Refuse-derived fuel
Refuse-derived fuel
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.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Nigeria: South West
- Nigeria: North Central (Middle Belt)
Sector Classification
Infrastructure
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)
Infrastructure
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)
Electric Utilities and Power Generators
Pipeline Opportunity
Refuse-derived fuel
Construct and operate waste management and electricity generation plants to produce refuse-derived fuel to supply electricity to main cities.
Business Case
Market Size and Environment
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)
Indicative Return
> 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)
Investment Timeframe
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)
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - Highly Regulated
Business - Supply Chain Constraints
Impact Case
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
7.1.1 Proportion of population with access to electricity
7.2.1 Renewable energy share in the total final energy consumption
59.3%. (22)
N/A
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)
11.6.1 Proportion of municipal solid waste collected and managed in controlled facilities out of total municipal waste generated, by cities
6.2% in 2015. (22)
N/A
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
Hazardous waste generated per capita: 73.28%. Proportion of waste treated: 0.24%. (22)
0.24% in 2015. (22)
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Public sector
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
Impact Classification
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.
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.
Enabling Environment
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)
Marketplace Participants
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.
Target Locations
Nigeria: South West
Nigeria: North Central (Middle Belt)
References
- (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.
- (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