October 25, 2023
Rapid urbanisation in Southeast Asia means increased waste that needs to be managed. While this is clearly a challenge given that the region’s population is expected to rise from about 686,825 million to 724,664 million by 2030, it also presents an opportunity to manage this waste as a resource that can be reused, particularly in areas with limited land mass and where traditional landfill is not an option.
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. 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.
Where do you currently see the greatest opportunity in Southeast Asia for waste-to-energy projects?
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.
In Vietnam there is an increasing focus on building waste-to-energy capacity in Hanoi, Ho Chi Minh City and the Mekong Delta.
Is more private investment coming into the region or are these projects largely being development by the public sector?
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.
Can you explain what types of contracts are being used for waste-to-energy projects and why?
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.
For further information, please contact author Mr.Raymond Lee at firstname.lastname@example.org