Study on Waste-to-Energy Project. in Almaty, the Republic of Kazakhstan

Transcription

1 Study on Economic Partnership Projects in Developing Countries in FY2013 Study on Waste-to-Energy Project in Almaty, the Republic of Kazakhstan Final Report SUMMARY February 2014 Prepared for: The Ministry of Economy, Trade and Industry Ernst & Young ShinNihon LLC Japan External Trade Organization Prepared by: Mitsubishi Heavy Industries Environmental & Chemical Engineering Co., Ltd. EX Research Institute Ltd. Clean Association of TOKYO 23

2 (1) Background and necessity of the project The basic concept for transition of the Republic of Kazakhstan to Green Economy was officially approved, and it promotes an economic growth based on the high energy efficiency, development of renewable energy technology and sets forth the sector-based objectives for the transition to Green Economy. For the waste sector, the ratio of recycling household garbage is set to be increased to 40% by 2030 and 50% by In addition, for the electricity sector, based on the Renewable Energy Act revised in 2013, the Ministry of Environment and Water Resource has been reviewing the FIT system and purchase prices, wherein Energy from waste has been included as an item of purchase. However, in Almaty, the largest city in Kazakhstan, garbage from urban households is virtually buried directly without getting separated, causing environmental degradation around the city with foul odor and harmful insects and bugs. Moreover, generation of methane only worsens the greenhouse gas effect, thereby adversely affecting the global environment. Besides, in Almaty, half of the city s demand for electricity relies on import and the heat supply is predicted to fall short of its demand in the future. Furthermore, cheap coal being used as the fuel for these energy resources is held attributable to the serious air pollution in Almaty city. Under such situation, Waste-to-Energy Project in this study which treats municipal solid waste will make a contribution to both sustainable waste management and energy supply-demand balance, and will be satisfied with Almaty City s demand. (2) Basic policy required to determine the project details 1) Almaty City s District Figure 1:City Map of Almaty Turksib district Zhetysu district Medeu district Alatau district Almalin district Auezov district Bostandik district Source:Prepared by Study Team 2) Waste generation and management in Almaty city The quantity of waste generated in Almaty city in 2012 was about 672,693t/y, of which approximately 644,900t or

3 about 95.9% were from homes and ordinary businesses whereas 15,800t or 2.3% were industrial waste from factories, 5,100t or 0.8% were waste from roads and 6,900t or 1.0% were the waste collected from commercial installations. When calculated on a daily base, the quantity is translated into approximately 1,842t /d Table 1:Population, area and garbage quantity data by the districts of Almaty city Districts Quantity of garbage collection (t/y Population Area (ha) Population density (people/ha) Garbage qty per person (g/person day) A B C Alatau Zhetys Turksib Almalin Auezov Bostandyk Medeu 358, ,900 17, , ,100 5, , ,300 13, Total 672,693 1,450,300 35, Daily qty(t/day) 1, Source: Prepared by the investigation team based on the data obtained from the Almaty City Statistics Bureau Private companies make contracts with garbage collection and transport companies for handling and disposing garbage, and there is almost no government budget or subsidies in garbage business. The largest disposal site, the Karasay disposal site located 30km to the west of the city, accepts 1,000~1,300t per day, of which 70% are the garbage collected by Tartyp Co., Ltd. KWC, a private enterprise, has been governing the Karasay disposal site and overseeing the business since 2010, and soil covering, which previously wasn t done, is now being carried out. Waste is directly buried without getting separated. Waste pickers pick up mainly plastics, etc. Figure 2:Landfill condition at Karasay disposal site (left), washed and shredded plastics (right) Source: Prepared by Study Team

4 3) Waste stream; current situation of Almaty city The above-mentioned condition is outlined in below as the waste stream of Almaty city. Figure 3: Garbage collection and transport in Almaty city Household waste Waste from ordinary businesses Industrial waste discharged from factories, etc. Waste from roads, etc. Industrial waste from commercial installations Collection Collected amounts: about 1,842t/day 65~70% of garbage collected by Tartyp 46 small and medium private Final disposal site KWC Co., Ltd. Landfilling 1,000~1,300t/d Valuables are salvaged, recycled, and then sold to Russia, China, etc. (estimated at 1.5t/d) Collection fee Disposal charge 340KZT/person/month: Household garbage: 4) Waste characteristics survey result Strong bias and significant difference were found in the waste composition of each district. Many drink bottles were found during the survey as the characteristic type of the waste. Many fallen leaves were found because the survey was conducted in autumn. In addition, ashes, that seemed to be residue after the woods were burned for heating, were discharged in some district, although the amount was small. Table 2: Physical composition of the waste of each district (wet base) (Unit: %) District name Alatau Zhetysu Turksib Auezov Almaly Bostandyk Medeu Kitchen waste Paper Fiber Vegetation Plastic Metal Glass Total Group A B C Features High rate of vegetation. High rate of plastic High rate of kitchen waste

5 Based on the survey results of the three compositions the water content is not so high. Therefore, they seem to be appropriately disposed of at the incineration facility without auxiliary fuel being used. The reason of high ash content can be assumed that the glass wastes such as drink bottles are contained relatively in a high percentage. According to the analysis results on the calorific values, they showed the appropriate values forwaste Power Generation. The calorific value of the waste generated especially from B group (Auezov District and Almaly District) was high, because the waste contained high plastic content. Table 3: Three compositions and calorific value of each group Group A group B group C group District name Alatau, Zhetysu and Turksib Auezov and Almaly Bostandyk and Medeu Water content (%) Combustible content (%) Ash content (%) Total of three compositions (%) Low calorific value(kcal/kg-wet) 2,190 2,422 1,864 5) Energy supply-demand situation in Almaty city Demand for power in Almaty province, where Almaty city is located, is 625MW. Because the self-power generation of the province is 316MW, its self-sufficiency rate for power is approximately 50%. The province depends on the supply from the provinces in the north or import from Kirgizstan for the 309MW shortage. Meanwhile, demand for heat for local heating, which came to 2,470 Gcal/h in 2011, is being supplied by existing facilities 1. The heat supplying methods in Kazakhstan are threefold: one is fromco-generation plants, the second is from local heat supply and the third is the heating equipment furnished to individual buildings. The co-generation plant is a majority way of meeting the city s heat demand Coal is used mainly as the fuel for co-generation plants and heat supplying plants in Almaty city. Because the energy efficiency of the co-generation facilities in the city has been declining significantly from wear and tear of equipment and environmental measures are not properly established, the co-generation system has become the largest source of air pollution of the city. In addition, treatment of coal ash after burning is currently a major problem in Almaty. 1From interviews with the Energy Bureau of Almaty city and other associated agencies.

6 Figure 4: Smoke from coal-fired co-generation plants (left) Air pollution in Almaty city (right) 6) Technical review of the disposal method There are mainly two disposal methods of the incinerating municipal solid waste, incineration (Stoker) method and gasification melting method in Japan. The gasification melting method was determined to be adopted considering environmental maintenance, economy, and easiness of consensus building with local residents. (3) Outline of Project 1) Concept of Engineering It is forecast that the amount of waste generated in Almaty City will be increasing from 1,842 t/d to 2,400 t/d by The recycle system will be expected to be introduced in the future, although the recycling climate now in the city is not mature yet. Plant capacity is as follows. First stage: 120 t/d x Two furnaces = 240 t/d (electric supply: about 2.2MW) 1 Second stage: 120 t/d x Two furnaces = 240 t/d (electric supply: about 2.2MW) Third stage: 120 t/d x Two furnaces = 240 t/d (electric supply: about 2.2MW) Total: 720 t/d (electric supply: about 6.6MW) 1:Case of operating only supply electricity The wastes that are conventionally directly disposed of by landfill are carried in and disposed of by gasification melting process. They are sanitized and volume-reduced, and at the same time the remaining heat generated during the gasification melting processes is recovered by the boiler. The steam generated by the boiler is effectively utilized for power generation with the steam turbine and the remaining heat is also used for heating inside and outside of the facilities. In addition, it is planned that the electric power generated is used for internal use of the facility and the excessive electric power is sold to the power company through the local power network. The following describes the relaxation effect of electric power supply and demand by this power transmission. The current total electric power demand in Almaty Province including the City of Almaty is 625 MW as described above, but an electric power

7 demand is expected to increase approx. 1.8 times from 2010 to 2020, assuming the total electric power demand in 2020 to be 1,125 MW. In response to this, if the 1st- to 3rd-term waste power generation facilities are introduced, total transmitted electric energy will be 6.6MW, allowing approx. 0.5% supply-and-demand relaxation against the total demand. The main equipment of this facility is composed of one-furnace with one-line and the backup equipment is basically prepared for the important common equipment of the two furnaces. The disposal flow sheet is shown below. Figure5:Disposal flow sheet 不燃残渣 2) Form of participation In this project, a PPP (Private Public Partnership) system should be introduced. PPP system can introduce private-sector vitality to realize high effects and efficiency by appropriate allocation of roles between the public and private sectors. Currently, the public work projects in the City of Almaty are generally ordered independently or as business by open bidding. Taking into consideration that Kazakhstan, including the City of Almaty, has no experience of construction and operation of the waste power generation facilities by an administrative organ, however, it is desired to collectively place an order to an entity including experienced corporations as a project ranging from construction to operation and management. As a specific project scheme, Japanese corporations will take care of design, supply of devices and dispatch of supervisors in EPC (Engineering, Procurement, Construction) contract for the installation of facilities and equipment across the board, and the local corporations will take care of installation of devices and civil engineering and construction to help reduce procurement costs and activate a local economy. In O&M (Operation & Management) as well, while adopting local corporations as much as possible, Japanese operation know-how will be utilized to support them as described above. Proposed business structure is shown as below.

8 Figure6:Business structure 3) Total project cost The cost estimation has been done based on the following condition. Table 4:Precondition Items Prerequisites Remarks Annual disposal 72,000t/year amount Business period The operation period is 20 years. Depreciation Declining-balance method is used. (10% and 25% /y for buildings and equipment, respectively) Amount equal to the initial investment less subsidy will be depreciated (by the advanced depreciation). Corporate tax 30% Loss carried forward for 3 years Fixed asset tax 1% Facilities/buildings Loan Expected for the business period (20 years) Procurement interest rate Price fluctuation Equity capital Public subsidy 7% Inflation rate is not taken into account. (It is assumed that, if the inflation rate varies, the income also varies accordingly.) One billion yen 70% of initial investment (The central bank s policy interest rate is 5.5% as of October 2013, but it swung approximately from 5.5 to 8.0% in the past five years no later than 2012.)

9 a)estimation of construction cost Rough construction cost was estimated on a turnkey basis including civil engineering and construction, supply of materials and equipment, design and supervision, and commissioning. Infrastructure such as electric power, water service, and an access road to the plant is not included in the construction cost on the assumption that it has been prepared nearby the site. Table 5:Estimation of Construction Cost Item Rough cost Civil engineering and construction cost 3,000,000,000 Plant construction cost 1,200,000,000 Device purchase cost 5,900,000,000 Design and supervision cost, etc. 900,000,000 Total 11,000,000,000 b)summarization of operating expenses and overall project expenses The operating expenses (OPEX) for each term (120 t/d x 2 incinerators/term) are as follows. Table 6:Summarization of Operating Expenses Item Amount of money (20 years) Operation and maintenance cost 550,000,000 Utility cost 2,890,000,000 Maintenance cost 2,000,000,000 Depreciation of initial expenses 63,000,000 Fixed asset tax 143,000,000 Repayment of long-term interest 2,539,000,000 Allowance of severance payment 38,000,000 Total 8,223,000,000 The following lists overall project expenses for each term (120 t/d x 2 incinerators/term), including summarized construction cost and operating expenses. Table 7:Summarization of Overall Project Revenues Expenses Fiscal year Total during project period Overall project revenues 13,296 Overall project expenses 19,223 Overall Project expenses (after public subsidies depreciated) 11,523 Ordinary profits (before tax) 1,773 Corporation tax (reflecting 3-year loss carried forward) 1,006 Profits of current period (after tax) 767 (Unit: 1,000,000) The revenues for each term (120 t/d x 2 incinerators/term) were calculated as follows based on the waste disposal revenues by the tipping fee received from the public sector and the sales revenues of electricity received from the electric company. The tipping fee was assumed to be 6,500/t.

10 Table 8:Summarization of Operating Expenses (Revenues) Item Amount of money Waste disposal revenues 468,000,000/y Sales revenues of electricity 180,000,000/y Other revenues (sales of slag) 17,000,000/y Total 665,000,000/y c)summary of Outcome from Preliminary Financial and Economic Analysis Evaluation by the Financial Internal Rate of Return (FIRR) The project IRR (FIRR) under the prerequisites assumed above is 7.86% as shown in Table 5-9, Cash Flow Statement for Base Case, which exceeds the central bank s policy interest rate of 5.5%.In the sixth year from commencement of business, the cash flow will be turned positive on a single-year basis due to fixed asset tax reduction by progress of depreciation and, in the eighth year from commencement of business when the corporate tax exemption ends under the loss-carried-forward program, the single-year cash flow is expected to remain positive. Evaluation by the Economic Internal Rate of Return (EIRR) Taking the above three economic effects into account, the economic internal revenue rate (EIRR) is 12.06% in the base case, which makes it possible to determine that this waste incineration power generation project is economically meaningful Based on the above financial and economic analysis, in consideration of the perspective of the project profitability and effect to the economy, this project can be regarded as feasible. d)environmental and Social Aspects We have conveyed the environmental survey around Karasay disposal site in order to verify the improvement effect of introducing the Waste-to-Energy project. Effective utilization of waste From the waste from Almaty City, plastics and other materials are picked by waste pickers at the individual disposal sites within the city and the disposal site operators buy the materials and sell to Russia and China and this is an effective utilization route. However, the amount is very small and thus there is no established recycle market. On the other hand, the other waste except for Municipal Solid Waste is landfilled at the five disposal sites within the city. By carrying out this project, they will be able to recover energy from city waste. Improvement in surrounding environment The Karasai Disposal Site, the largest in the city, utilizes a depression made by an earthquake that was once a level ground. They have not carried out seepage control work and just cover the waste with earth as a measure against scattering. It is guessed that seepage water goes into the ground in some geological conditions. It is planned to lay drain pipes and send the seepage water to a reservoir where the water will be vaporized. In the

11 season from April to May when they have much rain, however, it is guessed that much processing capacity will not be expected and the surrounding water environment will undergo adverse impacts. As a result of site study and interviews, there is concern that health hazard has been spread among the nearby residents due to odor and air pollution from the disposal site. As currently they collect mixed waste and directly landfill it, plastics burn by fire caused from generated methane and this adversely affect the surrounding environment. If the waste is detoxified (for example, changed to slag) by implementing this project, it is expected to restrict adverse impact on water and atmosphere in the area around the disposal site. Effect on reduction of greenhouse effect gasses At present, the Karasai Disposal Site generates much of methane, a greenhouse effect gas, due to mixed waste collection and direct landfilling. As we can expect reduction of the greenhouse effect gas emission by this project, we carried out verification as described below. It was found that approximately 36,138 t of carbon dioxide emission would be reduced by implementation of this project. Although not taken into account in this calculation, reduction of carbon dioxide emission from collection and transportation of waste can be expected because the project site is closer to the city center than the current Karasai Disposal Site. With regard to construction of a melting furnace that will gasify city waste of approximately 720 t/day, many environmental and social effects are considered. Specifically the environmental effect includes exhaust gas from the plant, dioxin, drainage, final melted slag and fly ash, which must be treated appropriately in conformity with Kazakhstan s civil laws. The concrete social effect includes consideration of livelihoods and lives of the waste pickers who currently collect valuables at the Karasai Disposal Site. Specifically, to take measures, we are planning to create new employment opportunities in the hand sorting lanes of the plant. In addition, it is required to create a land utilization plan to prevent non-voluntary relocation of the residents around the project site.

12 (4) Project Schedule Year Encouragement to include waste power generation in the FIT system (*1) Improvement of the FIT system (*1) Quarter 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Improvement of the PPP Law (*1) Full-fledged FS Prioritization of implementation, decision of implementation (*1) Final proposal to the government Government approval as the PPP project (*1) Formation of local residents agreement (*1) Environment impact assessment (*1) Discussion and conclusion of the project contract with the government of Kazakhstan Investment and financing contract Establishment of the Special Purpose Company (SPC) 1st-stage facility construction work Confirmation of plant operation and project operation 2nd-stage facility construction work 3rd-stage facility construction work (*1) To be done by the government of Kazakhstan (*2) The start of construction depends on the development and demand situations of the target area. Source: Prepared by Study Team (*2) (*2)

13 (5) Feasibility on implementation The feasibility of this project depends on whether Kazakhstan s financial and administrative scheme can be established and arranged. As set forth below at this moment we have many issues which private sectors cannot deal with and it is expected that these issues shall be discussed and settled by the central Government and/or local Government. 1) Financial issues Since waste collection and treatment business has been privatized already, it is possible that a conflict of interest between current contractor and new one would be brought up. In order to introduce a comparatively expensive and high-technological gasification system and realize an economic operation, it would be essential that CAPEX / OPEX or tipping fee (T/F) be granted by central / local Governmental budget. In order to operate the project economically, financing support with lower interest from public / governmental financers including Japanese or Kazakhstan would be also essential. 2) Regulatory issues Special tariffs in FIT scheme of Law of the Republic on Promotion of the Use of Renewable Energy Resources have not been confirmed at this moment, and Municipal Solid Waste is not included in renewable energy resources. Kazakhstan does not have comprehensive law on waste treatment, therefore there is no definition of waste collection contractor nor waste treatment contractor. Therefore, waste treatment is almost entrusted to private sectors, so administrative management in Almaty City is expected to be strengthened. PPP Law has been renewed and its contents are still being discussed in Congress now. However, the way of risk share between public and private sectors, and the process to compensate operation costs is not clear under a PPP project, therefore private investments are often prevented.

14 (6) Technical advantages of Japanese companies 1) Advantage of gasification melting technology In Japan, waste incineration started after establishment of the Waste Sanitation Law in A forced draft incinerator was constructed in 1918, followed by an incinerator with power generation equipment in 1929, a full continuous feed type incinerator in 1963, thus establishing an incineration system through various technological innovations. In such technological innovations, waste incineration allows sanitary disposal and a high volume reduction effect. On the other hand, however, the problems are surfacing that contaminants such as dioxins are emitted with waste gases, and that there is an urgency of the disposal sites where discharged incineration ashes should be landfilled. In order to solve these two problems, gasification melting technology has developed greatly and spread in Japan, which technology has high environmental performance (such as flue gas emission), and also allows collection and recycling of by-products such as ashes. It is being introduced in Japan in an accelerated manner. A waste incineration volume (including gasification melting) accounts for approx. 80% of total waste disposal volume in Japan. Having the world s highest number of incineration facilities in Japan, the waste power generation technology of the Japanese corporations has been proven, and has high global reputation. Furthermore, the stoker type incinerators were constructed and operated in CIS countries in the ex-soviet era, but they had caused environmental burdens because of its mechanical defect. It is presumed difficult for those incinerators to obtain understanding of local residents because of their bad impression. On the other hand, the gasification melting technology is highly evaluated and has advantage under the government s intention to accelerate introduction of innovative technology. 2) Application of the Tokyo model and facility operation know-how In constructing the waste disposal facilities, Japan has a variety of administrative experiences required before and during construction, and during the operation and maintenance period after construction, such as environment impact prediction assessment including environment assessment, explanation to the neighboring residents of the construction site, and systems and activities for diffusing sorted waste collection to the residents for recycling and appropriate waste disposal. In the present waste power generation field in Japan, a blanket ordering system is prevailing from construction to operation and maintenance, and a variety of know-how has been accumulated

15 concerning project operation such as not only operation and maintenance, but sales of electric power by waste power generation and valuables through project operation. As mentioned above, Japan s great advantage in smooth realization of the first waste power generation project in Kazakhstan is that it is possible to not only improve the waste disposal facilities (tangible aspect), but introduce know-how (intangible aspect) endorsed by abundant experiences in the waste disposal projects over decades into operation and maintenance. (7) Project Location Map Figure 7: Map of Kazakhstan Source:The university of Texas at Austin Figure 8:Map of Almaty City Alatau District Candidate Project Site Distance from the center of city: around 10km Source:Tengri News,Территория "Кок-Жайляу" вошла в черту Алм