Waste-to-Power Model for ERP

Proposed Structure of this Public Private Partnership (PPP) Model

The project will be leveraging a New-Build-Finance-Bulk-Tariffs model. To enable alignment of interests, a new project company may be formed in which the operator of the landfill partners with an experienced power producer. The waste will be collected from the landfill to the new facility to be built, requiring tipping fees to be paid by the current landfill operator for the reduction of waste under its management. In return, the landfill operator may benefit from the sale of the emission reduction credits (ERCs) in the voluntary carbon markets, as well as the sale of power to distributors via the new project company, of which it holds equity interest. The grantor will provide the concession to build and operate the waste-to-power facilities for a fixed period, after which it will take over ownership and operation.

Table 1: Model Attributes

Proposed risk allocation of the Public Private Partnership Model

Key features of PPP structure

• Private sector entity to design, build, finance, operate and maintain landfill gas plant via concession agreement with the ministry/ government or state-owned entity
• The private sector entity acts as the implementation partner, and is responsible for all activities related to the implementation, management, monitoring and reporting of the project over the project crediting period
• In exchange, private sector entity can earn the revenue from the ERCs generated from the project
• The government or state-owned entity benefits from the cost savings from not needing to treat landfill waste

Expected ERC end use

• End use can belong to project developer as part of additional revenue stream

Key considerations/risks for proposed project

• Extensive stakeholder engagement required to ensure buy-in from operators of landfill sites as well as any other relevant stakeholders
• Need to ensure adequate technical local expertise in day-to-day execution to ensure minimal carbon leakage from treatment of landfill waste
• Stable political environment key to enable smooth execution of landfill gas
• Partnering with a service provider for the project’s marketing, sales and pricing is needed to identify potential offset buyers, negotiate contracts, and secure good target price per tonne to enable the financial viability of ERC generation
• Contracting a monitoring, verification and reporting (MRV) service provider with experience in conducting MRV and preparing the necessary documents for generating ERCs in a voluntary carbon market standard will reduce risk of registration and issuance delays or bottlenecks, and strengthen credibility of project’s carbon integrity quality

Figure 1: Financing and Activity Flows for the Model

Case study: Exploitation of the Biogas from Controlled Landfill in Solid Waste Management Central, Brazil

Project description

This project includes a system to collect, transport, and treat landfill gas, generating electricity for self-use and feeding into the national grid. The project reduces greenhouse gas (GHG) emissions by destroying methane in high-temperature flares, which has 21 times greater GHG potential than carbon dioxide, and replacing electricity from fossil fuels.

The landfill site in which landfill gas is collected occupies a total area of 114.9 hectares (ha), with 65 ha planned for municipal waste treatment and disposal. The landfill serves the municipality of Belo Horizonte in Brazil which has a population of 2.7 million (M) residents.

Targeted results

Expected annual ERCs generated from the program will be 112,011 tonnes.

Figure 2: Structure of Case Study PPP

Consórcio Horizonte Asja signed a concession contract between Municipality of Belo Horizonte to have the right to exploit the landfill gas arising from wastes from the CTRS / BR.040 landfill. Consórcio will invest and operate its landfill gas electricity plant that collects waste from the CTRS / BR.040 landfill. The renewable electricity generated from the plant will be sold to the national grid. At the end of concession agreement, the project will be transferred back to municipality of Belo Horizonte.

Summary of the model financials

Assuming a similar project context as the case study, the estimated Net Present Value (NPV) without ERC in- and outflows – only considering non-ERC inflows through other revenue streams or cost savings enabled by the project – is negative at $1.7M¹. With ERC cashflows, the total project will still have a negative NPV of $1.5M, which helps make landfill gas projects a bit more financially viable. It should be noted that the overall NPV of project will likely improve beyond ERC crediting period as revenue generated from electricity sale continue to recur.

Table 2: Summary of sources of inflows and outflows and key assumptions

Table 3: Net cashflows summary (in USD)

Footnote 1: All prices are expressed in United states Dollars (USD)