Waste Management 48 (2016) 604618

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Waste Management
journal homepage: www.elsevier.com/locate/wasman

Economic analysis of waste-to-energy industry in China

Zhao Xin-gang a,, Jiang Gui-wu a, Li Ang a, Wang Ling b
a
School of Economics and Management, North China Electric Power Univ., Beijing 102206, China
b
State Grid Liaoning Electric power co., LTD. Benxi Power Supply Company, Benxi 117000, China

a r t i c l e i n f o a b s t r a c t

Article history: The generation of municipal solid waste is further increasing in China with urbanization and improve-
Received 6 April 2015 ment of living standards. The 12th five-year plan period (20112015) promotes waste-to-energy
Revised 23 September 2015 technologies for the harmless disposal and recycling of municipal solid waste. Waste-to-energy plant
Accepted 11 October 2015
plays an important role for reaching Chinas energy conservation and emission reduction targets.
Industrial policies and market prospect of waste-to-energy industry are described. Technology, cost
and benefit of waste-to-energy plant are also discussed. Based on an economic analysis of a waste-
Keywords:
to-energy project in China (Return on Investment, Net Present Value, Internal Rate of Return, and
Waste-to-energy
Waste incineration
Sensitivity Analysis) the paper makes the conclusions.
Industrial performance 2015 Elsevier Ltd. All rights reserved.
Economic analysis
Internal rate of return (IRR)
Net present value (NPV)
Sensitivity analysis
Break-even analysis

1. Introduction awareness of environmental protection and the restrictions on

The rapid urbanization and industrialization of China have
resulted in an increasing volume of municipal solid waste
(MSW). The amount of MSW increased from 31.3 million tons in
1980 to 179.36 million tons in 2011 China (Zheng et al., 2014).
At present, the delivering quantity of household waste averages
170 million tons in China, and the amount of untreated MSW has
reached 7 billion tons with an annual increase of 810%. The huge
amount and rapid increase of MSW has become another major
social problem along with energy shortages in China. The MSW
poses threats to environment quality and human health, which is
an obstacle to the economic and social development. If not
properly managed, the MSW would not only occupy huge land -
resources, but also get in the way of city construction. Whats
more, the stench of MSW and harmful substances could be a cause
of urban environment pollution. Due to the lack of MSW disposal
capacity, backward infrastructure and operational skills of MSW
treatment facilities, as well as the lack of supporting facilities,
nearly two-thirds of Chinas cities are being afflicted with waste
siege.
Traditionally, the MSW is disposed in landfill, or by ways of
direct incineration or composting. However, the growing public
Corresponding author.
E-mail addresses: rainman319@sina.com (X.-g. Zhao), 392235682@qq.com
(G.-w. Jiang), 475626340@qq.com (A. Li), bxwl_650928@126.com (L. Wang).
landfill sites have made the government to seek more effective
ways of MSW disposal. The use of landfills can no longer be consid-
ered a satisfactory way, therefore new methods have to be chosen
and waste-to-energy (WTE) plants would provide an answer
(Messineo and Marchese, 2008). Compared with other MSW treat-
ment technologies, MSW incineration performs best (Dong et al.,
2014), and WTE plant is a better waste management option
(Ofori-Boateng et al., 2013).
WTE refers to the recovery of the energy from waste materials
into useable heat, electricity, or fuel. WTE plant (waste incinera-
tion) is the primary approach of WTE process that converts bio-
mass to electricity (Tan et al., 2015). In most cases the WTE
refers solely to WTE plant in China, incinerating MSW to generate
electricity. The application of large-scale incineration technologies
is inevitable as landfill areas would ultimately cease (Abd Kadir
et al., 2013). Thus, the most common alternative to landfill site is
WTE plant in the future. It is an important part of Chinas 12th
five-year plan on comprehensive energy conservation.
Generally speaking, the technologies are mature and WTE
plants should have a good prospect in China (Fu et al., 2015). How-
ever, in the past few years, the development of WTE plants was not
satisfactory with many problems. On the one hand, there are some
difficulties from social aspects affecting the development of WTE
industry, such as potentially toxic emissions and public opposition.
On the other hand, some characteristics of WTE plants are also not

http://dx.doi.org/10.1016/j.wasman.2015.10.014
0956-053X/ 2015 Elsevier Ltd. All rights reserved.
 X.-g. Zhao et al. / Waste Management 48 (2016) 604618
Nomenclature
Pt pay back period
NCFT net cash flow in the T year
CNCFT
1 cumulative net cash flow in the T
1 year
T the particular year when the cumulative net cash flow is
positive or zero for the first time
NPV net present value
n the operation period of a project
i basic discount rate
t a certain year
Pt due principals of the year when all the debts are paid off
It due interests of the year when all the debts are paid off
Ft amount of funds can be used for debt repayment in the
year when all the debt are paid off
T the particular year when the debts are paid off
TP loan repayment period
tons/day tons of waste per day
conducive to the development of this industry, such as high costs
and difficulties in financing (Zhang et al., 2010).
It is necessary and useful to make economic analysis of WTE
plants. A systematic literature review is made which applies eco-
nomic analysis and theories to the issue of waste incineration
(Massarutto, 2015). A social cost-benefit analysis of WTE in the
UK and a techno-economic analysis based on the WTE plants in
Brazil have been made to discuss the economic effects of WTE
plants (Jamas and Nepal, 2010; Leme et al., 2014). WTE plants
are highly dependent on MSW treatment fees owning to its high
installation, operation and maintenance costs. Besides, WTE plants
have better environmental benefits and remarkable external bene-
fits (Lim et al., 2014; Tsai and Kuo, 2010; Tan et al., 2014a, 2014b),
and they have better impacts on society and environment
(Michael, 2013; Pavlas et al., 2010).
Although some economic analyses have made with respect to
WTE plants in some countries, there are lacking for economic anal-
yses of Chinas WTE plants. This paper would introduce the latest
industrial policies and market prospect of WTE industry in China.
Based on the current policies and industry status, this paper makes
a comprehensive and detailed economic analysis of WTE plants.
The loan debts, feed-in tariff, revenues and tipping fees (waste
disposal subsidy) are taken into account, and the profitability
and debt-payment capability is discussed. Also, the break-even
analysis and sensitivity analysis are made to understand how the
economic effects could be influenced when some factors change.
2. Status quo
2.1. National policy
A series of national policies have been released to provide better
conditions for the development of WTE industry (Table 1). One the
one hand, there are a number of incentive policies to encourage
WTE industry. WTE plants enjoy preferential corporate income
taxes (Financial Ministry, 2009), the unified feed-in tariff of 0.106
$/kW h and tipping fees from local government ranging from
13.04 to 19.56 $/t (National Development and Reform
Commission, 2012). The tipping fees are exempt from tax, and
the value added tax (VAT) from electricity sales is instantly
returned after paying. Only the income tax is levied on BOT pro-
jects according to three exemptions and three halves. That is,
the plants enjoy 100% tax exemption for income tax in the first
three years when it gains profits, and 50% tax exemption for
605
CIt the cash inflow in a certain year
COt the cash outflow in a certain year
P/F the factor of present value
IRR internal rate of return
P unit revenue
Q break-even volume
Cf annual fixed cost
Cv variable cost
E capacity utilization rate of BEP
Qc annual power generation capacity
P electricity sale price of BEP
Cv the variable cost of BEP
$/t US dollar per ton of waste
$/kW h US dollar per kilowatt-hour
income tax from the fourth to the sixth year. In 2012, the 12th
Five-Year Plan on National Facility Construction of Urban Waste
Harmless Disposal put forward the goals, major tasks and
standards for the harmless disposal of MSW and WTE industry
(State Council, 2012). Besides, waste incineration technology is
expected to increase by 10%, achieving a proportion of 30% in
5 years, with a total of $ 4.24 billion investments (National
Development and Reform Commission, 2014).
One the other hand, standards and supervisions for WTE indus-
try become more strengthened. The minimum registered capital
for WTE plants and access to WTE industry has been strictly
restricted (Ministry of Construction, 2007). The operation and
emission standards of WTE plants are further defined. The provi-
sion for environmental protection distance of new WTE projects
is made for not less than 300 m (Ministry of Environmental
Protection, 2008). In 2013, the pollution control standards for
harmless disposal of MSW were updated or revised (Ministry of
Environmental Protection, 2013). In 2014, the strictest new
national standards for pollution control on the MSW incineration
began to be implemented in phases in Chinas history (Ministry
of Environmental Protection, 2014). Thus, these regulations would
contribute to the healthy development of WTE industry.
In general, the incentive policies are expected to encourage the
governments to strengthen policy support and financial support
for WTE projects, which are beneficial to accelerating the develop-
ment of WTE industry. At present, those regulations make it diffi-
cult for enterprises to enter WTE industry. But they could help
select enterprises. Those enterprises with powerful financial
strength, advanced technologies and rich experiences may get
more guarantees and favors from government and will have a
broader development space. Thus, a great upsurge in WTE industry
has been raised over the country.
2.2. Market
The market potential is great for WTE industry because the rate
of harmless disposal of MSW is very low and the amount of MSW is
huge and increases fast. Besides, being the guidance for WTE
industry, the 12th five-year plan puts forward the goals and
requirements for the disposal of MSW. In 2012, the MSW disposal
capacity is 446.3 thousand tons/day and MSW incineration capac-
ity only took 27.5% of total harmless treatment capacity. It requires
an annual compound increase of 25% to achieve the MSW disposal
capacity up to 871.5 thousand tons/day by 2015. Also, the annual
606 X.-g. Zhao et al. / Waste Management 48 (2016) 604618
Table 1
The national policies on WTE plants.
Date Policy
October 2006 The 11th Five-Year Plan of National Urban
Environmental Sanitation
April 2007 Municipal Solid Waste Management Approaches
August 2007 The State 11th Five-year Plan on Facility Construction of
Urban Waste Harmless Disposal
September 2008 The Notice on Improving the Assessment and
Management of Environmental Impact of Biomass Power
Projects
December 2008 A Notice about Comprehensive Utilization of Resources
and the VAT Policy of Other Products
December 2009 A Directory of Environmental Energy and Water
Conservation Projects Preferential Corporate Income Tax
(Trial)
April 2010 A Guide to Garbage Disposal Technology
December 2011 The State 12th Five-Year Plan of Environmental
Protection
March 2012 The Notice about Improving Waste Incineration Power
Price Policy
May 2012 The 12th Five-year Plan on National Facility
Construction of Urban Waste Harmless Disposal
January 2013 The 12th Five-Year Plan of National environmental
standards
July 2014 Standards for Pollution Control of Municipal Solid Waste
Incineration
August 2014 The Catalog of State focus on the Promotion of Low-
carbon Technologies
compound increase should reach 35.8% to achieve the MSW
incineration capacity up to 307.2 thousand tons/day (State
Council, 2012).
In China, the incinerated volume of MSW increased from 3.7
million tons in 2003 to 35.8 million tons in 2012 and the number
of WTE plants increased from 47 to 138. Annual generation of
MSW is expected to reach 200 million tons by 2020 (Zhou et al.,
2014). More social requirements for environmental improvement
and energy shortage will become an important force driving the
development of WTE industry. It is calculated that the total invest-
ments in WTE market would be $ 14.2 billion to $ 17.7 billion
(Guangzheng Hang Seng, 2013).
In general, 70% of the total investments in pollution control and
environmental protection come from government. The investment
in pollution control and environmental protection rose from $ 38.9
billion in 2005 to $ 134.5 billion by 2012 at an average annual
growth rate of 19.4% (Ministry of Environmental Protection,
2013). It is predicted that the investments in MSW disposal would
reach $ 130.4 billion during the 12th five-year plan period, which
is four times as that of the 11th five-year plan period (Wang
et al., 2010). Also, the investments in facility construction will be
about $ 43 billion during the 12th five-year plan period (State
Council, 2012), which is nearly five times the actual investments
during 11th five-year plan period.
However, WTE industry is subjected to some barriers. On the
one hand, urban residents do not have strong awareness on
garbage classification. The calorific values (30006700 kJ/kg) of
Chinese MSW are typically less than half of those (8400
17,000 kJ/kg) of the developed countries (Cheng and Hu, 2010a,
2010b). The main reason is that garbage classification is rarely
done. On the other hand, public acceptance is considered most crit-
ical for the effectiveness of any integrated MSW management
scheme (Achillas et al., 2011). WTE plant is misunderstood and
even resisted or rejected by the public. For the public, they are
Main contents
Recommending different technologies for waste disposal in different regions (Ministry
of Construction, 2006)
The registered capital of WTE incineration plants is not less than $ 16.3 million
(Ministry of Construction, 2007)
Encouraging advanced waste incineration technologies. By the end of the 11th Five-
Year, the rate of waste incineration is not less than 35% in the eastern cities (National
Development and Reform Commission et al., 2007)
Further defined the operation and emission standards of WTE incineration plants. The
environmental protection distance of new project expansion shall not be less than 300
meters (Ministry of Environmental Protection et al., 2008).
The VAT is instantly returned after paying for WTE incineration projects (Financial
Ministry and State Administration of Taxation, 2008)
Waste incineration projects can enjoy preferential corporate income tax (Financial
Ministry et al., 2009)
Provisions for garbage incineration technology, construction and operation of WTE
incineration plants (Ministry of Housing and Urban-Rural Development et al., 2010)
Encouraging garbage anaerobic gas, incineration power and heating, landfill gas power
generation, kitchen waste recycling (State Council, 2011)
A ton of garbage can be converted into grid electricity tentatively of 280 kW h, and a
national unified WtE benchmark price of 0.106 $/kW h is executed (National
Development and Reform Commission, 2012)
Making a plan on the rate of harmless waste disposal and the capacity of garbage
incineration facilities during the 12th five-year period (State Council, 2012)
Strengthening and improving the pollution control standards for harmless disposal of
MSW, revising the pollution control standards for MSW incineration (Ministry of
Environmental Protection, 2013)
Waste incineration emission standards are more stringent, basically consistent with
international standards (Ministry of Environmental Protection, 2014)
The waste incineration technology is selected in the catalog. The total government
investment will reach $ 4.24 billion in the next five years (National Development and
Reform Commission, 2014)
opposed to living close to WTE plants. And they mistrust the
emission standards, technologies of WTE plants and even the
government regulation. Besides, because of asymmetric informa-
tion, the public often has misunderstandings and prejudices
against WTE plants (Huang et al., 2015).
3. Data base
3.1. Technology
WTE plant transforms heterogeneous wastes into more homo-
geneous residues with the ability of reducing the mass of waste
by 70% and the volume by up to 90% (Cheng and Hu, 2010a,
2010b). It generates electricity by driving turbines with high tem-
perature steam produced by the incineration of MSW.
3.1.1. WTE system
WTE system is similar to that of most fossil-fuel fired power
plants (Ofori-Boateng et al., 2013; Chen et al., 2013). A typical
WTE system for energy production consists of waste storage cham-
ber, boiler/incinerator, steam turbine/generator, flue gas cleaning
system and residue treatment system (Ofori-Boateng et al.,
2013). The process can be separated into three main steps, inciner-
ation, energy recovery and air pollution control (Zheng et al.,
2014), as shown in Fig. 1.
After transporting by closed trucks, MSW is poured into a waste
storage chamber to ferment for about three days. This ferment pro-
cedure could reduce the materials humidity and increase their
calorific values (Zheng et al., 2014). Thus, the MSW is more com-
pact and the components are roughly the same. MSW is then
burned in an incineration boiler at high temperature, where air is
continuously supplied to ensure turbulence and the complete com-
bustion of the components to their stable and natural molecular
forms (Cheng and Hu, 2010a, 2010b). One of the main advantages
 X.-g. Zhao et al. / Waste Management 48 (2016) 604618 607

Hot
Combusted
combusted Flue gas
Waste heat gas Flue gas
gas
MSW Combustor
boiler clean up
Stack

IBA (for IBA (as APC

Steam
recycling) waste) residue
Ferrous/non-
ferrous metals Ageing
IBA Steam Inertization
Reprocessing process and
reprocessing turbine and landfill
landfill

IBA Electricity

To the secondary To electricity

aggregates market grid

Fig. 1. The high level diagram of WTE system (Evangelisti et al., 2015). IBA represents incinerator bottom ash and APC represents air pollution control.

Table 2
Grate-based WTE combustion technology and circulating fluidized bed combustion technology.

Items
Incineration capacities
Application conditions
Technical maturity
Combustion
Operational cost
Auxiliary fuel
Garbage particle
Flue gas treatment
Flue gas
Fly ash
Leachate treatment
Grate-based WTE combustion technology Circulating fluidized bed combustion technology
Medium (500 tons/day) or large (1000 tons/day) Small, 100500 tons/day
Higher heat value, plenty of financial resources, state-owned operator Low heat value, limited government financial resources
Mature Short history, already commercialized
Put garbage directly into the furnace, drying before burning. The average Dry the crushed waste with the 600700 C sand. The
combustion time is long combustion time is short
$ 16 and $32 per ton $ 10$ 20 per ton
No auxiliary fuel Coal (a ratio of not more than 20%)
Breaking is not needed except for huge volumes Pre-treatment is needed to crush the waste into particle
about 20 mm
Weak control of dioxins Effective control of sulfur dioxide, nitrogen oxides, dioxins,
etc.
35004800 cubic meter per ton of waste 35004800 cubic meter per ton of waste
15% of the waste disposal amount 1520% of the waste amount, handled as hazardous waste
with high costs
Separate treatment, cannot be sprayed back into the furnace for Being sprayed back into the furnace, but have impact on
combustion combustion efficiency

of MSW incineration is the complete destruction of any living
organisms (Brunner and Rechberger, 2014). Poisonous and harmful
materials are fully decomposed because the operational tempera-
ture 900950 C is maintained there. Burning auxiliary fuel in the
chamber may be used if necessary. However, this is only done in
the case of nonstandard regimes as is putting into operation and
shutting down (Kilkovsky et al., 2014). This part of WTE plant is
called thermal system. The end product derived from the combus-
tion of MSW is hot combusted gas composed primarily of nitro-
gen, carbon dioxide, waster, oxygen and non-combustible residues
(Tan et al., 2015). Hot flue gases will enter the heat exchanger as a
hot stream to generate steam from water. The hot steam with a
certain temperature and pressure can be used to generate
electricity in the steam turbine (Lombardi et al., 2014). By this
way, the incineration contributes to energy recovery from waste
by generating electricity from thermal energy (Bajic et al., 2015).
Energy recovery system represents a substantial part of the
whole technology which enables to utilize heat contained in flue
gas from incinerators or combustion chambers as much as possible
(Kilkovsky et al., 2014). Even though the process produces an effec-
tively sterile ash residue, air pollution and health hazards could
occur as a result of the emissions from the process (Bajic et al.,
2015). The byproducts of incineration process are flue gases, fly
ash and bottom ash. Emissions include the following elements
and compounds: sulfur, chlorine, fluorine, nitrogen, carbon diox-
ide, carbon monoxide, nitrogen oxides, sulfur monoxide, polychlo-
rinated di-benzodioxine, furan, methane, ammonia, hydrochloric
acid, and hydrogen fluoride (Pan et al., 2015; Tabasov et al.,
2012). For this reason, it is extremely important that the incinera-
tor is equipped with emission control accessories (Bajic et al.,
2015). The flue gas cleaning system has to be designed in order
to meet the regulatory requirements, taking the specific environ-
mental aspects of the site of the operation into account (Poggio
and Grieco, 2010). In addition, emissions can be further controlled
by modifying fuel composition, modifying moisture content of fuel,
modifying particle size of fuel, modification of construction cham-
ber shape, and improved construction/incineration application
(Pan et al., 2015).
3.1.2. Incineration technology
The incineration technology is the core of WTE plants. The
common incinerators used around the world include grate-based
WTE incinerators, fluidized bed incinerators, rotary kiln furnaces
and pyrolysis gasification furnaces. The technologies of its craft
and design have a direct influence on MSW disposal effects and
economic benefits (Zheng et al., 2014). Grate-based WTE combus-
tion and circulating fluidized bed are the major MSW incineration
technologies currently being commonly used in China (Chen and
Christensen, 2010), and their performances are compared in Table 2
(Cheng and Hu, 2010a, 2010b).
3.1.2.1. Grate-based WTE combustion technology. At present, most
incineration facilities adopting grate-based WTE combustion
technologies are located in the more economically developed
cities of eastern coastal areas, especially in the provincial
capital and the sub-provincial cities. Grate-based WTE systems
608 X.-g. Zhao et al. / Waste Management 48 (2016) 604618
represent slightly more than half of the treatment capacity of Chi-
nas WTE plants. Most of them have medium (500 tons/day) or
large (1000 tons/day) incineration capacities per furnace, and rely
predominantly on imported equipment. Because of their high costs
and heat content requirement for MSW, the systems are typically
used in the economically more developed cities (Zheng et al.,
2014). Besides, grate-based WTE plant is used for MSW with rela-
tively high calorific values. It is difficult to add coal in grate-based
WTE plants because the coal particles may burn in the gaps
between the grates and cause damage (Chen and Christensen,
2010).
3.1.2.2. Circulating fluidized bed combustion technology. Circulating
fluidized bed incinerators are almost based entirely on domestic
technologies in China. They have much lower investment and
operational costs compared to grate-based WTE systems, and
easily allow co-firing of MSW with coal. As a result, WTE facilities
based on China-made fluidized bed technologies are being increas-
ingly adopted in small and mid-sized cities and the large cities in
the middle and western parts of China. Although the development
of fluidized bed technology in China is promising, the treatment
capacities of such incinerators until now are limited to the range
of 100500 tons/day (Cheng and Hu, 2010a, 2010b).
In general, circulating fluidized bed plants with or without coal
as auxiliary fuel is inferior to grate-based WTE plants in avoiding
potentials in global warming and by causing more human toxicity
via water, slag and ashes, and bulky waste especially for MSW of
low calorific value. The generation of fly ashes is higher with
circulating fluidized bed plants but contamination contents are
lower than those from grate-based WTE plants. Qualified flue gas
scrubbing facilities are vitally necessary for both incineration tech-
nologies (Chen and Christensen, 2010).
Circulating fluidized bed incineration also has some advantages.
It is adaptable to a wide variety of waste types. The technique is
suited to burn high moisture wastes with low calorific value
(Van Caneghem et al., 2012). Additionally, the operation and main-
tenance of grate-based WTE incinerators are costly, varying
between $ 16 and $32 per ton MSW treated, while it is approxi-
mate $ 10$ 20 for fluidized beds (Cheng and Hu, 2010a, 2010b).
The market share of grate-based WTE plant becomes increasingly
higher than that of fluidized bed in China. Because circulating flu-
idized bed combustion technology is not as mature and stable as
grate-based WTE plant (Zheng et al., 2014).
3.1.3. Emission control and management
The flue gas and solid residues generated during MSW
incineration should be treated accordingly to avoid secondary
environmental pollution, especially the flue gas contains signifi-
cant amounts of dioxins, particulate matters, heavy metals, etc.
(Zheng et al., 2014). Air pollution control equipment is required
to treat the flue gas, and emission standards must be fulfilled
before flue gas discharging (Tabasov et al., 2012).
The flue gases whose lower temperature at about 250 C after
giving up its energy in the heat recovery system should be cleaned
in the flue gas cleaning system (Kilkovsky et al., 2014). Many tech-
nologies are available for dust removal, such as wet scrubbers,
electrostatic precipitators and fabric filters. Other technologies like
condensation electrostatic precipitators and ionization wet
scrubbers can be also applied. Acid gases are removed by means
of alkaline reagents. The commonly used technologies are dry
treatment with Ca(OH)2 or with NaHCO3, semi-dry process with
Ca(OH)2 and wet scrubbing (Biganzoli et al., 2015). Wet scrubbing
is the most powerful technique but it produces a large amount of
waste water. In order to reduce the waste water production, wet
scrubbers are installed in some plants downstream of a dry
neutralization with Ca(OH)2. Heavy metals are normally removed
by adsorption on active carbon (Poggio and Grieco, 2010).
Dioxins have generated a lot of controversies mainly because
they are among the most toxic environmental compounds. It is
described as a serious public health threat (Nzihou et al., 2012).
However, with significant advances in incinerator design and emis-
sion control driven by stringent regulations in the developed coun-
tries, incinerators can now operate with emission of virtually no
dioxins (Cheng and Hu, 2010a, 2010b). The lessons learned from
Huizhou, Chinas unsuccessful WTE project have shown that the
plants have inadequate dioxin-control strategies due to less
stringent standards than those in the U.S. and Europe, along with
poor monitoring practices (Wan et al., 2015).
Modern MSW incinerators are well equipped for dioxin control.
The dioxins escaped from MSW incinerators result from a balance
of destruction and formation processes. Overall, formation of diox-
ins depends on the evolution of precursors within combustion
gases, the interactions with reactive fly ashes, and the presence
of oxygen, transition metal catalysts, and gaseous chlorine
(Cheng and Hu, 2010a, 2010b). Temperature is the most important
factor in dioxin formation. In general, dioxins can be totally
destructed in the combustion environment when the combustion
temperature is higher than 850 C, the oxygen concentration is
more than 6%, and the residence time of flue gas is longer than
2 s. Their formation in thermal processes can also be inhibited by
various chemicals. In the post-combustion zone, dioxin formation
can be prevented by quickly cooling the flue gas escaping the com-
bustion chamber to temperatures below 200 C, and minimizing
the presence of the catalytic metals.
The technologies used for dioxin control in developed countries
are also available in China, such as incineration and cooling condi-
tions control, inhibition chemicals, flue gas scrubbing, and catalytic
destruction. It is necessary for WTE plants to continue to improve
the incinerators and flue gas treatment systems to further reduce
dioxins (Cheng and Hu, 2010a, 2010b). Source-classified collection,
which significantly reduces the contents of Cl-containing plastics
and metals in the waste stream and allows more precise control
of the combustion conditions, is being gradually introduced in
MSW management. Anyway, the emissions of dioxins and other
air pollutants are expected to get effective control. Because China
has implemented a new emission standard, by which the emission
limitation for dioxins is 0.1 ng TEQ/N m3, also limitations for other
air pollutants are greatly stricter.
Despite the significant waste volume reduction, considerable
amount of solid residues (i.e., bottom ash, fly ash, and air pollution
control residue) are generated at different points during MSW
incineration. The solid residues can be sent to landfills or cleaned
up and used off-site for certain construction purposes and the pro-
portions of them vary greatly according to the waste type and
detailed process design (Cheng and Hu, 2010a, 2010b). Bottom
ash is a highly heterogeneous mix of slag, ferrous and non-
ferrous metal, ceramics, glass, other non-combustibles and resid-
ual organic matter. In incinerators, the bottom ash constitutes
approximately 2530% by weight of the MSW input (Bosmans
et al., 2013). The bottom ash from incineration is biologically clean
and stable, and it is treated in a slag reprocessing pilot plant facility
where valuable metals are recovered. Appropriate stabilization
treatment can improve bottom ash characteristics and would allow
its use in concrete aggregates and other construction materials.
While bottom ash is now landfilled or specially treated for use
in construction, air pollution control residues are enriched in heavy
metals and are more hazardous. The disposal of these hazardous
residues may be more critical and expensive. They are disposed
of in underground storages. The latest development is to extract
secondary resources such as iron, aluminum, copper, zinc and
other metals from these residues. Thus, in the future, incineration
 X.-g. Zhao et al. / Waste Management 48 (2016) 604618
is likely to become a means to conserve resources by both utilizing
energy and recycling materials (Brunner and Rechberger, 2014).
Fly ash, one of the flue gas residues, is clearly classified as a haz-
ardous substance by the law. It should be dealt with in accordance
with hazardous material waste laws. There are considerable efforts
made to develop methods to improve these wastes, to extract met-
als, and to avoid using landfills for hazardous materials and instead
employ them after stabilization in road construction or in the
building industry (Poggio and Grieco, 2010). In short, such meth-
ods are coarsely classified as, melting and solidification, solidifica-
tion with cement, stabilization using chemical agents or extraction
using acid or other solvents. Fly ash quantities are much lower,
generally 15% by weight of the input. Fly ash immobilization is
required in order to make it environmentally safe for landfill dis-
posal (Bosmans et al., 2013). However, the management of fly
ash has not received adequate attention in China. Only a few cities
in China have such special hazardous waste landfills in service or
under construction with most of them rejecting fly ash due to its
large volume (Cheng and Hu, 2010a, 2010b). Significant efforts
should be spent on strengthening the regulations on fly ash
management and reuse.
3.2. Cost
The costs of WTE plants are mainly divided into investment
costs and operational costs. The investment costs include the
expenses on facilities, infrastructure, land use, etc. (Fig. 2). The
operational costs are determined as a result of a complex balance
calculation (e.g. slag and dust residues to be disposed, auxiliary
fuel and chemicals to be purchased), price forecasting (for all
items), and comparison with real projects experience (e.g. personal
costs, maintenance costs, security, insurance etc.) (omplk et al.,
2013).
The developed countries have the experience of waste inciner-
ation for many years. The relevant technologies and equipment
are more mature. However, it is expensive for China to introduce
the advanced technologies and equipment entirely from abroad.
Thus, the strategy of importing main equipment and adopting
China-made auxiliary equipment is feasible which could save
investment costs. Some research institutes have conducted some
researches on technology and equipment and achieved some
breakthroughs in China, such as Zhejiang University, Tsinghua
University, and Chinese Academy of Science. The investment costs
of WTE plants have been reduced greatly.
The incinerator, which accounts for approximately 50% of the
investment costs, is the core of WTE system (Zheng et al., 2014).
Also, flue gas cleaning system is often an important contributor
to the costs of WTE plant, accounting for 1535% of the total
investment costs (Bosmans et al., 2013). A set of low-cost waste
incineration technologies which is suitable for domestic actual
conditions was successfully developed in China. The core technol-
ogy is circulating fluidized bed combustion technology. Based on
this set of technologies, an investment budgetary estimate was
made of WTE plants whose disposal capacity is 1000 tons/day
(Lin et al., 2007). As is shown in Fig. 3, the thermal system has
the largest percentage of 54.9% in the investment costs, followed
by the flue gas cleaning system of 15.2%, while the other systems
spend less, all together taking 29.9% of the total investment costs.1
The investment costs are closely related to the incineration
technologies and the scale of plants. Different incineration tech-
nologies, the investment costs are different. Equipped with similar
flue gas cleaning systems, the investment in circulating fluidized
bed plant is generally only 70% of that of grate-based WTE plant
1
Minor adjustment is made based on actual conditions.
609
(Chen and Christensen, 2010). At present, most of Chinas WTE
plants import equipments from North American and Western Eur-
ope, which are expensive relative to the local economy (Pan et al.,
2015). Besides, even though the same technology is adopted, the
investment cost of China-made equipment is lower than that of
imported equipment, accounting for about 35% (Table 3).
Because the main fuel source of WTE plants is MSW which
could be got without purchasing. Only small amount of fuel is
needed to serve as combustion improver, which makes up a small
part of operational costs of WTE plants. The operational costs of
grate-based WTE plants are costly, varying between $16 and $32
per ton MSW treated, while it is approximate $10$20 for fluidized
beds (Zheng et al., 2014). For WTE facilities designed and
constructed in China, the operational costs are much lower as
compared to the imported ones (Pan et al., 2015).
Lin et al. (2007) studied the operational costs of WTE plants
adopting circulating fluidized bed combustion technology whose
disposal capacity is 1000 tons/day. It is indicated that the depreci-
ation and maintenance expenses are the largest, taking 37% of the
total operational costs, followed by the purchase of auxiliary fuel,
accounting for 31%. The staff salaries take a smaller proportion
for 14% of the total operational costs (Fig. 4). The data could act
as a reference to study the operational costs of Chinas WTE plants.
However, their studies were based on the standards published in
1999 for pollution control on MSW incineration. The emission
requirements are not strict and the operational costs of pollution
prevention and control are relatively lower compared with the lat-
est emission standard GB18485-2014. According to the latest stan-
dards, the environmental expenses would increase a lot, especially
the expenses on the treatment of waste leachate and fly ash. The
requirements on treatment of fly ash are so strict that the treat-
ment cost is high, ranging from 81.5 $/t to 244.5 $/t. The treatment
of waste leachate is difficult and the treatment cost is about
32.6 $/t.
In short, compared with other MSW treatment technologies,
WTE plant requires high investment and operational costs.
Imported WTE equipment is generally more expensive and has
higher operational costs than China-made WTE equipment. The
investment cost and operational cost for China-made WTE
equipments are only 1/31/2 of those of imported ones (Cheng
and Hu, 2010a, 2010b). Thus, more efforts should be made to invest
in the research and development of China-made technologies and
equipment, especially the large capacity incinerators.
3.3. Benefit
3.3.1. Economic benefits
WTE plant is economically feasible with short payback period
(6.01 years), high NPV ($ 6.50 million) and IRR (12.21%) in Thailand
(Udomsri et al., 2010). The annual revenue from sales of electricity,
heat and recyclables are significant, varying from 9.1 to 14.8
million Euros/year in Malta (Pirotta et al., 2013). Also, WTE plant
achieves the high profit increment of 287% in Malaysia (Tan
et al., 2014a, 2014b). A Chinas WTE plant shows that the net profit
was $ 3.31 million in 2006, accounting for 12.7% of the total invest-
ment. The stable and high rate of return on investment has driven
the rapid development of WTE industry (Cheng and Hu, 2010a,
2010b). The sources of revenues come not only from the electricity
sales and tipping fees from government, but from tax incentives,
heat supplies, bottom ash sales, etc. In the United Kingdom, the
tipping fees and the sale of electricity are the main sources of
revenue. About 7080% of revenue is from the tipping fee and
2030% generated from the sale of electricity (Jamas and Nepal,
2010). However in China, the income from electricity sales
accounts for 7085% of the total incomes, the tipping fee 1530%.
610 X.-g. Zhao et al. / Waste Management 48 (2016) 604618

Equipment and devices

Construction costs

Investment Land use and other costs

costs Preparation funds

Loan interest

Risk Management

Costs Raw materials

Plant power consumption

Staff salaries

Depreciation Loss
Operational
Fly ash handling
costs Maintenance charge
Bottom ash processing
Environmental expenses
Leachate treatment
Financial expenses
Environmental monitoring
Additional expenditure

Fig. 2. The cost structure of WTE plants.

Thermal system

Fuel supply system

6% 4%
4%
Ash handle system
15%
Water supply and water
treatment system
Flue gas cleaning system

3% 55%
Electrical system
3% 10% Automatic control system

Others

Fig. 3. Investment costs (Lin et al., 2007). Minor adjustment is made based on actual conditions.

Currently in China, the national unified feed-in tariff of WTE generally higher than the central and western regions of China.
projects is implemented at 0.106 $/kW h, while the unified tipping On the other hand, they are related to the waste incineration facil-
fee has not been made. The tipping fees are determined by negoti- ities. The China-made waste incineration facilities are relatively
ating between project investors and local government (China Solid cheaper and gets low tipping fee, usually from 4.9 $/t to 17.9 $/t
Waste Network, 2010). Thus, different WTE plant enjoys different (Guangzheng Hang Seng, 2013). Without forming the unified stan-
tipping fee. On the one hand, they are related to the regions where dards on tipping fees makes the operation of WTE plants more dif-
the WTE plants are located. The tipping fee is 16.3 $/t in Beijing and ficult. When the tipping fee is being negotiated, the treatment of
9 $/t in Tianjin. Even in the same province, the tipping fees are dif- bottom ash, fly ash and waste leachate should be taken into
ferent for different WTE plants. For example, the tipping fee is 1.6 account, in addition to the investment costs and operating profits.
$/t in Heze City, Shandong, and 10.9 $/t in Liaocheng City, Thermal production is also quite important with the electricity
Shandong. The tipping fees in the eastern developed areas are production and the expected efficiencies are much higher in case of
Combined Heat and Power (CHP) or trigeneration case. CHP or tri-
generation case has the benefit of energy-step-utilization which
could improve the efficiency of energy utilization. A case shows
Table 3
that heat and electricity production from MSW incineration pre-
The average investment cost of WTE plants ($/t).
sents the highest potential with 5.15  109 kJ of heat and
WTE plants Imported China-made 4.8  105 kW h of electricity from a plant with disposal capacity
equipment equipment
of 1000 tons/day in Malaysia (Tan et al., 2014a, 2014b). While in
Grate-based WTE plant 73,35081,500 48,90057,050 China, a circulating fluidized bed plant with the same disposal
Circulating fluidized bed 65,20073,350 40,75048,900
capacity could supply heat 4.2  1011 kJ and gain $ 822 thousand
combustion plant
per year. The bottom ash being comprehensively utilized is about
 X.-g. Zhao et al. / Waste Management 48 (2016) 604618
3%
37%
5%
14%
Fig. 4. Operational costs.
1.3  104 tons per year and the income is $ 815 thousand. Also, the
metal recycled is 666 tons per year, which makes an annual profit
of $ 54 thousand (Department of Environmental Protection of
Shanxi Province, 2008).
3.3.2. Social benefits
In addition to significant economic benefits, WTE plant has sig-
nificant social benefits. It plays an important role in energy recov-
ery, land conservation, job creation etc. (Cucchiella et al., 2014;
Nzihou et al., 2012). For example, the US WTE plants generated a
net of 1.35  1010 kW h of electricity in 2004, greater than all other
renewable sources of energy (Psomopoulos et al., 2009). WTE plant
is a potential option to mitigate greenhouse gas (GHG) emission
while achieving economic feasible (Tan et al., 2014a, 2014b). The
application of WTE plants reduces US GHG emissions by about
26 million tons of carbon dioxide. Also, combining all WTE recy-
cling through onsite ferrous metal recovery programs, 82% of the
US WTE plants recycle nearly 1.5  106 tons (Psomopoulos et al.,
2009). It is reported that MSW from 1,000,000 person equivalent
could power 12,400 cars, provide electricity for 30,900 houses
and heat 15,100 houses (Murphy and McKeogh, 2006; Cucchiella
et al., 2014). In Bangkok, the electricity production via WTE plants
can cover 2.5% of total electricity consumption (Udomsri et al.,
2010). Thus, the WTE plant could turn the waste into wealth
and it has a good future.
The potential investment in WTE plants will lead to the trade
balance deficit decrease (corresponding to 0.4% of the trade deficit
of Greece) and make a positive impact on the GDP of Greece. More-
over, through the reduction of oil, electricity, or other energy
imports, WTE plants could offer considerable effects in the
economic growth rate, reduce the unemployment, promote trans-
actions in the financial markets and achieve a serious increase in
public revenue (Psomopoulos et al., 2014).
WTE plant could lead a country to greater energy independence
(Cucchiella et al., 2014). Through WTE plants, UK is gradually
becoming a net importer of petroleum. WTE can also improve
security of supply by reducing dependence on imported energy
and fuels (Jamas and Nepal, 2010). The problem of power shortage
and fluctuations in Ghana could also be resolved (Ofori-Boateng
et al., 2013). In order to reduce wasted disposal, decrease the crude
oil imports, and mitigate GHG emissions, WTE plant is also desir-
able for Korean government. The marginal willingness to pay for
a 1% increase in energy security in Korea, a 1% reduction in GHG
emissions, the creation of 10,000 new jobs, and the doubling of
landfill life expectancy (Lim et al., 2014). And in Italy, WTE plants
could create 25002700 new jobs (Cucchiella et al., 2014; Lim
et al., 2014). Thus, the contribution of WTE plants to economic
growth and energy security is significant.
In China, according to the 12th five-year plan on the
construction of MSW treatment facilities, the disposal capacity of
611
31%
Auxiliary fuel
Chemicals
Power consumption
7% Water consumption
3%
Labor costs
Maintenance and Depreciation
Labor protection
incineration will reach 3.1  105 tons/day in 2015. If the WTE is
just to generate electricity, the annual generation capacity will
reach 3.14  1010 kW h according to the generation efficiency of
280 kW h/t. It is predicted that the net coal consumption rate of
Chinas thermal power units would be about 0.32 kg/kW h in
2015 (Yang et al., 2013). So, WTE will substitute 1.0  107 tons of
coal equivalent in 2015. The benefit of saving fossil energy is signif-
icant. While the coal imports was just 2.9  108 tons and the elec-
tricity imports was 6.9  109 kW h in 2012. So, the theoretical
saved coal accounts for 3.5% of the coal imports in 2012. The the-
oretical generation capacity is 4.6 times more than the electricity
imports in 2012. The contribution of energy recovery will be
extended to other areas of economic interest. In general, develop-
ing WTE plants will affect the energy imports, affect the trade bal-
ance, foster the product level, cause economic growth and
eventually cause positive change in GDP. This qualitative positive
effect is certain, but the exact figures cannot be easily estimated
(Psomopoulos et al., 2014).
Land conservation is another advantage of WTE plants. In the
future, the cost of landfilling waste is likely to increase due to land
scarcity and disamenity (Jamas and Nepal, 2010). Some Brazilian
cities have started searching for alternatives to dispose MSW other
than landfills, because of the lack of land, the high land prices and
the bad effects on land resources made by dumping of waste in
landfills (Leme et al., 2014). According to recent data, 100,000 m2
of land are enough to treat in a WTE plant about one million ton
of MSW per year, whereas the same amount of MSW landfilled
would require 100,000 m2 each year (Psomopoulos et al., 2009;
Jamas and Nepal, 2010; Pirotta et al., 2013). Thus, WTE plant has
become a promising strategy (Tan et al., 2014a, 2014b). A new
WTE plant could be built on the site of the existing WTE plant, thus
reducing the capital cost for land in the new facility to zero. The
landfill site cannot be used for anything else, and thus new green-
fields must be converted to landfills. However, WTE plants do not
require more land than the initial requirement and the required
land is smaller than landfills disposing of the same quantity of
MSW. Thus, the initial capital for land use of WTE plants is very
small (Psomopoulos et al., 2009).
In Malta, WTE plants will achieve the minimum land savings up
to 2.7  105 m2, corresponding to 0.09% of the total area of the Mal-
tese archipelago. Those savings could represent from 13,500 to
17,000 m2 per year, a decisive benefit for Malta (Pirotta et al.,
2013). While in China, the land occupation of a circulating fluidized
bed plant would be 8  104 m2 with disposal capacity of 1000
tons/day. A sanitary waste landfill with 30-year design period
and the same disposal capacity would occupy 7  105 m2. Simi-
larly, the compost would occupy 1.4  105 m2 (Department of
Environmental Protection of Shanxi Province, 2008). Obviously,
the land occupation of sanitary waste landfill is 8.8 times more
than WTE plant. And the land occupation of compost is 1.8 times
612 X.-g. Zhao et al. / Waste Management 48 (2016) 604618

Table 4 heating, bottom ash and metals recycled. Table 4 shows the rele-
Economic and technological parameters of waste incineration BOT project. vant economic parameters and some assumptions used for eco-
Parameters Value ranges Assumption in this nomic analysis.
analysis
Disposal capacity 6001500 tons/day 1000 tons/day 4.1. Finance evaluation
Average investment 73,35081,500 $/t 73,350 $/t
Loan ratio 5070% 70% Based on the basic parameters and simulated operation, the
Loan annual interest 6.15% (more than 6.15%
rate 5 years)
operating cash flow statement and the profit and loss statement
Loan term 1020 years 15 years are shown in Tables 5 and 6.
Unit operational costs 19.56 $/t 19.56 $/t
Feed-in tariff 0.106 $/kW h 0.106 $/kW h 4.1.1. Profitability
Tipping fee 13.0424.45 $/t 13.04 $/t
4.1.1.1. The net profit margin and return on investment (ROI). This
Calorific values 30006700 kJ/kg 5000 kJ/kg
Net electrical 1427% 21% project has a stable net profit margin and a high ROI. In the first
efficiency year of operating, the net profit margin is 14.7%. Later, the net
Concession period 2530 years 25 years profit margin keeps a sustained growth until the eighteenth year.
Construction period About 2 years 2 years Finally, the net profit margin maintains at 26.7%. In the entire con-
cession period, the net profit margin is higher than 14%. The ROI
more than WTE plant. Thus, WTE plant could significantly con- will also maintain a sustained growth until the eighteenth year,
tribute to land conservation. and then stays at 19.5% later. During the whole operating period,
In addition, accelerating the development of WTE plants will the ROI is higher than 10%. So, the project has good profitability
drive the whole WTE industry chain. It is estimated that the invest- and the investment prospect is good (Fig. 5).
ments in WTE industry would be about $ 4.2 billion during the
12th five-year plan period. And the annual expenses on equip- 4.1.1.2. The pay back period.
ment needed would be over $ 1.6 billion (UBS Investment jCNCF T
1 j 0:89
Research, 2012). All in all, the development of WTE industry has Pt T
1 11 11:3 years 1
NCF T 2:83
significant economic and social benefits.
Ignoring the time value of money, the investors of the WTE pro-
ject can recoup their investments within 12 years. Later, investors
4. Economic analysis
would have pure profits for more than ten years.
In general, the concession period of a WTE plant is 2530 years,
4.1.1.3. Net present value (NPV). The NPV is closely related to the
during which the construction period takes about two years. The
discount rate. According to the equation,
bank loans to WTE plants are generally not more than 70% of the
total investments. The loan period is generally 1020 years and X
n

t
the annual interest rate is 6.15%. The projects are expected to be NPV CI
COt  1 i 2
t0
profitable when the disposal capacity is more than 600 tons/day
(Zeng, 2012). And the daily disposal capacity of newly built plants When the basic discount rate i1 12%, the NPV is as follows,
is generally 6001500 tons in China. In profit, not all the WTE
NPV 1 0:31 million dollars 3
plants are in the case of CHP or trigeneration, and the heating is
related to the season and the location of WTE plants. The compre- Similarly, when the basic discount rate i2 15%, the NPV is as
hensive utilization of bottom ash and recycling of metals have not follows,
been achieved in many WTE plants.
NPV 2
3:97 million dollars 4
This paper chooses an imported grate-based WTE combustion
plant as analysis object to make the economic analysis. This eco-
nomic analysis assumes that the profits just come from the elec- 4.1.1.4. Internal rate of return (IRR). According to the interpolation
tricity sales and tipping fees, without considering the profits of calculation method, the IRR is as follows,

Table 5
The cash flow statement of waste incineration BOT project ($ million).

Year 1 2 3 4 5 6 7 8 9 10 11 12
Cash inflows 0 0 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04
Investment 11.00 11.00 0 0 0 0 0 0 0 0 0 0
Loan principal repayment 0 0 3.63 3.63 3.63 3.63 3.63 3.63 3.63 3.63 3.63 3.63
Interest expense 0 0 3.35 3.13 2.91 2.68 2.46 2.23 2.01 1.79 1.56 1.34
Costs 0 0 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14
Income tax 0 0 0 0 0 0.38 0.41 0.43 0.92 0.98 1.04 1.09
Net cash flow
11.00
11.00 1.91 2.14 2.36 2.21 2.40 2.60 2.33 2.50 2.67 2.83
Cumulative cash flow
11.00
22.01
20.09
17.95
15.59
13.39
10.98
8.39
6.06
3.56
0.89 1.94

Year 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash inflows 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04
Investment 0 0 0 0 0 0 0 0 0 0 0 0 0
Loan principal repayment 3.63 3.63 3.63 3.63 3.63 0 0 0 0 0 0 0 0
Interest expense 1.12 0.89 0.67 0.45 0.22 0 0 0 0 0 0 0 0
Costs 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14
Income tax 1.15 1.20 1.26 1.32 1.37 1.43 1.43 1.43 1.43 1.43 1.43 1.43 1.43
Net cash flow 3.00 3.17 3.34 3.50 3.67 7.47 7.47 7.47 7.47 7.47 7.47 7.47 7.47
Cumulative cash flow 4.94 8.11 11.45 14.95 18.62 26.09 33.57 41.04 48.51 55.98 63.45 70.93 78.40
 X.-g. Zhao et al. / Waste Management 48 (2016) 604618
NPV 1
IRR i1 i2
i1 
NPV 1 jNPV 2 j
0:31
12% 15%
12%  12:22% 5
0:31 3:97
Thus, the WTE project has good economic benefits and good
profitability. The IRR is 12.22%, and the static pay back period is
11.3 years. The net profit margin and ROI are attractive, up to
26.7% and 19.5% respectively.
4.1.2. Debt-payment capability
4.1.2.1. Loan repayment period. The loan repayment period reflects
the time required to repay debt. According to the loan repayment
table (Table 7), the loan repayment period is as follows,
Pt It
TP T
1 9 0:6 9:6 years 6 that the electricity sale price is not less than 0.1 $/kW h. If the gen-
Ft
Because the calculated loan repayment period is less than the
deadline of repayment specified by the bank, it indicates
the WTE project has sufficient income to repay. In other words,
the project has the capability to repay the bank loans on time with
relatively small financial risk.
4.1.2.2. The time interest earned ratio. Two time interest earned
ratios are chosen to reflect the ability to repay the bank loans,
the ratio of earnings before interest and tax (EBIT) to interest
expenses and the ratio of operating net cash flow to interest
expenses, respectively. As is shown in Fig. 6, both the curves of
two ratios presents the increasing trend. As time goes on, the abil-
ity of enterprise to repay interest is becoming stronger and stron-
ger. Thus, the debt paying ability is strong for the WTE project, and
it can be guaranteed for the bank to get the principals and
interests.
4.2. Uncertainty analysis
Uncertainty analysis is made to know how the economic effects
could be influenced when some factors change, and know the
degree of influence. Besides, it is a necessary task to understand
the risk tolerance of the WTE project.
4.2.1. Break-even analysis
All kinds of uncertainty factors can influence the economic
effects of WTE plant, such as investments, costs and generating
capacity. When the changes of these factors reach the critical val-
ues, it will influence the attraction of WTE project, and influence
the decision-making of investors.
According to the parameters, the annual power generation
capacity is 106.46 million kW h. By taking the tipping fees into
account, the unit revenue of generating electricity is about 0.151
$/kW h. The annual fixed cost is $ 3.2 million and the variable cost
is 0.07 $/kW h.
According to PQ  C f C v Q 
(1) The break-even volume is as follows,
 Cf
Q 38:1 million kW h
P
Cv
(2) The capacity utilization rate of break even point (BEP) is as
follows,
Q
E  100% 35:8%
Qc
(3) The electricity sale price of BEP is as follows,
613
Cf
P C v 0:1 $=kW h 10
Qc
(4) If the production and sale follow the power generation
capacity, and the electricity sale price is determined, the
variable cost per unit of BEP is as follows,
Cf
C v P
0:12 $=kW h 11
Qc
Thus, if the unit revenue and cost are in line with the expected
value, the critical condition of having no loss is that the annual
electricity production is not less than 38.1 million kW h. The
capacity utilization rate of BEP is 35.8%. If the generation of elec-
tricity reaches the power generation capacity, and the cost is in line
with the expected value, the critical condition of having no loss is
eration of electricity and the electricity sale price is in accordance
with the expected value, the critical condition of having no loss is
that the variable cost is less than 0.12 $/kW h.
4.2.2. Sensitivity analysis
Through measuring the extent of variation of decision indexes
caused by uncertainty factors to know how the uncertainty factors
influence the economic effects. Thus, when the external conditions
change, the investors can judge the withstanding capability of the
WTE project.
4.2.2.1. The feed-in tariff and tipping fees. For WTE plants, the pri-
mary income comes from the electricity sales and tipping fees.
And the two parts are dominated by the policy, which can directly
affect the cash flow and income, and consequently affect the IRR of
the WTE project. When the tipping fee increases to 13.69 $/t, 14.34
$/t and 15 $/t, the IRR will increase by 0.82%, 1.55% and 2.2%. When
tipping fee decreases to 12.39 $/t, 11.74 $/t and 11.08 $/t, the IRR
will decrease by 0.68%, 1.36% and 2.12% accordingly. Similarly,
when the feed-in tariff increases to 0.111 $/kW h, 0.117 $/kW h
and 0.122 $/kW h, the IRR will increase by 1.80%, 3.53% and
5.49%. When the feed-in tariff decreases to 0.101 $/kW h, 0.095
$/kW h and 0.09 $/kW h, the IRR will decrease by 1.63%, 3.23%
and 4.92% accordingly (Table 8). Compared with the feed-in tariff,
the standard of tipping fees is formulated by negotiating. Thus, it is
easier to be changed. If the tipping fee increases, the IRR would be
higher than 12.22%. The rate of return is higher and the profitabil-
ity is stronger.
4.2.2.2. The loan interest rate. The loan interest rate can influence
the expenditure and financial expenses, and consequently influ-
ence the IRR of the WTE project. The changes of loan interest rate
can not only affect the prediction for WTE industry of investors, but
also affect the operational activities of companies. The higher the
loan interest rate is, the lower the IRR is. That is, when the loan
interest rate increases by 5%, 10%, 15% and 20%, the IRR will
decrease by 0.38%, 0.69%, 1.02% and 1.36% (Fig. 7). Compared with
7
feed-in tariff and tipping fees, the values of IRR have less difference
when loan interest rate changes, and the degree of influence is
smaller.
8
4.2.2.3. Investment cost and operational cost. Investment cost and
operational cost can directly influence the expenditure and cost,
and consequently influence the economic effects of WTE project.
When the investment cost increases by 5%, 10% and 15%, the IRR
will decrease by 1.2%, 2.38% and 3.33%. When the investment cost
9 decreases by 5%, 10% and 15%, the IRR will increase by 1.52%, 2.97%
and 5.11% (Table 9). Similarly, when the operational cost increases
by 5%, 10% and 15%, the IRR will decrease by 1.01%, 2.12% and
3.07%. When the operational cost decreases by 5%, 10% and 15%,
614 X.-g. Zhao et al. / Waste Management 48 (2016) 604618

Table 6
The profit and loss statement of waste incineration BOT project ($ million).

Year 3 4 5 6 7 8 9 10 11 12 13
Income 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04
Costs 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14
Depreciation 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19
Financial expenses 3.35 3.13 2.91 2.68 2.46 2.23 2.01 1.79 1.56 1.34 1.12
Profit before tax 2.36 2.58 2.80 3.03 3.25 3.48 3.70 3.92 4.15 4.37 4.59
Income tax 0 0 0 0.38 0.41 0.43 0.92 0.98 1.04 1.09 1.15
Net profit 2.36 2.58 2.80 2.65 2.85 3.04 2.77 2.94 3.11 3.28 3.44
Net profit margin 14.70% 16.09% 17.49% 16.52% 17.74% 18.96% 17.29% 18.34% 19.38% 20.43% 21.47%

Year 14 15 16 17 18 19 20 21 22 23 24 25
Income 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04 16.04
Costs 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14 7.14
Depreciation 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19
Financial expenses 0.89 0.67 0.45 0.22 0 0 0 0 0 0 0 0
Profit before tax 4.82 5.04 5.26 5.49 5.71 5.71 5.71 5.71 5.71 5.71 5.71 5.71
Income tax 1.20 1.26 1.32 1.37 1.43 1.43 1.43 1.43 1.43 1.43 1.43 1.43
Net profit 3.61 3.78 3.95 4.11 4.28 4.28 4.28 4.28 4.28 4.28 4.28 4.28
Net profit margin 22.52% 23.56% 24.61% 25.65% 26.70% 26.70% 26.70% 26.70% 26.70% 26.70% 26.70% 26.70%

ROI/Net profit margin

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00% Year
3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Net profit margin ROI

Fig. 5. Net profit margin and return on investment.

Table 7
The loan repayment table.

Year 2 3 4 5 6 7 8 9 10
Accumulated loans in the beginning of the year 0 52.92 47.28 41.29 34.93 28.17 21.01 13.40 5.32
Loans in this year 51.35 0 0 0 0 0 0 0 0
The total profit used to repay the loans 0 8.90 8.90 8.90 8.90 8.90 8.90 8.90 8.90
The loan interests repaid in this year 0 3.25 2.91 2.54 2.15 1.73 1.29 0.82 0.33
The loan principal repaid in this year 0 5.64 5.99 6.36 6.75 7.17 7.61 8.08 5.32
The balance after repayment 0 0 0 0 0 0 0 0 3.25

the IRR will increase by 1.19%, 2.2% and 3.31%. Thus, the changes of
investment cost have a little greater influence on the IRR than the
change of operational cost.
4.2.2.4. Income from electricity sales. The income from electricity
sales can directly influence the profit and economic effects of
WTE project and it is determined by power generation and feed-
in tariff. The main reason for influencing the income from electric-
ity sales is the calorific values or net electrical efficiency. As is
shown in Fig. 8, the IRR and income from electricity sales are grow-
ing proportionally. When the income from electricity sales
decreases by 13%, the IRR would be fewer than 8%. When the
income from electricity sales increases by 9%, the IRR would be
more than 15%. Thus, garbage classification and adopting advanced
incineration technology would indirectly improve the IRR and eco-
nomic effects of WTE projects.
For government, it is practicable to adjust the policy mix of
feed-in tariff and tipping fee to adjust the IRR, and consequently
affect the development prospects and market potential of WTE
industry. It is unpractical to adjust the loan interest rate to adjust
the IRR and market potential of WTE industry, for the influence of
loan interest rate on IRR of WTE plant is limited. For the compa-
nies, understanding how the feed-in tariff, tipping fee, loan interest
rate, investment cost, operational cost and income from electricity
sales affect the IRR can evaluate the profitability and withstanding
capability of WTE plants. And it is convenient for investors to make
trade-off decisions to control the cost and decide the ways of
financing.
 X.-g. Zhao et al. / Waste Management 48 (2016) 604618 615

Ratio
35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00 Year
3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
the ratio of EBIT to interest expenses the ratio of operating net cash flow to interest expenses

Fig. 6. Two time interest earned ratios.

Table 8
The sensitivity analysis of feed-in tariff and tipping fee.

IRR Tipping fee ($/t)

11.08 11.74 12.39 13.04 13.69 14.34 15.00
Feed-in tariff ($/kW h) 0.122 15.14% 16.09% 16.94% 17.71% 18.41% 19.05% 19.64%
0.117 13.58% 14.26% 14.87% 15.75% 16.64% 17.44% 18.16%
0.111 11.77% 12.53% 13.32% 14.02% 14.65% 15.40% 16.32%
0.106 10.10% 10.86% 11.54% 12.22% 13.04% 13.77% 14.42%
0.101 8.53% 9.24% 9.86% 10.59% 11.30% 11.93% 12.75%
0.095 6.87% 7.56% 8.25% 8.99% 9.64% 10.31% 11.05%
0.090 5.29% 5.94% 6.63% 7.30% 7.96% 8.73% 9.41%

IRR
14.50%

14.00%

13.50%

13.00%

12.50%

12.00%

11.50%

11.00%

10.50%

10.00%
-20% -15% -10% -5% 0% 5% 10% 15% 20%
Loan interast rate

Fig. 7. The sensitivity analysis of loan interest rate.

Table 9
The sensitivity analysis of investment cost and operational cost.

IRR Investment cost

15%
10%
5% 0% 5% 10% 15%
Operational cost
15% 21.06% 19.08% 17.41% 15.53% 14.11% 12.79% 11.56%

10% 19.65% 17.99% 16.11% 14.42% 13.09% 11.75% 10.67%

5% 18.58% 16.71% 14.76% 13.41% 11.94% 10.84% 9.74%
0% 17.33% 15.19% 13.74% 12.22% 11.02% 9.84% 8.89%
5% 15.84% 14.10% 12.55% 11.21% 9.95% 8.97% 7.92%
10% 14.47% 12.90% 11.42% 10.10% 9.06% 7.95% 7.03%
15% 13.27% 11.64% 10.29% 9.15% 7.99% 7.03% 5.97%
616 X.-g. Zhao et al. / Waste Management 48 (2016) 604618

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-20%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
Fig. 8. The sensitivity analysis of income from electricity sales.

Table 10 5. Conclusion and policy recommendations

The pay back period and the IRR of plants adopting different technologies or
equipment. Significant changes have taken place in Chinas WTE industry.
WTE plant with 1000 tons/day Pay back IRR (%) With the strengthening of government support (policy/financial),
period WTE industry is facing good market prospects. Based on matured
(years) technology and low operational costs, the WTE industry can expect
Grate-based WTE Imported equipment 11.32 12.22 relevant margins and stable profit.
combustion plant China-made equipment 7.62 17.96 A business case of a WTE plant with a concession of 25 years
Circulating fluidized bed Imported equipment 12.00 11.57 and capacity of 1000 tons/day shows: Good profitability of WTE
combustion plant China-made equipment 8.41 16.60 project with IRR of 12.2% and payback period of 11.3 years. Also
the profit margin and ROI are attractive with up to 26.7% and
19.5% respectively. These analyses are based on a typical Chinese
electricity feed-in tariff of 0.106 $/kW h and MSW tipping fee of
Table 11
13.04 $/t.
The relationship of loan ratio and IRR.
The project has strong capability to resist risks of changing
Loan ratio 50% 60% 70% 80% 90% external conditions. Main factors are the feed-in tariff and tipping
IRR 10.74% 11.38% 12.22% 13.69% 16.22%
fee. With these parameters the government can control the market
for WTE projects efficiently.
China-made equipment has 3035% lower investment cost than
imported equipment. The economic analysis shows how this is
4.3. Other influencing factors impacting other economic key figures. For example the payback
period is reduced from 12 to 8 years or the IRR is increased from
4.3.1. Technologies and equipment 11% to 18%. Technological risks by using China-made equipment
The analysis above chooses an imported grate-based WTE plant were not considered in this study. Further extension of the eco-
as analysis object. When adopting other technologies or equip- nomic analysis taking into account power generation efficiency,
ment, the economic effects are different. Based on the same param- ash quality, flue gas emission, availability and equipment lifetime
eters and simulated operation, whether technology and equipment would also be of great interest for the future.
is adopted, the pay back period is within twelve years and the IRR
is higher than 11% (Table 10). Though adopting same technology,
Acknowledgment
China-made equipment has about four years shorter the pay back
period than imported equipment. The IRR of project adopting
This paper is supported by National Natural Science Founda-
China-made equipment is higher than that of imported equipment
tion of China Project (Grant No. 71273088, 71471058), Science
by about 5%. Obviously, the pay back period and IRR of China-made
and technology project funding by State Grid Liaoning electric
technologies and equipment are superior to that of imported tech-
power co., LTD. Benxi Power Supply Company (Grant No.
nologies and equipment. This is also helpful to explore and foster
FZJS1400825 and FZJS1400829).
China-made technology and equipment market.

4.3.2. Fund structure Appendix A. Supplementary material

The fund structure could also influence the IRR of the WTE pro-
ject. When the ratio of bank loan accounts for 50% of the total
investments, the IRR is 10.74%. And when the ratio of bank loan
accounts for 90% of the total investments, the IRR is 16.22%
(Table 11). The higher the ratio of bank loan is, the higher the
IRR is. Thus, when the investors have fewer funds in the hands,
they could turn to strive for more bank loans for help. By this
way, they could increase the profitability. However, more bank
loans would increase the financial risks and the difficulty to get
loans from the bank is greater.
Supplementary data associated with this article can be found, in
the online version, at http://dx.doi.org/10.1016/j.wasman.2015.10.
014.
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