In the past year, construction of an artificial ski site in Copenhagen was completed next to a high artificial climbing mountain and a restaurant. None of these would have wanted to be located on top of a plant for producing energy from burning waste. The building, which you would think would be located far away from the public, is likely to become one of the most attractive sites in the city. In the Austrian capital of Vienna, a similar plant built 30 years ago by architect and artist Friedensreich Hundertwasser became an attraction for art and architecture aficionados. Copenhagen and Vienna are not exceptions; there are currently hundreds of such plants. In the leading countries - France and Germany - there are over 120 of them. In Israel, on the other hand, there is only one.
The state of affairs in Israel in municipal waste treatment shows a dismal picture: 80% of waste is transported to burial sites, where it is buried in the ground, causing environmental hazards, such as groundwater pollution, air pollution, and unpleasant odors. There is also a high probability of a fire in the landfill because of the materials emitted from the waste, resulting in severe air pollution. All of these disadvantages have been known for many years, but the Ministry of Environmental Protection has confined itself to encouraging waste recycling - bottles, paper, packing, glass, etc. - without much success. Recycling is more environmentally friendly than burning waste to produce energy, but Israel is also not a standout in this. In the past five years, the proportion of waste designated for recycling rose from 18% to 22%, but it is still far from the 34% rate in EU countries.
The Ministry of Environmental Protection, headed by Minister Ze'ev Elkin, is now taking action to change the situation with an investment of NIS 4 billion by 2030. For the first time, innovative sorting facilities will be built that will do a better job of sorting the waste and sending some of it for recycling. Israel currently has 13 landfills approved for receiving municipal waste, some of which are scheduled to close down in the coming years. Most of the waste is transported from central Israel to the Efeh landfill in Mishor Rotem in the south. The Ministry of Environmental Protection says that 2,500-4,000 more dunam (625-1000 acres) are needed for landfills in the coming years. If the current policy continues, the existing landfill areas will be enough only until 2024.
In that case, why has no energy facility been established to this day? "It is not economically feasible. The landfill charge in Israel is very small, so revenue from such a facility will not cover the cost of building it. We therefore decided to support the construction costs; there was previously opposition to this in the ministry," says Ministry of Environmental Protection deputy director general for local government, education, and community Guy Samet. Additional variables affecting economic viability are the general cost of electricity and the demand for heating energy. Some of the budget for reducing landfills will come from the cleaning fund in which the landfill charges are deposited, in which NIS 1 billion has been deposited. The money is earmarked for promoting landfill alternatives, and the ministry has had difficulty in finding uses for it.
Even if energy production facilities are built and the proportion of recycling is increased, the effort to reduce the average per capita quantity of waste cannot be neglected. 5.3 tons of waste is produced each year in Israel, a third of which consists of leftover food and another third of plastic and paper. This is an average of 1.7 kilograms per person per day, a number that varies from one community to another. One of the factors affecting the quantity is an economic situation that causes more consumption. In Tel Aviv, the average is 2.3 kilograms per person per day. The quantity of waste is projected to reach 6.7 tons a year in 2030.
Economic incentives constitute an important element in the policy of the local authorities, which are responsible for collecting municipal waste and transferring it to landfills or recycling, and in the future also for plants producing energy from waste. The cost of burying waste in landfills varies from one district to another in Israel. Local authorities pay NIS 330 in the north, NIS 270 in the central district, and NIS 210 in the south. The difference is caused by the cost of fuel, because most of the landfills are located in southern Israel. This price includes NIS 106 paid to the state as a burial fee that is deposited in a cleaning fund.
The fee is supposed to encourage the authorities to cut down the amount buried, but since it is much lower than in the rest of the world, this does not happen. The state can increase the fee, which will also make energy production from waste more worthwhile. This means, however, increasing the burden on the local authorities, so the state prefers to make these investments itself. "There are countries in which there is a differential price according to the quantity of waste that a person throws away. In Israel, the waste disposal method is linked to municipal property tax, so this cannot be measured," Samet says. A source closely familiar with the problem confirms the problem. "There are local authorities that realize what the morally right thing to do is, but the situation of the local authorities is not great, so it cannot be left up to them. It is the state's job."
Successful recycling depends on education and trust in the system
The Ministry of Environmental has set a target: reducing the rate of landfill burial to 26%. The ministry plans to accomplish this by increasing the recycling rate from 22% to 51% and sending 25% of the waste to energy production plants. This is far from the EU target of 10% burial, but it constitutes a significant improvement in the current situation. 22% of waste in EU countries is currently sent for recycling, 22% to energy production plants, and 44% to landfills.
The recycling issue is controversial in Israel. Parties active in the sector refer to it as a failure, citing the small increase in the recycling rate. Samet dismisses the claim: "There is an increase in the recycling rate to 22%, although the volume of waste has risen." Samet realizes, however, that separating waste from the beginning (putting it into special recycling containers) depends on educating people, and is not necessarily economically worthwhile for the local authorities. "In Israel, a fairly high proportion of bottles are recycled, but it is more difficult to separate organic waste. The result is that the special containers are almost empty, and there is a special separate transportation system that actually collects very little. The system is essential, and if people see a blue container for paper recycling thrown into a truck that handles ordinary waste, their trust wanes, despite the fact that they don't know what was really in the container." Sources dealing with the matter say that another problem with recycling is the global demand for recycled materials, which is dwindling.
Today, 27% of waste is separated at the beginning, and the Ministry of Environmental Protection's goal is to increase this proportion to 37%, a difficult task. The ministry's method of raising the recycling rate to 51% is to build innovative waste sorting facilities capable of separating waste for recycling from other waste. Today, 55% of waste in Israel is not sorted at all and 18% undergoes only basic sorting. The Ministry of Environmental Protection wants six innovation waste sorting facility built in 2020-2022, and is allocating NIS 240 million to provide up to 40% of the capital required for construction (one such facility costs NIS 100 million). NIS 150-300 million will be used to support the facility's operations (payment will be per sorted ton). NIS 400 million will be used to build facilities for treatment with biodegradable material. These facilities handle materials of sorted waste, so there is interdependence between the sorting facilities and the treatment facilities.
The Ministry of Environmental Protection will invest larger sums in building energy production facilities, which it says cost NIS 1 billion. The ministry plans to invest up to 80% of this cost, but because a tender will be held, it is likely to be smaller. The state has earmarked a total of NIS 2.8 billion for construction of three plants. The first is scheduled for construction in 2025 and two more by 2030. Each of these facilities will handle 1,000-1,500 tons a day, making a total of 500,000 tons a year. According to the Ministry of Environmental Protection, in order to reach a target of only 10% of waste put into landfills, five such facilities must be built, and that is the ministry's target.
In addition to benefiting from reduced use of landfills, there is also the benefit from the generation of new sources of energy in the country. A plant for producing energy from waste generates at least 500 kilowatt-hours of electrical energy per ton of waste, and the new facilities can also reach 650-800 kilowatt-hours. This energy is relevant mostly to factories, and it will therefore be necessary to locate some of the facilities in or near industrial zones. A similar thing is happening with an RDF plant constructed by Veridis in Hiriya in 2017. The plan produces alternative fuel from waste, and will replace some of the fuel used by the Nesher cement factors in Ramle.
The ability of the facilities to generate high revenue from energy sales is obviously a significant element of economic viability. According to the Ministry of Environmental Protection, some countries recognize such facilities as renewable energy plants, and attractive rates have been set for them. In contrast to other renewable energy sources, such as solar energy, production of energy from waste is a continuous energy source. According to the economic model devised by the ministry with the help of KPMG, the annual rate of return for a venture will be 13%.
Bureaucracy is liable to delay the process
Before publishing the tenders for construction of the plants, the Ministry of Environmental Protection must obtain building permits. In early January, the National Board for Planning and Building approved the plan, and the next step is the planning of the facilities themselves through submitting plans to Planning and Building Commissions. Four months ago on Jerusalem Day, the cabinet approved the first facility in Ma'alei Adumim, but its location beyond the Green Line is liable to keep international companies from participating in the tender, and could lead to its cancelation. Sources involved in the matter warn, "There is a shortage of suitable land, and zoning is liable to take several years. It all depends on the ministry's ability to find land." According to the timetable set by the Ministry of Environmental Protection, an international tender for construction of the facilities is slated for publication next year. The ministry hopes that there will be an approved urban building plan in two years and that construction itself will take three years. The Ministry of Environmental Protection is trying to get the Accountant General to examine companies in advance in order to save time.
This will also require cooperation from the local authorities - construction of facilities for energy production from waste in their jurisdictions will lower waste transportation costs for them. Furthermore, any developers building a plant will prefer ensuring in advance a steady stream of waste from a number of local authorities. Each day on which the developer does not treat the maximum quantity of waste means a loss of money. The fact that there are a large number of local authorities in Israel is therefore liable to create difficulties for developers, because they have to maintain working relations with many waste suppliers. The Ministry of Environmental Protection wants to reduce this risk by encouraging long-term agreements between the local authorities and developers. "They have to be given a 20-year exemption from tenders," says Samet.
The problem is that the entry fees for energy production plants from waste cannot be higher than the cost of burying waste in landfills (the fee for burial and the cost of transportation), because no local authority will volunteer to pay more just to bring waste to a more environmentally friendly facility. "The local authorities themselves are very strong, and they won't support something if it isn't worthwhile for them. No local authority will raise its property taxes for this. The economic aspect is the key for both the local authorities and the developers. No developer will bid in a tender unless it is ensured both a stream of waste and regulatory certainty in terms of the entry fees it will have to charge," a source involved in the problem told "Globes."
What is likely to delay construction is opposition from residents of various communities - what is referred to as "not in my back yard" (NIMBY). The Ministry of Environmental Protection encountered a similar problem in the construction of a desalination facility in the western Galilee. The plant was supposed to have been built four years ago, but the Planning and Building Commission approved the location only recently. Many cities in Europe have plants for producing electricity from waste, but the facilities' operation causes emissions, and the Ministry of Environmental Protection will have to take into account likely objections when its selects the facilities' locations. "This problem must be overcome once and for all in Israel," the source says. "It is all due to demagogy on the part of opinion-makers whom everyone follows. Every ordinary city in the world has a plant for producing energy from waste - not in some hole, but on the outskirts of the cities, with a very high level of supervision. It's very easy to say you don't want gas or energy facilities, but the country has to be strong enough against this," he added.
Public companies likely to profit from the measure
The fact that Israel is a few years behind on treatment of waste has prevented the emergence of companies dealing in the field. Samet says that the tenders for building waste sorting facilities and facilities for producing energy from waste are arousing great interest among many international companies.
Despite the fact that there are not many Israeli companies in the field, two prominent ones in the category are Veridis, recently sold to Delek Motors (TASE: DLEA), and Yaacobi Brothers Group (TASE: YAAC), which held its IPO a year ago.
Veridis has holdings in several landfills in Israel, so the government plan for reducing landfill waste burial in Israel is actually likely to harm the company. On the other hand, its familiarity with the sector will enable it to participate in the new tenders, which could have greater potential for it. The company already has a plant in Hiriya for producing energy from waste supplying energy to the Nesher factory in Ramle. Yaacobi Brothers Group owns a fairly innovative waste sorting plant built following a Ministry of Environmental Protection tender, which currently sorts all of the waste from Jerusalem. The group is likely to take part in the tender for new sorting facilities together with international companies or by itself, and also in tender for building facilities for production of energy from waste.
Published by Globes [online], Israel business news - www.globes-online.com - on September 20, 2018
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