National compensation recedes: "Open source" and "throttling" for waste incineration power generation enterprises
Waste incineration power generation companies are facing a "recession in national subsidies", and the time for "power supply interruption" has been clarified. In September 2020, a supplementary notice on matters related to the "Several Opinions on Promoting the Healthy Development of Non-Aquatic Renewable Energy Power Generation" stated that waste incineration power generation projects will no longer be in operation for 15 years or if the reasonable utilization hours in the entire life cycle reach 82500 hours, they will no longer Enjoy state subsidies, and the waste incineration power generation concession period is generally 28 years.
In the past four years of "national compensation and decline", no matter how long the waste incineration power generation project runs, it has faced pressure of reducing revenue. According to the 2023 results of 27 listed companies (including Hong Kong stocks) with waste incineration and power generation as its main business, some companies have experienced varying degrees of revenue decline, and 6 companies 'net profit has dropped by more than 20%.
How can waste incineration power generation companies pay equal attention to "open source" and "throttling" after "national compensation and retreat" to achieve longer-term sustainable development? In June 2024, The Paper News and the Shanghai Development Strategy Research Institute's "Approaching Zero Carbon" joint research group successively investigated Pudong Development Zone Zero-Carbon Green Valley (formerly "Dawn Ecological Park", hereinafter referred to as "Zero Carbon Green Valley"), Tianma Waste and Low-Carbon Environmental Protection Industrial Park Two waste incineration power plants in Shanghai's zero-carbon creation parks, as well as Everbright Environmental Protection Energy (Suzhou) Co., Ltd.(hereinafter referred to as "Suzhou Energy"), to explore how waste incineration power generation companies can expand profits, reduce costs and increase efficiency.
The survey found that, first of all, waste incineration power generation companies urgently need to deploy and transform as soon as possible and expand their sources of income through other innovative models such as "heating". Secondly, enterprises can effectively reduce production and operation costs and reduce carbon emissions through energy conservation and efficiency improvement, especially automation, intelligent, and information systems. Finally, the policy needs to further make up for the income impact of "national subsidies and recessions" on enterprises.
"Open source": Focus on "heating" and broaden sources of revenue
The top priority is to expand revenue channels and layout and transform as soon as possible. "Heating" has become a way to increase income actively explored by waste incineration power generation companies. Companies can make profits by selling steam generated by waste incineration and power generation processes. Therefore, finding the right steam demander is crucial for enterprises.
On the one hand, waste incineration power generation companies will "proactively go out" to find steam demanders within a certain geographical distance, and then transport steam through pipelines; if there is no steam demanders nearby, companies can also sell steam through vehicle transportation., this approach can expand the scope of cooperation considerations. The specific method adopted by the enterprise mainly depends on the steam demand and transportation costs.
In general, pipes are used to transport steam, and the closer the distance, the lower the cost. If the distance exceeds 10 kilometers, the steam mass loss will increase significantly. Therefore, it is relatively economical and appropriate to find steam demanders within 10 kilometers (the closer the better, the best within 6 kilometers). Chen Weihua, general manager of Shanghai Liming Resources Reutilization Co., Ltd.(hereinafter referred to as "Liming Resources"), said that companies generally seek partners within 6 kilometers. The company uses waste heat resources to supply heat to Xiangyang Industrial Park within 5 kilometers in the first phase, and the construction of the second phase to Bailonggang Sewage Treatment Plant is intensifying.
"It is still necessary to cultivate customers with heating needs." Yang Tao, general manager of Tianma Waste-Free and Low-Carbon Environmental Protection Industrial Park, said that no matter the geographical distance, as long as the other party can accept the steam transportation and procurement costs after evaluation, cooperation can be considered. Therefore, the company has expanded its consideration of steam demand sides to 20 kilometers, focusing on heat users in the industrial park, such as chemical, washing, and food companies. In Yang Tao's view, both pipeline transportation and mobile heat storage are feasible, and the two complement each other.
In the short term, if a few enterprises in the industrial park have heat needs, they can consider providing heat through mobile heat storage models. This model is less affected by distance, but a car can only transport 6 tons of steam, so heat storage is limited. In the future, this problem will need to be solved through technical iteration.
In the long run, if there is a large demand for heat users in nearby industrial parks, you can consider investing in laying pipelines to transport steam. It will mainly involve inter-regional planning and coordination issues. Once implemented, it will be more economical and cost-effective. Shanghai Environment's two waste incineration power plants have achieved heating transformation through cooperation with nearby steam demanders. One company cooperates with Taopu Zhichuang City on a distributed energy station project through external heating, and the other company provides heat to Pudong Airport through a pipe network.
On the other hand, steam supply and demand sides need to be better connected and matched. From the perspective of steam suppliers, at present, in addition to waste incineration power generation companies actively docking with demand parties, third-party companies that understand the needs of both heating parties will also actively docking. For example, mobile heat storage companies will proactively contact steam suppliers to provide heat to demanders. From the perspective of steam demand, there are two situations. First, only companies newly built near waste incineration power generation companies will actively seek nearby heat sources when there is steam demand; second, there are still many companies with steam demand and do not understand that waste incineration power generation companies can provide heat.
The ideal way is to consider the issue of steam supply and demand when planning and introducing enterprises into industrial parks and establish a link between waste incineration power plants and heat users. Local governments can directly write green electricity, heat supply, etc. into investment manuals to create a better business environment for enterprises. For example, Kangheng Environment's domestic waste incineration project in Liuzhou City can provide heat energy, assist the production of surrounding snail powder industrial parks, and drive the green transformation of the industry. However, the specific implementation involves the coordination between industrial land and sanitation land, and the government needs to make good plans.
In addition to external "heat supply", a widely used income-increasing model, waste incineration power generation companies are also actively innovating and expanding other sources of income.
For example, as the operator of Zero-Carbon Green Valley, Dawn Resources is taking advantage of the renewable energy advantages of waste incineration power generation projects and is building a "green data center" nearby. When the research team conducted a research on Liming Resources in June, it was in time for the office building to be demolished and renovated. It was replaced by Liming Intelligent Computing Center, which started construction in July 2024 and is scheduled to be put into use in October 2025. After completion, it will mainly serve Pudong area. Green electricity from Liming Waste Incineration Power Plant can be directly supplied to the data center, while waste heat such as steam and hot water can supply energy to air conditioners, thereby reducing electrical energy efficiency (PUE) and carbon emissions. It is understood that after the data center is put into operation, 70% of the green electricity from the Liming Waste Incineration Power Plant can be consumed nearby.
The survey found that how to benefit from carbon market transactions is also a question for waste incineration power generation companies. To this end, some waste incineration power generation companies have also laid out digital carbon management work in advance. Tianma Waste-Free and Low-Carbon Environmental Protection Industrial Park launched the solid waste carbon steward digital platform in June 2022 to facilitate the management of carbon emissions in the park. At the same time, through the flue gas online monitoring system, the carbon dioxide emission concentration is displayed in real time, and carbon emissions are scientifically and accurately grasped. data.
"Throttling": Energy saving and efficiency increasing, and control production and operation costs
While actively exploring sources of income, we also need to control costs well. The survey found that in recent years, the cost increase of waste incineration power generation companies mainly comes from environmental protection and manpower. Enterprises reduce production and operation costs through energy conservation and efficiency improvement.
The cost of waste incineration power generation enterprises mainly consists of fixed costs and operating costs. Yu Xiaoyang, deputy general manager of Everbright Environmental Protection Energy (Suzhou) Co., Ltd., said that environmentally friendly consumables account for almost one-third of operating costs, and this part of costs will increase. Because, in order to meet the ever-increasing national and local environmental protection standards, companies must increase investment in environmentally friendly consumables such as lime and activated carbon to purify the flue gas generated by waste incineration and power generation.
For waste incineration power generation companies, the key to reducing costs is energy conservation and efficiency improvement. Through equipment upgrades or technical transformation, production energy consumption can be reduced and waste incineration power generation efficiency can be improved. The application of automated, intelligent, and information systems can make production operation management more efficient and reduce manpower investment.
The overall impression given by many waste incineration power generation companies is that there are hardly many staff members in the workshop, but the staff in the central control room is relatively dense. Take Suzhou Energy as an example. A team of 11 people go to the production workshop for inspection twice a day, and spend most of the time in the central control room. Staff use real-time indicators and numbers on the screen to monitor whether there are abnormalities at any time from garbage entering the pit to power generation. In the pit where garbage piles up like mountains, specialized personnel operate the garbage crane through the glass isolation layer. With the assistance of the automated system, the fermented garbage that meets the incineration standards is hoisted from the pit to the garbage incinerator.
Suzhou Energy has invested millions of yuan to establish automated and intelligent systems, such as automatic combustion systems for waste incinerators, one-button start-stop systems for steam turbines, and intelligent inspection auxiliary systems, which not only reduces manpower investment, but also reduces personnel workload and labor intensity. For example, in the past, waste incineration equipment operated normally 24 hours a day, requiring three shifts, with 13 people per shift. After automation, 11 people would be enough.
The waste incineration power generation industry still needs policy support to increase income
In the past four years since the "national subsidy has retreated", investment and construction in China's waste incineration power generation market has been almost saturated, and the industry's growth rate may slow down in the future. Since the waste incineration power generation industry has both environmental protection and economic attributes, companies not only need to expand revenue sources and control production costs through their own efforts, but also need the government to provide policy support to make up for the negative impact of "national subsidies and receding".
At present, there are two policy ideas. The first is to support green electricity trading for waste incineration power generation, issue green certificates and participate in green certificate trading for some projects that exceed the number of reasonable utilization hours or projects that exceed 15 years old; the second is to increase urban domestic waste disposal fees.
First of all, there are policies from the national to local governments to support green electricity and green certificate transactions. In July 2023, the "Notice on Full Coverage of Renewable Energy Green Power Certificates to Promote Renewable Energy Power Consumption" clarified that all renewable energy power generation projects, including biomass power generation, that have been established and registered, will be issued with green certificates. Shanghai and Chongqing actively support waste incineration power generation projects to participate in the city's green electricity and green certificate transactions to improve project economics.
However, although the general direction of the policy is clear, it has not stirred up too much water in reality.
On the one hand, the policy still needs to solve the problem of "selling electricity across walls". "Selling electricity across walls" refers to allowing distributed energy projects to directly sell electricity to surrounding energy consumers in specific areas within the distribution network. However, the difficulty lies in how to actually implement the policy and how to distribute benefits between the two parties to distributed power transactions and power grid companies.
Direct sales of green electricity nearby can increase corporate profits and help achieve optimal allocation of resources. For example, the waste incineration power plant and data center in Zero-Carbon Green Valley are both Dawn resources and are both located within the red line of property rights, so it can achieve nearby consumption of green electricity. However, for more waste-to-waste power plants, most of the green electricity is sold to the State Grid, and only a small part of it participates in green electricity transactions. Due to the obstruction of "electricity sales across walls", it is impossible to achieve more income growth.
On the other hand, the benefits generated by green certificate trading remain to be seen. Judging from the market transaction situation, due to the low value of green certificates and insufficient market demand, even if companies obtain green certificates and sell them to the market for "cash", the income level will be low; from the perspective of the electricity-carbon market, the current waste incineration power generation project is temporarily unable to participate in carbon market transactions, and companies cannot evaluate which of green certificates and carbon market transactions has higher income. Due to policy uncertainty, companies are worried that if they trade green certificates now, it will affect their future earnings in the carbon market. "On the road of green certificate trading, we are just close to the door. As long as the policy is clear, we can push it immediately." said Chen Weihua, general manager of Liming Resources.
Secondly, the waste disposal fee needs to be borne by the local finance department, but these issues need to be clarified when, whether or not, and how much.
It is understood that there has been arrears in garbage disposal fees in some places, and "collecting money" has become one of the daily tasks of waste incineration power generation companies. As for whether it will increase or not, companies have a certain "negotiation space" for fees, which is related to the local government's industrial planning and investment promotion work. There is no unified standard for how much to increase. Local governments need more detailed supporting policies to implement national policies. Some companies have also reported that it is unlikely that garbage disposal fees will increase.
The local waste disposal fee is jokingly called "installment payment" by waste incineration power generation companies, and there is a set of accounting formulas. Generally speaking, the local government determines the fees based on the investment costs, operating costs, and benefits during the operating period of the enterprise, and then provides subsidies every year. In theory, this fee should be reasonably adjusted based on policy changes.
Taking flue gas emission standards as an example, with the improvement of environmental protection standards, waste incineration power generation companies need to increase investment in equipment renovation, operation and maintenance to meet the requirements. This means an increase in operating costs. So, can the garbage disposal fee be increased accordingly? How much should it be increased? Enterprises expect the local government to provide a unified and detailed guidance price range to ensure that there are reference standards for the increase in garbage disposal fees in order to be relatively fair.
A pessimistic view in the industry is that the "national compensation retreat" has transformed the waste incineration power generation industry from a sunrise industry into a sunset industry overnight. According to research, in fact, not only is there a problem of arrears in garbage disposal fees, but there is also a "hanging bill" for online electricity bills. The uncertainty of earnings worries companies. In order to withstand the time pressure of the "15-year operating period" and "82500 hours", companies must transform as soon as possible through business models such as external heating in the next two to three years.
At the same time, waste incineration power generation companies also need policy support to achieve stable transition and development. Policies need to avoid "one size fits all" and clear blockages through more detailed policies. First, it is necessary to ensure that green electricity and green certificate transactions do not conflict with existing renewable energy subsidy policies, so that enterprises can take "reassurance" and benefit from it, so that the New Deal can be successfully implemented; Second, policies must be formulated. Fully consider the impact of economic factors, the accounting standard for waste disposal fees needs to reasonably cover enterprise cost inputs.
In fact, policies are tilting the balance towards "marketization" and encouraging companies to actively innovate and expand profits. In November 2023, the "Guiding Opinions on Standardizing the Implementation of New Cooperation Mechanisms between Government and Social Capital"(hereinafter referred to as the "Opinions") listed waste solid waste treatment and waste incineration power generation projects as projects that should be wholly owned or controlled by private enterprises. At the same time, the "Opinions" clearly state that the additional benefits obtained by franchisees through strengthening management, reducing costs, improving efficiency, and actively innovating will mainly belong to the franchisees on the premise of ensuring project quality and output (service) effectiveness.
This policy is considered by the industry and indicates the development direction of marketization of the waste incineration power generation industry. But for companies, it can be said that several companies are happy and others are sad. On the one hand, it encourages enterprises to be self-reliant, especially private enterprises to benefit through innovation; on the other hand, the waste incineration power generation industry, as the key to solving the problem of "garbage siege", also bears the responsibility of ensuring people's livelihood. If more pressure is given to private enterprises, can the economy withstand it? Will it affect the livelihood issue of garbage disposal? All need to be further observed.
The prerequisite for the development of waste incineration power generation enterprises is to solve the problem of waste disposal first. Only when people's livelihood is guaranteed can there be industrial development. The two cannot be put the cart before the horse. Therefore, enterprises are required to actively expand their sources of income, and the government is also required to provide strong, practical and stable support based on the actual interests of enterprises.
