Incineration with energy recovery is designed to convert solid waste into energy, typically electricity and/or heat. Energy from waste can treat residual household and similar waste that remains after waste prevention, recycling and organic waste treatment steps have been taken. However, this approach has significant environmental downsides and large capital requirements making it a less preferable option in a circular economy framework. Incineration, even with energy recovery, should be considered only after exhausting reduction and recycling solutions, due to its alignment with linear economy models and its notable health and climate risks. It's crucial to acknowledge that the effectiveness and suitability of Waste-to-energy (WtE) solutions, particularly in low and middle-income countries (LMICs), are limited. Evidence suggests that WtE tends not to be viable in these regions due to challenges such as the need for strong environmental regulation, appropriate waste types, and sustainable operational expenses..

While Waste-to-Energy (WtE) systems reduces landfill space and treats hazardous substances, it requires a robust and independent environmental regulatory framework to control emissions effectively. This necessity often poses a challenge in LMICs, hindering the practical implementation of these technologies. The environmental impact, particularly the emissions associated with this method, cannot be overlooked. Strict environmental regulations and robust emissions control are crucial to mitigate these risks.

One popular type of incineration with energy recovery in developing countries is Refuse Derived Fuel (RDF). Instead of burning the waste at the facility, the residual non-recyclable waste is first sorted and then turned into fuel briquettes which are then sold to off takers such as cement kilns. However, the feasibility of WtE in all its forms, including RDF, remains unproven at scale in LMICs, with even examples like Indonesia showing limited implementation. This underscores the need for cautious adoption of such technologies, ensuring they are employed judiciously and only after exploring all viable reduction and recycling options..

Costs and revenue model

Operational expenses for Incineration include waste procurement, maintenance, emission control and ongoing monitoring. These types of projects usually require high initial capex investment for facility construction, emission control equipment, and grid connection. Revenues come from selling the produced energy using Energy Purchase Agreements. In many countries those projects receive additional support from government subsidies. Profitability of the business model is highly dependent on local conditions and the specific Energy Purchase Agreement.

Many WtE developments are organized as PPPs where the public sector has a stake in the project. Due to the very constrained government budgets in EMDEs such projects often require development capital to make them bankable and attract private investors. Project financing, including concessional debt from development banks, can be used to fund facility construction, with revenue from energy sales used for repayment. Waste-to-energy plants can be attractive to private capital providers looking for larger scale infrastructure investments that could be part of an ongoing business.

Blended finance and concessional loans from DFIs/MDBs and other development capital providers can be critical for the success of WtE projects in EMDEs. The commercial risk related to energy prices can be de-risked with subsidies, feed-in tariffs or through long-term energy purchase agreements. To further reduce the risk, those offtake agreements can be additionally backed by guarantees or insurance from specialized institutions, public funds or DFI/MDBs.

Other enabling conditions

• Improving public private partnerships regulations and support schemes: PPPs are a robust and proven approach for WtE projects so defining the governing principles and developing clear frameworks for such partnerships will be crucial for the success of the sector.

• Feedstock quality and availability: The scale and productivity of these infrastructure investments are highly dependent on feedstock quantity and quality.

• Local energy market economies: Local economic market conditions such as local energy prices, market competitiveness, and regulatory frameworks affect the overall economics of WtE projects.

• National action plan on methane: Signatories of the Global Methane Pledge are expected to voluntarily develop and implement methane reduction measures within their own borders. This could include regulations, incentives, and investments in sectors like waste. An increasing number of countries are releasing national action plans to address methane emissions. Historically, waste-to-energy projects have received the majority of methane abatement financing (CPI, 2023)

• Environmental and regulatory compliance: Incineration is subject to strict environmental regulations and emissions standards. Investors must ensure that the incineration facility complies with local, state, and federal regulations, which may require costly emissions control technologies and monitoring. In addition, incineration facilities should have plans for the utilization or disposal of ash and other byproducts generated during incineration.

• Public perception and opposition: Waste incineration facilities often face resistance from nearby communities due to concerns about air pollution, health risks, and the release of potentially harmful substances. Public opposition can lead to delays, legal challenges, and increased project costs.

• High capital costs: Building and operating waste incineration facilities can require significant upfront capital investment, including the construction of specialized infrastructure and waste handling systems.

• Economic viability and market dynamics: The economic viability of waste-to-energy incineration projects are highly dependent on energy prices, as they often produce electricity or heat as byproducts.

• Waste supply and contracts: Securing a consistent and reliable supply of waste feedstock is essential for waste incineration projects. Investors need to negotiate long-term waste supply agreements with municipalities or waste generators. Contractual obligations for waste supply and energy off-take agreements can introduce financial risks if waste volumes or energy prices do not meet expectations. In addition the composition of municipal solid waste can vary, affecting the efficiency and emissions of incineration processes.