It is almost three weeks since a large-scale war started in the Tigray region of Ethiopia involving a multitude of internal actors and external military players. That this is happening in a country where the African Union (AU) is rooted, with its overarching slogan ‘silencing the guns in Africa’, is puzzling, to say the least.
Now is the time to turn Africa’s waste into energy
Waste to energy (WtE) is probably the world's least discussed form of sustainable power generation – attracting much less attention than wind, solar, hydro, geothermal or even tidal energy.
Yet the quiet success of WtE projects in Europe has not escaped the notice of ambitious investors who believe the technology could also work for Africa.
As Europe’s WtE market approaches saturation, Africa is an obvious next step.
- Energy demand in the continent is predicted to rise by 127% by 2040, according to BP’s Energy Outlook 2019, with electricity demand almost tripling and the share of renewables in Africa’s fuel mix growing from 1% today to 16% over the same period.
There are significant challenges in developing WtE projects in countries with little or no organised waste collection. This is compounded by a scarcity of finance and, in some countries, political instability.
To date, only one WtE developer of note has successfully constructed and started operating a major waste-fed power project in Africa – the $120m Reppie plant in Ethiopia. Developed by Cambridge Industries and commissioned in 2018, the facility is designed to convert 1,400 tonnes of waste per day from the Koshe landfill site in south-east Addis Ababa into 185 GWHr of electricity per year.
Other African municipal solid waste (MSW)-fed plants are at various stages of development, including Climate Neutral Group’s Joburg Waste to Energy Offset Project, intended to produce 19MW of energy from landfill gas.
Some biogas facilities have been up and running for a few years, like the food-waste-fed Ketu Ikosi Biogas Project in Lagos, Nigeria, and Tropical Power’s 2.4MW Gorge Farm Anaerobic Digestion Power Plant in Naivasha, Kenya, which runs on vegetable waste.
While delivery of these projects has not been entirely smooth, the end-to-end experience of delivering some of the first WtE plants in Africa provides useful lessons for the industry.
There are some key demographic factors that favour the development of WtE in Africa.
- Rapid urbanisation has created megacities (with populations of more than 10 million) across the continent. Cairo, Kinshasa and Lagos in Nigeria are already megacities, while Luanda, Dar es Salaam and Johannesburg will attain megacity status by 2030, according the UN.
- Highly concentrated conurbations need regular power and sustainable forms of waste disposal.
There are also political drivers that support WtE in Africa.
- The UN’s Sustainable Development Goal 7 focuses on delivering universal access to affordable, clean energy, a policy that favours WtE in appropriate contexts.
Government attitudes to landfill are also changing. Cities like Addis Ababa have expanded so much and so rapidly that they have encircled enormous waste dumps which were originally outside city boundaries. This has forced people to live and work next to, or even on, dangerous landfill sites, compelling governments to consider more sustainable options for waste management.
WtE is technically more reliable than solar, wind or hydro energy
As African economies mature and establish their own modern service industries, industry chiefs and politicians are keen to ensure that these are not held back by unreliable energy supply. South Africa’s Reserve Bank has estimated that the country’s rolling blackouts could dock domestic economic growth by 1.1% in 2019.
If uninterrupted supplies of feedstock can be guaranteed, WtE does not have the intermittency issues that hinder solar, wind and even hydro energy, and is therefore technically more reliable than other forms of renewable energy.
- A bonus feature of WtE projects is their capacity to generate revenue from by-products, such as metals sorted from the waste and residual products, which, depending on the type of feedstock used, can be made into construction materials, agricultural feed or fertiliser.
- The relatively high moisture content of waste in African countries, due to the high proportion of organic matter and what are often very humid climatic conditions, presents opportunities to harvest power from excess steam.
- WtE operators can also collect the water extracted from the waste during the drying process, for human or industrial consumption.
WtE developers are often obliged to tackle a certain amount of stigma around mass incineration – traditionally a contentious proposition because of concerns about its impact on air quality.
In fact, WtE covers any process that produces energy from waste, including collecting methane from peat, anaerobic digestion and gasification, as well as incineration.
WtE covers any process that produces energy from waste. Many of these can be operated sustainably
Plants based on any of these processes can be operated sustainably using the right kinds of technology – a fact that few outside the industry appreciate.
Another challenge is that, historically, there has been very little in the way of systematic waste collection in Africa.
Even where organised waste collection exists, such as in the Ugandan capital, Kampala, consumers need to be trained to sort and dispose of waste in ways that support WtE fuel collection.
- Because of its high moisture content, drying MSW before it can be used to produce power in developing countries adds to the cost of the WtE process.
- The calorific level of waste in Africa is also much lower on average than it is in developed countries, where MSW has a higher plastic content, meaning that African waste burns less efficiently than waste in developed markets.
The scale of investment required to get WtE projects off the ground is significant, and sometimes prohibitive, for emerging economies in Africa. This automatically shrinks the pool of potential lenders. High interest rates in some African jurisdictions do not help.
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There are local currency loans from credit providers such as such as UK-based GuarantCo, which specialises in infrastructure development in low-income countries. But the availability of such assistance is fairly limited.
There is also a shortage of bankable projects to serve as models, and a lack of experience in low-carbon financing.
Typically, WtE projects are constructed on an engineering, procurement and construction (EPC) basis, where contractors foot the upfront cost of procuring and building the WtE facility.
- At present, it appears that there are not enough sufficiently capitalised contractors in Africa, who can offer satisfactory assurance to lenders that their balance sheets will underpin entire projects.
- Few EPC contractors have demonstrable track records of delivering WtE or similar projects, and using international contractors is likely to be politically unpalatable in African jurisdictions, unless they partner with a local firm.
African governments have traditionally erected fewer hurdles to projects in terms of permits and licences compared to those in developed countries, but regulation is tightening.
While higher standards are to be welcomed, a lack of communication between different government departments in some African countries can cause the necessary approvals to get stuck in the system.
Developing a successful WtE project
There are certain key components a WtE project needs to be successful in Africa.
- It is essential for any WtE development to have prospective or secure bankable power purchase agreements (PPAs) in place, before approaching lenders to finance the project.
- Before signing any agreements, developers should ascertain that the offtaker understands the project and is unlikely to walk away if the scheme is delayed.
- It is also helpful to have offtakers for any by-products, although these can be arranged once the PPAs have been signed.
- While offtakes with independent power producers (IPPs) and government utilities are desirable from a security of investment perspective, many WtE projects are likely to be off-grid and reliant on PPAs with local energy users.
- Having technology that can accommodate the local MSW feedstock is also vital. Most developers will buy in their technology from a third party. How this is paid for varies, but is always a costly and risk-heavy aspect of any project.
- The technology must also sufficiently detoxify emissions to satisfy government and/or lenders’ criteria.
- Because most WtE projects will be unique to their context, they cannot be operated remotely and developers need to have skilled technicians on the ground at all times to resolve any glitches.
Many African jurisdictions have opportunities to implement waste collection and sorting systems from scratch that are tailored to WtE.
In parts of some of the larger African cities, in South Africa and Nigeria, for example, the cost of collecting and sorting waste is now being levied on inhabitants.
Relatively few African governments can currently afford to foot the cost of sophisticated waste disposal, however, so developers may need to subsidise this part of the supply chain, at least to begin with.
It helps to have investors who understand the WtE market and the geographical context of the project, and to have a small pool of committed lenders whose interests are easier to align with project goals.
If governments are unable or unwilling to help fund a WtE project, development finance is available from other sources, such as the growing green bond market and specialist funds focused on renewables.
In any event, establishing regular, transparent dialogue with government is indispensable. Governments should be able to give a developer a clear vision of what they want from a project and what they are prepared to offer in terms of offtakes, credit enhancement, subsidies (if applicable) and political will to see deals through.
If a developer ends up with a utility offtaker that becomes insolvent or financially strained, it is helpful to know that government will step in to secure the project. It is worth remembering that political will can come and go, and that subsidy regimes may evolve or be phased out.
Putting appropriate environmental and social governance (ESG) processes in place is becoming increasingly critical to developing successful energy projects. WtE developers therefore need to invest time and resources communicating the story of a project internally within the host country.
When operated correctly, WtE projects can be one-stop social and economic transformation units, getting rid of waste safely and producing power for the country, while also providing jobs and educational opportunities.
Ultimately, African WtE projects need to be operated by the host countries for themselves, so it is important to train local workforces and ensure that anyone who stands to be affected by the project also reaps a net benefit from it.