What Is a Waste to Energy Plant Business Plan?

The typical waste-to-energy plant generates electricity from steam turbines powered by burning municipal solid waste (MSW). Because MSW is the feedstock for the process, waste to energy plants also may be referred to as “trash to energy” or “resource recovery” or “energy recovery” plants. MSW contains energy-rich materials, including paper, plastics, yard waste, and wood.

Though the vast majority of waste to energy plants are incinerators, and their output is electricity, some waste to energy plants are designed to produce heat, heating oil, diesel, or dimethyl ether (DM), depending on the feedstock used. The feedstock for waste to energy plants that produce synthetic fuel usually is high energy waste, most often plastics and tires.

Below we have put together a quick overview of waste to energy and how to construct a waste to energy plant business plan.

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Considerations in Planning a Waste to Energy Plant

A great deal of research must be done in the initial planning of a waste to energy plant. The following are among the key questions to be answered at the outset.

  • What type of waste is available in the area (e.g., municipal solid waste, tires, plastics, wood, hazardous waste, etc.)? The types of waste to be used as feedstock will determine the technologies that can be used.
  • How much waste (tons per year) should the plant be able to transform into energy? Again, this has a big impact on technology selection.
  • What is the desired output (electricity, heat, synthetic fuel)? This will also help determine the choice of technologies.
  • Where will the plant be located in relation to electric, heat, and water pipelines?
  • What local legal and environmental requirements could impact the choice of technologies?
  • What underground water resources are available for generating steam? (Lack of underground water could make it necessary to use pyrolysis technology, which is less efficient than steam for transforming MSW into energy.)
  • Is the chosen technology well-proven for the intended purpose?

The answers to these and other important questions will inform the development of any business plan,

Why Is a Waste to Energy Plant Business Plan Needed?

Commercial, for-profit waste to energy plants make money in two main ways: by charging gate fees (also called tipping fees) for the MSW received as feedstock for the process and by selling the output of the process—electricity in most cases. The front end of the process is governed by a Concession Agreement between the entity operating the plant and the municipality delivering MSW. The back end is governed by a Power Purchase Agreement (PPA) between the entity operating the plant and the power company buying the plant’s output.

As is the case with most new businesses, especially ones that involve obtaining financing and constructing a new facility, a business plan may be needed to establish the project’s technical, commercial, and financial feasibility. The first step in the development of such a business plan is to complete a feasibility study, which focuses on the market need and proposes the best technologies for the project.

Some financial institutions don’t require a business plan as a condition for financing the development of a waste to energy plant. Instead, they rely on the feasibility study and the financial projections it contains. The same is true for many private equity investors.

What Is Included in a Feasibility Study for a Waste to Energy Plant?

Market Review

  • Target market
  • Market segments
  • Market growth

Technical Feasibility

  • Evaluation of regional MSW (chemical composition and moisture) to project energy production results
  • Assessment of local conditions (e.g., local regulations, climate, seismic activity, available pipelines, transportation, soil stability, underground water resources, ecological issues, etc.)
  • Comparison of available technologies in terms of environmental considerations, availability, equipment prices, future maintenance costs
  • Identification of proposed technologies

Commercial Feasibility

  • Drafts of Concession Agreement and Power Purchase Agreement

Financial Feasibility

  • Baseline financial model with underlying financial assumptions
    • 3-year sales forecast
    • Pro forma profit and loss statement
    • Projected cash flow
    • Projected balance sheet
  • Financial indicators and ratios

After careful review of the results of this type of feasibility study, important decisions can be made about the inputs to and outputs from the process, the technologies to be employed, the financing needed, and the development and ongoing operation of the waste to energy plant.

As noted earlier, if a separate waste to energy plant business plan is not required, the feasibility plan may be expanded and strengthened to the point that it serves as the primary document for obtaining financing.

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