GGGI TECHNICAL REPORT NO.

24

Unlocking potential for

large-scale waste treatment plants
with a focus on energy recovery
and modular project design
Lessons learned from Cambodia, Lao PDR, and Vietnam
GGGI TECHNICAL REPORT SERIES
1. Market Assessment of Fuel Pellets and Green Charcoal for Energy Uses in Senegal, Dereje Senshaw, 2017.
2. Policy Recommendations on Energy for Productive Uses in Rural Areas of Senegal, Dereje Senshaw, 2017.
3. GGPA Synthesis Report, Jan Stelter, 2018.
4. Meeting Global Housing Needs with Low-Carbon Materials, Christina Cheong and Donovan Storey, 2019.
5. Green Growth Index Concept, Methodology and Applications, Lilibeth Acosta, et al., 2019.
6. GGPA Methodology Report, Jan Stelter, 2019.
7. G20 Background Paper: Green Growth to Achieve the Paris Agreement, Frank Rijsberman, Orestes Anastasia, Pranab Baruah,
Stelios Grafakos, James Kang, and Dereje Senshaw, 2019.
8. Assessment of Feedback from Regional Expert Consultations on The Green Growth Index (Phase 2), Lilibeth Acosta, et al., 2019.
9. Review of GGGI’s Experience to Design and Operationalize National Financing Vehicles to Finance Climate and Green Growth Policy
Implementation, Fenella Aouane and Frank Rijsberman, 2019.
10. Assessment of Complementarities between GGGl's Green Growth Index and UNEP's Green Economy Progress Index, Lilibeth Acosta,
et al., 2019.
11. Green Growth in Action: Achieving Green Energy Transformation, Dereje Senshaw, Muharrem Askin,
Bolormaa Chimednamjil, 2020.
12. Employment Assessment of Renewable Energy: Power Sector Pathways Compatible with NDCs and National Energy Plans,
Stelios Grafakos, Dereje Senshaw, Diana Alejandra Quezada Avila, 2020. GGGI TECHNICAL REPORT NO. 24
13. Achieving Green Growth and Climate Action Post-COVID-19, Frank Rijsberman, Lilibeth Acosta, Nishant Bhardwaj, Chris Dickinson,
Mark Gibson, Stelios Grafakos, lngvild Solvang, Donovan Storey, 2020.
14.
15.
Green Growth in Action: Attaining Green Cities, Donovan Storey, Aarsi Sagar, et al., 2020.
The Promise of Green Growth: A Pathway to Prosperity while Achieving National and Global Ambitions, Orestes Anastasia,
Stelios Grafakos, et al., 2020.
Unlocking potential for
large-scale waste treatment plants
16. Green Growth Index 2020 – Measuring performance in achieving SDG targets, Lilibeth Acosta, et al., 2020.
17. Green Growth Simulation Tool Phase 1 – Concept, Methods and Applications, Lilibeth Acosta, et al., 2020.
18. Post-COVID-19 Green Recovery Report Summary: Recommendations to Green Mexico's Recovery at the Subnational Level,
Jose L. Amaya, Pablo Martinez, Diana A. Quezada, and Laura Valdez, GGGI Mexico, 2021.
19.

20.
Green Recovery and Climate Action: Assessing Green Jobs from Renewable Energy and Forestry Investments for Developing and
Emerging Economies, Stelios Grafakos, Hanna Kim, Svenja Krispien, Diana Quezada, Frank Rijsberman, 2021.
Closing the Climate Financing Gap: Stocktaking of GGGI Green Investment Projects 2015–20, Lasse Ringius, DaYeon Choi, 2021.
with a focus on energy recovery
and modular project design
21. Accelerating Implementation of GGGI Members’ Nationally Determined Contributions: A Review of GGGI Members’ NDCs for
E-Mobility, Chang Sun Jang, Eileen Hur, Ji Hi Yun, Kyung Nam Shin, 2021.
22. Green Growth Index 2021: Measuring Performance in Achieving SDG Targets, Lilibeth Acosta, Simon Zabrocki, et.al, December 2021.
23. Green and Blue Growth Synergy – Concept for the OECS Green-Blue Growth Index, Lilibeth Acosta, Kristin Deason, et.al,
December 2021.

Lessons learned from

24. Unlocking the potential for large-scale waste treatment plants with a focus on energy recovery and modular project design: Lessons
learned from Cambodia, Lao PDR, and Vietnam, Shomi Kim, Jerome Fakhry, et.al, 2022

Cambodia, Lao PDR, and Vietnam

Copyright © 2022
Global Green Growth Institute
Jeongdong Building 19F, 21-15 Jeongdong-gil, Jung-gu, Seoul 04518, Republic of Korea
The Global Green Growth Institute does not make any warranty, either express or implied, or assume any legal liability or responsibility for the accuracy,
completeness, or any third party’s use or the results of such use of any information, apparatus, product, or process disclosed of the information contained herein
or represents that its use would not infringe privately owned rights. The views and opinions of the authors expressed herein do not necessarily state or reflect
those of the Global Green Growth Institute.
ACKNOWLEDGEMENT

Overall guidance and supervision were provided by Jaeseung Lee

(Deputy Director and Head of Emerging Economies Asia, GGGI),
Shomi Kim (Co-lead, Waste Community of Practice, GGGI), and
Tero Tapio Raassina (Regional Investment Lead, GGGI).

The technical report was authored by Shomi Kim (GGGI), Jerome

Fakhry (Senior Regional Officer, GGGI), Pierre Telep (Climate Platform,
Consultant), Benyoh Emmanuel Kigha Nsafon (Climate Platform,
Consultant), and Michael O´Neill (Climate Platform, Consultant).

Valuable reviews and contributions were provided by Achala Abeysinghe

(Director and Head of Programs Asia, GGGI) and GGGI colleagues,
from Vietnam (Huong Ta, Senior Program Officer; Thinh Tran, Senior
Investment Officer), from Cambodia (Sut Samedy, Investment Officer),
and from Lao PDR (Ankit Bhatt, Senior Analyst). Hyeunjae Kim (Program
Officer, GGGI Lao PDR) contributed to editing the report.

Design/layout by Hanh Hoang (Communications Officer, GGGI Vietnam).

 Unlocking potential for large-scale waste treatment plants
with a focus on energy recovery and modular project design 7

LIST OF ACRONYMS

TABLE OF Abbreviation Definition

CONTENTS AD Anaerobic Digestion

ADB Asian Development Bank
BAU Business-as-usual
BOOT Build–own–operate–transfer
BOO Build–own–operate
LIST OF ACRONYMS 7 BOT Build–own–transfer
CAPEX Capital Expenditure
EXECUTIVE SUMMARY 8 CO2e Carbon dioxide equivalent
DFI Development Financial Institution
1 CURRENT SITUATION OF MUNICIPAL SOLID WASTE EVN Vietnam Electricity Corporation
FIT Feed-in-Tariff
IN MEKONG COUNTRIES 10 GHG Greenhouse Gas
1.1 Large-scale waste treatment 11 HCMC Ho Chi Minh City
IPP Independent Power Producer
1.2 Outlook of MSW in Cambodia, Lao PDR, and Vietnam 12 IW Industrial Waste
IRR Internal Rate of Return
2 OPPORTUNITIES WITH LARGE-SCALE TREATMENT ktCO2e kilotonnes of carbon dioxide equivalent
FOR MUNICIPAL SWM IN THE MEKONG REGION 15 LSWM Large-scale Waste Management
LSWTP Large-scale Waste Treatment Plant
2.1 Technology and infrastructure options for MBT Mechanical and Biological Treatment
large-scale treatment for municipal MSW 16 MoC Ministry of Construction Vietnam
2.1.1 Mechanical and Biological Treatment 16 MoNRE Ministry of Natural Resources and Environment
2.1.2 Waste to energy technology 17 MPWT Ministry of Public Works and Transport Lao PDR
MSW Municipal Solid Waste
2.1.3 Techno-economic considerations 19
MSWTE Municipal Solid Waste to Energy
2.2 Potential benefits and environmental and social impacts 21 MtCO2e Metric tons of carbon dioxide equivalent
2.2.1 Environmental benefits, including GHG reduction 21 MWe Megawatt electrical
NDC Nationally Determined Contribution
2.2.2 Job creation 21
OECD Organization for Economic Cooperation and Development
2.2.3 Security of energy supply 22 O&M Operation and Management
PPA Power Purchase Agreement
3 IMPLEMENTATION CHALLENGES AND PPP Public–Private Partnership
RISK MANAGEMENT 25 W2E Waste to Energy
W2F Waste to Fuel
3.1 Access to waste feedstock supply 24
RDF Refuse Derived Fuel
3.2 Long-term offtake agreements with cement plants 24 RE Renewable Energy
3.3 Business model development challenges 24 SOE State-Owned Enterprise
SWM Solid Waste Management
4 FINANCING OPTIONS 25 TPA Tons Per Annum
TPD Tons Per Day
4.1 Blended financing to de-risk private sector investment 26 UNFCCC United Nations Framework Convention on Climate Change
4.2 Public private partnerships with municipalities 26 US$ United States Dollar
4.3 Climate finance 27 VCOMS Vientiane City Office for Management and Service

5 CONCLUSIONS AND RECOMMENDATIONS 29

REFERENCES 31
 Unlocking potential for large-scale waste treatment plants
8 GGGI Technical Report No. 24 with a focus on energy recovery and modular project design 9

EXECUTIVE SUMMARY 2 Ensuring supply of good feedstock through source separation mechanisms should be emphasized
when developing large waste treatment facilities.

The urban share of the world’s population is projected to reach two-thirds by 2050. As the increase of While an MBT facility will process unsegregated MSW, some level of waste feedstock source
waste generation in low-middle income countries is three times higher than upper middle- and segregation will increase the quality of the final product and decrease operational costs. The quality
high-income countries, management of municipal solid waste (MSW) has become one of the most of the final products such as RDF and organic compost will have a direct impact on the market prices,
pressing urban issues for many developing nations. In addition, many of the developing nations and thus, on the financial viability of the plant. Source separation mechanisms should be progressively
still take the “collect and dump” approach in MSW management with an absence of adequate introduced starting with large waste generators such as markets and businesses. All three countries
waste treatment facilities. The traditional way of landfilling in an uncontrolled manner is costly currently have a high share of organic matters in their MSW and very limited source separation.
both economically and environmentally, as valuable resources are being thrown away without
being recovered which contributes to the release of methane from decaying organic waste in ever- 3 Having an offtake agreement in place is a key success factor for financial sustainability of the project.
increasing quantities. Leachate discharged without proper treatment is polluting the environment in Whether MBT or W2E plant models, sustainable waste management projects with a focus on energy
the communities around landfill sites while regular open burning causes health problems for the recovery can generate positive financial returns, under the condition that the offtake agreement is
residents in these communities. made at a favorable market price for investors, making such investments attractive to the private
The 3-R practices (“Reduce, Reuse, Recycle”) are promoted globally, but implementation is complex sector. For W2E plants, a power purchase agreement (PPA) is a prerequisite condition as shown
and slow, and recycling activities in developing nations are still small scale and highly informal. in Vietnam. For MBT, securing long-term offtake agreements for RDF is critical for sustainable
Efficient recycling requires source separation at the household level and therefore long-term operations of the plant. Through consultations with cement manufacturers, the following conditions
behavior change. Despite ongoing efforts, there are still large amounts of unsegregated waste arriving are prerequisites: i) consistent supply of feedstock throughout the year, ii) RDF of a good standard
at landfill sites, most of which has little recycling value. Against this backdrop, the Global Green that will not affect the quality of the cement produced, iii) unaffected air emissions from using RDF,
Growth Institute (GGGI) has developed projects that target large-scale MSW treatment with a focus and iv) in some cases, financial support for up-front investment costs to cover engineering adjustments
on energy recovery and modular project design in three countries in the Mekong region suitable for to be able to receive RDF.
Public–Private Partnership (PPP) arrangements.

This technical report aims to present lessons learned from Mechanical Biological Treatment (MBT) projects
4 Blended finance and climate finance can mitigate the risks for private sector investment and
improve financial viability.
in Cambodia and Lao PDR and Waste to Energy (W2E)i projects in Vietnam. This report also assesses Waste management is an area in which private investments could have a transformational impact
the market potential, policy frameworks, as well as implementation challenges and risk management including through Public Private Partnerships (PPP) and concessions, especially due to the technical
with regard to turning the waste issues into an opportunity that will deliver environmental, climate and financial complexity in developing and operating such treatment facilities. However, the sector
and socioeconomic impacts in the respective countries under discussion. This report also aims to is often considered too risky by potential investors. Blended finance, such as the use of concessional
provide guidance and insights to policymakers from countries with similar socioeconomic profiles loans or guarantees, can be used as a tool to share risks and unlock private investments. Diverting
and international development agencies on unlocking the potential for large waste treatment waste towards Large-scale Waste Management (LSWM) facilities can greatly reduce GHG emissions
infrastructure by identifying the most appropriate policy instruments, technology, and financing associated with decaying organic waste at landfills. Therefore, climate finance resources, in the form of
options. Key learnings can be summarized as follows: equity, loans or grants, should be pursued, together with carbon credits to enhance financial returns.

1 Enabling policy environment and financial instruments are critical in making large waste treatment
infrastructure bankable.

In Vietnam, the government has created an enabling environment for the W2E plant model. The
Vietnam Electricity Corporation (EVN) has the responsibility to buy 100% of energy generated by
renewable energy (RE) generators including from W2E projects from MSW. In addition, the generally
high landfill gate fees at US$20/ton and feed-in tariff (FIT) set at 10.05 US cents/kWh favor
project bankability, which led to the development of a 500 TPD W2E facility in Bac Ninh province.

Current low gate fees and the absence of a feed-in-tariff scheme do not enable economically feasible
W2E projects in Cambodia and Lao PDR1. It was assessed that the most financially and technically
viable modular design in the given operating environments is the MBT plant model. The main product
of MBT is Refuse Derived Fuel (RDF) which can be used as coal replacement in cement factories. The
cement-making process, which includes very high temperatures and long residence times, effectively
replaces the very expensive pollution control equipment required for a purpose built W2E plant,
therefore keeping the cost of MBT and corresponding gate fees relatively low.

i In this report, waste to energy (W2E) refers to combustion of waste in a purpose-built facility to generate electricity.
10
10 GGGI Technical Report No. 24 11

CHAPTER

01
CURRENT SITUATION
OF MUNICIPAL SOLID WASTE
IN MEKONG COUNTRIES
 Unlocking potential for large-scale waste treatment plants
12 GGGI Technical Report No. 24 with a focus on energy recovery and modular project design 13

1.1 Large-scale waste treatment 1.2 Outlook of MSW in Cambodia, Lao PDR, and Vietnam
MSW generation is rapidly rising around the world, with over 2 billion tons generated annually. This MSW is a mixture including food waste, paper, plastic, rags, glass, textile, rubber, leather, metal, stones, and
amounts to a footprint of 0.74 kg per person per day2. Global annual solid waste generation is expected to ceramics generated from residential, municipal, community, commercial, and institutional activities. The
grow to 3.40 billion tons by 2050, driven by rapid population growth and urbanization3. MSW is growing composition of MSW can vary from one country to another, but organic materials are generally the largest
even faster than the rate of urbanization and presents multiple environmental, climate and social threats. component of MSW which accounts for up to 60–70% in low-middle income countries. Rapid population
It is estimated that the number of urban residents generating MSW globally will increase from 3 billion to growth, urbanization, and change in consumption patterns in Cambodia, Lao PDR, and Vietnam have
4.3 billion between 2012 and 2025, and the amount of MSW generated per capita per day will also increase resulted in an increase in the amount of MSW generation.
from 1.2 kg (1.3 billion tons per year) to 1.42 kg (2.2 billion tons per year), respectively4. While waste
minimization and source separation should be prioritized and increased overtime, part of the solution Cambodia
is also to develop downstream large-scale waste treatment plants (LSWTP) to manage the increasing
In 2016, it was estimated that 4.24 million tons of MSW was generated across the country7. On average,
quantity of unsegregated MSW with a low value.
every Cambodian is currently estimated to generate about 0.73 kg per day of solid waste8.

There have been several successful implementations of W2E and MBT plant models in Southeast
MSW collection and transportation is generally contracted to private companies, under the supervision of
Asia5. These modern downstream waste management technologies have proven so far to be efficient in
local authorities and technical line agencies. The collection rate varies greatly depending on the city, and
managing large quantities of unsegregated MSW. Modular plant designs include mechanical separation
collection is generally focused on city centers and roads large enough to accommodate collection trucks.
infrastructure, energy recovery technologies for the non-organic fraction and biogas or compost for the
In Phnom Penh, the capital city, to address growing difficulties in waste collection, the city was divided into
organic fraction. The project design can be tailored to fit in the policy environment, investor risk appetite,
three zones serviced by three separate private waste contractors, with an online payment system currently
and local offtake arrangements. This approach presents an additional opportunity for professional
being established.
quality control in waste handling, as well as improved emissions from disposal sites.

In 2019, around 1 million tons of MSW was sent to the Dangkor landfill in Phnom Penh, growing at an
Innovative waste management techniques are gaining interest in Asian megacities6, and it is a matter of
annual rate of 12%9. Dangkor is the only MSW landfill to service the entire city, it is located about 10 km
urgency that action is taken regarding the management of MSW. The fast-growing cities of Cambodia,
from the city center and is reaching full capacity which puts immense pressure on establishing adequate
Lao PDR, and Vietnam in the Mekong region are no exception. There is a need for large-scale solutions for
waste treatment facilities10. Another smaller landfill is used for industrial waste, such as garments. The last
the treatment of waste that are both financially and environmentally sustainable. Sustainable treatment of
detailed composition of MSW arriving at the Dangkor landfill was conducted in 2015 and is presented in
MSW does not only offer an opportunity to reduce the quantities of waste landfilling, but it also provides
Table 1 below.
an opportunity for circularity, with the creation of new revenue streams. This is the case for instance,
where waste is converted to biogas or when organic waste is recovered into composted materials to
improve agricultural outputs, and thus, positively contributing to climate mitigation. Lao PDR
According to the survey conducted by GGGI, the average waste production per capita in Vientiane in
Figure 1. Projected waste generation, by region3 Lao PDR is estimated at 0.75 kg per day11, amounting to 5,400 TPD and approximately 2 million tons per
year for an estimated population of 7.2 million nationwide. Waste composition at the landfill is presented
in Table 111.

Waste generation has increased significantly in urban centers of Lao PDR, with only about 30% being
714
Millions of tonnes per year

661 collected in Vientiane11. In Vientiane, solid waste is managed jointly by a public company established
602
under the Vientiane City Office for Management and Service (VCOMS) and ten private companies directly
516 490
466
440
468 contracted by VCOMS. There is no formal source separation mechanism. The high waste collection fee,
396
342
396 392 lack of waste treatment facilities, and inadequate waste management practices have prompted open
334
255 269 290 289 dumping and burning as the most common practice for waste disposal12.
231
177 174
129
Vietnam
Vietnam has experienced a rapid growth, along with industrialization and urbanization that has led to
Middle East and Sub-Saharan Latin America and North America South Asia Europe and East Asia and
North Africa Africa Caribbean Central Asia Pacific significant shifts in production and consumption patterns. Vietnam produces more than 27.8 million tons
per year of waste from various sources13, and the volume of waste is projected to increase by 10–16%
2016 2030 2050
per year14. The composition of waste in Vietnam varies widely from one city to another. However, waste
While waste minimization and source separation should be increasingly prioritized over time, MSW composition in big cities in Vietnam show a high content of organic materials.
disposed at landfills in most developing nations currently needs to be managed as a mixture of waste. This
gives rise to the need for large-scale waste treatment plants. Such facilities can minimize the environmental Waste collection in Vietnam is still managed in a traditional way and travel distances to landfill sites are
impacts and maximize resource recovery from MSW. long due to a shortage of transfer stations. Households mostly dispose of waste in plastic bags in front of
 14 GGGI Technical Report No. 24 15

homes, which are collected by waste workers’ handcarts. According to the MONRE National Environment
Report in 201914, the waste collection rate was 78% of total waste generation, of which 71% was landfilled,
and the remainder treated by either incineration without energy recovery or composting. Among the
available 904 landfills, only 20% are sanitary.

Table 1. Composition of MSW at landfills in capital cities in Cambodia, Lao PDR, and Vietnam
Composition Fraction (%)

Cambodia15 Lao PDR11 Vietnam16

Organic waste 55.9 56 57.3

Plastics 21.1 27 10.9
Paper 6.5 6 5.9
Textile 8.0 3 3.8
Nappies 2.9 NA NA
Glass 1.4 2 3.5
Rubber and leather 0.7 NA 0.2
Metal 1.1 NA 0.6
Stones and ceramics 1.5 NA NA
Hazardous waste 0.2 NA 0.5
Others* 0.7 6 17.3

CHAPTER

02
*Others refers to all other waste not listed on the table

OPPORTUNITIES WITH
LARGE-SCALE TREATMENT FOR
MUNICIPAL SWM IN THE MEKONG REGION
On a global scale, technological innovation has improved the successful deployment of
solutions for large-scale waste treatment. The application of technological innovation and
consequent modular design depends on the specific conditions of each county. Conducting
a technology feasibility is the initial process to determine the likelihood of operational and
financial success when implementing a project. This chapter aims to explore the feasibility
of developing large-scale MSW treatment facilities by evaluating the implementation costs
for different technologies. GGGI conducted studies in Cambodia, Lao PDR, and Vietnam to
analyze the techno-economic, environmental, and social sustainability of different
large waste treatment technologies that are proposed to respective governments.
 Unlocking potential for large-scale waste treatment plants
16 GGGI Technical Report No. 24 with a focus on energy recovery and modular project design 17

2.1 Technology and infrastructure options for large-scale treatment for municipal MSW 2.1.2 Waste to energy technology
2.1.1 Mechanical and Biological Treatment (MBT) Different energy recovery processes are available from MSW. RDF is one of them and recovers the calorific
value of solid waste. RDF is made of combustible solid wastes such as plastics, paper, wood, and other dry
MBT is the mechanical processing of unsegregated waste combined with a form of biological treatment
organic matter which are not recyclable due to cross-contamination18, and the composition varies with
such as composting or anaerobic digestion (AD). The mechanical processing recovers recyclable materials,
the seasons, location of waste collection, and efficiency of MSW sorting19. Though incineration of waste is
removes inert materials and contaminants (glass, stones, etc.), removes moisture, and increases the
one of the most common methods being investigated for waste management in Asia due to its perceived
calorific value. The main output is RDF which can partially replace coal in cement plants or be used in a
simplicity20, mass burning of waste can be inefficient if the moisture content is high. The waste first must
standalone W2E facility. This approach is considered financially and environmentally more sustainable
be pre-processed before combustion, effectively turning it into RDF, with the heat produced being used
in comparison to incineration in a country where the largest share of the municipal waste is organic17.
to produce steam which is then used to turn turbines and generate electricity. This process requires a
Biological pre-treatment process can also be used to reduce moisture content in the RDF fraction.
relatively high upfront capital expenditure and making it commercially viable would require high gate fees
and adequate feed-in-tariffs. While this is currently unrealistic for Cambodia and Lao PDR, it is a possibility
The AD component breaks down micro-organisms to produce biogas which can be used to produce heat
for Vietnam. A study conducted in Bac Ninh province, Vietnam, concluded that such process would be
or electricity. In the case of Cambodia, a suitable MBT set up is to combine RDF as the main output, with a
financially viable with a gate fee of US$20/ton and FIT of 10.05 US cents/kWh which is aligned with
small AD module without grid connection to self-power the system. An AD module for its own consumption
Vietnam’s policies.
at the plant was considered due to the high tariff for electricity in Cambodia. Depending on the size of the
site and the quality of the organic fraction, composting is another option that could be incorporated into
About ten different active W2E projects exist in Vietnam and several other projects are currently under
the system to generate organic compost for soil improvement, which is the preferred option for the
development. The Soc Son W2E project in the Nam Son waste treatment complex will be the largest in
Lao PDR project. The organic fraction that is too contaminated for use for agricultural soils can be applied
Vietnam and second largest in the world upon completion in 2021, with a capacity for handling 4,000 tons
to old landfills for soil rehabilitation. In both countries, RDF can be used as a partial replacement for coal in
of MSW per day. It is expected that 75 MW of power will be generated at the facility. According to EVN21,
cement factories.
Vietnam has signed PPA as of early 2019 with three W2E developers including the Go Cat project
HCMC (2.4 MW), the Can Tho project (6 MW), and the Nam Son project (0.6 MW).
RDF use in cement kilns is suitable because toxic organic compounds are destroyed in the flames at
temperatures of up to 2000°C with a long residence time, effectively replacing the very expensive pollution Figure 3. Typical schematic illustration of W2E incineration plant with pre-procession mechanism22
control equipment required for a purpose built W2E plant. In addition, clinker reactions at around 1450°C
allow a complete incorporation of ashes, including heavy metals, into the clinker material. Given the offtake
potential for RDF in the proximity of Phnom Penh and Vientiane, MBT facilities are a more financially viable
waste management solution for Cambodia and Lao PDR compared with more capital-intensive incineration
plants.

Figure 2. Schematic illustration of MBT plants options. Anaerobic digestion is preferable in Cambodia due to the high cost
of electricity, while composting plant is considered for Lao PDR.

Compost
Composting facility Agriculture

Organics

Anaerobic digestion

MIXED Sorting Energy

WASTE Facility

Dry waste RDF

RDF processing Cement kiln

Recyclables Rejects
(High value
recyclable materials)
Landfill
 Unlocking potential for large-scale waste treatment plants
18 GGGI Technical Report No. 24 with a focus on energy recovery and modular project design 19

BOX 1: Selected schemes for MSW treatment technology 2.1.3 Techno-economic considerations
LSWTP has been identified by GGGI as part of a standard set of policy prescriptions for MSW Techno-economic viability is used as a measure to assess the operational and financial sustainability
management in Cambodia, Lao PDR, and Vietnam. The selection of a particular waste treatment potential of a project. The volume, composition, and energy content of the MSW, as well as the capital
technology depends on the overall enabling framework in each selected country. An overview of the expenditure, enabling framework, and perceived project risks are strong determinant factors in deciding a
selection criteria is presented below: suitable waste management technology solution. A project site often builds up gradually towards becoming
a fully integrated infrastructure, and investment in modular phases can be a good solution to reduce
• Cambodia – MBT with RDF and AD the perceived risks. Retrofit and other improvement investments are common, following a mechanical
• Proximity of four cement factories (<120 km) from Phnom Penh are potential offtake partners separation plant as a first investment phase.
that currently depend on coal and are ready to consider RDF as an alternative source of energy.
The potential market for RDF is estimated at about 420,000 tons annually for all cement plants, Cambodia
assuming that 20% of the coal is replaced with RDF.
The results of a pre-feasibility study on the development of an MBT in Cambodia that combines RDF
• Conversely, the cost of retailed electricity (about US$0.12–US$0.15 per kWh) in Cambodia is high, production with AD to self-power the plant showed that it is a feasible option for sustainable management
while proposed FITs are low, impeding the development of W2E facilities. Therefore, the electricity of MSW in Phnom Penh. Electricity generation from AD was considered due to the high price of electricity
generated from biogas can be used for plant production only and not for sale, hence reducing in Cambodia. The study assumed that the plant would be operating with a capacity of 1,100 tons of waste
operational expenditure. per day. Results show that for a projected concession period of 30 years, the project will cost close to
• In terms of calorific value, 2 tons of RDF is generally needed to replace 1 ton of coal. Moreover, US$20 million with an RDF output of 500 tons per day over 288 days of running time, resulting in an
the long-term average price of coal is estimated at US$80 per ton compared to projected price of equity IRR to the tune of 12–19%. Locating the plant at the current landfill site will also enable the process
US$25 per ton for RDF. of mining the most combustible legacy waste, which in turn, will improve the overall RDF output rate. The
business model foresees sales of RDF to cement factories while additionally generating revenues from
• Gate fees are not common practice, limiting the scope of more expensive technologies. However, a gate-fee collection. The technical and economic breakdown of the pre-feasibility study is presented in
gate fee of about US$5 per ton is required for financial viability of the MBT project. Table 2.

• Lao PDR – MBT with RDF and composting Lao PDR

• W2E technologies like incineration are not feasible due to low gate fees and low-price electricity
In Lao PDR, GGGI conducted a pre-feasibility study on the development of an MBT that combines RDF
generated from hydroelectric power. It is important to note that Électricité du Laos would offer production and open windrow composting. The project assumed that at peak capacity, the plant will
less than US$0.05 as part of a PPA, contrarily to at least US$0.08–US$0.12 per kWh requested by process 700 tons of unsegregated MSW including up to 200 tons of old waste mined from the landfill during
investors to make W2E investments bankable. the first ten years. The business model which combines sales of RDF, compost, and gate-fee collection has
• Agriculture is the main activity in Lao PDR with high demand for fertilizer. Imports of chemical an indicative financial viability of both project and equity IRRs in the 13–19% range under the condition
fertilizers to Lao PDR cost an average US$500 per ton, compared to US$200–US$270 per ton for that the final products are sold at the estimated market prices. The aerobic treatment offers a sustainable
locally produced organic fertilizer23. waste management strategy that combines waste stabilization and nutrients recovery into composting.
The separated organic fraction from the MBT plants will be combined with other source separated organic
• The market price for imported coal is between US$90–US$120 per ton23, which makes RDF wastes, including drier garden and agriculture wastes, for composting. It is worth noting that about 80% of
attractive in price. However, plants located closest to Vientiane are not familiar with RDF and the population in Lao PDR lives in rural areas and most are subsistence farmers engaged in agriculture24, so
further engagement is required. Plants with a stronger offtake are located further away, which is a the compost produced from organic waste could be utilized for soil improvement. The study results show
viable option but would increase operational costs. that, assuming a 25% conversion rate, 200 TPD of organic waste will yield up to 50 TPD of compost.

• Vietnam – W2E A high level of source separated organics input will be important to achieve a good quality compost product
• The government has established an enabling environment for W2E investments. Landfill gate fees to balance out potential contamination within the organic waste processed through the mechanical
vary by province and can be high (up to US$22 per ton in some provinces) compared to Cambodia sorting process. Compost that is too contaminated for agricultural lands can be used for the rehabilitation
and Lao PDR. The government has put in place a FIT of US$10.05 cent/kWh that makes W2E of damaged soils25. MBT is considered very cost-effective for Lao PDR because compared to other MSW
projects feasible. treatment technologies, MBT requires a gate fee of around US$2–US$5 per ton, compared to US$15 per
ton and US$20 per ton for controlled landfill and W2E respectively26.
• The market potential for MSWTE in Vietnam was estimated at 630 MW in 2020. With the growing
amount of MSW, this potential is projected to reach 815 MW to 1155 MW by 2025 and 2030, For both Cambodia and Lao PDR projects, it is preferable to select a semiautomated plant to keep the
respectively. investment cost down and retain jobs for the informal waste pickers at the landfill sites. Typically, 35% of
• Unlike the case of Cambodia and Lao PDR, there are enabling policies to offtake energy from MSW is turned into RDF and the percentage of RDF can be increased by adding waste mined from the
the W2E project. Moreover, EVN has the responsibility to buy 100% of energy generated by RE landfill and possibly drier industrial waste (IW) such as textiles. Up to 5% can be recovered for recycling and
generators, including W2E. around 30% residue is returned to landfills (too heavy and too light fractions, inert materials, and hazardous
materials). It should be noted that due to the large-scale waste input needed for financial viability, such
projects are currently only limited to Phnom Penh in Cambodia and Vientiane in Lao PDR.
 Unlocking potential for large-scale waste treatment plants
20 GGGI Technical Report No. 24 with a focus on energy recovery and modular project design 21

Table 2. Technical and economic breakdown of MBT plants in Cambodia and Lao PDR2728 2.2 Potential benefits and environmental and social impacts
Component Description 2.2.1 Environmental benefits, including GHG reduction
Cambodia 27
Lao PDR 28
These projects bring many environmental benefits, especially due to the current lack of environmental
Designed capacity 1,100 TPD input 700 TPD input controls at the landfills. Diverting MSW away from landfills reduces the risk of groundwater and surface
RDF-to-MSW ratio 46% (fresh MSW, landfill mining, or IW 39% (fresh MSW, landfill mining, or water contamination with landfill leachate. It also reduces the risk of landfill fires during the hot season,
input) IW input) which emit toxic fumes and oils. These landfills also create odors and attract vermin and mosquitoes, which
Technology Semiautomated and AD self-powered Semiautomated RDF plant and open affects local communities and the health of the populations in these communities.
RDF plant windrow composting
RDF market price US$25/ton US$30/ton
These projects also offer a solution for mitigating GHGs emissions, mostly methane released from the
decaying organic waste under anaerobic conductions. For example, the study “Mass balance to assess
Coal market price (in early 2020) US$80/ton US$90/ton
the efficiency of a mechanical–biological treatment”17 investigated GHG emissions from an MBT plant
RDF-to-coal caloric ratio 3,000/5,500 or 1/2 3,000/5,500 or 1/2
and concluded that, adopting MBT has the potential to cut down GHG emissions (primarily from landfill
RDF-to-coal ratio (based on CV) 20/80 20/80 gas avoidance) by 287 kg of CO2e and 764 kg CO2e per ton of waste as compared to open dumping and
Organic fertilizer market price NA US$200–US$270 traditional landfilling, respectively.
Organic compost market price NA US$170
Also, compost applied to soil has long-term potential to mitigate GHG. It is estimated that about up to 79 kg
Investment size (excl. land) US$19.62 million US$15.07 million CO2e is saved per ton of composted waste applied to land32. In addition, compared to open dumping, RDF,
Capital structure 70/30 debt/equity 70/30 debt/equity composting, or incineration helps to reduce odor and the accumulation of flies which can be a media for
Gate fee US$5/ton (based on 1,100 TPD input) US$4.4/ton applied to 40% of many diseases.
the waste disposed
Project IRR c. 12.54% c. 13.30% BOX 2: Climate rationale for LSWTP according to NDC
Equity IRR c. 18.93% c. 19.50% • Cambodia: Considering business-as-usual (BAU) emissions without forestry and other land use, the
waste sector would contribute 3.3 MtCO2e (4.1%) emissions by 2030. However, the development
Vietnam of modern MSW treatment facilities as outlined in the Nationally Determined Contribution (NDC)
scenario would reduce 0.6 MtCO2e by 2030, that is about an 18% decrease in the country’s GHG
Waste incineration with energy recovery had earlier been practiced in Vietnam to treat hazardous waste emissions. The establishment of the MBT project at the 1,100 TPD scale is included in the NDC33.
in hospitals and this approach can deliver benefits in terms of peoples’ safety in times of the COVID-19
pandemic, especially in the absence of enforcement measures for disposal of testing devices. It should • Lao PDR: According to the updated NDC, in 2020, Lao PDR reached around 82 MtCO2e of GHG
also be noted that incineration is getting to be a more attractive option for waste disposal for many city emitted which would be expected to reach 104 MtCO2e in 2030 under a BAU scenario. The MBT
authorities29. The provision of Decision 491/QD-TTg dated May 7, 2018, that aims to significantly reduce project is included in the NDC conditional scenario, aiming to mitigate a minimum of 40 ktCO2e on
MSW landfilling by applying incineration as well as other waste treatment solutions encouraged the average per year34.
development of more W2E facilities30. In terms of those capable of offtake, EVN remains the sole buyer • Vietnam: The BAU emissions for the waste sector is projected at 46.3 MtCO2e by 2030. With
who has the responsibility to acquire 100% of electricity generated from W2E projects. In order to support domestic resources mobilized for modern waste treatment facilities by 2030, the waste sector
the existing efforts made by the government of Vietnam, GGGI supported a US$60 million W2E project is expected to reduce 9.1 million tons of CO2e, about 19.7% of the BAU scenario. Also, with
in Bac Ninh province with a treatment capacity of 500 TPD of waste which reached financial closure international support as well as through the implementation of new mechanisms under the Paris
in 2021. The technology is a viable option for MSW management in Vietnam thanks to enabling policy Agreement (2015), there is potential for a reduction of 33.2 million tons of CO2e, approximately
mechanisms in the country such as the available FIT for W2E projects and the high gate fees. This project is 71.7% compared to the BAU scenario35.
considered to be technically and financially viable and has attracted investment from the private sector and
Development Finance Institutions (DFI). Building on this success, additional support for local developers
and financiers are needed to catalyze investments in W2E. 2.2.2 Job creation

Table 3. Technical and economic breakdown of W2E plant in Bac Ninh province in Vietnam31 Such projects have the potential to provide positive socioeconomic benefits in the form of employment
Component Description
opportunities, depending on the size of the facility. Both unskilled and professional opportunities would
be created. In Cambodia and Lao PDR for instance, these have been estimated at up to 50 new positions
Designed capacity 500 TPD (input), 10 MWe (output)
per facility. According to the study “Mechanical Biological Treatment of Municipal Solid Waste”36 about
Technology MSW to RDF technology and Circulating Fluidized Boiler
eight direct jobs would be created for an MBT plant of 50,000 tons per annum (TPA) capacity, 40 for a
Investment size US$60 million 265,000TPA plant, and 85 for a 417,000TPA plant, without mentioning other positions that would be
Indicative capital structure 65/35 debt/equity created along the waste management chain from collection, storage, and transportation. The development
Applicable gate fee US$20/ton (based on 500 TPD input) of more RE facilities could help Southeast Asia meet about 41% of all its energy needs by 2030 and create
Applicable FIT US$10.05 cents/kWh an additional 6.7 million green jobs by 2050. Typical employment for an incineration plant of 50,000TPA
Expected operation days 350 days per year capacity would be up to 8 direct positions37. Many other jobs would be created during the stages of
Expected project IRR c. 13%
structuring, designing, and construction of W2E plants.
 22 GGGI Technical Report No. 24 23

2.2.3 Security of energy supply

W2E can contribute to energy security by diversifying the energy mix. Ensuring a reliable supply of
energy is an important priority in developing W2E markets and this can be guaranteed by sustainable
energy infrastructures and national polices. In the case of W2E projects, the power system also needs to
be large enough to meet the energy demand of the potential customers. Vietnam has made significant
improvements in its energy infrastructure with just about 9% of energy lost along the transmission and
distribution line32. This impressive statistic assures that energy generated would reach different
end-user sectors.

Security of supply of fuel is also important for cement manufacturers, especially if they rely on imported
coal. Securing offtake of good quality RDF can help mitigate this fluctuation risk associated with coal.

CHAPTER

03
IMPLEMENTATION CHALLENGES
AND RISK MANAGEMENT
 24 GGGI Technical Report No. 24 25

3.1 Access to waste feedstock supply

As waste collection services are generally fragmented, with the involvement of both public and private
sectors, it is important that the relevant government agencies take the lead on streamlining access
to waste. In addition to access required for daily quantities, some basic improvements in feedstock
management through source separation mechanism being put in place should be considered in order to
produce a good quality final product, while meeting the targeted revenue generation from sales of this
final product. Source separation at the household level is commonly challenging in developing nations and
requires a longer-term approach. Targeting specific sectors that generate high levels of organic waste, such
as markets, restaurants, agro-processing businesses, and industries producing waste of high calorific value
such as textile, can be impactful.

Waste collection in Vietnam is also managed by small private companies that can sign a contract with
the waste treatment company to secure a given quantity of feedstock. In addition, the introduction of an
incentive framework as a dominant tool to promote the supply of feedstock can play a significant role in
feedstock management. These systems for waste collection have already paved the way for LSWTP as
they can be used to mitigate waste supply chain associated risks.

3.2 Long-term offtake agreements with cement plants

While electricity offtake is secured in Vietnam, the long-term involvement of product offtake in Cambodia
and Lao PDR within a reasonable distance is critical for the sustainable operation of the plant, especially for
RDF. While cement multinationals with experience in RDF are present in Cambodia, Lao PDR has a more
challenging environment, with the plants located closest to Vientiane having no track record in alternative
fuel use. The case from Thailand was benchmarked to present the calorific value and the market price of
CHAPTER

04
RDF. The lower price of RDF in comparison to coal is an attractive factor for cement factories however,
consistent supply of feedstock, impact on cement quality, and air emissions need to be carefully controlled.
Some cement plants will also need equipment upgrades with a reasonable pay-back period in order to use
RDF efficiently.

3.3 Business model development challenges

A challenge facing the implementation of LSWM facilities in the Mekong region is the lack of experience
of local stakeholders in MSW projects, in particular developers and financiers (commercial banks). Such
stakeholders are pivotal to the scaling-up of LSWM facilities, both in the country and regional contexts.
LSWM projects are capital intensive, and their returns are long term, which requires that financiers be
knowledgeable with the pricing, terms, and conditions for such projects. In addition, the traditional method
of treating waste in the region has been landfilling38. These methods do not provide attractive financial FINANCING OPTIONS
returns and financiers have learned over time to shy away from waste management-related projects.
It also created a lack of experienced local project developers. Therefore, this requires strong support and
technology transfer to build up the capacity of local developers to ensure the sustainable operation of The management of MSW is an essential public service. In lower-middle income
the LSWM projects. Likewise, local commercial banks are also lacking in experience for assessing LSWM countries such as Cambodia, Lao PDR, and Vietnam, the public is often apathetic about
projects, given the lack of demonstration projects for reference in the region. As a result, this situation waste management, and they are not inclined to make regular payments for waste
hinders the confidence of local/international financiers in financing LSWM projects and raises an urgent collection services. Greater expenditure is needed to encourage a paradigm shift in
need for blended finance. As the government of Vietnam is engaged to actively create an enabling public attitudes. The more perceived social benefits that are evident to the public
framework that would incentivize investments in LSWM facilities, a growing opportunity for developers regarding sustainable waste management, the more likely attitudes will change.
and financiers to invest in such projects is rising. In this section, three possible financing options are discussed.
 Unlocking potential for large-scale waste treatment plants
26 GGGI Technical Report No. 24 with a focus on energy recovery and modular project design 27

4.1 Blended financing to de-risk private sector investment A schematic diagram of a typical PPP structure is presented in Figure 4 below.

In Vietnam, the lending interest rate applied by commercial banks ranges from 7–11%. With over 30 Figure 4. Schematic layout of PPP structure47
commercial banks operating in the country, commercial finance is a vital source for project developers to
mobilize finance for their projects. In obtaining these commercial loans, additional collaterals may typically GOVERNMENT Direct Agreement
be required to secure funding from commercial banks. With funding sources leveraged from international IMPLEMENTING
AGENCY
DFIs through on-lending programs, Vietnam’s local commercial banks have recently made concrete steps
in financing project developers in green infrastructure. Accordingly, projects that have environmental PPP
benefits can also be eligible to access these lending facilities with more preferential terms. Agreement

Cambodia’s Ministry of Economy and Finance set the market interest rates for 2020 loans based on an
Equity Investor PROJECT Lenders
average of the interest rates set by Cambodia’s eight commercial banks: 8.92% for KHR-denominated loans Shareholders’ COMPANY Loan
and 8.45% for US$-denominated loans. In case of Lao PDR, the interest rate for project financing marks at Agreement Agreement

4%39 for the government approved projects, which is lower than the average interest rate of 6.69% from
1992 to 202140.
EPC Contract O&M Contract
The GGGI supported projects in Lao PDR and Cambodia show a debt/equity split of 70%/30%. In Vietnam,
regarding MSWTE power plants, the private sector appetite is more acute, GGGI supported the project
developer on financial structuring for the W2E project in Bac Ninh province, of which 35% equity EPC O&M
Contractor Contractor
commitment comes directly from the investors. Such commercial finance resources can be leveraged
through available climate finance under the blended finance mechanisms to de-risk the project or more
broadly enhance its bankability.
4.3 Climate finance
Solid waste management is an area in which private investments could have a transformational impact, Landfills are major emitters of GHG in the waste sector, especially of methane, which is 28 times more
however the sector is often considered too risky by private investors. Blended finance has emerged potent to climate change than carbon dioxide48. These emissions can be greatly reduced by diverting the
as a tool for reducing risks and promoting private investments in LSWM facilities. Blended finance waste towards LSWM facilities. Climate finance can support mitigation actions that result in environmental
combines concessional financing, loans that are extended on more generous terms than market loans, and socioeconomic benefits49. There are different types of financial instruments that could be sought
and commercial funding41. It is an approach that helps to get projects off the ground. In the context of through climate finance to improve LSWM practices and deliver climate mitigation. Those include equity,
LSWM facilities, blended finance can help reduce associated risk borne by private stakeholders, as well guarantees, loans, and grants.
as encourage developers and financiers to invest in a sector in which they have limited experience in.
Accordingly, blended finance for private sector projects is fast becoming one of the most transformative
Equity investments can act as a catalyst because of their ability to support early and growth-stage
tools that development finance institutions can use, in cooperation with development partners, to mitigate
businesses that would otherwise not be able to take on debt. Direct equity could also allow investees to
risks and to help mobilize private investment in LSWM facilities42.
scale operations more efficiently to achieve a greater sustainable development impact. Equity enables the
GGGI’s contribution in terms of transaction advisory and facilitation play a vital role in utilizing available de-risking of partner investments and can be a good source of incremental finance when commercial debt
public and climate finance to leverage private sector investment through the blended finance mechanism. provision is still shallow for MBTs like in the case of Cambodia and Lao PDR.

4.2 Public private partnerships with municipalities Concessional loans from climate finance institutions could be blended with local commercial loans to share
Most developing countries have limited technical and financial capacity to develop and operate LSWM the risk, catalyze the private investment, and achieve a better cost of capital for project financing. Highly
facilities. Well-structured and commissioned projects can mobilize financial and technical resources from concessional loans could help scale-up LSWM projects in the three Mekong River countries, though there
the private sector seeking new and bankable investment opportunities. Public-private partnerships (PPPs) is a consensus that far too much climate finance coming from governments and development finance
are mechanisms for government to procure and implement public infrastructure and/or services using institutions is in the form of loans. According to the OECD report “Climate Finance Provided and Mobilized
the resources and expertise of the private sector. The most common PPP models practiced around the by Developed Countries,” by 2018 loans represented 74% (US$46.3 billion) of public climate finance, up
world include build–own–operate–transfer (BOOT) model; build–own–operate (BOO) model; and from US$19.8 billion in 2013. Grants represented just 20% (US$12.3 billion) of public climate finance.
build–own–transfer (BOT) model43. Cambodia, Lao PDR, and Vietnam have implemented several
infrastructure projects via the PPP finance model. In Cambodia, projects via PPP have been implemented Grants can help transaction advisory and capacity building around LSWM projects. For LSWM projects to
since 1993 mostly in the energy sector using BOT and BOO models44. The government of Lao PDR however be successful in Cambodia, Lao PDR, and Vietnam, support will be needed from climate finance flows either
has a long-term vision to establish PPPs as a regular procurement mechanism to be used by all government as public grants without repayment contingencies or through technical assistance improving advisory
agencies45. Vietnam has implemented several power projects under Asian Development Bank (ADB) and de-risking efforts. In Vietnam, GGGI provided financial advisory on a pro-bono basis to support a
technical assistance with PPP content, and ADB private sector PPP portfolios. In 2018, the ADB signed a private sector developer to successfully obtain funding for the W2E project. The financial advisory from an
US$100 million loan facility agreement with China Everbright International Limited to develop the first international organization helped local developers design an appropriate financial structure to reduce the
W2E PPP project in Vietnam46. risk and access to sources of finance. In Lao PDR, GGGI is seeking grant support from international climate
funds to lower the private sector investment risks associated with product offtake.
 28 GGGI Technical Report No. 24 29

Carbon market (Voluntary or bilateral) based on Article 6 of the Paris Agreement (2015) also provides an
opportunity for financing LSWM projects. Some pre-requisites however would be carbon credit pricing as
well as the development of frameworks through which these impacts can be generated. For the Lao PDR
project, this could create an additional annual revenue of US$760,000–US$950,000, if selling carbon
credits at the price of US$20–25 per ton.

Programmatic blending of climate finance with municipal co-financing is a promising financing option. Individual
projects can often have a high transaction cost and can be complex in nature. Aggregation of projects
through a programmatic approach that builds on local ownership will provide an opportunity for action at
scale while being more sustainable.

Finally, the strategic use of climate finance can also include credit guarantees and subordinated debt that can
buffer potential losses for senior lenders by lowering the number of senior claims on assets. An additional
credit guarantee enables the domestic banks to share risks and support projects. It also opens a door for
project developers to receive softer loans on non-recourse terms.

CHAPTER

05
CONCLUSIONS
AND RECOMMENDATIONS
 Unlocking potential for large-scale waste treatment plants
30 GGGI Technical Report No. 24 with a focus on energy recovery and modular project design 31

This technical report demonstrates that LSWM facilities can be financially viable in the big cities of
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