The number of WtE (Waste to Energy) plants contracted by DBO (Design Build Operation) has recently increased. In this report, we investigate the terms of the contracts regarding which party should take responsibility for risk sharing in the event of fluctuations in the condition of the waste. Using these models, we calculated how changes in the quantity and quality of the waste influence the required operation costs (i.e. business operation cost minus income from the sale of electricity).
In the investigation, for all of the DBO projects, local government is responsible for the collection of waste and the income from generation of power belongs to the private contractor. Moreover, the contractor is expected to accept the risk when changes in quantity or quality of the waste occur, providing this change is within the range of the contract. There are very few cases that can be studied which reveal any of the detailed data regarding the risks involved when changes take place in waste conditions.
On the other hand, calculations show that when the quality of waste (calorific value) increases by 10%, it has almost no bearing on operation costs. When quality of waste decreases by 10% however, operation costs tend to increase by approx. 8%. Also, when the quantity of waste decreases by 10%, operation costs increase by an estimated 7-12%. The main factor behind these aggravations is seen to be a profit decrease in the sale of electricity and an increase in the cost of auxiliary fuel.
Based on the results of this analysis and research, some suggestions for achieving sustainable business operations are presented. For DBO to realize the safe and stable operation of a WtE plant, there must be cooperation between the local government and the private contractor in order to fully recognize the magnitude of the risks involved with fluctuation in waste conditions. If this is to move forward in its goals, the two parties must work closely together to find an appropriate and fair balance in sharing this responsibility.
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