FEATURE: Unlocking private finance in Peru’s waste sector
The Mobilising Investment for NDC Implementation programme has been working with countries around the world to unlock finance for the implementation of Nationally Determined Contributions (NDC). The project in Peru is capitalising on a key opportunity to mobilise private finance in the waste sector. Yasomie Ranasinghe from PwC UK reports.
Unsustainable waste management in Peru
Peru, with a rapidly growing population that is currently over 32.5 million, generates over 23,000 tons of solid waste per day. Municipal governments in Peru are typically responsible for waste management activities within their municipalities and many waste disposal sites do not have systems to collect and treat leachate or capture landfill gas emissions. With only 35 operational sanitary landfills in the country, around 50% of the waste generated is sent to uncontrolled, unlined, open air dumpsites (it is estimated that there are over 1500 of these in the country) causing serious contamination and health related problems.
The Ministry of Environment (MINAM) of Peru has identified waste management as a priority environmental and social issue to address, as well as a key opportunity to contribute to the achievement of Peru’s NDC of reducing national emissions 20% below business-as-usual (BAU) by 2030 (or 30% conditional on international support). In 2017, a new Law on Solid Waste Management was passed that extends responsibility of waste management to producers of waste, placing more emphasis on the treatment, recovery and recycling of waste and protection for the environment and human health. MINAM has also developed plans for the construction of thirty-two landfills that meet the requirements of this new law.
Scoping opportunities for the private sector in the waste sector
In order to meet its NDC goals, Peru needs to mobilise significant levels of private sector investment across all of the target areas and sectors. However, to date there has been very limited private investment in the waste sector and a low level of involvement from private sector companies in the operation of waste management facilities. Commercial banks, and by extension “second tier” institutional investors that require the participation of commercial banks to invest in such projects, have typically shown little interest in investing in the construction and operation of landfills due to the small scale of investment and time required to generate returns.
There is a key opportunity to mobilise private finance in the waste sector by demonstrating a viable business model to the private sector for making productive uses for landfill gas. A number of emissions reductions technologies exist that capture landfill gas (i.e. methane that has over 30 times the climate change impact of Co2) which may be used for electricity generation or as fuel for operations at landfill sites. Although there are currently thirty two landfills in Peru at concept/early development/construction stages, not all of these have secure financing for the construction of the landfill or emissions reductions technologies. None have secured private sector investment.
The Mobilising Investment (MI) for NDC Implementation country team (made up of individuals from PwC UK and PwC Peru) has been working with MINAM since early 2018 to identify opportunities to mobilise private sector investment for projects delivering sanitary landfills that provide both adequate facilities for the final disposal of waste and emissions reductions within the waste sector. During the first phase of the project, the MI team developed concept notes to evaluate different emissions reductions technologies against a number of criteria in order to determine the most appropriate options for two landfill sites.
The first concept note evaluates three emissions reductions technologies for a landfill in the planning stage of development in Trujillo, the third largest city in Peru located in La Libertad province. The second concept note focuses on a landfill under construction in San Juan Bautista (one of the thirty-two) in the Amazonian Ica province. Given the strong demands and existing plans for the construction of sanitary landfills in Peru, these concept notes could be used to provide guidance on evaluating emissions reductions technologies for future landfill developments.
Building the investment case for emissions reductions technologies
Following the identification of appropriate technologies at each site, the team developed investment cases with proposed business models and financial structuring for the chosen technologies. An investment case was built for a landfill gas capture, flare and energy generation technology at Trujillo due to the emissions reductions potential and the opportunity to generate revenue from the sale of electricity to the grid. At San Juan Bautista the investment case was developed for a leachate evaporation technology powered by biogas captured from the landfill due to the emissions reductions and leachate management potential in an area of high conservation value.
The MI project in Peru is continuing to work with MINAM to analyse the enabling environment for investment into emissions reductions technologies and propose an investment mobilisation mechanism to encourage future investment into the broader waste sector in Peru.
Image: A Recycler with Albina Ruiz, President of Group Ciudad Saludable, courtesy Alex Proimos.