Garbage in – energy out: what you need to know when developing waste-to-energy projects in Southeast Asia

Increased population means greater demand for energy. The region is expected to see electricity demand grow at a 3.7 percent annual rate, twice the global average, between 2016 and 2040^[2]. This is where waste-to-energy projects are expected to play an important role serving the dual goals of waste management and energy production in Southeast Asia.

In the circular economy, waste is a resource. One way to use this resource smartly is as a source of secure, stable and climate-friendly energy. In this way, waste-to-energy plays an important part of the waste hierarchy by making use of food waste, for instance, that cannot be avoided or recycled, reducing the need for fossil fuels and landfilling.

But while several Southeast Asian countries have policies to encourage and support the development of waste-to-energy plants, the implementation of these projects faces many challenges, from regulatory to technology and funding, as well as the need for coordination between governments, businesses and local communities.

Raymond Lee, Ramboll’s Manager for Projects and Business Development in the Asia Pacific, will be speaking on the key aspects to consider when developing a new waste-to-energy project at the Waste Management & Waste-to-energy Asia Summit in Thailand from 25 to 27 October 2023. In this Q&A he discusses some of the major considerations for developing waste-to-energy projects in Southeast Asia.

We see Malaysia and Thailand as the countries that are going to move the fastest on waste-to-energy projects. Governments in these countries are very supportive and recognise the need for this infrastructure. In Thailand, for example, almost 50 percent of the total waste generated is disposed of in landfill. The Thai government is therefore offering a range of subsidies and tax incentives to help get these projects developed.

Thailand has a specific policy for very small power plants that that makes it very attractive to investors entering this market. It has an enhanced feed-in tariffs for plants lower than 10 megawatts.

But similarly in Indonesia, which is one of the largest producers of waste in Southeast Asia, the government is establishing various new waste-to-energy projects through the Presidential Regulation No.35 of 2018 under the National Strategic Program^[3].

In Vietnam there is an increasing focus on building waste-to-energy capacity in Hanoi, Ho Chi Minh City and the Mekong Delta.

It’s both. There’s a strong government and public mandate across South East Asia. In Indonesia, they have allocated specific plots of land for waste-to-energy projects. But it will take private investment to get these developed.

On the government side, they need to be convinced that there is a need for waste-to-energy projects and implement a stable political framework that supports long term foreign investment in public infrastructure, and this will in turn attract the private sector.

We are seeing more green financing from the development banks but not every country will have an Asian Development Bank, for example, coming in to take on the debt or equity; it requires both the public and private sector to work together on this.

Most importantly, developers of waste-to-energy facilities need to develop a bankable solution from an early pre-feasibility stage that would attract lenders and financiers towards such an infrastructure project. This requires a proven technical solution, an optimal risk allocation, and a clear payment mechanism (gate fees, feed-in-tariffs). The public sector plays an important role to enable and attract investment by providing a stable political framework, clear goal setting and enabling regulations for achieving the sustainability, environmental and social aspects of the project outcomes.

The decision is typically made by the public sector and initially depends on the amount of risk that they want to take on but Design, Build, Own, Operate and Transfer contracts are generally the most popular. Like any complex infrastructure project, governments will try to balance risk through a robust contracting model to ensure that the facility is delivered as expected in a predictable manner.

This is even more necessary for countries in South East Asia that may not have done many waste-to-energy projects. Projects in South East Asia tend to stay away from models we see in Europe such as the Engineer, Procure, Construct and Maintain contract type where different packages are developed and the risk is spread. It can be much more difficult to get finance for these types of contracts in South East Asia because the investors want to deal with one entity rather than taking on the risk.

For countries that are less familiar with waste-to-energy project development, they will therefore put more responsibility on the private sector.

In fact, this is what we see even in Europe where the industry is further developed, and sometimes it becomes the adaptive model, for example, in the UK we see a variety of contracting models, including PPP type projects.

However, it's very much the responsibility of the public sector to guarantee the waste stream will be there. Everything else generally rests with the private sector.

It literally is garbage in, energy out. The guarantee of waste composition is what drives the entire project because we've seen many facilities all over the world where government expects a type or amount of waste but make an incorrect assumption on how waste composition will change over time, leading to an inefficiently run plant.

We recommend doing a waste characterisation study that goes across all the seasons, for at least one year. In South East Asia, it is important to consider both the wet and dry seasons and how this affects waste output. You also need to look at some of the changes in waste output over the years.

Top down studies will give you high level raw projections in terms of waste composition; how much plastics we see in the waste, how much wood is in the waste etc. We recommend not only looking at those, but also doing a bottom up approach and ensuring that you sample where the waste is actually going.

You need to design into the facility changes in waste consumption based on various factors, from policies around recycling to consumer trends.

When waste cannot be avoided, reused or recycled, waste-to-energy offers a smart way to make the most of our resources but waste-to-energy projects are complex and it is essential to consider all of these questions when developing projects in South East Asia.

Ramboll has a long track record of both thermal and anaerobic digestion waste-to-energy projects. We have 160 dedicated waste-to-energy project managers and specialists with in-depth knowledge of processes, technologies, suppliers and facility operation. Across the Asia Pacific, Ramboll has delivered some of the region’s first-mover waste-to-energy facilities such as Singapore’s Integrated Waste Management Facility, which is the largest of its kind in the region, Australia’s first waste-to-energy plant the Kwinana facility south of Perth, and the Maldives’ first Waste-to-Energy facility, which will divert about 200,000 tonnes of waste from landfill yearly, generating 100,000 MWh of renewable energy and reducing CO2 emissions by 200,000 tonnes, equivalent to emissions from 40,000 cars.