There is a clear need to reduce dependence on landfill and find better waste solutions. At the same time, a parallel need exists to reduce our reliance on fossil fuels for energy generation and utilise innovative technologies that facilitate renewable energy sources.

Waste to Energy (WtE) initiatives (also described as Energy from Waste) seek to address these needs by redeploying waste from landfill for use in energy generation.

It is estimated that WtE processes contribute to only around 1% of Australia’s electricity output, below the OECD average of 2.4%, with just 4% of Victoria’s waste currently utilised to produce energy. As a result, a significant opportunity exists to increase Australia’s WtE output and, as such, interest in WtE facilities is growing.

Australian governments (Commonwealth, states and territories and municipal) are developing policies and guidelines to facilitate WtE initiatives.

In its final report, released in November 2019, the Victorian Government’s inquiry into recycling and waste management recommended increased promotion, regulation and investment in WtE projects.

What is Waste to Energy?

WtE describes the process of utilising waste to generate energy, in the form of electricity, heat or fuels. WtE projects involve a range of stakeholders, from local councils who manage municipal waste, through to businesses in the waste and energy sectors, energy users and generators of waste.

Broadly, WtE facilities fall into two main categories: thermal treatment and biological processing of organic waste. These processes use a range of technologies including combustion, gasification, anaerobic digestion and fermentation. The exact type of technology utilised in any project is dependent on the characteristics of the feedstock waste material. Similarly, the outputs and residues from WtE processes also vary, depending on the nature of the feedstock and the technology used.

WtE is typically considered ’renewable energy’ when organic waste (biomass) is used as the feedstock. However, the use of plastic feedstock in some WtE facilities also requires the use of fossil fuels, diminishing the environmental credentials of such initiatives.

Opportunities arising from WtE initiatives:

WtE initiatives present several potential opportunities for project proponents and the wider community. These include an increased opportunity to extract value from waste, opportunities to reduce greenhouse emissions and reduced reliance on both fossil fuels for energy and landfills that are reaching capacity. Not only will such benefits improve amenity through reducing traffic, odour, and noise issues created by landfill, they may also alleviate the need to create additional landfill sites.

Beyond these direct benefits, WtE initiatives present a significant opportunity for investment and associated job creation, along with opportunities to redeploy waste that is problematic in landfill (e.g. agricultural waste). The potential for businesses to reduce energy costs in the face of rising gas and electricity prices through WtE initiatives is another notable advantage.

A number of these potential opportunities and benefits have already materialised in a handful of existing and economically viable WtE plants in Australia, with viability set to continue to improve as technology matures and costs decline.

Examples of leading WtE projects in Australia are;

  • the $700m Kwinana project in Western Australia, which processes approximately 400,000 tonnes of municipal, commercial and industrial waste per annum to produce approximately 36MW of baseload power for export to the grid; and
  • Yarra Valley Water’s plant, the first WtE facility in Victoria, which opened in 2017. The plant has converted 60,000 tonnes of spoiled food waste into renewable energy capable of powering 1,500 homes. The project has also allowed YVW to save over $1 million in energy costs and has helped alleviate landfill problems.

Risks to be addressed

While the opportunities are compelling, there are certain risks to be addressed when considering the implementation of an WtE plant.

It is important that an appropriate balance is struck so that the demand for WtE feedstock does not incentivise the creation of more waste. For example, a business may relax its waste reduction or recycling efforts if its waste is feeding WtE production to create energy at lower cost.

Additionally, depending on the feedstock and technology, WtE processes may create air pollution, contaminated water or other residues. To address this risk, strict emission standards, controls and monitoring is required, which may reduce the feasibility of the WtE plant. However, this is likely to be less of an issue for smaller-scale facilities using a benign and homogenous feedstock.

Some WtE processes can produce residues which can be applied to beneficial uses, such as fertiliser, with the nature of the feedstock determining the extent to which residue can be used. If residue is put to such a beneficial use, additional specification, certification and monitoring requirements will apply.

Further, the transportation of unprocessed organic waste feedstock may pose a biosecurity risk, due to the potential spread of pests and plant disease. Where this is identified as a risk, mitigation and monitoring requirements will likely apply. There is also a risk that such transportation and the WtE plant itself may also adversely affect amenity, through odour, noise, local transport congestion, dust and vermin, depending on the feedstock and treatment method used. However, several WtE plants situated in heavily populated areas overseas operate with minimal impact on amenity, particularly in Asia and Europe.

Potential challenges to viability

These regulatory approvals are likely to be facilitated (and objections avoided or minimised) where the preponement carries out thorough investigations and there is open consultation with the community regarding the proposed facility;

  • The composition of waste feedstock may vary over time, which may be affected by changing consumption patterns or government policy to divert certain materials from landfill. For that reason, WtE facilities need to be designed to allow for some flexibility in feedstock volume and composition; and
  • A pipeline of potential WtE is necessary to encourage contractors, waste generators, plant operators, waste contractors, technology providers and financiers to dedicate resources to this emerging sector, and to encourage an active and competitive market for WtE projects.

Typical contracting structure

Before undertaking an WtE project, proponents should understand and assess the issues outlined in this article and appropriately address all responsibilities and risks through an integrated suite of project contracts.

Notable features of the contracting structure are:

  • An WtE project requires secure contracts for supply and delivery of feedstock, particularly where the project relies on feedstock from an external source. Long-term supply contracts (preferably 15-20 years) may be difficult to achieve as existing market practice and preference is for contracts of significantly shorter duration, typically around two years for commercial waste contractors.
  • For procurement of design, construction and commissioning of the WtE plant, the proponent will need to engage consultants and a contractor (whether construct-only, design & construct, EPC or BOOT contracting structure) under clear and robust contractual terms that provide protection for the proponent.
  • If the proponent will not operate or maintain the plant, the proponent will need to engage a services contractor to provide operations and/or maintenance services throughout a defined contract period.
  • A waste disposal contractor will be required for any residue that is not re-used on site or sold to external customers.
  • If the project feasibility is dependent on revenue from the project output – such as energy sales into the grid or selling residues, commitments for secure long-term offtake contracts will be required at the outset. As an alternative to selling energy to energy retailers, the project proponent may be able to sell WtE energy directly to industrial or corporate users or local councils. The project proponent may also have the ability to utilise the energy on site in its own operations.
  • Where external financing is required, robust debt and equity arrangements will need to be agreed at the project outset, with associated security mechanisms.