18/10/2018 - 16:15

Govt seeking more info on waste project

18/10/2018 - 16:15

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Just hours after the developers of a $670 million waste-to-energy project announced they planned to start construction after obtaining all necessary approvals, the state government disclosed it has asked the Environmental Protection Authority to conduct further investigations.

Govt seeking more info on waste project
The Kwinana project is underpinned by 20-year waste supply agreements. Photo: Gabriel Oliveira

Just hours after the developers of a $670 million waste-to-energy project announced they planned to start construction after obtaining all necessary approvals, the state government disclosed it has asked the Environmental Protection Authority to conduct further investigations.

A consortium led by Macquarie Capital and global investor DIF announced this morning that construction of the Kwinana project - Australia’s first large-scale waste-to-energy facility - would start this month.

The project will process 400,000 tonnes of municipal waste per year and generate 36 megawatts of power for the grid.

It will also create 800 construction jobs over three years and 60 operational jobs.

Macquarie and DIF are investing $270 million into the project, they have secured $400 million from banks and other lenders, and have signed construction and operations contracts.

They also announced the project had passed all regulatory hurdles.

“The facility has received all the necessary environmental and development approvals to commence construction,” the consortium stated.

The federal government’s Australian Renewable Energy Agency, which is putting $23 million into the project, also said the project had the all-clear.

“The project has approval from the WA Environmental Protection Authority,” it stated this morning.

However, WA environment minister Stephen Dawson said this afternoon a key issue was the type of waste that would be accepted in the new facility.

“The EPA paid particular attention to emission limits and waste acceptance criteria,” he said in a statement.  

“I have requested the EPA investigate into and report on the definition of residual waste which is contained in the Ministerial Statement. This report is expected soon.”

Mr Dawson said waste used as input for waste-to-energy plants must target genuine residual waste that cannot feasibly be reused or recycled.

“(The) waste-to-energy proponents have advised my office that they have accounted for best practice waste management and volumes related to a three-bin system with food organics and garden organics (FOGO),” he said.

“There is a place for waste-to-energy in managing residual waste, but not at the expense of reasonable efforts to avoid and reuse.”

A spokesman for the consortium said they have no issue with the review.

Depending on the state government's final stance, the group most affected may be the local councils that have signed take-or-pay contracts with the Macquarie consortium.

A three-bin system - with the extra bin dedicated to FOGO 'waste' - may substatially cut the volume of residual waste the councils have available for delivery to the consortium.

The Kwinana project is underpinned by 20-year waste supply agreements with eight local councils in Perth’s southern suburbs, including the Rivers Regional Council and the City of Kwinana.

Backing for the project includes from the federal government’s Clean Energy Finance Corporation (CEFC), which will commit up to $90 million, as well as the Australian Renewable Energy Agency.

The federal government backing comes six months after Business News reported that Josh Frydeneberg - who was then Environment and Energy Minister - had asked the CEFC and ARENA to prioritise waste-to-energy projects.

This was part of the federal government's response to China dramatically cutting the amount of waste material it accepts from other countries, which has created a crisis in the waste management industry, including in WA.

In contrast, the WA government has little enthusiasm for waste-to-energy.

A draft WA waste strategy released this month by Mr Dawson stated that energy recovery was the least preferred of all resource recovery options, after reuse and recycling.

The draft strategy comes against a backdrop of falling recycling rates in Perth - the proportion of municipal waste that is recycled has fallen for the past three years and stands at just 35 per cent.

The residual 65 per cent - or 950,000 tonnes - is currently dumped in landfill and provides potential feedstock for the waste-to-energy plant, subject to how tightly the government defines residual waste and which councils sign up as suppliers.

Long history

Melbourne-based Phoenix Energy has been working on the Kwinana project for nearly a decade.

Macquarie Capital became lead sponsor in December last year and has now teamed up with European investment group DIF (formerly Dutch Infrastructure Fund) to acquire the project after reaching financial close.

Spanish infrastructure and renewable energy company ACCIONA has been contracted to design and build the facility while global waste management company Veolia will be the operator.

Macquarie took over the project last year after Phoenix failed to complete agreements with its previously announced engineering and construction partners, including Mitsubishi and BGC Contracting.

Law firm Ashurst advised the consortium on the project, initially working with Phoenix and latterly with Macquarie, while Norton Rose Fulbright advised DIF on the acquisition of a majority interest in the plant.

The Kwinana facility is one of two large waste-to-energy projects planned for Perth.

The second project, estimated to cost about $400 million, is led by Swiss company Hitachi Zosen Inova with local partner New Energy Corporation and international investor Tribe Infrastructure Group.

The Eastern Metropolitan Regional Council selected the HZI consortium as its preferred tenderer in September last year

The HZI plant is to be built in East Rockingham and will divert 300,000 tonnes of waste from landfill.

The technology

The Kwinana facility will use Keppel Seghers moving grate technology, which thermally treats the waste and converts the recovered energy into steam to produce electricity.

Metallic materials will be recovered and recycled, while other by-products include ash, which is commonly used as road base or in building and construction in Europe. 

Moving grate technology is used in approximately 2,000 facilities globally, with Keppel Seghers providing its technology to more than 100 waste-to-energy plants in 18 countries.

The Kwinana facility will be managed by newly appointed chief executive Frank Smith.

“This project is an example of the private and government sectors coming together to resolve community issues, in this instance dealing with ever-growing demands on landfill and generating reliable baseload renewable energy to Australia’s overall energy mix,” Mr Smith said in a statement.

“As we progress through construction and into operations, we remain committed to engaging with the local community, building on the dialogue that has already been established through the early stages of the project.”

Macquarie Capital executive director Chris Voyce said the project provided a practical, long-term solution for waste management.

“We are pleased to have contributed our global infrastructure and renewable energy expertise,” he said.

“Our support for the creation of lower carbon-intensive energy sources is underscored by the expansion of our participation in this project over the past three years; we originally came on board as a financial adviser and have since taken on the responsibilities of co-developer and investor.”

DIF Australia managing director Marko Kremer added: “DIF is excited to be involved in the first thermal waste-to-energy project in Australia and look forward to continue our contribution to the sector going forward.

“European countries have long embraced the conversion of waste into energy and it has proven to deliver multiple benefits in terms of managing waste and contributing to sustainable and secure energy supply.”

Arena chief executive Darren Miller said the Kwinana project provided a renewable energy solution for reducing waste going to landfill.

“The use of combustion grate technology is well established in Europe and North America but has not yet been deployed in Australia," Mr Miller said. 

“More than 23 million tonnes of municipal solid waste is produced annually in Australia and this project could help to divert non-recyclable waste from landfill and recover energy in the process."

The latest deal

The Kwinana facility is the latest of several big infrastructure projects in WA involving Macquarie and DIF, which has invested about $8 billion in infrastructure projects globally.

Last week, it was announced that Macquarie had agreed to provide development capital to the Asian Renewable Energy Hub, which is aiming to develop a large wind and solar power hub in the Pilbara at an estimated cost of $22 billion.

Macquarie also joined the project consortium alongside Intercontinental Energy, Vestas and CWP Energy Asia.

In April, it was announced that DIF (and super fund Cbus) had formed a joint venture with state-owned utility Synergy to build solar farms and wind farms in the South West Interconnected System.

Macquarie was financial adviser to Synergy on this transaction.

These deals come after Macquarie Group paid £2.3 billion last year for the UK government’s Green Investment Bank, which was one of the leading investors in green infrastructure in the UK and Europe.

 

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