Solid Waste Management in Ukraine: Potential for PPPs

Landfill GasSolid waste management is a major problem in Ukraine. A 2014 Russian-language study by the International Finance Corporation (an update in English was just released but is not yet online) reports that Ukraine produces up to 13 millions tons of municipal solid waste annually with recycling rates in the 3 – 8 percent range. That means most solid waste ends up in its 6,700 landfills and dumps, many of which are unauthorized, overfilled, or fail to meet sanitary requirements..

Government has taken some positive steps to deal with the problem: it’s improved solid waste management legislation and plans to meet European Union standards for recycling. But Ukraine is grappling with an economic crisis, a simmering war with Russia, and 1.3 million internally-displaced persons in urgent need. Simply put, government doesn’t have the resources – not financial, technical, or managerial – to fix these problems anytime soon.

This spells bad news for ordinary citizens. Toxic pollutants contaminate water and soil, and landfills emit methane, a virulent greenhouse gas. Landfills are running out of space. And the economic cost of not recycling – in terms of lost raw materials – are significant.

Clearly, government needs to develop and implement a sound solid waste management strategy. Part of that strategy should include partnering with the private sector through public-private partnerships.

How Can PPPs Help Ukraine’s Solid Waste Management Sector?

The private sector can offer a number of services that government alone would find difficult to provide itself. These include:

  • Building and managing recycling facilities to recover glass, plastic, metal, and cardboard;

  • Developing and operating incineration and landfill gas recovery facilities to generate heat and/or electricity;

  • Designing, building and managing modern landfills, including waste collection and transportation.

Several Ukrainian cities, namely Vinnytsia and Ivano-Frankivsk, are already developing PPPs to capture landfill gas and use it to generate electricity.

Is the Private Sector Interested?

The private sector has shown cautious interest, at best, in solid waste management in Ukraine. Some reasons the private sector might consider participating in a solid waste PPP are:

  • With a sufficiently high tipping fee, which covers the costs of managing landfills, a multi-year PPP can be a source of stable, long-term income for the private operator.

  • Ukraine has significant amounts of waste that have not been tapped for recyclables or landfill gas. An efficient private sector player would have the opportunity to exploit these resources profitably.

  • Because of uncertainties over the price and availability of imported gas, mostly supplied by Russia, the Ukrainian government is eager to identify new ways to generate heat and electricity. Solid waste can be used to generate both.

  • Ukraine has a special Green Tariff for electricity generated from renewable resources. The amount depends on the source of power generation.

Can this work? There are many examples of successful PPPs in the sector. One example is a landfill in Berhampur, India, where the operator will process 150 tons of waste per day. Another example is in Wenzou, China, a city of 2 million, where a PPP converts waste to electricity.

Managing Risks

The risks of a solid waste management PPP in Ukraine are high. How these risks are allocated depend on the specific PPP and on which partner is best positioned to handle them. A thorough feasibility study and effective communication with potential private partners, NGOs, other stakeholders and the public can identify these risks so that they can be properly managed. Some potential risks include:

  • Regulatory risk. Legislation impacting PPPs, concessions, tariffs, and budgets is still developing. There is a risk that regulatory changes could impact the business model for the worse. Critical regulations, therefore, should be identified and contract terms developed to ensure that unexpected changes do not undermine the economics of the PPP. This could include tariffs, special green tariffs, tipping fees, permits, and others.

  • Environmental risk. Although the private sector can assume responsibility for environmental risks when building and operating modern landfills, it will not want to be held accountable for previous pollution. A thorough environmental review is essential.

  • Technical and logistical risks. The private operator is better positioned to assume risks with construction, developing a sound logistical system for collecting and transporting waste, or developing efficient recycling systems.

  • Risk of underestimating waste volume. Revenue forecasts depend on accurate estimates of waste volume. Overly optimistic estimates could lead to operator losses.

In sum, the Ukrainian government needs the financing, business savvy and technical expertise from the private sector to develop its solid waste management sector. PPPs should be a key component of a sound solid waste management strategy.

Learn more:

Handshake Issue 12: Waste and PPPs by World Bank Group Public-Private Partnerships

PPPs Tap into Landfill Gas for Power Generation

PPP UkraineUkraine inherited a highly inefficient and polluting solid waste management system upon independence in 1991. It has been struggling with its garbage ever since. A recent World Bank study reports that Ukraine generates over 17 million tons of waste per year. Its waste recovery rate is alarmingly low — about 5 percent. The rest ends up landfills or illegal dumps near cities, posing health and environmental risks. Regardless of future government actions and potential changes in consumer behavior, Ukraine needs to significantly expand its landfill capacity.

The Ukrainian government has taken some important steps to foster a legislative environment that will improve the processing and recycling of waste. Encouragingly, cities have recognized that tapping landfill gas for power generation is an effective part of comprehensive solid waste management system. The USAID funded Public Private Partnership Development Program (P3DP) is in the forefront of this movement, helping two cities — Vinnytsia and Ivano Frankivsk — introduce biogas technology as part of their comprehensive solid waste management systems through public-private partnerships (PPPs).

Value in Vinnytsia

Vinnystia, a city of 370,000 in south-western Ukraine, plans to decommission its existing landfill and generate electricity from its landfill gas, which mostly consists of methane — a greenhouse gas with over 21 times the impact of CO2. The project will generate and sell electricity using biogas that is currently flared. The proceeds will be used to recultivate and close down the landfill once its capacity expires.

The municipality has completed feasibility studies and expects to be ready for tender in 2014. An independent study showed that the project could attract up to $3 million in private sector investment, generate $5 million in tax revenues, and reduce gas emissions of nearly 460,000 tons of CO2.

The idea is catching on. After visiting the site in Vinnytsia, the Governor of Ivano-Frankivsk, championed the initiating of a similar PPP in his own region. A feasibility study is underway and is expected to be completed in late 2014.

The Demonstration Effect

With approximately 100 landfills in Ukraine suitable for extraction and utilization of landfill gas, the demonstration effect has the potential to be replicated across the country. If this becomes an ingrained aspect of Ukraine’s solid waste management system, Ukraine’s landfill gas utilization will ultimately contribute to more efficient and environmentally friendly use of the country’s resources.

Other benefits include:

  • Lower costs. The high cost of gas in Ukraine is a drain on local budgets. Business is uncompetitive and municipalities do not have the necessary funds to address infrastructure needs.
  • Greater energy independence. Ukraine imports most of its natural gas from Russia, making it vulnerable to geopolitical pressure. Harnessing landfill gas will reduce the need for imports.
  • Opportunities for small business. Local Ukrainian businesses will have greater opportunities to participate in the solid waste and energy sectors.
  • Reduced greenhouse gas emissions. Ukraine is a leading contributor to carbon emissions on a per capita basis. A study by Bio, an engineering firm, estimates Ukraine could save the equivalent of 6 million tons of CO2 annually by using landfill gas.

With improving solid waste management as a top priority for the Ukrainian government, this is a good time to demonstrate how PPPs can improve the collection, processing and disposal of solid waste throughout the country. PPPs bring private sector investment for infrastructure and public services, as well as new technologies and managerial skills that play a major role in increasing energy efficiency and mitigating climate change. Landfill gas PPPs could lead the way, forming an integral component of a sustainable solid waste management program.

This article was originally published in Handshake: Waste & PPPs.