Use of Alternative Fuels in the Cement Sector in Ethiopia: Opportunities, Challenges and Solutions Use of Alternative Fuels in the Cement Sector in Ethiopia: Opportunities, Challenges and Solutions The material in this work is copyrighted. Copying and/or work do not imply any judgment on the part of the World Bank transmitting portions of all of this work without permission may concerning the legal status of any territory or the endorsement or be a violation of applicable law. IFC encourages dissemination acceptance of such boundaries. The findings, interpretations, and of its work and will normally grant permission to reproduce conclusions expressed in this volume do not necessarily reflect portions of the work promptly, and when the reproduction is for the views of the executive directors of the World Bank or the educational and non-commercial purposes, without a fee, subject governments they represent. to such attributions and notices as we may reasonably require. 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The boundaries, colors, and parties named herein. denominations, and other information shown on any map in this Contact Information 2121 Pennsylvania Ave, NW Washington, DC 20433, USA ifc.org 2017  Photo: © Curt Carnemark / World Bank Table of Contents Executive Summary 9 1. Background And Objectives 12 2. Approach And Methodology 14 3. The Use Of Alternative Fuels In The Cement Sector: Drivers And Global Practices 16 4. The Cement Sector In ETHIOPIA: Overview And Energy Demand Forecast 20 5. Technical Potential For The Use Of Alternative Fuels 22 5.1 Municipal Solid Waste 22 5.2 Wood Biomass and Agricultural Residue 27 5.3 Wastewater and Sewage Sludge 30 5.4 Waste Tires 32 5.6 Summary of Potential 32 6. Waste Management And Alternative Fuels: Policies, Practices And Barriers 33 7. Economic Potential For The Use Of Alternative Fuels 38 8. Summary And Conclusions 41 Annexes 42 List of Acronyms and Abbreviations AF Alternative fuels MSMEs Medium, small and micro enterprises CO2 Carbon dioxide MSW Municipal solid waste C&D Construction and demolition OPEX Operational expenditure CAGR Compound annual growth rate PET Polyethylene terephthalate CAPEX Capital expenditure PJ Prosopis juliflora CRGE Climate resilient green economy PP Polypropylene EU European Union PPP Private-public partnership EUR Euro PVC Polyvinyl chloride GJ Gigajoule RDF Refuse-derived fuel ha Hectare SSA Sub-Saharan Africa IFC International Finance Corporation SWM Sikud waste management l Liter t Metric ton km Kilometer TDF Tire-derived fuel LDPE Low density polyethylene US$ US dollar LHV Lower heating value WTE Waste-to-energy m3 Cubic meter WWTP Wastewater treatment plant MRF Material recovery facility Acknowledgments This report was produced as part of a broader assessment to promote the use of alternative fuels in the cement sector in Sub-Saharan Africa conducted in four countries: Ethiopia, Kenya, Nigeria and Senegal. The assessment was managed by Alexander Larionov and Sinem Demir (IFC). IFC commissioned Exergia S.A. to support the collection of information and analysis, and in particular its key experts, Kostas Batos, Konstantinos Georgakopoulos and Chris Theophilou. The team would like to acknowledge the contribution from stakeholders, including Addisu Gebremehdin (Senior Expert, Ministry of Environment), Aweke Hailemariam (General Manager, Addis Ababa Water and Sewerage Authority), Gemechis Tilahun (Addis Ababa Water and Sewerage Authority), Dawit Ayele (General Manager, Addis Ababa City Cleansing Management Agency), Haile Assegide (Executive Director, Derba Cement), Mesfin Abi (General Manager, Habesha Cement), Kasim Ahmed (Production Manager, Habesha Cement), Axumawi Ebuy (National Cement), Habte Woldemariam (General Manager, Dynamic Sanitation Services), Abebe Deyore (Dibora Collecting Service) and Gebregzahber Kassa (Sanitation and Beautification Coordinator, City of Mekelle). The assessment was supported by the Korea Green Growth Partnership. The team would like to thank Eun Joo A. Yi (Program Manager) for support and guidance. The team is grateful to World Bank Group colleagues for guidance and support of the assessment, as well as feedback on the report. We would like to thank Daniel Shepherd, Etienne Kechichian, Philippa McLaren, Michel Folliet, James Michelsen, Farouk Banna, Henri Sfeir, Jonathan Wanjiru, Jeremy Levin, Luis Alberto Salomon, Alexander Sharabaroff, Denis Obarcanin and Yana Gorbatenko. Foreword Rapid urbanization in emerging markets has created new challenges for economic development and poverty reduction. The need for more buildings, transport and other infrastructure has boosted demand for construction materials and especially cement, making it the centerpiece of the urban development agenda. In Sub-Saharan Africa, consumption of cement is expected to continue to grow over the coming decade. To meet this demand, over a dozen new kilns were launched in Africa in recent years. At the same time, increasing output poses challenges for cement producers, who invest significantly in sourcing energy and fuel, primarily coal or natural gas. An alternative approach is to improve efficiency and implement new technologies – such as waste heat recovery and renewable energy – and utilize alternative fuels, which are already used by major players in the cement sector globally. In IFC, a member of the World Bank Group, we have an investment portfolio in cement and construction materials of over $4.2 billion, and vast global experience in developing innovative solutions and leveraging best practices. For instance, we identify waste heat recovery opportunities as well as international best practices in the use of alternative fuels at cement plants. In 2016, IFC launched an initiative to help increase the use of alternative fuels in the cement sector in Africa, with a focus on several countries, including Ethiopia. In this country, major cement producers are already using agricultural residue to offset coal which has become increasingly expensive. The capital, Addis Ababa, is a major urban area, generating over a million metric tons of waste each year. Growth of waste quantities resulted in overfilling of disposal sites, followed by a tragic landslide incident at the Koshe landfill earlier this year. The issue is recognized by the government, which is already looking at waste-to-energy solutions. Further, Prosopis juliflora, an invasive alien tree species that occupies more than one million hectares in one of the provinces, represents significant fuel potential. Harvesting prosopis could also free up agricultural land and create much needed jobs. This report summarizes the outcomes of the assessment of alternative fuel opportunities in the country, with a focus on sourcing energy from municipal, commercial and similar waste, tires, sewage sludge and agricultural residue. It outlines the total potential as well as possible project models, involving linkages between the cement and waste management sectors. IFC has also assessed market barriers and offered measures that will increase the uptake of the use of alternative fuels. We hope that this report will provide useful information to policymakers, cement producers, waste management companies, as well as investors and project developers to realize the untapped potential for the use of alternative fuels in the cement sector in Ethiopia. Milagros Rivas Saiz Global Head of Cross-Industry Advisory Executive Summary From August 2016 to March 2017, in collaboration with the Korea Green Growth Partnership, IFC conducted an assessment of opportunities to increase the use of alternative fuels (AF) in Sub-Saharan Africa (SSA). The assessment focused on countries with the highest demand for cement in the region: Kenya, Senegal, Nigeria and Ethiopia. The assessment identified cement production clusters with high potential for substituting conventional fuels (primarily coal and natural gas) by co-processing these with fuels derived from waste streams. The assessment quantified opportunities for fuel substitution based on AF availability and the economic potential for fuel substitution. It also identified barriers to fuel substitution and measures for addressing these barriers. The AF considered in the assessment included refuse-derived fuel (RDF) produced from municipal solid waste (MSW), wood biomass and agricultural residue, sewage sludge (produced from wastewater), used tires and tire-derived fuel (TDF), used oils, and other similar wastes, where applicable. In Ethiopia, the assessment focused on the Addis Ababa metropolitan area (including areas that are within 50 km of the city boundaries), where two thirds of cement production and a high proportion of waste generation is located. Agricultural wastes, especially sesame husks, are already used as fuel by some of the producers. These producers are exploring opportunities to increase substitution. To achieve higher substitution rates, however, they will need to secure a consistent supply of AF at predictable prices that are lower than the current price of coal (around US$6.2/GJ in thermal equivalent). The assessment shows that, with the creation of an enabling environment for private sector participation, cement companies could develop the infrastructure to source AF at a cost much lower than that of coal. Biomass, RDF and TDF represent the highest thermal energy potential. Cement players are emphasizing the use of Prosopis juliflora (PJ), an invasive species that currently occupies over 1.2 million ha of land in the Afar region. While assessed technical potential is tremendous, there may be risks associated with sourcing of PJ. These risks call for diversification of the fuel supply, including the use of RDF/TDF. Sewage sludge is not currently produced at required volumes, and infrastructure for producing bulk volumes of dry sludge is only planned to be developed in the next 3-5 years. Total investment required by cement producers is estimated to be up to US$40 million. This is based on up to around US$20 million for cement kiln upgrades (US$5 million for each of the four companies in the Addis Ababa cluster), a US$10 million contribution towards establishment of a MRF that produces RDF and TDF (assuming that the cement sector contributes up to 50% of total required investment of US$20 million, in order to secure supply and control prices), and a US$10 million investment in a PJ processing facility. This investment will pay back in 3-4 years. To support realization of this opportunity, cement producers need to secure AF supply at predictable prices that remain below the current price of coal (around US$6.2/GJ in thermal equivalent). The establishment of an efficient waste management system is therefore critical, as proven by global experience. This is, however, hampered by the current poor state of basic waste collection and transport infrastructure, and a lack of incentives for private participation in waste management projects. Globally, while cement producers tend to co-invest in AF production facilities, they are typically reluctant to invest in or support basic waste management infrastructure – this is a non-core business that imposes additional risks on operations. Presently, waste management services in Ethiopia, including those in the Addis Ababa area, are dominated by municipal companies. Private companies operate on a very small scale and there is no system of incentives for diversion of waste from landfills. 10 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Furthermore, there are community engagement issues around new disposal site projects in the Addis Ababa area, limiting overall waste disposal capacity. At the same time, certain projects under implementation, such as the waste-to-energy (WTE) project at the Repi disposal site, show that the government is committed to reducing the quantities of waste being landfilled. CAPEX US$ million / The following measures, implemented as part of the payback (years) integrated solid waste management (SWM) system, would encourage the use of AF by securing long-term supply and 40 / 3-4 incentivizing investors to build the needed facilities: (1) Establishment of a waste quantities measurement and metering system at all stages of waste 34.8 handling which would enable payments for waste management services to be linked to the volumes 24 of waste processed; (2) Establishment of a Private-Public Partnership THERMAL ENERGY DEMAND AND (PPP) framework and a system of incentives TECHNICAL AF POTENTIAL, which would encourage private operators to Million GJ/year enter the Ethiopian market and engage in waste recovery projects; and Figure 1. Summary of (3) Improvement of the technical capacity and alternative fuel opportunities awareness of municipal waste management for the cement sector in the operators and government agencies responsible Addis Ababa area in Ethiopia, for waste management, in order to empower assuming removal of barrierS them to make informed decisions on upgrading for the private sector waste handling infrastructure. Implementation of concepts such as Extended Producer SOURCING COST Responsibility is also essential. This is one of the key 8 2,2 2,2 2,5 6,2 mechanisms for ensuring that the total cost of waste is 6 covered by payments from ‘polluters’, including indirect 4 payments through the cost of goods. Implementation will 2 contribute towards creating a favorable environment for 0 investors, including local and international private sector RDF TDF Agri biomass Coal (prosopis) waste management service providers, financial institutions and cement companies. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 11 1. Background and Objectives In the past decade, countries in Sub- National and local governments are faced with the challenge of creating Saharan Africa (SSA) have been going modern urban infrastructure that supports sustainable growth of cities by reducing their environmental footprints. In Nigeria, for example, the through economic and social changes total amount of MSW generated is expected to reach more than 100 that are reshaping development and million t/year by 2020, almost double the recorded volumes in 2010. growth patterns and creating new challenges and opportunities for various 69 86 102 100 stakeholders, including the private sector, governments, and society as a whole. 0 2010 2015 2020E Rapid urbanization has led to significant Figure 2. Municipal solid waste generation growth of industrial and household in Nigeria, million t/year1 consumption, which in turn has triggered rapid growth in waste volumes, 200 100 149 including municipal solid waste (MSW), 100 wastewater, hazardous and chemical 0 wastes, and industrial waste. 2015 2020E Figure 3. Expected demand for cement in Sub-Saharan Africa, million t/year1 Another urbanization trend is the rapid growth in demand for new residential and commercial property and, therefore, increased demand for construction materials, including cement. From 2015 to 2020, the demand for cement in SSA is expected to increase by almost 50%, calling for new cement kilns to be built. On average, since 2010, compound annual growth (CAGR) of cement consumption in the region has been approximately 7%, with certain countries, including Ethiopia, Nigeria, Kenya and Senegal, showing even higher growth rates. 20% 7% 10% 9% 8% 8% 10% 0% SSA Ethiopia Nigeria Senegal Kenya Figure 4. Cement consumption growth (2010-2015 CAGR)1 1 Source: CW Group, 2015, Cleaner Cement Sector Africa: Context Study. 12 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Photo: Simone D. McCourtie / World Bank Production of clinker and cement is highly energy intensive; In response to these challenges, IFC conducted a thermal energy and fuel contributes up to 40% of total study to identify opportunities for and barriers production costs. Availability of primary fuel is often a major challenge in markets where demand for cement is growing rapidly, to the use of AF in the cement sector in SSA, as is the case in SSA. Typically, coal and natural gas is used as the focusing on the countries with significant demand primary fuel for cement kilns. Many countries rely on imports for cement, including Ethiopia.2 The study had of these fuels; these are often associated with a high cost of the following objectives: transportation, customs, duties and surcharges, currency exchange risks and insecurity of supply. Ethiopia, for example, imports (1) Assess technical and economic potential for fuel coal from South Africa; the prices have been volatile in recent substitution in key cement production cluster(s) in Ethiopia; years and have been subject to upward pressure due to growing transportation costs and surcharges at the port of Djibouti. (2) Assess the overall market environment and identify barriers for implementation of AF projects, including 200 120 130 130 160 policy, administrative, financial and technical aspects, and propose solutions that would enable private sector players, including cement companies, to invest in infrastructure to 0 increase fuel substitution rates and make sourcing of AF Jan 16 April 16 July 16 Oct 16 economically feasible, thereby reducing cement companies’ Figure 5. Coal price in Ethiopia, US$/t environmental footprints and contributing to sustainable development of the country.   Given this situation, most major cement producers are looking for cheaper reliable alternatives. In Ethiopia, agricultural residues are increasingly being used as fuel for cement kilns. In other countries, including Kenya and Senegal, there have also been some positive experiences in the use of alternative fuels (AF). At the same time, substitution rates typically do not exceed 15-20%, which is relatively low, based on best practices in the European Union (EU) or the United States (US). Some of the waste streams that can become sources of fuel, such as MSW, sewage sludge, waste tires, oils, and other commercial or industrial waste, seem to be underexploited when compared to global best practices. This may indicate that there are certain barriers that prevent cement companies and other stakeholders from implementing AF projects. 2 Other countries included in the assessment are Kenya, Senegal and Nigeria. These countries are covered in separate reports. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 13 2. Approach and Methodology The potential for fuel substitution by The assessment draws on studies, reports and other data available from market stakeholders and the World Bank, as well AF was informed by the following as interviews conducted with 15 stakeholders, including cement activities: producers, environmental and waste management authorities, (1) Assessment of technical potential for and private waste management operators. Data included in the assessment was collected up to 31 March 2017. sourcing AF based on quantities of waste available (generated and collected, or It is worth noting that the economic potential for the use of technically feasible to collect) in the key alternative fuels was assessed primarily from the standpoint of cement production clusters; the cement sector. The assessment identifies costs and benefits for the cement industry (as well as associated waste management (2) Analysis of waste management practices, players). For each specific project or opportunity, further regulatory framework, and other factors analysis should be performed to assess financial implications that would affect accessibility and the cost of for the public sector, including the impact of various incentives and support measures. Such further analysis may include a sourcing key AF streams, in order to identify comparison of costs and benefits of operating or upgrading a barriers to full utilization of AF potential, and disposal site, as opposed to supporting construction of material development of solutions; recovery/RDF production facilities, in order to justify specific incentive schemes. (3) Assessment of the cost of sourcing AF under different scenarios involving To assess the potential for AF projects, the assumptions on available infrastructure, following assumptions were made: secondary regulations, and stakeholder participation; and (1) Based on waste composition data, assumptions were made as (4) Preliminary assessment of economic to the physical properties of key waste streams, their calorific feasibility of AF projects, based on required value and amount of available fuel (such as RDF or TDF) – capital expenditure (CAPEX) by cement see Annex 1 for details; companies and cost differential between AF (2) It was assumed that certain modifications would be and traditional fuels. performed on the cement kilns in order to maximize fuel substitution rate and burn AF (as specified in Annex 1); (3) Key stages of waste conversion into fuel would include collection, transportation, processing and then delivery to the cement kiln. Detailed assumptions on each of the technical and economic parameters regarding processing facilities and logistics, based on available data and IFC’s experience in the sector, are available in Annexes 2-4; 14 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA (4) For the purpose of the assessment, the total sourcing cost waste management service fees and payments, as well as was estimated for each AF stream reviewed. Under the revenue from recyclables. Details on the cost structure and assumptions are provided in Annexes 2-4; and baseline scenario, the total sourcing cost includes a sum of the costs incurred at all stages of waste-to-fuel conversion (5) For certain types of waste, some of the sourcing cost components were excluded for the purpose of the listed under item (3) above. The cost includes fixed and assessment. For the assessment of MSW/RDF costs, two variable operating expenditure (OPEX) as well as CAPEX scenarios have been considered, as indicated in Table 1 depreciation over the period of the economic life of the below, to reflect various possible scenarios of the market facilities and infrastructure (excluding pre-existing facilities). environment, capacity of sector players and regulatory Where appropriate, the cost of sourcing is adjusted for barriers, based on the data in Annexes 2 and 3. Table 1. Sourcing scenarios for municipal solid waste / refuse-derived fuel Cost Item Option 1 Option 2 Cost of primary collection and Excluded Included (with the exception of the cost transportation of MSW currently covered by waste management fees and addition of the depreciation of CAPEX required to maintain infrastructure) Cost of MSW processing at a Included (proportional to the volume of Included (full) comprehensive MRF waste converted into RDF) Cost of RDF delivery to the cement Included Included plant Cement sector participation in MRF 50% + adjustment of the sourcing cost 50% CAPEX for the revenue from recyclables Cement sector participation in None 50% collection and transportation infrastructure CAPEX USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 15 3. The Use of Alternative Fuels in the Cement Sector: Drivers and Global Practices Cement production is highly energy intensive – energy costs make up approximately 60% of total production costs. Thermal energy costs, in particular, are significant, representing 40% of production costs.3 Thermal energy needs vary from 3.2 to 4.2 GJ/t of clinker produced, depending on the process used.4 Dry process systems are the most efficient, using less than 3.8GJ/t.5 Modern cement plants tend to use from 3.3 to 3.5 GJ/t of clinker produced. The cement industry is therefore focusing on reducing thermal fuel costs by substituting conventional thermal fuels with lower cost AF arising from waste streams. Key waste streams that can be used as AF are plastic, biomass, tires, and solid industrial and household waste. These streams make up approximately 60% of AF used by major global cement producers. OVERALL* BY CEMENT PRODUCER 100% 0% 20% 40% 60% 80% 100% 14% Lafarge group Plastic 6% Wood chip and other 8% biomass 9% Heidelberg group Tires Industrial and household 13% waste (solid) Holcim group 15% Waste oil Industrial waste and Italcementi group other fossil-based fuel 16% Agricultural waste 17% Cemex group Other AF *Overall proportions are estimated based on relative production of cement and clinker of producers Figure 6. WASTE used as af by selected major cement producers6 3 Electricity needs vary from 90 to 120kWh/t of cement produced. 4 Wet processes involve grinding raw materials in water to form a slurry, which is fed either directly into the kiln or to a slurry drier. Semi-wet processes involve dewatering raw slurry in filter presses; the filter cake is pelletized and fed to either a grate preheater or a filter cake drier. Semi-dry processes involve pelletizing raw material with water and feeding the mix into a grate preheater or to a long kiln. Dry processes involve grinding and drying raw materials to form a flowable powder, which is fed into the preheater or precalciner. 5 Source: http://hub.globalccsinstitute.com/publications/co2-capture-cement-industry/24-cement-plant-descriptions 6 Sources: Rahman, Rasul, Khan and Sharma, 2014, Recent development on the uses of alternative fuels in cement manufacturing process; Holcim, Annual Report 2011 Holcim Ltd, 2012; Securities and Ex- change Commission, Italcementi Group, Annual report, 2015; Heidelberg Cement, Annual Report 2015; GBL Annual Report 2013. 16 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Globally, most large producers’ plants have achieved a substitution rate of 10-30%, with some plants reaching 100% substitution.7 European countries have advanced significantly, averaging 18% and reaching as high as 85% substitution. selected geographies* selected european countries (2011) 0% 50% 100% 0% 50% 100% EU (2012) Netherlands Belgium Japan (2012) Germany* Canada (2008) Sweden Poland USA (2004) Switzerland** Australia (2013) Spain * Data is for 2010 ** Includes only Holcim, data is for 2012 Figure 7. AF substituTION rates in selected regions and countries8 Poland’s fuel substitution rate has grown rapidly, from a negligible contribution in 1998 to over 60% in 2016. Some plants have achieved a rate of 85%. AF co-processing capacity, primarily for RDF, of 1.5 million t/year has been installed; this capacity is expected to grow to approximately 2 million t/year.9 7 Source: Wurs and Prey, Alternative fuels in the cement industry, University of Vienna, http://www.coprocem.org/documents/alternative-fuels-in-cement-industry.pdf 8 Source: Rahman, Rasul, Khan and Sharma, 2014, Recent development on the uses of alternative fuels in cement manufacturing process. 9 This capacity draws on municipal waste production of 15-20 million t/y. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 17 Factors contributing to Poland’s rapid AF substitution growth Poland’s strong growth in AF substitution, to over 60% in 2016, was supported by a range of factors, as set out below. Successive increases in landfill tax: - Adoption of a tax in 1998 prompted greater interest in AF (previously substitution had focused on hazardous wastes, which were forbidden to be disposed of at landfill sites); - Landfill taxes were extended to municipal wastes in 2001; and - The tax was increased significantly in 2008 from 4 EUR/t to approximately 17 EUR/t, with a 100% increase to be implemented between 2008 and 2018. Expanded supply of RDF due to overproduction in Germany following a ban on disposing of recyclable and organic waste at landfill sites in 2005; this drove the substitution rate in Poland to 20%. Clear responsibilities for waste collection by landfill operators and municipal waste management by municipalities, supported by adoption of relevant EU Directives (Waste Management, Waste Incineration, and Landfill Directives). Allocation of legal responsibility to manage used tires to tire manufacturers under the Extended Producers’ Responsibility principle – in response, tire manufacturers created a shared company to subsidize and organize tire collection and management. Investment in RDF handling facilities by all cement companies at their plants – Polish cement companies were willing to duplicate the AF experience of international cement groups, in order to reduce operating costs. Investment in shredding lines for RDF preparation by the waste management sector (typically local entrepreneurs supported by international companies or investment funds), supported by: - High potential demand for RDF from the cement sector, at up to 1 million t/year in source MSW volume equivalent; - Mid- to long-term contracts with the cement industry; - Subsidies provided by EU and local government funds (partly through an allocation of the landfill tax); and - Shared investment by both cement plants and RDF preparation plants in some cases. 18 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA AF substitution rates have also been increasing in other regions, Producer Responsibility, which engages producers of goods including emerging markets. In Egypt, Italcementi’s Katameya such as electronics, cars and car parts, and packaging in the plant has reached 8.3% substitution in two years, saving sector, and incentivizes them to invest in basic waste collection 115,000 t of CO2. Fossil fuels were replaced with biomass and transportation infrastructure, as well as waste recycling (such as chopped wood and cotton stalks) and high-quality and waste-to-energy projects. Globally, these are the types of RDF produced by a waste pre-treatment facility using material mechanisms that engage private investors and project developers diverted from landfills.10 In Mexico, CEMEX’s Tepeaca plant in this sector, while cement companies act as long-term off-takers uses 800 t of commercial and industrial residues per day supplied of fuel and may be reluctant to invest in basic infrastructure, as by Mexico City’s waste management facilities. In 2016, CEMEX this is outside their scope of business. There are, however, cases was planning to invest in RDF facilities to increase capacity to where cement companies co-invest specifically in the production 1,600 t per day.11 of fuels (such as RDF and TDF), on a standalone basis or as part of a comprehensive material recovery facility (MRF). This allows An important lesson from global best practices for the use of AF is that fuel substitution is driven not only by fuel prices cement companies to secure long-term supply of fuel as well as and access to fuel for cement kilns, but also to a great extent obtain more control of the prices and the value chain. by the waste management sector which is the main source of Therefore, the development of integrated solid waste AF. In many markets, strong incentives exist to divert waste from disposal sites and maximize recovery, including as energy management systems in African cities would be the major factor and fuels. Those incentives include different types of fees fostering the use of AF. However, experience from emerging and surcharges (such as gate fees) applied to various forms markets also shows that, in the medium term, it may be possible of waste and wastewater treatment. Furthermore, in certain to create a market environment and structure projects specifically cases, there is a complete ban on disposing of certain types of in the AF space with more proactive participation of the cement waste. Strengthening of the waste management sector is often sector. Such scenarios and opportunities are explored in the accompanied by implementing mechanisms such as Extended remainder of this report. 10 Source: Italcementi Annual Report 2015. 11 Source: CEMEX, 2015 Sustainable Development Report. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 19 4. The Cement Sector in Ethiopia: Overview and Energy Demand Forecast The cement cluster in the Addis Ababa The Ethiopian cement industry serves one of the largest markets in SSA area, which represents two-thirds of – Ethiopia produced 10 million t in 2017, nearly matching demand. New kilns are planned to be commissioned, supporting further growth to an production, utilizes approximately 24 estimated 12 million t/year of clinker by 2020. million GJ/year in thermal energy, served predominantly by coal. The price of coal is The largest players in the industry are Mugher Cement, Derba Midroc is currently at US$160-180/t (or US$6.2/GJ Cement, Messebo Cement, Dangote Cement and National Cement. Another player, Habesha Cement, has recently launched production with thermal equivalent) and increasing. capacity of up to 1.5 million t/year. The Addis Ababa area represents the biggest cement production cluster, where four out of six key players, Mugher, Derba Midroc, Dangote and Habesha Cement are located, with an expected thermal demand of 24 million GJ/year by 2020. Other players are dispersed across the country. (Million Ton) Production Imports Apparent consumption Exports CAGR 10.0% CAGR 12.4% 4.3 4.9 5.9 6.5 7.0 7.7 8.5 9.3 10.2 11.3 12.4 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E Figure 8. CEMENT PRODUCTION AND CONSUMPTION IN ETHIOPIA12 12 Source: CW Group, 2015, Cleaner Cement Sector Africa: Context Study. 20 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Cement plant locations and production technology* Plant capacity and thermal energy demand Messebo Cement (EFFORT Investment Group) • Mekelle Cement capacity Clinker capacity Thermal energy • Integrated dry, new (million t/year): (million t/year): demand (million ETHIOPIA National Cement 13.3 10.1 GJ/year): 36.4 (East African Holdings) • Dire Dawa 100% 1,6 4,6 • Integrated VSK 1,3 Other 1,2 3,1 ADDIS ABABA Mugher Cement 0,9 • Mugher 1,2 3,2 Habesha • Integrated dry, new 0,9 2,2 5,9 National Derba Midroc Cement 1,7 (Midroc Ethiopia Technology Group) 50% Mugher • Derba 2,1 1,7 6,3 • Integrated dry, new Messebo Dangote Cement 2,5 1,8 6,3 Derba Midroc • Mugher • Integrated dry, new Dangote 2,5 1,9 6,8 Habesha Cement 0% *Only clinker production units are present • Holeta Figure 9. CEMENT PLANT LOCATIONS, CAPACITY AND ENERGY DEMAND IN ETHIOPIA AS OF MARCH 201713 The cement industry has good technical potential for AF substitution: Certain cement producers are using agricultural wastes and all major the plants use dry process, cyclone preheater technology and cement companies aim to increase use of AF to substitute coal. The currently most are capable of achieving a substitution rate of 20- use of tires, waste oils and other industrial wastes is limited and 25% (with a maximum theoretical replacement of 30%); this could MSW/RDF is not used at all. be increased to 50% and above with installation of appropriate AF equipment.14 All major players are seeking to offset costly coal with alternatives. National Cement is piloting use of sesame husks and rice husks. Currently, the cement industry uses predominantly coal for its Messebo Cement has already made the modifications necessary to use thermal energy needs. Most of the coal is imported from South sesame husks as fuel on a large scale. The equipment and machinery Africa. The resulting cost at the plant has been steadily increasing and installed is designed for 40% heat replacement with the prospect to was within the range of US$160-180/t, which translates to at least rise to 60%.15 Further sourcing of agricultural residues may, however, US$6.2/GJ in thermal equivalent. Some players reported a price of up be associated with additional cost and potentially increased risk to US$200/t in 2016, translating to US$7.8/GJ. of access to fuel. A detailed analysis of the AF sourcing potential is A more conservative estimate of US$6.2/GJ will be used for further provided in the next section. Further analysis will be focused on the analysis. Addis Ababa area, which shows the highest thermal energy demand, along with the greatest untapped potential fuel substitution. US$/t US$/GJ 250 8,0 87.69 US DOLLARS PER METRIC TON 7,8 83.66 200 7,0 79.64 200 6,2 75.61 160 6,0 71.58 150 67.56 130 130 120 5,0 63.53 5,0 5,0 4,7 59.51 100 4,0 55.48 51.45 50 3,0 47.43 Jan 16 Apr 16 Jul 16 Oct 16 Nov 16 Nov-2015 Dec-2015 Jan-2016 Feb-2016 Mar-2016 Apr-2016 May-2016 Jun-2016 Jul-2016 Aug-2016 Sep-2016 Oct-2016 Figure 10. COAL PRICE TREND IN ETHIOPIA 13 Source: CW Group, 2015, Cleaner Cement Sector Africa: Context Study; Interviews with sector players, 2016. 14 AF substitution potential depends on a range of factors, including waste availability, sourcing cost, and distance from the cement plants; each case must be assessed separately (see Section 2 of the report and Annexes 2-4). 15 Source: http://www.messebocement.com/Biomass.aspx USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 21 5. Technical Potential for the Use of Alternative Fuels RDF from MSW generated in the Addis 5.1 Municipal solid waste Ababa area, biomass (specifically PJ) and The generation of municipal solid waste has been growing steadily, waste tires show the highest technical particularly in Addis Ababa. As in many countries in Africa, however, potential for sourcing as AF, at 35 million/ estimating quantities of available waste is challenging due to the absence of reliable statistics and sub-optimal collection rates, especially outside GJ in thermal energy. This exceeds major cities and in rural areas. thermal energy demand of cement Across Ethiopia, based on an average estimated generation of 0.30 companies located in the Addis Ababa kg per capita per day and projected population size of up to 110 area. It is estimated that MSW available million by 2020, the total amount of generated MSW is expected to be in the Addis Ababa area by 2020 will approximately 12 million t/year.16 The Addis Ababa area is the largest translate to up to 240,000 t/year of source of MSW. Although there are uncertainties and gaps in statistics RDF and 3.8 million GJ/year of thermal available from authorities, it is reasonable to assume that in 2015, an estimated 1.1 million t MSW was generated with a 60-70% collection energy. PJ is estimated to represent up rate. Since 2006, the recorded quantity has nearly doubled, following to 30 million GJ/year in technical thermal rapid urban growth. Assuming this trend continues in the future, at a potential (assuming that up to 10% of PJ constant collection rate, the available amount of waste would exceed 1 residue can be immediately accessed). million t/year by 2020. A further 1 million GJ/year is estimated to Households, institutions, commercial centers, factories, hotels, health be available from waste tires. facilities and public areas are the main sources of waste. In Addis Ababa, it is reported that 76% of MSW is generated by households, the remainder is generated by organizations or in public areas.17 16 Source: World Bank, 2012, What a Waste, A Global Review of Solid Waste Management. 17 Interview with Addis Ababa City Administration Cleansing Management Agency, 2016. 22 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA MSW in Ethiopia (2020): ~12 million t MSW trends in Addis Ababa, t/year 1 600 000 1 445 400 1 400 000 1 180 000 1 200 000 Addis Ababa 1 011 780 Area 1 000 000 826 000 1.5 million t 800 000 600 000 450 000 400 000 Rest of 200 000 Ethiopia 0 9.7 million t 2006 2015 2015 2020 2020 (estimated) (estimated) (recorded (forecast) (forecast - collection) collection) Figure 11. FORECAST OF AVAILABLE WASTE QUANTITIES18 Other 15% MSW generated in Addis Ababa is composed primarily of organic Glass waste. Waste in other Ethiopian towns and cities is likely to have 3% Hygienic Organic an even higher level of organic waste. textiles 57% 3% A WTE plant currently under construction at Repi, the primary Textiles 3% disposal site serving Addis Ababa, is expected to utilize Board approximately 360,000 tons/year, based on its planned peak 3% electricity output of 25MW (an additional processing line of Unclassified combustible 25MW capacity may be installed in future). With this site fully in 3% Paper operation, over 600,000 t/year of waste will remain untreated. 4% Plastic Figure 12. waste composition IN ADDIS ABABA 9% 18 Interview with Addis Ababa City Administration Cleansing Management Agency, 2016. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 23 Legend Cement Industries Dangote Cement Derba Midroc Cement Mossebo Cement Mugher Cement National Cement Habesha Cement Waste collected (thousand tons/year) 0 - 50 ADDIS 50 - 100 ABABA 500 - 600 Ethiopia Administrative Setting https://commons.wikimedia.org/wiki/File:Map_of_zones_of_Ethiopia.svg Figure 13. WASTE COLLECTED IN MAJOR URBAN AREAS IN ETHIOPIA 2015, MILLION T/YEAR MSW availability is affected by management of waste streams, Waste collection practices and efficiencies vary widely. Collection from collection to disposal. Waste collection systems do not efficiencies reach 70% in Addis Ababa and Mekelle, but are exist in many areas, or are inadequate for serving the intended estimated to be much lower in other towns and cities. It is customers. Waste is dumped along roads, drainage systems or any common practice, however, for primary collection of household other available space. In the absence of engineered landfills in waste to be conducted by individuals or small or micro most cities, waste is generally dumped in an uncontrolled manner enterprises, referred to as associations. The pre-collected waste is on the outskirts of towns and cities. The situation is exacerbated placed in containers, which are then collected by municipalities by inadequate enforcement of waste management policies, and transferred to dumpsites or landfills for final disposal. financial and operational constraints, and lack of awareness of good waste management practices amongst citizens. 24 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA In Addis Ababa, solid waste collection services are divided non-governmental organizations. Street sweeping is carried into primary and secondary collection. Primary collection and out by the Addis Ababa City Administration Cleansing transport to intermediate garbage containers (skip points) Management Agency.21 Secondary collection, i.e. the are outsourced to small and micro enterprises and private collection from skip points for final disposal at dumpsites, companies (with private companies focusing on collection is performed by Addis Ababa City Administration Cleansing from organizations). Small and micro enterprises involved 20 Management Agency and a few private contractors. in waste collection are organized by the government and involve 6,400 people. Methods used for primary collection include door-to-door, curbside collection and block collection systems. Door-to-door collection, the most common method, involves collecting waste from households using push-carts. Curbside collection, the second most commonly practiced method, involves households depositing their waste using baskets, plastic bags, etc. into containers of varying sizes placed by Addis Ababa City Administration Cleansing Management Agency near street corners. Garbage containers for block collection are provided by private companies to Figure 14. Primary waste collection using hotels, hospitals, enterprises and other governmental and push-carts in Addis Ababa19 Collection Transfer Sorting and Disposal treatment • Municipalities • Municipalities • Households • Municipalities Actors • Small and micro enterprises • Private contractors • Private companies • Private contractors • Private companies • Informal sector • Informal sector • Primary collection and • Secondary collection • Recovery of recyclables • Disposal at dumpsites Process storage at skip points (from skip points and deposit of and sanitary landfills to final disposal) recyclables at banks Figure 15. MSW MANAGEMENT IN ETHIOPIA 19 Source: Addis Ababa City Administration, 2010, Overview of Addis Ababa City Solid Waste Management System. 20 Interview with Addis Ababa City Administration Cleansing Management Agency, 2016. 21 Source: Desta, Worku and Fetene, 2014, Assessment of the contemporary MSW Management in Urban Environment: The case of Addis Ababa, Ethiopia, Journal of Environmental Science and Technology 7 (2). USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 25 In Addis Ababa, waste is collected at skip points using 8 m3 garbage bins, Ethiopia does not use waste transfer before being transported to the final disposal site. The Addis Ababa City stations. Instead it uses skip points, or, Administration Cleansing Management Agency has 19 solid waste compactors in cities that lack skip points, collected of 80 m3 capacity, additional solid waste compactors of 24 m3 capacity, and 111 waste is stored on the roadsides until skip-mounting trucks for lifting 8 m3 garbage bins.22 The agency is planning to it is transported to dumpsites. replace the skip trucks with 40 m3 compactors to reduce transport costs. While the Addis Ababa City Administration Cleansing Management Agency Figure 16. Skip points to support secondary waste collection in Addis Ababa23 is encouraging separation of waste at source, most sorting is conducted by the informal sector on collection, at skip points, or at dumpsites. The individuals and small and micro enterprises involved in sorting then sell the recyclables (plastic bottles, metals, aluminum etc.) to middlemen, brokers, or formal or informal recycling companies. From January to November 2016, approximately 611,600 m3 (161,500 t) of solid waste had been processed by small and micro enterprises, generating an income of 8 million Birr (US$350,000) from sale of the recyclables.24 In Addis Ababa, most solid waste is disposed of at Repi dumpsite.25 Repi is associated with many environmental, social and operational problems: it has exceeded its capacity, is surrounded by residential areas, and has no leachate collection or treatment system, no rainwater drain, no fence and no waste weighing system. Over 300 informal waste pickers sort remaining valuable items such as unbroken glass bottles and scrap metals. A new sanitary, engineered landfill was constructed in Sendafa (35 km from Addis Ababa) in order to replace Repi. The launch of the new landfill site is, however, being delayed due to challenging consultation with local communities. For the purpose of the assessment, it is assumed that the total amount of municipal and similar solid waste available in the Addis Ababa area by 2020 at the current rate of collection will be up to 700,000 t/year (excluding the amount Figure 17. Repi dumpsite in Addis Ababa 26 consumed by the WTE facility). Based on the assumed waste composition, this 22 Interview with Addis Ababa City Administration Cleansing Management Agency, 2016. 23 Source: Addis Ababa City Administration, 2010, Overview of Addis Ababa City Solid Waste Management System. 24 Interview with Addis Ababa City Administration Cleansing Management Agency, 2016. 25 Interview with Dibora Garbage Collecting Service, 2016. 26 Source: Addis Ababa City Administration, 2010, Overview of Addis Ababa City Solid Waste Management System. 26 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Photo: A’Melody Lee / World Bank translates into the potential for generating up to 240,000 t/year As at May 2017, however, no projects had been implemented on a of RDF and 3.8 million GJ/year of thermal energy, which is up to large scale. Given the attractiveness of PJ, this assessment focuses 20% of the total forecasted thermal energy demand in the cement on PJ as the primary source of AF derived from wood biomass or sector. agricultural residue. 5.2 WOOD BIOMASS AND AGRICULTURAL RESIDUE While agricultural residue is available across the country, the largest quantities are available from PJ in the Afar region. Wood biomass and agricultural residue offer promising sources of AF. Ethiopia’s agricultural sector is well developed – it is the largest producer of coffee in SSA, and amongst the largest producers of wheat and maize in the region. Residue from maize, 1 (2%) 1 (2%) Other wheat, and sorghum together represent a technical potential Rice straw and husks of 27 million t/year. Currently, this agricultural residue is used primarily by rural households for cooking (as available given 21 (42%) 7 (14%) Prosopis crop seasonality). However, the most biomass-to-fuel potential juliflora Sorghum straw is represented by PJ, an invasive species occupying around 1.2 million ha in the Afar region.27, 28 The total amount of biomass from PJ is estimated at 21 million t/year (based on an estimated yield of 17.8 tons/ha) and much of it would be available within 100-200 km from the Addis Ababa cement cluster. 8 (16%) Wheat straw Much analysis has been conducted on the use of PJ as a fuel source. The calorific value of PJ is estimated at 4,200-4,500 kcal/kg of biomass (or up to 17GJ/t), indicating a total energy potential of over 300 million GJ/year. Harvesting of PJ would also result in significant benefits. PJ is an invasive species 12 (14%) Maize stalks that causes severe environmental degradation, and harvesting it would support greater biodiversity and enable crop and Figure 18: Estimated agricultural residues, livestock production by local communities using cleared space. million t/year Negotiations have been in progress to secure access to the PJ- invaded areas, in order to bring in harvesting equipment and processing facilities to produce fuel for the cement companies. 27 Source: Joint Ethiopian Electric Power and NCSC / East African Mining Corporation PLC report regarding the Prosopis juliflora harvesting areas in Afar region. 28 Source: Afar Regional Government Pastoral Agriculture Bureau. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 27 Photo: © Simone D. McCourtie / World Bank Afar Coffee residues Cotton residues Oromia Sesame stalk Amhara Sawdust SNNPR Rice residues Tigray Maize stalks Wheat straw Somali Sorghum straw Gambela Prosopis Juliflora Benshang ul Gumz 0 2 4 6 8 10 12 14 16 18 20 22 Figure 19. Agricultural residue production by region and crop Legend Cement Industries Dangote Cement Derba Midroc Cement Afar Mossebo Cement Mugher Cement National Cement Habesha Cement PJ-invaded Region Waste Generation (thousand tons/year) Ethiopia Administrative Setting https://commons.wikimedia.org/wiki/File:Map_of_zones_of_Ethiopia.svg Figure 20. Location of the PJ-invaded region 28 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Utilization of PJ (as well as other residue), although very 2. Harvesting of PJ is predicated on access to land: ‘harvesting promising, may be associated with a number of risks and concessions’ from the local government along with agreements challenges, potentially increasing the cost of sourcing and with local communities and farmers to hand over part of the preventing access to some of the residue: cleared land, may take time and require additional costs to be borne by cement companies. 1. Accessibility and costs for most crop residues is defined by seasonality and alternative uses (including use by nearby For the purpose of this assessment, it is assumed that up to 10% communities) and cement delivery logistics: most crop growing of the PJ residue can be immediately accessed via cement supply regions are outside a 100 km range of the Addis Ababa cluster, routes (i.e. by cement trucks that would deliver the fuel to the so a limited amount of residue would be accessible by cement plants), resulting in up to 30 million GJ/year technical thermal trucks; alternative logistics would dramatically increase the cost potential being available. of sourcing; USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 29 5.3 Wastewater and sewage sludge Addis Ababa is the only city with a centralized sewerage network, however, the network covers only 13% of the city. The rest of the population relies on septic tanks,29 which are evacuated by 50 to 60 government and 40 to 45 private trucks of varying capacity (3, 7.5, 8, 10, 12 and 16 m3). Wastewater is collected in a number of catchments (open lagoons), three Waste Water Treatment Plants (WWTP), and a number of smaller plants that are either in operation or are under construction. Sewage collected at catchment areas is estimated at 8.2 million tons/day. The sludge is left to be digested anaerobically. The lagoons are emptied and dried sludge removed on a staggered basis every 10 years. The WWTPs have capacities of up to 12,500 m3/day. All of the plants use biological waste stabilization pond technology. The Kality plant has a design treatment capacity of 7,500 m3/day and will be upgraded to 100,000 m3/day at an estimated cost of US$15 million (expected by 2025). The plant in Chefe has a potential treatment capacity of 12,500 m3/day. These quantities suggest a thermal energy potential of up to 2-3 million GJ/year from dry sludge. These quantities, however, are unlikely to be available in the next 5-7 years or beyond, as significant expansion of the sewerage network will be required to produce sludge at full planned capacity. Table 2. Catchment sites and quantity of disposed sewage Catchment Area Quantity (t/day) Kality 3,200,000 Decentralized (outside Addis Ababa) 2,853,000 Easter 1,500,000 Akaki 675,000 Total 8,228,000 29 Interview with Addis Ababa City Water and Sewerage Authority, 2016. 30 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 10,0 8,3 8,0 6,0 4,0 2,0 1,0 0,05 - Total wasterwater Total wastewater captured by Total wastewater generated in centralized sewerage system processed at WWTPs Addis Ababa or through septic taks and delivered to catchments/ lagoons Figure 21. Wastewater treatment volumes in Addis Ababa (2015), million m3 Based on the available data, sewage sludge will not be considered as a technically feasible source of AF in the medium term for the purpose of the assessment. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 31 5.4 Waste tires Though no reliable country-wide data is available and no formal collection system is in place, an estimated 30,000-35,000 t/year of tires is estimated to be available in the Addis Ababa area. Waste tires are most commonly recycled by formal and informal micro-entrepreneurs; limited amounts are disposed of at dumpsites together with MSW. Once an integrated waste management system has been established, it may become feasible to establish formal waste tire collection and processing infrastructure (including joint processing facilities with MSW). This would make tires a viable source of AF, at an estimated 1 million GJ/year. 5.5 Summary of potential The assessment suggests that major technical opportunities for the use of alternative fuels are associated with the use of PJ and MSW concentrated in the Addis Ababa area. Tires and TDF may also represent potential once a collection system has been put in place. The total technical thermal energy potential for the Addis Ababa area is estimated at 35 million GJ/year. Thermal energy 35 30 25 20 The market environment, regulatory 15 10 framework and barriers that prevent 5 the full utilization of this potential, 0 especially for RDF and agricultural Wood biomass (PJ) RDF TDF Coal (demand) residue, as well as the cost of sourcing these fuels under different scenarios, Figure 22. Technical potential for sourcing are explored further in Sections 6 and alternative fuels – summary for the 7 of this report. Addis Ababa area, MILLION GJ/YEAR 32 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 6. Waste Management and Alternative Fuels: Policies, Practices and Barriers An environmental and waste Ethiopia’s Constitution is an important source of environmental law. management legislation framework Ethiopia’s environmental policy is based on Articles 92.1 and 92.2: exists in Ethiopia, however, incentives Article 92.1: “Government shall endeavour to ensure that all are inadequate or are not enforced Ethiopians live in a clean and healthy environment” in way that encourages greater Article 92.2: “Government and citizens shall have the duty to private sector participation in the waste protect the environment”30 management space. Payments from The primary national policy on waste management is the Solid Waste ‘polluters’ only partially cover costs and Management Proclamation (513/2007), issued in 2007. Its main objective tend not to be linked to waste quantities. is to enhance capacity for prevention of possible adverse effects from This low level of cost recovery limits waste and creation of economically and socially beneficial assets from waste. the ability of private sector players to invest in their capacity. As such, the The Proclamation covers the following topics relating to SWM: responsibilities, waste management planning, collection & storage, introduction of measures such as the transportation, treatment, disposal, incineration, recycling, and ‘polluter pays’ principle, and Extended management of hazardous waste. The Solid Waste Management Producer Responsibility will be critical Proclamation supplements the Environmental Pollution Control for attracting private investment into the Proclamation (300/2002), which places an obligation on all urban sector. governments to devise and implement safe and effective mechanisms to handle, transport, and store municipal waste. It also states that any Ethiopia’s waste management policy is transport or treatment of municipal waste can be done only with a permit based on the Solid Waste Management from the Ethiopian Environmental Protection Agency. and Environmental Pollution Control Waste management governance – a snapshot Proclamations, and the Environmental The Government of Ethiopia established the Ministry of Environment Policy. Development of the sector and Climate Change (formerly the Environmental Protection Authority) is hindered, however, by a lack of in 2013. It is mandated with coordination of the implementation of the enforcement of the existing policy and Ethiopian Climate Resilient Green Economy (CRGE) Strategy, covering environmental management and forestry. More specifically, the Ministry: regulations, limited management capacity, lack of coordination between Drafts environmental policies, regulations, directives and municipalities and other stakeholders, standards. and limited involvement of formal Coordinates various environmental protection stakeholders. private sector players. Very poor working Oversees and controls the disposal of municipal and industrial conditions and low efficiency of informal waste and by-products. sector players are further concerns. Approves licences for various manufacturing and service industries based on relevant environmental declarations. 30 Source: Environmental Policy Review 2011: Waste Management in Ethiopia. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 33 Table 3. Main articles of the Solid Waste Management proclamation and the Environmental Pollution Control proclamation SWM activity Proclamation Description Management of Environmental Pollution Control All urban administrations shall ensure the collection, municipal waste Proclamation transportation, and, as appropriate, the recycling, treatment or safe disposal of municipal waste through the institution of an integrated municipal waste management system. Management of Solid Waste Management Proclamation Each household shall ensure that recyclable solid wastes are household solid waste segregated from those that are destined for final disposal and are taken to the collection site designated for such wastes. Urban administrations shall ensure that adequate household solid waste collection facilities are in place. It is prohibited to dispose of litter on streets, waterways, parks, bus stops, train stations, sports fields, water bodies in urban areas or in other public places while litter bins are available. Collection / recycling of Solid Waste Management Proclamation The manufacturer or importer of glass containers or tin cans glass containers and tin cans shall develop and implement a system that enables it, on its own or through other persons, to collect and recycle used glass containers or tin cans. Collection and disposal of Solid Waste Management Proclamation Food industries and restaurants shall collect, store and food-related solid waste dispose of the food-related solid wastes they generate in an environmentally sound manner. Restaurants shall design and implement SWM systems in accordance with directives issued by the concerned 34 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA SWM activity Proclamation Description Transportation Solid Waste Management Proclamation Urban administrations shall set the standards to determine the skills of drivers and equipment operators and prevent overloads of solid waste. Disposal Solid Waste Management Proclamation Each urban administration shall, in conformity with the relevant federal environmental standard, ensure that solid waste disposal sites are constructed and properly used. The owner of any solid waste disposal site shall, regardless of fault, be liable for any damage caused to the environment, human health or property in the course of its operation and after its closure. Management of Solid Waste Management Proclamation The generation, keeping, storage, transportation, treatment or hazardous waste disposal of any hazardous waste without a permit from the Authority or the relevant regional environmental agency is prohibited. Any person engaged in the collection, recycling, transportation, treatment or disposal of any hazardous waste shall take appropriate precaution to prevent any damage to the environment or to human health or well-being. Permitting Solid Waste Management Proclamation Any person should obtain a permit from the concerned body of an urban administration prior to his engagement in the collection, transportation, use or disposal of solid waste. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 35 In addition to the proclamations, the Environmental Policy of Ethiopia, issued Although an environmental and in 1997, refers to waste management either directly or indirectly: waste management legislation framework exists in Ethiopia at the Article 3.7 addresses issues related to human settlement, urban national and municipal levels, there environment and environmental health; is a lack of incentives for private Article 3.8 addresses issues related to the control of hazardous materials sector participation in the waste and pollution from industrial waste; and management space, including waste recovery and AF projects. Article 3.9 addresses atmospheric pollution and climate change. Regional SWM legislation and regulation essentially follow national policy.31 For example, in the Amhara region the regional law is the Basic Solid Waste Management Directive of Amhara Regional State Health Bureau 2009, which addresses issues of garbage classification, collection and storage, treatment, disposal, and recycling in the same manner as the national governmental policy.32 Waste management tariffs – a snapshot Waste collection charges in Addis Ababa are reported to be added to water bills: • MSW is charged at 20% of the water bill for households and 40% for organizations; • Wastewater collection and treatment service fees are included in drinking water accounts, at approximately 4-5% of water accounts in 2016 (an increase to 50% in the short-term is planned). Waste services in Mekelle are charged at varying rates from 2 birr/year for low-income households to 26 birr/year for high-income households (US$0.08-US$1). In Dire Dawa, collectors gather waste from households 2-3 times per week at a charge of 10 birr/month (US$0.4). A gate fee is charged at Repi dumpsite of 15 birr/ton of waste (US$0.6). 31 The Ethiopian legal system comprises a federal government and regional governments. 32 Source: Environmental Policy Review 2011: Waste Management in Ethiopia. 36 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Photo: © James Martone / World Bank The current framework and enforcement practices create the As a result, in the current market environment, any potential AF following issues and challenges: project, especially in the RDF/TDF space, will require consolidation of waste streams and volumes and additional investment in • In many cases, waste management services are provided as a basic waste management infrastructure, as well as guaranteed social service: the cost is recovered on the basis of household cost recovery to ensure uninterrupted supply of waste to the AF incomes and/or other utility bills, rather than linked to the production facilities. In the case of the Repi WTE project, the quantities of generated wastes (added to the fact that metering government took on the roles of sector coordinator and sole and measurement of waste volumes is not universally done and investor. To engage private players in such projects (including reporting has significant gaps); AF), full implementation of the ‘polluter pays’ principle and other mechanisms such as Extended Producer Responsibility is essential. • The payments recovered from ‘polluters’ contribute to around This will result in the sector becoming more attractive for private 30% of the total estimated cost of collection, transportation players, including cement companies. The impact of some of these and treatment of waste. The rest is being subsidized by the barriers on the cost of sourcing key types of AF and economic government, often irregularly and incompletely, despite the feasibility of such projects is explored in the following section. fact that the budget for waste management services has been increasing over the past few years; • Historically, the sector has been dominated by small-scale municipal companies and mini- and micro-entrepreneurs that are semi-formal or informal, especially at the primary collection level. The low level of cost recovery and cash flow gaps do not allow these players to invest in waste recovery or development of infrastructure, therefore, it has been traditionally done by the government (although on a limited scale). USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 37 7. Economic Potential for the use of Alternative Fuels Comparative assessment demonstrates In the context of Ethiopia, and specifically in the Addis Ababa area, to that, if barriers for access to finance for utilize the RDF potential fully, material recovery facilities will need to be built. Assuming a total capacity of up to 1 million t/year of MSW, basic waste collection and treatment these facilities would be able to produce up to 240,000 t RDF per year infrastructure are removed and incentives and will require CAPEX of up to US$20 million, with TDF production for private sector players are created, requiring up to US$1 million more.33 the cost of sourcing of certain AF, such Depending on how many kilns will be modified by each cement as RDF and TDF, at US$2.1-2.5/GJ, can be company, additional CAPEX of up to US$20 million will be required (if 35-50% lower than that of coal. Full all kilns in the Addis Ababa are modified). utilization of economically viable AF would offset 25-30% of thermal energy Implementation of the Option 1 scenario described in Section 2 would mean that the cost of basic collection and transportation infrastructure and reduce total fuel costs by up to would be fully covered by the waste management sector players or 10% across the sector. Total investment other agencies (rather than passed on to other players).34 Based on the of up to US$30 million would be estimated cost of processing MSW into RDF (proportional to the total needed (including AF production amount of incoming MSW), as well as the cost of delivery of RDF to facilities and kiln modifications), paying major cement plants in the area, the total cost of sourcing RDF can be estimated at US$2.2/GJ, which is around one third of the current cost of back in 3-4 years. Expanding the use coal. of agricultural residue beyond current levels may result in additional costs, and Under this scenario, the cement sector would cover 50% of MRF available volumes may be volatile due to CAPEX, affording it some control of the cost of fuel and ensuring security of fuel supply. Thus, the total investment requirement for the fluctuations in crop production. cement sector is estimated at up to US$30 million, paying back in 3-4 years. Implementation of the Option 2 scenario in the Addis Ababa area would mean that cement companies would invest in the entire consolidated MSW/RDF value chain, including basic collection infrastructure, and bear the full operational cost (excluding the payments that waste management companies are currently receiving for their services). This scenario represents Ethiopia’s current situation where private sector operators lack access to finance for investing in infrastructure and are not incentivized to engage in waste recovery projects. 33 See Annex 2 for detailed MRF characteristics and assumptions. 34 See Section 2 and Annexes for details on the cost structure. 38 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA In this case, the total cost of sourcing RDF would be US$4.2/GJ, 8 accompanied by the risks of waste supply security, since the waste 6,2 6 collectors will not be able to recover the cost of building and operating proper collection and transportation infrastructure. 4 2,5 However, even with these additional costs and risks, AF projects 2 would still be viable under this scenario, as RDF would be 30% cheaper than coal. Investment in establishing waste collection and 0 transportation infrastructure is estimated at US$30 million. If Prosopis juliflora Coal cement companies (in cooperation with large-scale private waste management operators) took on 50% of this cost as well as 50% Figure 24. Comparative cost of sourcing PJ as fuel of MRF costs, the total investment amount would be up to US$45 for co-processing In the cement kilns in the Addis million, paying back in 6-7 years due to fuel cost savings. Ababa area, US$/GJ Given the estimated quantities of tires, it makes economic sense 8 to recycle tires and produce TDF at a combined facility, which is assumed to require US$20 million in capital investment for both 6,2 6 RDF and TDF production. In the case of a standalone TDF facility, 4,2 capital investment is estimated at US$1 million, while the cost 4 of sourcing of TDF would be US$2.2/GJ, resulting in a 2-3 year payback period. The main issue for unlocking TDF potential is, 2,2 2 however, access to fuel, as the infrastructure for separate collection of tires is virtually non-existent. It can be assumed that establishing 0 Option 1 Option 2 Coal a RDF production framework will also boost TDF production. Figure 23. Comparative cost of sourcing refuse- derived fuel for co-processing for the cement kilns in the Addis Ababa area, US$/GJ The cost of sourcing PJ is relatively low – as this type of fuel is accessible in bulk quantities and supply is highly concentrated, cement trucks can be used for transporting the biomass fuel to the kiln. Based on the processing cost alone, the estimated cost of sourcing PJ would be US$2.5/GJ, which is around 2.5 times lower than that of coal. A standalone PJ project would require CAPEX of an estimated US$10 million, paying back in around 3 years. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 39 8 6,2 6 4 2,2 2 0 Tires Coal Figure 25. Cost of sourcing of tire-derived fuel for co-processing in the cement kilns in the Addis Ababa area, US$/GJ As presented below, sourcing costs for key types of AF – RDF, TDF and PJ – compare favorably with the cost of coal. Thus, under the Option 1 scenario for sourcing RDF (along with TDF and PJ), the total amount of investment required by cement companies would be US$40 million, paying back in 3-4 years, while under the Option 2 scenario, the CAPEX estimate is US$55 million, paying back in 6-7 years. 7 6 5 4 3 2 1 0 RDF TDF Agri biomass RDF Coal (option 1) (prosopis) (option 2) Figure 26. Comparative cost sourcing alternative fuels in the Addis Ababa area, US$/GJ 40 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 8. Summary and Conclusions There is significant potential for sourcing AF for the cement sector in Ethiopia, specifically in the Addis Ababa area where With these measure implemented, the cost of AF sourcing and four out of six major cement producers are located. Almost 35 overall economics, especially for RDF, point to the Option 1 million GJ could technically be sourced from waste-derived fuels, scenario. At the same time, the high cost of coal would even such as RDF, TDF and agricultural residue (specifically PJ). This justify deeper engagement of the cement companies in the waste/ exceeds the thermal energy demand in the Addis Ababa area, AF supply chain, including building a consolidated collection and which is estimated to amount to 24 million GJ/year by 2020. The delivery infrastructure. The required amount of CAPEX would use of sewage sludge, typically a high-potential source of energy, then be US$55 million, paying back in 6-7 years, according to the is not feasible due to the current low capacity of the wastewater scenario modeled under Option 2. However, it needs to be noted treatment system. that ‘interim’ scenarios are also possible, depending on factors relating to the stage of market development and parameters of All major cement producers in the Addis Ababa area are each deal, including the following: considering using AF and particularly PJ. The use of PJ may, however, require long-term engagement with the local Contracting and payment mechanism and processing communities and may be associated with additional sourcing of payments (directly from service consumers, through risks (and potentially increased costs). To justify investment in AF designated government agencies, etc.); projects, it is essential that the long-term supply of AF be secured at a predictable cost lower than the current cost of the major Composition of investors in the waste management conventional source of energy, which is coal (at US$6.2/GJ). infrastructure and their expected rates of return; Specific incentives for waste recovery (including those The business case for increasing the use of AF is strong. The introduced as clauses of a PPP agreement) such as sourcing cost for selected AF is estimated at US$2.2-2.5/GJ, direct subsidies to players, one-off or recurring fees and resulting in fuel cost savings that will support pay back of the surcharges (gate fees or equivalents), co-investment in required investment of US$40 million by the cement sector in 3-4 infrastructure or offsetting part of CAPEX, tax credits, years. Some of the steps within that system that would directly cross-subsidizing of waste management costs; and support investment in AF include: Liabilities of the stakeholders engaged in the AF project, (1) Establishment of waste quantities measurement and risk insurance and penalties, etc. metering system at all stages of waste handling, which The actual sourcing cost is therefore likely to fall between the would enable linking payments for waste management Option 1 scenario and the Option 2 scenario, under which cement services to the volumes of processed waste; players would cover the full costs of the RDF value chain. (2) Consolidation of the existing waste management collection and transportation infrastructure currently operated by Much will depend on the development of an enabling small-scale municipal companies and private medium, environment and supporting infrastructure in the sector. In small and micro enterprises (MSMEs) and establishment Ethiopia, the government already has experience in investing of a PPP framework for private sector participation in this in waste management infrastructure and implementing waste process; and recovery projects, such as the Repi WTE facility, which is to be (3) Upgrade of technical capacity and knowledge of the launched in 2017. Continuation of this work, coupled with the waste management sector players, including government specific measures above would create an enabling environment agencies, with a focus on possible deal structures, and unlock potential for the increased use of AF within the next contracting and tendering practices. few years. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 41 ANNEXES 42 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Annex 1 Assumptions on the properties of source waste streams, pre-processing requirements and corresponding modifications to the cement kiln. Municipal solid waste TIRES • 12-16 Lower Heating Value (LHV) GJ/dry ton • 12-16 LHV GJ/dry ton • -0.4 CO2 change • -0.8 CO2 change PROCESSING PROCESSING COLLECTION & Bag Drying & Screening / Shredding Tire transport opening shredding sorting & baling/ management & Chopping & sorting pelletizing collection & shredding Trash collection fleet o Bag open- o Blower o Infrared o Secondary o Tire shredder / ing system of rotary sensor shredder shredder Metal o Overhead aerobic o Mechanical o Pelletizer Granulating removal electro- digestion centrifuge magnetic drum moving o Primary belt or shredder rotating magnetic drums Typically up to 30% substitution, can be fed to kiln entry region, calciner or Typically 10-20% substitution when fed as 5-30mm pieces to kiln entry region or burner [<30mm, 15% moisture and <12% when fed to burner, <0.8% chlorine, calciner [dry process]; 10% substitution when whole tires fed directly to kiln and <2,00mg/kg heavy metal] Cement plant Typical upgrades required Typical upgrades required Indicative costs* (EUR) • Debaler: Breaks up compacted wasted (RDF, agricultural waste, etc.) to loosen the material and render it into a loose fluff TOTAL 4,255,000 Feeding / trasport machinery 750,000 • Storage systems: Store the AF in silos, hoppers or moving floor systems Foundations – civil works 550,000 • Flow control rotor type weighing systems, equipped with dosing mechanisms: Allow for accurate and Shredding systems and mills 500,000 consistent feed rate of AFs Pre-calciner and calciner 500,000 • Materials handling: Handle AFs using mechanical (screw conveyors, belt type conveyors, disconveyors, elevators, etc.) and/or pneumatic transport systems Fuel storage & fire-fighting systems 400,000 Weigh feeders 150,000 • Pipe above the burner: a pipe coated with castable refractory materials above the main burner Environmental protection equipment 150,000 • Flexible multi-fuel burner – the AF must be fine, e.g. RDF in pellets and <12% moisture, sewage sludge in In-situ analyzers 150,000 pellets <5mm Moving machinery 150,000 • Calciner: Allows for lower temperature combustion, thereby reducing Nox – typically required for high AF Moving floors 120,000 levels and low grade AFs Double valves – flaps 50,000 • Analyzing system: Ensures kiln efficiency by monitoring O2 and CO levels (variations in AF moisture content may cause flame shape change or CO rise in the calciner) Pneumatic transport 35,000 Other (electromechanical fabrications, • 3G flap system (triple gate): Minimizes false air entry during AF feeding – required for solid AFs which are not installation, control, debaler, etc.) 750,000 pulverized and cannot be sent to the calciner pneumatically or via mechanical conveying systems Typically up to 20% substitution, can be fed to kiln entry region or calciner in Typically 20% substitution, can be fed at the main burner if below 6mm, or at kiln 2-5mm pellets (semi-dry and dry process systems) or pneumatically to burner entry region or calciner Sewage sludge Agricultural waste • 10.5-29 LHV GJ/dry ton • 14.4-19 LHV GJ/dry ton • -2.5 ∆ CO2 (ton/ton coal replaced) • -2.5 ∆ CO2 (ton/ton coal replaced) PROCESSING PROCESSING Collection through sewage Screening & Dewatering / Pelletizing collection Drying Shredding Pelletizing system/trucks treatment drying Notes: Lower heating value (LHV) calculated based on reported higher heating value (HHV). Change in CO2 emissions assumes that biomass is carbon-neutral; negative values represent a net reduction in emissions. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 43 Annex 2 Technical, operational and economic assumptions on waste management facilities involved in production of alternative fuels. TYPE OF FACILITY SET OF ASSUMPTIONS Material recovery of MSW Located very close to or on a major dumpsite. (MRF producing RDF) Capacity: up to 0.5 million t/year MSW. The MRF will have the capacity to perform the following operations: - Receiving of waste. - Manual removal of large items. - Bags knife splitter. - Magnetic separation. - Primary shredding. - Second magnetic separation, trommel screen separation, air or ballistic separation. - Thermal drying to reduce moisture to 10%. - Secondary shredding to the required product fineness of 30 mm and possible pelletizing of product to 12 mm (if needed). - Drying will be performed using open chamber firing in a rotary drum as the gas available from the landfill is not adequate or available. The operating hours of the facility are 8,000 hours/year. Electricity consumption: 30 kWh/t of waste at an electricity price from the grid of 0.1 US$/kWh. Cost of fuel for moving machinery (cars, pickups, forklifts and front loaders): 0.7 US$/t of MSW. Operation and administration costs: US$3 million/year. Maintenance costs: 20% of the operation and administration costs. Insurance: US$0.5 million. Total operating (OPEX) fixed costs: ~ US$4-5 million/year. Total operating (OPEX) variable costs: ~ US$13 million/year. CAPEX: up to US$10 million. Economic life: 20 years. SEWAGE SLUDGE Plant capacity (wet input): 30,000 t/year. TREATMENT PLANT The moisture of wet sewage sludge is considered 60% (average) and the plant will have the ability to dry the sludge to 5% moisture content. The operating hours of the plant are 8,000 hours/year. Electricity consumption: 300 kWh/t of dry product at an electricity price from the grid of US$0.1/kWh. Cost of fuel for moving machinery: US$0.7/t of wet sludge. Total operating (OPEX) fixed costs: ~ US$1 million/year. Total operating (OPEX) variable costs: ~ US$1.7 million/year. CAPEX of the plant: US$8-10 million. Economic life: 20 years. 44 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA TYPE OF FACILITY SET OF ASSUMPTIONS Tire processing plant Capacity: 30,000 tires per year. producing tire-derived fuel End-of-life tires will be shredded to a size of 5-30 mm so as to be (TDF) suitable for co-firing as AF by the cement industry. The plant will have the ability to handle any size and type of tires. From the large tires, the central steel cord will be removed, then will be cut and directed to the shredder. The small tires will be shredded directly in the primary shredder. Any oversize pieces of tires will be recycled for re-shredding. The operating hours of the plant are 8,000 hours/year. Electricity consumption: 50 kWh/t of tires at an electricity price from the grid of US$0.1 /kWh. Total operating (OPEX) fixed costs: ~ US$0.5 million/year. Total operating (OPEX) variable costs: ~ US$0.5 million/year. CAPEX of the plant: ~ US$1 million/year. Economic life: 20 years. Agricultural residue Capacity: 40,000 t/year. processing facility Agricultural residues will be shredded to a size of 5-30 mm so as to be suitable for co-firing as AF by the cement industry. The plant will have the ability to handle any size and type of agricultural residues. Sieving will be performed so that any slides of material not shredded will return for re-shredding. Large trunks will be cut into sizes of up to 500 mm before being fed to the primary shredder. Straw, etc. will be fed directly to the shredder. The operating hours of the plant are 8,000 hours/year. Electricity consumption: 30 kWh/t of agricultural residues at an electricity price from the grid of US$0.1/kWh. Total operating (OPEX) fixed costs: ~ US$0.5 million/year. Total operating (OPEX) variable costs: ~ US$0.7 million/year. CAPEX of the plant: ~ US$1 million. Economic life: 20 years. Sources: IFC, interviews with market players. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 45 Annex 3 Technical, operational and economic assumptions on the collection and transportation of source wastes and AF. FACTOR ASSUMPTION Number of loads per day for 25 km 50 km 100 km 200 km collection and transport to the processing facility (return trips) 1 3 3 2 Persons for collection (workers) Tires: 3 MSW: 4 Sewage sludge: 1 Agricultural residue: 4 Cost of each worker (US$/day) 11 (up to 100 km) 14 (200 km) Cost of the driver (US$/day) 14 Cost of truck (US$/day) 27.4 Truck fuel consumption (l/km) 0.2 Price of diesel 1 Truck load (t) Tires: 4 MSW: 10 Sewage sludge: 15 Agricultural residue: 7 Sources: IFC, interviews with market players. 46 USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA Annex 4 Composition and maximum selling price of recyclable materials. RECYCLABLES COMPOSITION (%) Maximum selling price (US$/t) Paper 7.0 40 Cardboard 6.0 50 Plastic bottles of Polyethylene 5.0 200 Terephthalate (PET) Glass 4.2 15 Recyclable construction and 3.2 80 demolition (C&D) waste Aluminum cans 3.0 200 Ferrous matter 2.5 100 Low Density Polyethylene (LDPE)/ 2.4 120 Polypropylene (PP) Non-ferrous metals 1.0 150 Polyvinyl Chloride (PVC) 0.8 80 Sources: IFC, interviews with market players. USE OF ALTERNATIVE FUELS IN THE CEMENT SECTOR IN ETHIOPIA 47 Emmanouela Markoglou Cross-Cutting Advisory Solutions T: +1 (202) 473-9526 2121 Pennsylvania Ave, NW Washington, DC 20433, USA ifc.org 2017