, waste from a secondary industry). As with municipalities, industrial companies may develop a WtE facility by contracting with a D&C or EPC contractor to deliver the project, and then operating the facility themselves or contracting with an O&M contractor to do so. Or, alternatively, an industrial company may choose to contract with a private sector developer under a BOO, BOOT or DFBOM model. 

Some electricity generators or transmission/distribution companies may develop WtE facilities. Electricity companies are more likely to develop and to operate such facilities themselves, rather than contracting with the private sector, other than with a D&C or EPC contractor to construct the facility. 

Some projects are developed as merchant facilities (i.e.  the feedstock is non-municipal waste, or feedstock is supplied by a municipality but the developer is taking risk on the volume and composition of waste supplied) with the waste project company (and its debt providers and equity investors) satisfying itself that sufficient waste is committed contractually or is otherwise obtainable within the facility’s catchment area46 to meet the tonnage capacity, and a route to market for the power (either to a captive off-taker or through access to the electricity grid under a FiT regime) to allow for export of all electricity generated. 

Combined heat and power projects will require a heat offtake commitment. In order to be commercially viable, such demand for waste capacity, electricity and heat must be at pricing levels which enable the facility to generate sufficient revenue to service debt, repay principal and provide a rate of return for the equity invested in the facility. Merchant facilities may be delivered by a D&C or EPC contractor (depending on the required level of transfer of technology risk) and may be operated and maintained (and repaired) by the waste project company (as the owner of the facility), by an equity investor in the project with experience as an O&M contractor, or a seperate O&M contractor. 

In conclusion

As noted at the start of this article, the demand for waste projects is driven by the growth in waste volume as the world’s population grows and becomes increasingly urbanised. This means that there will continue to be a growing demand for new waste treatment infrastructure. 

 

Notes

1.  "Waste arising" is a term of art within the waste management industry. For the remainder of this article we refer to waste volume. 
2.  Reflecting the fact that early projects in Australia made use of processing technologies used in, and were engineered by contractors to, the mining industry. 
3.  As distinct from sewage or waste water. 
4.  Daniel Hoornweg, Perinaz Bhada-Tata & Charles Peterson, ‘What a Waste: A Global Review of Solid Waste Management’ (Report, World Bank, 2012). 
5.  Indonesia has outpaced the 2025 projection of 150,000 tonnes a day.  Currently, over 175,000 tonnes a day is generated. 
6.  The terminology differs between hemispheres: "Energy from Waste" (EfW) and "Waste-to-Energy" (WtE) are the same thing. 
7.  Materials that may be recovered from the waste stream and re-used: in the context of waste projects, re-usables are not typical. 
8.  Materials that may be recovered from the waste stream and recycled, for example, cardboard, paper (including newspapers and magazines), glass bottles, plastic bottles and containers, drink cans (aluminium) and food cans (ferrous metals), the recycling of which will require the use of energy.
9.  Depending on the jurisdiction, "Fuel from Waste" (FfW) may be referred to as PEF (process engineered fuel), RDF (refuse derived fuel) or SRF (solid/specified recovered fuel). These are solid fuels as opposed to gaseous fuels, such as methane (derived from landfill capture in some circumstances) or syngas (derived from gasification of MSW using some forms of WtE technologies). 
10.  Assumes 0. 75 MW per tonne of MSW, or 584,000 tonnes of MSW for a 50 MW (438,000 MW/h per year) WtE facility.  We have seen 0. 55 (wetter MSW) to 0. 8 (drier MSW) MW per tonne of MSW depending on the mix and origin of waste stream, which impacts the calorific value of the MSW and as such the MJ/kg derived. 
11.  These figures were reported in The Jakarta Post in October 2015: While reported in tons (short tons), we have assumed metric tonnes. 
12.  Approximately 60 per cent is organic, 15 per cent plastic (and as such re-usable or recyclable), 9 per cent paper (and as such capable of being used for PEF/RDF/SRF), and 4 per cent metal (and as such re-usable). 
13.  Estimates of MSW arising vary by source of information, with this being the most conservative estimate. 
14.  In the USA, as published by the United States Environmental Protection Agency in 2014, 54 per cent of MSW is landfilled, 26 per cent is recycled, 8 per cent is composted, and 12 per cent is used in WtE (tending to indicate MSW arising of 270 million).  A Biocycle/Columbia University State of Garbage Survey indicates that up to 69 per cent of MSW is being landfilled. 
15.  For these purposes Europe includes Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Switzerland and the United Kingdom. 
16.  2014 figures, source: OECD, Municipal Waste, <https:></https:>
17.  With a disposal capacity of around 47 million tonnes per annum, source: Mark Doing, "The Market for Mechanical Biological Waste Treatment Plants in Europe", (September 2016) 6 Waste Management. 
18.  2014 figures, source: Confederation of European Waste-to-Energy Plants, <www.cewep.eu>. </www.cewep.eu>
19.  Directive 1999/31/EC. 
20.  In jurisdictions such as the UK, local planning laws have also influenced outcomes, such as investment in MBT solutions over WtE solutions (as councils adopted anti-"incineration" policies based on bad experiences in the 1980s and early 1990s in the time prior to technological advancement and cleaner WtE technologies). 
21.  Organic material from domestic "green" bins and activities of municipalities (typically, parks and gardens and lopping and topping of trees). 
22.  Note: ORFs usually require organic waste to be segregated at source, with a low tolerance for contamination from non-organic waste materials. 
23.  Depending on the profile of the organics delivered to an ORF, diversion of 95 percent by mass can be achieved. 
24.  In our second article we will consider in detail materials regarded as re-usable and recyclable by reference to various markets. 
25.  In our second article we will consider in detail the range of MBT technologies used. 
26.  Commercial and industrial waste from commercial and industrial premises. 
27.  Construction and demolition waste from construction and demolition sites. 
28.  Process engineered fuel (PEF), being fuel (with limited or no organic content) derived from waste used to fire industrial facilities, including cement kilns, being a FfW. 
29.  Refuse derived fuel, being solid fuel (with limited or no organic content) derived from waste used to fire industrial facilities, including cement kilns, being a FfW. 
30.  Solid/specified recovered fuel, being solid fuel (with limited or no organic content) derived from waste used to fire industrial facilities, including cement kilns, being a FfW. 
31.  In terms of mass, MBT can divert up to 90 per cent by mass from landfill, although diversion of 70 per cent by mass is more usual. 
32.  Animal and human waste matter derived from waste water processing, that may be used in agriculture or as supplementary feedstock for WtE facilities. 
33.  The generation of electricity and the production of heat (typically steam). 
34.  The use of land to dispose of waste arising in urban and rural areas.  In terms of volume, typically WtE diverts 90 per cent by volume from landfill: fly ash and bottom ash are residual by-products of WtE, with fly ash requiring safe disposal but bottom ash may be usable as alternative daily cover or re-used as a constituent for road covering. 
35.  Dumping of waste other than at a controlled or sanitary landfill, including at any unlicensed landfill.
36.  Landfill that is licensed, including compliance with requirements as to control and operation. 
37.  Licensed landfill isolated from the environment such that disposal to it is safe because isolation continues until waste has degraded biologically and physically. 
38.  For project finance funded WtE projects, the WtE project must be able to earn sufficient revenue from payments for diversion of waste from landfill and from sale of electricity, or electricity and steam, to service debt, repay principal and earn a rate of return for equity investors. 
39.  Examples of jurisdictions in which landfill levies and taxes have been imposed include the United Kingdom, where a per tonne tax on landfill was imposed ten years ago and has risen incrementally to £82. 60 per tonne for non-inert waste, and Australia, with the landfill levy rate in each state for MSW is set out below: New South Wales, Metro: AU$135. 70 per tonne; Regional: AU$78. 20 per tonne.  Victoria, Metro: AU$62. 03 per tonne , and Rural: AU$31. 09 per tonne.  South Australia, Metro: AU$76 per tonne; Regional: AU$35 per tonne.  Western Australia, Putrescible (including MSW): AU$60 per tonne; and Inert: AU$50 per tonne. 
40.  The capacity at a landfill capable of being used to dispose of waste. 
41.  In our second article we will include details of FiT regimes. 
42.  In addition, for some waste projects the policy settings confer value in terms of certificates that may be sold by project and therefore provide another source of revenue.  We will consider these in later articles. 
43.  In the two subsequent articles, we will consider the form of assistance given. 
44.  There are different economics to dry and wet MRFs (including in the context of the source of the waste containing the recyclate fraction).  We will consider these in the later articles. 
45.  In the context of WtE projects delivered as PPPs, it is more likely than not that the waste project will be over-sized in order to accommodate growth in municipal waste arising over the life of the project facilities.  In order to optimise the cost of finance, it is often important to bank the gate fee and electricity revenue from the spare capacity.  This puts pressure on sponsors to guarantee their ability to secure merchant waste in the quantities needed to operate the facility at full capacity.
46.  Unlike a municipality, the catchment area of a merchant facility is not defined by an area within which the municipality has power, or the obligation and power, to collect and to dispose of waste. The catchment area of a merchant facility is defined by the substitutability of the service provided by the merchant facility by another means of waste processing or treatment, which is a function of the cost to the customer for the service provided by the merchant facility (compared to any substitutable service), which includes the charges/fees of the merchant facility, the cost of transportation to the merchant facility, and the cost of disposal of any residue, and whether sufficient waste can be derived from that catchment area will enable the merchant facility to generate sufficient electricity (in the context of WtE), re-usables/recyclables, FfW and compost (in the context of an MBT), re-usables/ recyclables or FfW (in the context of a MRF) or compost (in the context of an ORF).

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