Refuse-derived fuel

Refuse-derived fuel
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Refuse-derived fuel
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
Infrastructure
Business Model Description

Construct and operate waste management and electricity generation plants to produce refuse-derived fuel to supply electricity to main cities.

Expected Impact

Increase access to energy for the population and mitigate against the negative environmental effects of waste.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
> 25% (in IRR)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
Average annual energy consumption per capita of 150 kilowatt hours.
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
> USD 10 million
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
Affordable and Clean Energy (SDG 7) Sustainable Cities and Communities (SDG 11) Responsible Consumption and Production (SDG 12)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
Industry, Innovation and Infrastructure (SDG 9) Climate Action (SDG 13)
Country
Regions
  • Nigeria: South West
  • Nigeria: North Central (Middle Belt)
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
IF

Development need: Nigeria will face several challenges in the next decades, with the infrastructure sector as the basis for the country’s sustainable development due to its cross-cutting characteristics. There are several potential areas for investments. These opportunities focus on, but do not exclusively relate to, serving rapidly growing urban populations, and include electricity generation or waste management.

Policy priority: National Integrated Infrastructure Master Plan 2019 - The value of Nigeria’s core infrastructure stock represents only about 25% of gross domestic product (GDP) according to 2013 estimates, a value significantly lower than the global benchmark of 70%. This low stock has been attributed mainly to low public and private spending on infrastructure.(1)

Gender inequalities and marginalization issues: Poor infrastructure can exacerbate the gender gap. In low income countries, women are responsible for over 70% of water and fuel wood collection. The time spent on water collection adds up to 200 million hours every day. Unsafe and low security transport also disadvantages women, by exposing them to violence. This affects their wellbeing and workforce participation.(21)

Investment opportunities introduction: To efficiently revamp infrastructure across various sectors, estimated investment of USD 30 trillion is required over 30 years (2014 – 2043). This estimate includes investments in the following priority areas: Energy, transport, social infrastructure and housing. (1)(2)

Key bottlenecks introduction: The low infrastructure stock has been attributed mainly to low public and private spending on infrastructure.(1)

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
IF

Development need: Energy consumption per capita is 136 kWh (kilowatt hours) per year, less than 3% of consumption in South Africa (4,803 kWh)(2). Nigeria will face several challenges in the next decades, with the infrastructure sector as the basis for the country’s sustainable development due to its cross-cutting characteristics.(2)

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Electric Utilities and Power Generators
IF-EU
Investment Opportunity Area

Refuse-derived fuel

Business Model

Construct and operate waste management and electricity generation plants to produce refuse-derived fuel to supply electricity to main cities.

Critical IOA UnitDescribes a complementary market sizing measure exemplifying the opportunities with the IOA.
Average annual energy consumption per capita of 150 kilowatt hours.

The average annual energy consumption per capita is on the level of 150 kilowatt hours (kWh) per year.(3) Currently, Lagos generates an estimated 20,000 tons of solid waste every day (4), only 10% of which is collected.

The power deficit in Lagos is estimated at 9,000-10,000 megawatts (MW), combined with low utilization of generating capacity.(3)

Lagos is Nigeria's largest city and Africa's 8th largest city. It achieved megacity status in 2010 with a population of 11 million. By 2030, the city’s population is estimated to be over 24 million people.(4)

IRRDescribes an expected annual rate of growth of the IOA investment.
> 25%

Based on a case study from other emerging markets, energy plants with refused-derived fuel input may generate an internal rate of return up to 60% within 10 years. This result assumes the plant generates up to 12 megawatts (MW) of energy.(5)

The estimated internal rate of return is 17.9% - 21.9%. This rate is a benchmark calculated as a cost of equity with a country risk premium, reflecting an average return required by investors active in the electric utilities and power supply subsector.(6)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)

The estimated investment period is 10 years. This estimate is based on a case study from other emerging markets of energy plants with refuse-derived fuel input and electricity production of up to 12 megawatts (MW).(5)

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
> USD 10 million
Capital - CapEx Intensive
High capital expenditure and know-how required for scaling up the business, technology challenges (7)
Market - Highly Regulated
Low knowledge of policymakers, no incentives/promotion programs, limited up-to-date regulations (8)
Business - Supply Chain Constraints
Effective waste segregation may still be an issue.(9)
Sustainable Development Need

In terms of electricity generation, main challenges include 40% of the population not having access to electricity grids, inadequate transmission capacity, 80% of the population having to rely on diesel generators, as well as governance challenges arising from inadequate management of assets.(3)

65 million metric tons of waste is generated annually in Nigeria.(10) Lagos, the biggest city in Nigeria, generates about 20,000 tons of urban waste every day.(11)

Currently, 40% of the population of Lagos has no access to the power grid or adequate transmission capacity.(12) Moreover, the power supply in Lagos is very unreliable (3), causing problems for businesses, and hampering economic and business development.

Gender & Marginalisation

Poor infrastructure can exacerbate the gender gap. In low income countries, women are responsible for over 70% of water and fuel wood collection. The time spent on water collection adds up to 200 million hours every day.(21)

Expected Development Outcome

Investments could reduce waste and pollution as well as sulfur dioxide and carbon dioxide emissions (3). Investments could also increase access to electricity, increase productivity and facilitate the circular economy.

Gender & Marginalisation

Increasing access to clean power and reducing waste helps rural women especially, who supply household needs and are therefore particularly exposed to air pollution and energy disruptions.

Primary SDGs addressed
7 - Affordable and Clean Energy
Affordable and Clean Energy (SDG 7)

7.1.1 Proportion of population with access to electricity

7.2.1 Renewable energy share in the total final energy consumption

Current Level

59.3%. (22)

N/A

Target Level

100% (23)

The Federal Ministry of Power together with the Rural Electrification Agency and the Niger Delta Power Holding Company is committed to provide solar power to 5 million households by 2023 while creating 250,000 jobs in the energy sector.(24)

11 - Sustainable Cities and Communities
Sustainable Cities and Communities (SDG 11)

11.6.1 Proportion of municipal solid waste collected and managed in controlled facilities out of total municipal waste generated, by cities

Current Level

6.2% in 2015. (22)

Target Level

N/A

12 - Responsible Consumption and Production
Responsible Consumption and Production (SDG 12)

12.4.2 (a) Hazardous waste generated per capita; and (b) proportion of hazardous waste treated, by type of treatment

12.5.1 National recycling rate, tons of material recycled

Current Level

Hazardous waste generated per capita: 73.28%. Proportion of waste treated: 0.24%. (22)

0.24% in 2015. (22)

Target Level

N/A

N/A

Secondary SDGs addressed
9 - Industry, Innovation and Infrastructure
Industry, Innovation and Infrastructure (SDG 9)
13 - Climate Action
Climate Action (SDG 13)
Directly impacted stakeholders
People
Households
Planet
Environment
Corporates
Small and medium enterprises
Public sector
Public institutions
Outcome Risks

Without proper filtration, many harmful compounds, such as methane emissions, may be released into the atmosphere .

There is a possibility of public resistance.

Impact Risks

Efficiency risk given the heavy involvement of public bodies (with higher costs) in the waste management sector.

Execution risk if activities are not delivered as planned and do not result in the desired outcomes

What

Investing in electricity generation from refuse is likely to have a positive impact because it provides an additional source of energy and reduces waste.

Who

Households, micro, small and medium enterprises, public buildings that suffer from inadequate access to electricity and uncollected waste

Risk

Although the solution has been already tested in a number of other African counties, it requires high capital outlays and know-how.

Impact Thesis

Increase access to energy for the population and mitigate against the negative environmental effects of waste.

Policy Environment

National Environmental Sanitation Policy: Recognizing the importance of environmental protection and proper management of waste, the Federal government has developed a policy to strengthen capacity and performance of the sector by making solid waste management methods efficient and sustainable.(13)

The policy has the following 11 objectives: 1. Develop policy guidelines that will make solid waste management in Nigeria efficient and sustainable. 2. Make the environment healthy by introducing sanitary solid waste management. (13)

The policy has the following 11 objectives: 3. Reduce waste generation and encourage source separation, recycling, reuse, and recovery of energy. 4. Dispose of waste to protect public health at all stages of collection, transportation, treatment, and final disposal.(13)

The policy has the following 11 objectives: 5. Encourage stakeholders to participate effectively in solid waste management. 6. Create employment and reduce poverty while increasing living standards. 7. Increase productivity in waste management.(13)

The policy has the following 11 objectives: 8. Facilitate recovery of investments made in waste management and create the ability to scale and sustain the project. 9. Create an institutional framework to improve operational efficiency of the waste management system.(13)

The policy has the following 11 objectives: 10. Create and maintain a waste management system that is indigenous and reliant on the physical and sociocultural characteristics of communities. 11. Ensure regular and affordable provision of waste management services.(13)

Financial Environment

Financial incentives: Funding is available from the African Development Bank. Financing is available from domestic financial institutions for bankable renewable energy projects. The Bank of Industry provides financing for renewable projects.

Fiscal incentives: Tax incentives (tariff flexibility) are also available for investments in renewable energy.(18)

Other incentives: Nigeria has favorable environment for issuing green bonds targeted at climate change adaptability/mitigation projects.

Regulatory Environment

Nigeria's environmental governance framework is regulated through the National Policy on the Environment, which establishes a management structure to protect the environment. It specifies the procurement of tasks necessary for attaining the SDGs.(13)

Decree n° 42 of 1988 Harmful Waste (Special Criminal Provisions, etc.): This decree prohibits carrying, depositing and dumping harmful wastes (injurious, poisonous, toxic or noxious substance) and prescribes penalties for improper practices.(14)

The National Environmental Standards and Regulations Enforcement Agency Act of 2007: This Act establishes regulations for protecting the environment, natural resources use and environment-related technologies.(15)

Decree n° 86 of 1992 oversees environmental impact assessments and states that the 'construction of incineration plants' requires an environmental assessment.(16) The National Environmental (Sanitation and Wastes Control) Regulations, S.I. No. 28, 2009 aim to ease the process of reducing pollution.(17)

Environmental issues in Nigeria are overseen by the Ministries of Environment both at the federal and state levels, as well as environmental health departments at the local government level.(13)

Private Sector

Energise Africa

Government

Lagos Waste Management Authority (LAWMA) (19)

Multilaterals

European Investment Bank, Africa Renewable Energy Fund (AREF), International Finance Corporation (IFC), African Development Bank (AfDB)

Public-Private Partnership

It would be recommended to pursue a public-private partnership (PPP) scheme with the Federal government. it is also possible to transform an existing coal-fired plant into a refuse-derived fuel facility.

country static map
urban
Nigeria: South West
Large cities, such as Lagos and Abuja, as they provide access to the largest population in a concentrated area with developed transmission infrastructure, allowing easy grid connectivity and facilitated access to segregated, appropriate waste types for firing the refuse derived fuel plan.
urban
Nigeria: North Central (Middle Belt)
Large cities, such as Lagos and Abuja, as they provide access to the largest population in a concentrated area with developed transmission infrastructure, allowing easy grid connectivity and facilitated access to segregated, appropriate waste types for firing the refuse derived fuel plan.
Sector Sources
  • 1) National Planning Commission (2015). National Integrated Infrastructure Master Plan. 2) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning.
IOA Sources
  • 3) Olurode, L., Isola, W. and Adebisi, D. (2018). 'Urbanisation and Energy Crisis: The Case of Lagos State', Sociology and Anthropology 6(11): 845-853. https://doi.org/10.13189/sa.2018.061105 4) Kaza, Silpa et al. (2018). What a Waste 2.0 : A Global Snapshot of Solid Waste Management to 2050. Washington, D.C.: World Bank Group. https://openknowledge.worldbank.org/handle/10986/30317 5) Srisaeng, N., Tippayawong, N. and Tippayawong, K.Y. (2017). 'Energetic and economic feasibility of RDF to energy plant for a local Thai municipality', Energy Procedia, 110: 115-120. https://linkinghub.elsevier.com/retrieve/pii/S1876610217301455 6) PwC analysis (2020), based on Prof. A. Damodaran data. 7) Rogoff, M. J. and Screve, F. (2011). 'Refuse-derived Fuel'. Waste-to-Energy (Second Edition). https://www.sciencedirect.com/topics/earth-and-planetary-sciences/refuse-derived-fuel 8) Institut für Energie-und Umweltforschung Heidelberg (2008). Renewable Energy Masterplan Nigeria. https://www.ifeu.de/en/project/renewable-energy-masterplan-nigeria/ 9) Ogunmakinde, O. E., Sher, W. and Maund, K. (2019). 'An Assessment of Material Waste Disposal Methods in the Nigerian Construction Industry', Recycling 4(13). https://www.mdpi.com/2313-4321/4/1/13/pdf 10) Benson, E.A. (2018). 'Recycling: How These Small Businesses Make Millions Selling Aluminium Monthly,' Nairametrics. https://nairametrics.com/2018/03/19/waste-management-and-the-business-of-recycling-in-lagos/. 11) Adenaike, F.A. and Omotosho, A.J. (2020). 'An Overview of Solid Waste Resource Recovery Efforts in Lagos,' International Journal of Waste Resources 10(3): 1–5. https://www.longdom.org/open-access/an-overview-of-solid-waste-resource-recovery-efforts-in-lagos-54448.html 12) Atkins and Lagos State Electricity Board (2014). 'Future Proofing Cities: The Lagos energy sector - Risk and Opportunities for Resilient Growth of the Lagos Energy Sector. http://www.asiapacific.atkinsglobal.com/~/media/Files/A/Atkins-Corporate/group/sectors-documents/urban-development/FPC_Lagos_Leaflet_Lowres.pdf 13) Environmental and Public Health Watch (2011). Policy Guidelines On Solid Waste Management 2005. https://tsaftarmuhalli.blogspot.com/2011/12/policy-guidelines-on-solid-waste.html 14) Harmful Waste (Special Criminal Provisions, Etc.) Act. http://extwprlegs1.fao.org/docs/pdf/nig18377.pdf 15) National Environmental Standards And Regulations Enforcement Agency (Establishment) Act 2007. http://extwprlegs1.fao.org/docs/pdf/nig120569.pdf 16) Environmental Impact Assessment Decree No 86 of 1992. https://www.elaw.org/content/nigeria-environmental-impact-assessment-decree-no-86-1992 17) National Environmental Standards and Regulations Enforcement Agency Act of 2007. https://www.nesrea.gov.ng/publications-downloads/laws-regulations/ 18) Adenaike, F.A. and Omotosho, A.J. (2020). 'An Overview of Solid Waste Resource Recovery Efforts in Lagos,' International Journal of Waste Resources 10(3): 1–5. https://www.longdom.org/open-access/an-overview-of-solid-waste-resource-recovery-efforts-in-lagos-54448.html 19) Lagos Waste Management Authority. Cleaner Lagos. https://www.lawma.gov.ng/ 20) The Guardian (2016). Kaduna, Kano governments plan to generate electricity from solid waste. https://guardian.ng/news/kaduna-kano-governments-plan-to-generate-electricity-from-solid-waste/ 21) OECD (2019). Gender Equality and Sustainable Infrastructure. https://www.oecd.org/gov/gender-mainstreaming/gender-equality-and-sustainable-infrastructure-7-march-2019.pdf 22) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf 23) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. https://dashboards.sdgindex.org/profiles/NGA 24) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf