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CDM PROSPECTS FOR SOLID WASTE MANAGEMENT IN THE PHILIPPINES

CDM PROSPECTS FOR SOLID WASTE MANAGEMENT IN THE PHILIPPINES. Presented to DENR Workshop on CDM Climate Change Institute. By S. West Stewart, Managing Director Philippine Bio-Sciences Co., Inc. ‘PhilBIO’ November 4, 2003. CDM Prospects for Solid Waste Management Overview.

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CDM PROSPECTS FOR SOLID WASTE MANAGEMENT IN THE PHILIPPINES

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  1. CDM PROSPECTS FOR SOLID WASTE MANAGEMENT IN THE PHILIPPINES Presented to DENR Workshop on CDM Climate Change Institute By S. West Stewart, Managing Director Philippine Bio-Sciences Co., Inc. ‘PhilBIO’ November 4, 2003

  2. CDM Prospects for Solid Waste Management Overview • Relative Size of MSW in the Philippines • Typical Ways to Extract LFG • Typical Ways to Upgrade & Utilize LFG • Payatas Demo Project Case Study • Basic Parameters for LFG CDM • LFG CDM Potential • The ‘Methane Kick’ Benefit

  3. 1. waste generation rate -What a Waste: Solid Waste Management in Asia, World Bank, 1999 2. Urban population data - (http://apps.fao.org); Philippine Statistical Yearbook

  4. GHG Emissions from the Waste Sector Source: Ms. Joy Goco, IACCC

  5. AEROBIC TREATMENT ANAEROBIC TREATMENT 1.2 kg O 0.35 m 3 3 2 methane CO + H O CO + H O - 1 kWh - 1 kWh 2 2 2 2 + 12.9 MJ - 3.6 MJ - 3.6 MJ 1 kg BOD Air Air removed Biomass 0.6 Biomass 0.06 kg dry weight kg dry weight

  6. Legend: 1- Leachate drainage system 2- Geosynthetics liner 3- Temporary soil cover 4- Compacted waste 5- Impermeable clay liner 6- Top soil layer 7- Flare 8- Pumping system 9- Surface water collection 10- Leachate treatment works Cross Section of Typical Landfill

  7. Huitex HDPE LinerEffective Leachate Containment

  8. PhilBIO’s RESTORE CONCEPT FOR MANAGED LANDFILL LEACHATE & METHANE GAS RECOVERY WITH ON SITE POWER GENERATION USING ANAEROBIC DIGESTER TECHNOLOGY FOR WASTEWATER TREATMENT AND HIGH SOLIDS

  9. PhilBIO’s Waste-to-Energy Solutions

  10. LFG UTILIZATION TECHNOLOGY • Direct Gas Utilitization ~ Gas Pipeline to nearby industrial gas user (for boilers) • 118 Projects in the USA • .5 to 5 km Gas Pipelines • Electric Power Generation • Internal Combustion Engines ~ 500 kW -3 mW • Gas Turbines ~ 3 mW to 50 mW • Nearly 1,000 Projects in the USA with installed based of 900 mW • Microturbines (Lopez Canyon, California) • In the future, Fuel Cells • Vehicular Fuel • Leachate Evaporation

  11. N2O SO2 CH4 CO Furans NOX Dioxins H2S CO2 leachate groundwater Source: Climate Change Institute

  12. Case Study: Payatas DumpsiteWaste Stream Composition PNOC/EC from “Payatas Extraction Project”

  13. PAYATAS DUMPSITEGAS COMPOSITION PNOC/EC, ibid.

  14. LFG PROJECT REQUIREMENTS • INVESTMENT COSTS – LFG RECOVERY • Assuming electric power generation option (US$/rated kW) PNOC/EC, ibid.

  15. LFG PROJECT REQUIREMENTS • INSTITUTIONAL – LFG RECOVERY • Legal ~ Project Itself is R.A.9003 Compliant • LGU ~ Meets Local Requirements for Solid Waste Management • Social ~ Community Outreach • Constant Interaction on Merits of Project • Local Barangay Approvals • Public Participation Forum & Comment Period • Avoid NIMBY ~ Example, Gapan, Nueva Ecija • Contracts ~ PPA, Gas Offtake Agreement, Waste Stream Conveyance Contracts • Carbon Ownership

  16. LFG Prospects for the Philippines • Standard Adaptation of Developed Country Technologies will rarely be economical without • Tipping Fees to sustain landfill development • Use of plastics for containment • Coverage & Compaction of waste • An appropriate Operations & Maintenance Budget, and • ERPA Contract(s)

  17. LFG Prospects for the Philippines • LFG Prospects Improve Substantially with CDM Status

  18. CDM: Monetizing Carbon Credits Increases Project IRR’s

  19. The Economics of waste to energy projects are especially attractive Jamaica Wind Farm Project 20 MW installed capacity 50,000 t CO2 ER’s p.a.(10 years) Project costs: US$20m (+) Carbon value: @ $3/ t CO2 = $1.72m @ $5/ t CO2 = $2.87m Proportion of project costs: @ $3/ t CO2 = 8.6% @ $5/ t CO2 = 14.35% PhilBIO’s CAT Waste to Energy Project 2 MW installed capacity >50,000 t CO2 ER’s p.a.(10 years) Project costs: US$3.5m Carbon value: @$3 /t CO2 = $1.72m @$5 /t CO2 = $2.87m Proportion of project costs: @ $3/ t CO2 = 49.1% @ $5/ t CO2 = 82.0%

  20. Fugitive Methane Achieves Greatest Carbon Potential • Generate more CERs in proportion to installed assets • Due to GWP of methane being 21 – i.e. 1 tonne of methane released has warming effect of 21 tonnes of CO2 • 1 MW of baseload power (8000 hrs/yr) can earn 25,000 to 40,000 CERs per year when powered by fugitive CH4 • US$75k to US$200k per MW capacity per year • Barriers . . . Globally, a limited number of projects > 20 MW • Most < 5 MW (In Philippines only a handful of projects are this large!) • As scales decreases – cost of carbon trading increases • High degree of stakeholder and bureaucratic obstacles • Low hanging fruit – all types of landfills – are politically charged • Converting all major Manila based ‘dumps’ into controlled or managed landfills ~ the most obvious of the ‘fruit’

  21. Fugitive Methane Philippines Greatest Carbon Potential • Job 1: Converting all major Manila based ‘dumps’ into controlled or managed landfills ~ the most obvious of the ‘ low hanging fruit’ • Convert Payatas & Vitas to Managed Dumpsite • Convert Montalban Sanitary Landfill for LFG Capture • Energy Potential: from 5,000 tons per day of waste • If 100% for electric power generation: > 50 mW Power plants • At >80,000 operating hours • Or with Carbon Potential of > 15,000,000 Ers • With Current Value ($3) of $45,000,000 (7 Year Crediting Period) • With CDM, the NCR Waste Management Crisis and its solutions become more realistic. • For Provincial Areas, compacted waste transported to Regional SLF with LFG or Waste to Energy Facilities • General Santos SLF with PhilBIO/BTA WTE, • At least 15 Major LFG or WTE Projects can be sited in the Philippines that would have significant economies of scale and attract investment. • Cebu, Davao, GenSan, Zamboanga, CDO, Ilo Ilo, Bacolod, Legazpi, Naga, Tacloban, Tagbilaran, Batangas, Urdaneta, San Fernando (2)

  22. CERs Improve Debt Service Coverage • Sale of CERs involve minimal costs • This cash flow can be readily applied to Debt Service • Direct Payments on Annual Debt Service Requirements • Funding Debt Service Reserve Accounts • Using Forward EPRA Sales as Collateral • Funding an Account to supplement variations in EBITDA • Applying Carbon Cash Flow to Debt Service Can Result in more favorable Capital Structures • Higher DSCR (More Debt Carrying Capacity) means less Equity Requirement – Thereby Increasing ROE • Allows Project to be Financed Because Increases DSCR past Predetermined Threshold set by the Lender • Either Way, Both Project Developer and Project Lender are Better Off.

  23. A Wind Project Example • Example Assumption: • US$82m Capital Outlay 300GWh • 75% EBITDA Margins 0.7 tCO2e/MWh Coefficient • $4 Price per CER D/E of 50% • $40 Price per MWh 15 yr Term, 7% interest Rate • CER Cash Flow Can Increase DSCR by up to 0.2, or roughly $4m (10%) in additional debt carrying capacity. • If CER price is increased to $8 (current forecasts are between $8-$12 in 5 years) this could mean up to $8m LESS equity investment – a full 20% reduction. • At price of $4 – CER sales represent 19% of annual debt service • At price of $8 – CER sales represent 37% of annual debt service • In methane (CH4) projects these benefits are significantly enhanced

  24. Debt Service Coverage Ratio Matrix for a Wind Project Extra Debt Capacity

  25. A Fugitive Methane Project Example BLUE Indicates Extra Debt Capacity

  26. CDM Prospects for LFG Projects • IF PROJECTS MEET CERTAIN CRITERIA • AT LEAST 10 YEAR LIFE OR CONTRACTUAL ARRANGEMENT • AT LEAST 1 MM TONS OF CAPACITY • AT LEAST 500 TPD INPUT • THEN, • GWP OF 21 TIMES CARBON DIOXIDE • ADDS UP TO 40,000 MTCE PER ANNUM • OR UP TO U.S.$200 PER RATED KW • WITH SUBSTANTIALLY INCREASED DEBT CAPACITY ~ UP TO 100% DEBT • FINALLY, PAYATAS EXAMPLE…

  27. Payatas: From Poor to…

  28. Achievable… Based on a similar LFG Project

  29. PhilBIO: SWM Track Record • 1995: Feasibility Study for Ayala Alabang Village Association & City of Muntinlupa • 1998:PhilBIO incorporated by PEI, U.S. Green Fund & U.S. Project Developer • 2 Years:Waste-to-Energy Project Feasibility Studies for Baguio and Talisay, Negros Occ. (Also in Thailand, Bangkok and Chiang Mai) • 2001:Rocky Farm CIGAR Project ~ 8 Farms with CIGAR • 2001:1st To do a Carbon Assessment & Validation -- CAT – 1st to receive ‘Letter of No Regrets’ from IACCC • 2002:1st To Execute Contract for City Waste to Energy Project-- General Santos City WTE Project • 3/2003: 1st to Execute a PDD for a City Waste to Energy Project-General Santos City WTE Project (Pending Additional Data) • 11/2003:1st to Execute Contract for Landfill Gas Project -- Payatas 100 kW LFG Project

  30. PhilBIO: Team/Resources • S. West Stewart, Managing Director • U.S. Investment Banking & Project Finance • More than 20 years of experience in Japan and other parts of Asia, 6 years of project experience in Philippines. • David A. Donnelly, Director • U.S. Investment Banking and Environmental Engineering Capability • More than 12 years of Asian business experience, currently General Manager, CleanTHAI, Bangkok • Dr. Marc Stuart, Mr. Justin Guest, EcoSecurities, Ltd. • Premier Carbon Global Financing Team • Financed Largest CDM LFG Project (NovaGenar, Brasil)

  31. PhilBIO: Local Team Resources • PhilBIO Team • Roberto C. Julian • Philippine Investment Banking, Insurance and Renewable Energy/Energy Efficiency Financing Expert • Ricky Beltran • Staff Economist • Philippine Project Development and Management Expert • Alberto Pascua • Philippine Engineering Water and Anaerobic Digester Design Expert • PhilBIO Construction Inc.~ Plastics, Geo-synthetic welding, seaming and installation & electric power plant installation.

  32. Philippine Bio-Sciences Suite 1703 Centerpoint Dona Julia Vargas Ave Ortigas Center Pasig City (02) 631-2745 (02) 635-9686 Philbio@pei.net.ph

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