What is holding back waste-to-energy developments in Australia?

Just what are the obstacles preventing Australia from joining the global waste-to-energy market, and how can they be overcome?

In 2009, I co-authored an article on the potential benefits of introducing commercial-scale, best practice waste-to-energy (WtE) facilities into Australia. At the time, following an increase of the federal government’s Renewable Energy Target (RET) and the growing adoption of energy-from-waste initiatives overseas, I had high hopes that two or more commercial-scale WtE plants would shortly be developed in Australia. Seven years later, however, there remain no commercial-scale WtE plants processing municipal solid waste (MSW) in Australia, despite the demonstrated benefits of such facilities.

While some innovative private firms working closely with progressive state and local government authorities and communities — particularly in Western Australia — have progressed through the planning process for commercial-scale gasification and combustion facilities, none are yet to commence construction. When a brief look at the global WtE market suggests continued growth, it begs the question: what is holding back WtE in Australia?

The global WtE market

The global WtE market, valued at US$24 billion in 2012, is expected to reach US$37.6 billion by 2020 (Grand View Research 2015), growth being driven by decreasing landfill area and the continued movement away from fossil fuels. In Europe, WtE adoption continues to grow on the back of EU Waste Legislation, which promotes diversion from landfill, and the adoption by Germany, Austria and Netherlands of WtE technologies that sustainably generate energy from industrial waste.

In the Asia–Pacific region, meanwhile, Japan is currently the key market, with around 60% of generated solid waste sent to WtE facilities. Continued industrialisation in China and India means these countries are expected to account for major future WtE growth as they strive for more sustainable approaches to their rapid development. The Indian government, for example, has recently increased its energy-from-waste target and is working on provisions to make it mandatory for state electricity firms to purchase all power generated from MSW.

Key risks and obstacles to WtE adoption in Australia

There are a number of factors in play which explain, to some extent, the lack of investment in WtE in Australia. Recent work by AECOM associated with identifying the key risks associated with implementation of advanced waste treatment (AWT) plants provides insight to the key obstacles and risks common to WtE development in Australia:

Waste supply

Upfront capital costs of WtE developments are high when compared with the traditional landfilling approach. Typically, commercial-scale WtE facilities are cost-effective at scales greater than 100,000 tonnes per annum. In Australia, very few local government authorities would generate such an amount of residual waste post-recycling, thus requiring a collaborative approach to waste management between councils that would achieve the required economies of scale. The potential amalgamation of councils, or formation of voluntary regional organisations of councils, could achieve this, but in the case of the latter, success has been varied given extensive agreements still required between individual councils and WtE developers.

WtE regulatory framework

A numbers of states have developed policies, yet there remains no national, consistent approach that includes deferring landfill levies, resource recovery and thermal efficiency criteria. The reality is that consistent WtE policy provides some certainty for investment decisions at a national level. In NSW, the metropolitan waste levy is currently at $133.10 per tonne, resulting in a gate fee at certain landfills of over $300 per tonne, a key driver for investment in advanced waste treatment. The situation in NSW is in stark contrast to that in Queensland, where there is no levy on waste disposed to landfill.

Technology risk

The development of AWT plants in Australia has had somewhat of a chequered history; some facilities have not performed to their initial expectations, in some cases requiring decommissioning. Limited due diligence on the track record of certain overseas developed technologies and their suitability for Australian conditions has also increased the perceived risks for financiers considering an investment in these types of developments.

Price of energy and other products

WtE developments typically rely on three primary sources of revenue:

1. The gate fee price per tonne of waste delivered to the facility.
2. The price for energy exported from the facility in the form of heat and/or power.
3. The price for other products (eg, char) which may be produced by the facility.

For commercial-scale facilities, revenue sources (1) and (2) are the key drivers of commercial success. While long-term (20-year) contracts for the price per tonne of waste delivered can be negotiated with suppliers of waste (typically a local government authority), the price of energy and other products is highly variable and WtE developers have found it difficult to both identify suitable purchasers of energy and agree to long-term supply agreements.

Facility siting

The identification of suitable sites for WtE development is challenging. Sites need to be in relative close proximity to key sources of residual waste, as well as near suitable electricity distribution network connections and/or industrial facilities with a need for energy in the form of power and/or heat. Suitable land use zoning at both a local government and state planning policy level also creates challenges. Even if all those boxes are ‘ticked’, the local community must ultimately accept such a facility being on its doorstep.

“The bigger the risks, the bigger the returns”: that’s the common line trotted out when weighing up investment and, in the case of WtE developments in Australia, it’s clear the risks — either real or perceived — have been holding back investment and growth like that seen in Europe and Asia.

The good news is that, with consideration given to solutions like those below, sufficient confidence required by financiers to invest in WtE developments can be achieved:

• Waste supply: Better cooperation is needed between councils, with the objective of setting up one legal entity able to enter into a long-term waste supply contract with the WtE developer and provide the required economies of scale.
• Regulatory framework: A consistent waste management policy across Australia would drive diversion of waste from landfill and contribute to the implementation of a consistent national landfill levy, resource recovery and thermal efficiency criteria.
• Technology: A consistent national requirement to ensure only technologies with a proven track record in treating similar feedstock, at a similar scale, are approved would provide increased confidence.
• Price of energy and other products: An increase in the federal government’s RET, and provision of specific incentives for project participants who invest in, and generate, renewable energy from WtE facilities, while diverting waste from landfill, would reduce the energy pricing uncertainty to some extent.
• Facility siting: State and local government authorities should take a lead in identifying suitable land for WtE facilities and preserve these areas specifically for waste management infrastructure, including allowing for appropriate buffer areas.

Recent developments, including the Turnbull government’s commitment to retain the Clean Energy Finance Corporation, which recently supported the set-up of a $200m fund specifically established to invest in bioenergy projects, is a step in the right direction. However, further work is required to support the WtE industry as continuing to dispose of around 20 million tonnes per year of waste to landfill is not a sustainable solution for Australia.

Despite the lack of progress since my optimistic 2009 article, I nevertheless remain positive that commercial-scale, best practice WtE facilities will be established in Australia over the next 10 years. As key obstacles such as waste supply and regulatory risks are overcome by industry working closely with all levels of government, we stand to divert at least a quarter of the waste currently going to landfill into these developments, kickstarting a market that, as is evidenced elsewhere worldwide, can and does work.

*Chani Lokuge is an Associate Director – Waste Management in AECOM’s Sydney office.

Image caption: Waste in NSW, Australia.