Unlocking Value: Alternative Fuels For Egypt’s Cement Industry In Partnership With 25 years Unlocking Value Alternative Fuels For Egypt’s Cement Industry DISCLAIMER © International Finance Corporation 2016. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly, and when the reproduction is for educational and non-commercial purposes, without a fee, subject to such attributions and notices as we may reasonably require. 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Table of Contents List of Figures....................................................................................................................................... 4 List of Tables.......................................................................................................................................... 5 Abbreviations........................................................................................................................................ 6 Elements and Compounds................................................................................................................... 8 Glossary................................................................................................................................................. 9 FOREWORD ............................................................................................................................................ 10 PREFACE.................................................................................................................................................. 11 EXECUTIVE SUMMARY.............................................................................................................................. 12 Chapter 1: INTRODUCTION .................................................................................................................... 23 1.1. Alternative Fuels as a Viable Option for Egypt’s Cement Industry........................................................... 23 1.2. Approach and Methodology............................................................................................................... 24 Chapter 2: A Changing energy picture .............................................................................................. 27 2.1 Egypt’s Energy Crisis........................................................................................................................... 27 2.2 The Cost of Energy Subsidies............................................................................................................... 28 2.3 Cement Producers and Rising Fuel Costs.............................................................................................. 28 2.4 Diversifying the Energy Mix................................................................................................................ 29 2.5 Alternative Fuels: A Key Substitute for Coal.......................................................................................... 29 2.6 Other Market Drivers: Regulating Waste............................................................................................. 30 Chapter 3: Co-processing: Making the most of resources......................................................... 33 3.1 International Trends........................................................................................................................... 33 3.2 Co-Processing Technical Considerations.............................................................................................. 36 3.2.1 Municipal Solid Waste (MSW)..................................................................................................... 37 3.2.2 Agricultural Waste.................................................................................................................... 37 1 3.2.3 Dried Sewage Sludge (DSS)....................................................................................................... 38 3.2.4 Tire Derived Fuel (TDF).............................................................................................................. 38 3.2.5 Other Technical Considerations.................................................................................................. 39 3.3 AFR Pre-Processing.............................................................................................................................39 Chapter 4: Unlocking The Alternative Fuels Supply ....................................................................... 41 4.1 Municipal Solid Waste (MSW)............................................................................................................... 41 4.1.1 MSW Supply in Egypt................................................................................................................. 41 4.1.2 Challenges in Using MSW for AFR............................................................................................... 50 4.2 Agricultural Waste............................................................................................................................. 50 4.2.1 Agricultural Waste Supply in Egypt............................................................................................. 50 4.2.2 Challenges in Using Agricultural Waste as AFR.............................................................................54 4.3 Sewage Sludge...................................................................................................................................55 4.3.1 Sewage Sludge Supply in Egypt...................................................................................................55 4.3.2 Challenges in Using Sewage Sludge as AFR.................................................................................. 57 4.4 Tire Derived Fuel (TDF)........................................................................................................................ 57 4.4.1 TDF Supply in Egypt................................................................................................................... 57 4.4.2 Challenges in Using TDF as AFR.................................................................................................. 60 4.5 Summary.......................................................................................................................................... 60 Chapter 5: Mapping cement industry demand ................................................................................. 63 5.1 Egypt’s Cement Industry......................................................................................................................63 5.2 Cement Production Forecast by 2025....................................................................................................65 5.3 Thermal Energy Needs........................................................................................................................ 66 5.4 Alternative Fuels Status in Egypt......................................................................................................... 69 5.5 Future Scenarios for AFR Use in Egypt................................................................................................. 70 5.5.1 Group 1 – AFR Early Movers........................................................................................................ 70 5.5.2 Group 2 – Cement Plants Moving to Use AFR................................................................................ 71 5.5.3 Group 3 – Cement Plants Taking No Action on AFR........................................................................ 72 5.6 Assessing Alternative Fuels Market Potential in Egypt........................................................................... 72 Chapter 6: AFR Economic Perspectives ............................................................................................ 79 6.1 Introduction.......................................................................................................................................79 6.2 Fossil Fuels.........................................................................................................................................79 6.2.1 Fossil Fuel Prices and Externalities...............................................................................................79 6.2.2 Coal: CAPEX and OPEX Considerations for Cement Plants............................................................. 81 6.3 Alternative Fuels................................................................................................................................. 81 6.3.1 AFR CAPEX and OPEX Considerations for Cement Plants............................................................... 81 6.3.2 Economics of Alternative Fuels....................................................................................................83 6.3.3 Comparison: Economics of Fossil Fuels versus AFR...................................................................... 89 6.4 Summary.......................................................................................................................................... 90 Chapter 7: Establishing the SUPPLY CHAIN .......................................................................................... 93 7.1 AFR Supply Chain.................................................................................................................................93 7.2 International Experience on AFR Business Models..................................................................................93 7.3 Egyptian Specificities...........................................................................................................................97 7.4 Proposed Business Models for Egypt and Recommendations per AFR Stream......................................... 98 7.4.1 RDF......................................................................................................................................... 98 7.4.2 Agricultural Waste................................................................................................................... 102 2 7.4.3 Dried Sewage Sludge (DSS)....................................................................................................... 103 7.4.4 Used Tires (TDF)....................................................................................................................... 104 7.5 Geographic Distribution..................................................................................................................... 106 7.6 Summary......................................................................................................................................... 107 Chapter 8: CONCLUSIONS AND RECOMMENDATIONS ........................................................................... 109 8.1 Summary.......................................................................................................................................... 109 8.2 Addressing the Supply & Demand Gap................................................................................................ 109 8.3 Recommendations.............................................................................................................................111 Bibliography........................................................................................................................................ 113 Annexes ........................................................................................................................................... 119 Annex A: The Cement Manufacturing Process................................................................................. 119 Annex B: Co-Processing Within International Regulations.......................................................... 121 Annex C: Emissions Control And Monitoring For The Cement Industry......................................125 ANNEX D: Total Agricultural Waste in 2012 by Type...........................................................................127 Annex E: Regulatory Framework For Alternative Fuels in Egypt................................................ 128 3 List of Figures Figure 1: Comparison Between Average AFR Substitution Rates in Europe and Egypt ................................................... 12 Figure 2: Advantages of Alternative Fuels for Egypt ................................................................................................... 14 Figure 3: The Main Stages of AFR Pre-Processing ......... .............................................................................................. 16 Figure 4: Oil and Natural Gas Production and Consumption (Source: British Petroleum, 2015) ...................................... 27 Figure 5: Comparison of Fuels in Subsidies with Social Sectors (Source: Ministry of Petroleum, 2014) ............................. 28 Figure 6: Estimated AFR Use Between 2006-2050 (Source: Iea-Wbcsd, 2009) ............................................................ 35 Figure 7: Average Thermal Fuel Mix in Cement Plants at the European Union and Worldwide (Source: Wbcsd-Csi, 2013A) . ................................................................................................................................... 36 Figure 8: Total Generated Msw Amounts per Region by Percentage (Source: Sweepnet, 2014)...................................... 42 Figure 9: Msw Composition in Egypt by Percentage (Source: Sweepnet, 2014) .............................................................. 44 Figure 10: Locations of Sorting and Composting Plants and Cement Factories in Egypt ................................................. 45 Figure 11: Municipal Solid Waste Generation by Region in 2012 (Tons per Day) ............................................................... 48 Figure 12: Amounts of Potential Rdf in Greater Cairo, Alexandria and Delta Regions from Total Msw Generated (Tons per Day) ........................................................................................................................................................ 49 Figure 13: Distribution of Agricultural Residue by Growing Season by Percentage ........................................................ 52 Figure 14: Distribution of Agricultural Areas and Residues Generation in Egypt in Proximity to Cement Plants ................ 52 Figure 15: Sewage Sludge Generation by Region in 2013 in Egypt by Percentage (Source: Hcww, 2014) ......................... 55 Figure 16: Estimation of Utilization Percentage of Scrap Tires in Egypt by Percentage ................................................... 59 Figure 17: World Cement Production Country Rankings in 2014 in Million Tons (Source: U.S. Geological Survey, 2015) ...... 63 Figure 18: Installed Clinker Capacity in 2014 in Million Tons (Source: Cement Egypt Interviews, 2015; Corporate Annual Reports, 2015) ............................................................................................................................................. 64 Figure 19: Location of the Cement Plants in Egypt ...................................................................................................... 64 Figure 20: Historical and Future Estimated Cement Consumption in Million Tons (Bars) and Annual Growth Rate Percent (Lines) (Source: Carré, 2014; Cement Egypt Interviews, 2015) .......................................................................... 65 Figure 21: Thermal AFRSubstitution Rates for the 14 Cement Plants Interviewed in April 2015 in Egypt (Source: Cement Egypt Interviews, 2015) ................................................................................................................... 69 Figure 22: Evolution of Landfill Tax on Municipal Solid Waste in Poland Between 2002 -2012 (Source: Eea, 2013) .............. 73 Figure 23: AFR Thermal Substitution Target in 2025 for Each Scenario .......................................................................... 75 Figure 24: Natural Gas Price Increases Pre- And Post- July 2014 Government Announcement (Source: Ministry of Petroleum, 2014) ........................................................................................................................ 79 Figure 25: Natural Gas Consumption in Energy Intensive Industries (Source: Hussien, 2015) ......................................... 79 Figure 26: Heavy Fuel Oil Prices in Egp per Ton (Source: Ministry of Petroleum, 2014) ................................................... 80 Figure 27: Schematic For Loader (Top) and Bridge Crane (Bottom) Operated Halls ....................................................... 82 Figure 28: Current Price of Scrap Tires (Source: Cement Egypt Interviews, 2015; AFRSuppliers Interviews, 2015) .............. 84 Figure 29: Average Fossil Fuels and AFR Prices at the Burner per Interviewed Cement Plant (Source: Cement Egypt Interviews, 2015) .................................................................................................................. 90 Figure 30: Backward Integration Levels into the Energy Supply Chain ......................................................................... 93 Figure 31: Viable Integration Levels for AFR ................................................................................................................ 93 Figure 32: Rdf Pre-Processing Platform ....................... ........................................................................................... 101 Figure 33: Proposed Scrap Tires Supply Chain Under Partial Integration or Outsourcing Models .................................... 105 4 List of Tables Table 1: Potential AFR Quantities from the Four Waste Streams ................................................................................... 15 Table 2: Three Scenarios of AFR Substitution Percentage ............................................................................................. 18 Table 3: AFR Use by International Cement Manufacturers (Source: Corporate Sustainability Reports, 2014) ................... 34 Table 4: Sample Ranges for the Physical and Chemical Properties of MSW and RDF ....................................................... 37 Table 5: Sample Ranges for the Physical and Chemical Properties of Agricultural Waste ................................................. 37 Table 6: Sample Ranges for the Physical and Chemical Properties of Sewage Sludge ...................................................... 38 Table 7: General Material Composition of Tires (Source: ETRMA, 2001) ......................................................................... 38 Table 8: Average Tire Weight (Source: Basel Convention, 2011) ..................................................................................... 38 Table 9: Tires Energy Content and CO2 Emission Factor in Comparison to Selected Fossil Fuels (Source: WBCSD, 2005)..... 39 Table 10: Volume and Percentage by Type of Waste Generated in Egypt (Source: NSWP, 2013; HCWW, 2014; HCWW, 2016).... 41 Table 11: Total Annual MSW Generation and Collection Rates in 2012 (Source: NSWMP, 2013) ......................................... 43 Table 12: Quantities of RDF Generated at Sorting and Composting Plants Based on 70% Average Efficiency (Source: MoURIS, 2015) ............................................................................................................................................ 46 Table 13: Quantities of RDF Generated at Design Capacities of Sorting and Composting Plants (Source: MoURIS, 2015).... 47 Table 14: Amounts of Potential RDF Based on Waste Composition by Region in 2012 (tons per day)................................. 49 Table 15: Estimated Agricultural Residues Generated and Quantities Available as AFR for Selected Crops in year 2012 (Source: MoA, 2014) ................................................................................................................................................. 51 Table 16: AFR Potential By Crop Waste Type ................................................................................................................ 53 Table 17: Sewage Sludge Production By Governorate in 2013 in Egypt (Source: HCWW, 2014) .......................................... 56 Table 18: Number and Types of Vehicles in Egypt and Estimated Numbers of Scrap Tires Produced (Source: CAPMAS, 2013) ......58 Table 19: Summary of the Availability of the Four Waste Streams as AFR ....................................................................... 61 Table 20: Theoretical Volumes of Clinker and Coal in 2015, 2020 and 2025 ..................................................................... 67 Table 21: Forecast of CO2 Emissions in 2015, 2020 and 2025 .......................................................................................... 67 Table 22: CO2 Emissions Gap Between the 100 Percent HFO Baseline Scenario and the 100 Percent Coal Scenario Forecasted for 2025 .................................................................................................................................................. 68 Table 23: Mitigation of CO2 Emissions Gap through AFR Amounts (13.2 million Gcal per Year) from Each of the Four Waste Streams ........................................................................................................................................... 68 Table 24: AFR Mix Implemented by Interviewed Cement Companies (Source: Cement Egypt Interviews, 2015) ................ 70 Table 25: Three Proposed Scenarios for AFR Thermal Substitution Rate by 2025 .............................................................72 Table 26: Fuel Mix Forecast in 2025 According to Each Scenario ................................................................................... 76 Table 27: Estimated Additional AFR Volumes Required to Reach 20% TSR by 2025 .......................................................... 77 Table 28: Fossil Fuel Prices at the Cement Plant Burner Tip in Egypt in 2015 ................................................................... 81 Table 29: Current Price of MSW and RDF (Source: Cement Egypt Interviews, 2015; AFR Suppliers Interviews, 2015) ......... 83 Table 30: Current Price of Selected Agricultural Crop Residues (Source: Cement Egypt Interviews, 2015; AFR Suppliers In- terviews, 2015) ........................................................................................................................................................ 84 Table 31: Transportation Cost of Tires ......................................................................................................................... 85 Table 32: Estimate for CAPEX and OPEX of AFR Pre-Processing at Platform or Other Facility (Outside Cement Plant) ........87 Table 33: Estimate for CAPEX and OPEX of AFR Co-Processing in Cement Plant ..............................................................88 Table 34: Estimate of Investment Required for Pre-processing Facilities by Waste Type by 2025 under BAU Scenario ........88 Table 35: Average Price of Fossil Fuels and Alternative Fuels at Cement Burner Tip (Source: Cement Egypt Interviews, 2015) .... 89 Table 36: Suitable AFR Integration Level by Waste Stream .......................................................................................... 96 Table 37: Five Scenarios for RDF Pre-Processing Facilities ............................................................................................ 100 Table 38: RD Cost Breakdown under Each Scenario Along the Value Chain ....................................................................100 Table 39: Final RDF Cost Comparison with Coal for Each Scenario ............................................................................... 101 Table 40: Operational Characteristics of Waste Suppliers ............................................................................................ 110 Table 41: Operational Characteristics of the Cement Industry ..................................................................................... 110 Table 42: Prioritization of the Four Waste Streams as AFR for the Cement Sector in Egypt .............................................. 111 5 Abbreviations AFR Alternative Fuels and Raw Materials or “Alternative Fuels” BAT Best Available Technology BAT-AEL Best Available Techniques Associated Emission Levels BAU Business as Usual BEP Best Environmental Practice BM Business Model BPD Bypass dust BREF European Commission Reference Document on Best Available Techniques CAGR Compound Annual Growth Rate CAPEX Capital Expenditures CAPMAS Central Agency for Public Mobilization and Statistics CEM Cement Market CF Clinker Factor CKD Cement Kiln Dust CPCB Central Pollution Control Board CSI Cement Sustainability Initiative DSS Dried Sewage Sludge EC European Community EEAA Egyptian Environmental Affairs Agency EGP Egyptian Pound (1 EGP = 7.8 $, Central Bank of Egypt on November 2015) EGPC Egyptian General Petroleum Corporation EIA US Energy Information Administration EII Energy Intensive Industries EIPPCB European Integrated Pollution Prevention and Control Bureau ELV Emission Limit Value EMR Emission Monitoring and Reporting ENCPC Egypt National Cleaner Production Center EPA Environmental Protection Agency EU European Union FICEM Federación Interamericana del Cemento Gcal Giga Calories, 1Gcal = 1,000,000 kcal GDP Gross Domestic Product GHGs Greenhouse Gases GJ Giga Joule (1 Gcal = 4.184 GJ) GNR Getting the Number Right HCWW Holding Company for Water and Wastewater HFO Heavy Fuel Oil kg Kilogram LCA Life Cycle Analysis LSF Lime Saturation Factor mg Milligram MJ Mega Joule MMBTU One Million British Thermal Units MRV Monitoring, Reporting and Verification MSW Municipal Solid Waste mtpa million tons per annum NGO Non-Governmental Organization OH&S Operational Health and Safety OPC Ordinary Portland Cement OPEX Operational Expenditures POPs Persistent Organic Pollutants ppb Parts per Billion RDF Refuse Derived Fuels SWM Solid Waste Management t Ton TDF Tire Derived Fuel TOC Total Organic Carbon TSR Thermal Substitution Rate UNEP United Nations Environment Program VOC Volatile Organic Compounds WBCSD World Business Council for Sustainable Development WMRA Waste Management Regulatory Authority WWTP Wastewater Treatment Plant Elements and Compounds Al2O3 Aluminum oxide As Arsenic CaO Calcium oxide Cd Cadmium CI Chloride CO Carbon monoxide CO2 Carbon dioxide Co Cobalt Cr Chromium Cu Copper Fe2O3 Iron oxide HCI Gaseous chlorine Hg Mercury K2O Potassium oxide N Nitrogen Na2O Sodium oxide Ni Nickel NOx Nitrogen oxides P2O5 Phosphorous pentoxide Pb Lead Sb Antimony Se Selenium SiO2 Silicate Sn Tin SO2 Sulfur dioxide SO3 Sulfite Te Tellurium TiO2 Titanium dioxide Tl Thallium V Vanadium Glossary AFR Throughout the document, the term AFR will be used as “Alternative Fuels and Raw Materials” because some wastes can be used for simultaneous energy and material recovery. The recovery of raw material is replacing the material needed to produce clinker and has nothing to do with the blended cement. Burnability A parameter that is used to show whether the burner flame profile, when AFRs are burned, is identical to that when only conventional fuels are used. In certain cases, the burnability has to be studied in depth because it can have a negative effect on the clinker quality. Burnability can improve the clinker quality if better conventional fuels are used. Bypass dust Discarded dust from the bypass system dedusting unit of suspension preheater, precalciner and grate preheater kilns, normally consisting of kiln feed material which is fully calcined or at least calcined to a high degree. Clinker Intermediate product in cement manufacturing and the main substance in cement. Clinker is the result of calcination of limestone in the kiln and subsequent reactions caused through burning. Cement It is made by grinding clinker and adding gypsum (calcium sulphates) and possibly additional cementitious (such as blast furnace slag, coal fly ash, natural pozzolanas, etc.) or inert materials (limestone). Co-processing The use of waste as raw material, or as a source of energy, or both to replace natural mineral resources (material recycling) and fossil fuels such as coal, petroleum and gas (energy recovery) in industrial processes, mainly in energy intensive industries. Decarbonation The chemical decomposition of limestone which liberates CO2. Fuel CO2 CO2 emission from burning fuel and not from decarbonation. MSW All types of municipal solid waste generated by households and commercial establishments. MTOE Million tons oil equivalent is a unit of energy defined as the amount of energy released by burning one ton of crude oil. Pre-processing Encompasses all activities needed to transform waste into an acceptable AFR for cement kiln co-processing. RDF Refuse derived fuel: solid fuel prepared from the energy rich fraction of municipal solid waste after the removal of recyclables. SWM Solid waste management refers to the supervised handling of waste material from generation at the source through the recovery processes to disposal. Tipping (or Gate) Fee The charge levied upon a given quantity of waste received at a waste processing facility. Volatility The tendency of a substance to vaporize and is directly related to a substance’s vapor pressure. A highly volatile fuel is more likely to form a flammable or explosive mixture with air than a non-volatile fuel. The rotary cement kiln would be fired with low-volatile fuels such as petcoke, low-volatile bituminous coal, and anthracite. On the other hand, high volatile-low calorific value AFR have limited use in the kiln primary firing system due to their relatively low combustion temperatures; they are used more in the precalciner firing. It is difficult to obtain complete combustion of low-volatile fuels in precalciners, which often requires design and operational modifications to the precalciner. Foreword Since its founding six decades ago, IFC has served as a bridge between private investment and the global development agenda. With a portfolio of $52 billion in over 100 countries, IFC is now the world’s largest development finance institution focused on the private sector. It is bringing to bear the transformative power of markets on some of the developing world’s most pressing challenges – from energy access to food security, infrastructure to health care, and education to financial inclusion. IFC’s role in bringing together private investment and development remains urgent and essential. One of our key priorities is to increase climate-related investment from 16 percent in fiscal year 2015 to 20 percent of our committed portfolio by 2020. Without immediate intervention to reduce greenhouse gases emissions, an additional 100 million people could fall into extreme poverty by 2030 as a result of climate change. Following the Paris agreement of 2015, where nearly 200 nations and scores of CEOs pledged to reduce their carbon footprint, IFC is in an unprecedented position to help clients capture the opportunities and mitigate the risks of climate change. Our objective is to boost climate-related investments and support the use of energy efficient technologies. To do that, IFC will maximize its impact by reducing greenhouse gas emissions from its investments, building client resilience to climate change, and engaging in thought leadership and standard-setting. In the Middle East and North Africa, IFC will focus on addressing the root causes of the region’s instability and its biggest long-term development challenge: a dearth of jobs and opportunity. IFC is looking to identify new clients in the fields of power, entrepreneurship, and access to finance. At the intersection of these priorities lie innovative opportunities such as those presented in this report. Egypt’s cement industry is a pillar of growth and crucial to the country’s economic recovery. But growth has been hampered by a complicated energy picture. As such, our regional Resource Efficiency Advisory team spearheaded this pioneering national study. The report identifies viable and low-carbon energy sources that would help cement producers satisfy their growing energy demand. For the first time, we have mapped, quantified, and analyzed co-processing in Egypt. We have also identified the current and future appetite for alternative fuels, highlighted impediments to market growth, and recommended potential solutions throughout the supply chain. We discussed our research with a range of industry players, many of whom were reluctant to previously come together. In these sessions, participants spoke about the challenges in making the switch to alternative fuels. There is no doubt that embracing these new technologies will take time and money, but the rewards far outstrip the hardships. We hope this study makes that point clear, and encourages producers, officials, and other stakeholders to find greener ways to help Egypt’s cement industry grow. Mouayed Makhlouf IFC Regional Director Middle East and North Africa 10 Preface Egypt’s cement sector is an important economic player, but it is also one that can play a decisive role in helping the Arab world’s most populous nation meet climate change targets. In Egypt’s Third National Communication to UNFCCC released in March 2016, it was reported that the cement industry alone contributes 40 percent (16.7 million tCO2e) of the country’s total industrial sector greenhouse gases emissions in 2005. At the 2015 Paris Climate Summit, Egypt committed to several actions to reduce emissions, which included development of locally-appropriate low-carbon energy systems such as incentivizing renewable energy technologies and switching to alternative and cleaner fuels. Other commitments also covered developing a national monitoring, reporting and verification system and adopting wider energy efficiency, especially in the production of cement, iron, steel, among other industries. The private sector is expected to play a prominent role in mitigating Stefanos, Mr. Bruno Carré, and Mr. Adel Draz; Cement Companies: climate change, whether through finance, technological innovations Amreyah Cement Company, Arabian Cement Company, ASEC or partnerships with public entities. Today, the business community is Cement, Assiut Cement Company (CEMEX Egypt), El Sewedy Cement ready to embrace that role than at any point in the past, making their Company, Lafarge Cement Egypt, National Cement Company, Suez own commitments to decrease their carbon footprints, adopt renewable Cement Company, and Titan Cement Company; Egypt’s Ministry energy, and engage in sustainable resource management. of Trade and Industry and its relevant agencies: Egyptian National Cleaner Production Center and the Industrial Development Authority, A key lever of achieving lower-carbon growth in the cement sector is and the Egyptian Organization for Standardization and Quality, the adoption of non-fossil based fuels. Not only is wider uptake of Egypt’s Environmental Affairs Agency and its relevant departments: alternative fuels of immense untapped potential for Egypt’s cement the Central Department for Waste & Hazardous Waste, the Waste sector, it is also a critical tool to help manage energy insecurity in the Management Regulatory Authority, the Department of Air Quality, the aftermath of diverting state-subsidized natural gas and heavy fuel oil Department of Industrial Pollution, the Central Department for Impact away from the cement industry. Assessment and the Department for Regional Offices; the Ministry of IFC, a member of the World Bank Group and the largest global development Local Development; Former Ministry of Urban Renewal and Informal institution focused exclusively on the private sector, commissioned, Settlements; Egypt’s Ministry of Agriculture; The Holding Company funded and facilitated the production of this study to assess the current for Water and Wastewater Treatment; ECARU; Nahdet Misr; EcoCem; status of alternative fuel usage across the sector and identify obstacles Reliance Egypt; Polyeco; Spirit of Youth Association; The Egyptian and solutions to encourage the development of a sustainable, commercial National Competitiveness Center; National Solid Waste Management waste-to-energy market in Egypt. The report is the culmination of nearly Program (NSWMP); the Egyptian Center for Economic Studies; and two years of original, first-of-its kind research that has mapped waste the following individuals consulted to understand tire manufacturing sources and identified the potential for co-processing across the cement and recycling: Eng. Ahmed Fahmy, Head of Solid Waste Management sector. CEMENTIS GmbH (Anne Dekeukelaere, Laurent Grimmeissen, Department, Gharbia Governorate; Eng. Eman Mohamed, EHS Jean-Pierre Degré and Stéphane Poellaer) and EcoConserv (Tarek Genena, Department Manager, Prelli; Maghrby Shaheen, Meet El Haroun; Omneya Nour Eddin, Eduardo Lopez, Fakhry Abdelkhalik, and Maysra Sherif Mohamed, Meet El Haroun; Mr. Shaalan Mohamed, Manager of Shams Eldin) provided considerable expertise and drafted the initial Haanna Masr company (tire recyclers), Ismaillia Governorate. findings of this study. In addition to commissioning and guiding the production of this study, The report relied on an extensive stakeholder engagement effort. IFC contributed with its international experience-gained through the Dialogue with different stakeholders was initiated to understand their financing of more than 180 projects in the cement sector in about levels of involvement and their roles in promoting the use of AFR, 60 countries, in the last 55 years. IFC’s present portfolio includes 30 as well as to elicit views and concerns on the potential for further investments and 10 advisory projects in cement, in 26 countries. IFC has usage. A primary objective in the various workshops was to dispel already invested more than $4 billion in the sector globally. misinformation, a barrier preventing cement industry players from The production of this study was made possible through the generous finding a point of consensus with other stakeholders. IFC’s research support of the Government of Italy, the Korea Green Growth Partnership, team (Dalia Sakr, Dina Zayed and Bryanne Tait) would like to extend its DANIDA, and the Earth Fund Platform. The production of this study gratitude to all parties interviewed for the purposes of data collection, as greatly benefited from the guidance and contributions of Benjamin well as to individuals who gave their time and support during multiple Stewart, Clara Ivanescu, Elizabeth Burden, Alexander Sharabaroff, rounds of dialogue. Jeremy Levin, Michel Folliet, Asimina Papapanou, Nada Shousha, Dalia Those include but are not limited to: Egypt’s Chamber of Building Wahba, Yana Gorbatenko, Sivaram Krishnamoorthy, John Kellenberg, Materials and the Cement Association, especially: Eng. Medhat Riham Mustafa, and Mohamed Essa. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 11 Executive Summary The Egyptian cement industry is the world’s 12th largest and a vital economic force supporting the construction and building sector that accounts for nearly five percent of Egypt’s Gross Domestic Product (GDP).1 Today the energy-hungry industry is at a cross-roads: due to fuel shortages, the cement sector is being forced to diversify its energy mix. In 2012, in the face of frequent electricity blackouts, the Egyptian to grow to 72 million tons of clinker, demanding 68 million GCal. Government diverted natural gas from heavy industrial users Assuming an average calorific value of 7,000 kcal/kg for coal, the towards power production, effectively leaving most of the 25 cement industry’s total energy demand in 2025 would require about operating cement companies with only a fraction of the gas needed 9.7 million tons of coal per year. That is enough to fill a train 1860 to continue their operations. By 2013, domestic cement production kilometers long, roughly twice the distance between Cairo and had fallen by 50 percent. With no end to fuel shortages in sight, Aswan. The associated greenhouse gases (GHGs) emissions would the industry lobbied to switch from natural gas to other fossil fuel- be 27 million tons of CO2 per year, more than the total annual based alternatives, such as coal and petcoke. emissions from countries the size of Tunisia, Croatia or Estonia. Yet, switching to coal entirely comes with a price. In 2015, about 49 On the other hand, integrating alternative fuels into the energy million tons of clinker were produced with a thermal energy appetite mix can help ensure a lower carbon transition that is commercially of 46 million gigacalories (GCal). By 2025, that figure is expected viable and economically attractive. Figure 1: Comparison between Average AFR Substitution Rates in Europe and Egypt (Source: WBCSD, 2013 and Cement Egypt Interviews, 2015) 1 The sector grew by nearly 10 percent in the past fiscal year, further expanding from a 7.4 percent growth rate in FY2014 (Bank Audi, 2016) “Egypt Economic Report: Between the Recovery of the Domestic Economy and the Burden of External Sector Challenges.” February 24, 2016. Retrieved online at: http://www.bankaudi.com.eg/Library/Assets/EgyptEconomicReport-2016-English-040615.pdf. 12 The technological and financial viability of transforming waste tire derived fuel (TDF) from scrap tires. The study has identified streams into thermal energy for the cement industry is well- the current status of co-processing in Egypt, analyzed the potential established internationally. The use of processed waste, known appetite for AFR, highlighted impediments to market growth, and as Alternative Fuels and Raw Materials (AFR), instead of and in recommended potential solutions throughout the waste supply chain addition to traditional fuels like coal or natural gas, is a common to ensure a sustainable market solution tailored to the Egyptian best practice in Europe (See Figure 1), where the average substitution context, which may lead to investment opportunities for players rate of AFR for the cement industry is almost 39 percent. Egypt’s within the AFR value chain. substitution rate, by contrast, was only 6.4 percent in 2014, despite severe energy shortages and declining fuel subsidies. The study concludes that Egypt produces enough solid waste to satisfy the cement sector’s entire thermal needs. In fact, achieving a In order to seek out viable and low carbon energy sources to help fill 20 percent thermal substitution rate in year 2025 would recover an the energy demand gap, IFC has carried out this study. The research annual four million tons of waste, which would have been landfilled, has mapped, quantified, and analyzed the price competitiveness of dumped or burned. When processed at scale, AFR per GCal can be four alternative streams of waste fuels across the country: refuse up to 40 percent cheaper than coal. At a conservative substitution derived fuel (RDF) from municipal solid waste, dried sewage sludge rate of 20 percent, the AFR market represents an opportunity of (DSS) from wastewater treatment plants, agricultural waste, and $200-250 million annually. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 13 Market Drivers environmental and health externalities associated with not only the combustion of coal, but also its importation. While the current use of AFR is limited in Egypt, the market is poised for rapid growth. Of the 14 cement plants interviewed for The government, determined to meet national climate emissions this report, 86 percent now use, or have active plans to incorporate, targets and to respond to public concerns after a heated debate, up to 30 percent AFR within the next five to ten years. Reaching that reacted. In April of 2015, the Executive Regulations of the law on figure could reduce CO2 emissions by 5.9 million tons of CO2 per Environment have been amended to allow and regulate the use of year and save the industry $77 million by 2025. coal. Under this amendment, each cement firm applying for a coal operational license must commit to mitigate the difference between Multinational cement firms own and operate 64 percent of the assumed greenhouse gases (GHGs) emissions from the theoretical installed capacity in Egypt. Most are members of the World Business consumption of 100 percent coal and a hypothetical baseline of Council for Sustainable Development Cement Sustainability 100 percent heavy fuel oil (HFO) within two years of the license’s Initiative (WBCSD-CSI). As part of that initiative, the majority of issuance.2 With this new reality, cement firms need to invest in GHGs the 14 CSI corporate members have set GHGs emissions reduction emissions-cutting initiatives to renew their operational licenses, targets, including AFR substitution. In addition, cement companies but each firm is free to determine the method most appropriate are motivated to use AFR in order to reduce their thermal energy for its circumstances. The use of AFR has been encouraged by costs and improve their competitiveness. the government of Egypt as one of the possible GHGs mitigation options. This will be a key regulatory demand driver for a strong The use of coal, which is not available domestically, puts pressure AFR market in Egypt. The coal license mitigation target could be on Egypt’s hard currency reserves at a time when the country is fully achieved if the sector reached a TSR of 30 percent by 2025, struggling with foreign capital liquidity. Civil society stakeholders which would require approximately 20.4 million GCal of AFR. also point to another crucial drawback to switching to coal; Figure 2: Advantages of Alternative Fuels for Egypt 2 Each firm must provide its current specific thermal consumption, which is capped at 4,000 MJ/kg (equivalent to 956 kCal/kg). This is above the national average of 945 kCal/kg. Authorities then calculate the total energy required to produce at nominal cement capacity and issue allowances for the respective volume of coal. HFO was used for this baseline to avoid penalizing those who were totally or partially using natural gas before the new regulations. This formula is valid for all plants, regardless of their real fuel mix. 14 Adopting alternative fuels may help the cement industry in not only These drivers have created an increased appetite and significant meeting these regulatory requirements, but in saving money. AFR unmet demand, which could lead to a five-fold increase in current is a locally available resource with immense growth prospects: a consumption levels of AFR, if the supply of waste is secured. steadily growing population base generates a continuous flow of waste. Furthermore, key governmental entities and the current regulatory frameworks are receptive to the incorporation of AFR Estimated Available AFR Supply as a means to confront the challenge of emissions, and the growing public health threat of waste. AFR usage will have fewer negative Of the four waste streams evaluated as part of this study, agricultural externalities. It will conserve valuable fossil fuels, reduce pressure on waste is by far the largest in volume, at an annual estimate of 10.7 foreign currency reserves and allow for safe disposal of waste that million tons. RDF from MSW, closely follows, at two to five million would otherwise be landfilled or illegally, openly dumped. tons, with DSS offering another one million tons. Tires are a distant fourth, due primarily to competition from the tire retread and reuse In summary, these are five drivers supporting AFR industry. The study concludes that current waste volumes in Egypt growth in Egypt: a) local fossil fuel shortages from this first three sources offer between 46-72 million GCal of constraining cement production, b) competitiveness potential fuel that goes untapped each year. Combined, the three amid rising fuel costs, c) a severe shortage of foreign waste streams contain enough technically viable fuel potential currency reserves hindering imports of clinker and to supply nearly 1.6 times the 46 million GCal of the Egyptian coal, d) CO2 mitigation requirements and licensing cement industry’s 2015 energy needs. Table 1 summarizes available mandates, and e) corporate and/or company-set quantities, prices and chemical properties for each of the proposed AFR substitution targets. waste stream. Table 1: Potential AFR Quantities from the Four Waste Streams Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 15 AFR Financial Viability and Commercial Potential for instance, also requires technologically-intensive preparation. As discussed, operating costs vary. But, in general RDF is considered the The entry of coal into the Egyptian energy landscape can be most expensive waste to prepare, whereas TDF is the least expensive expected to create fierce competition for other fuel sources, but since it requires only shredding. there is still a market for waste-based alternative fuels in Egypt and a potential appetite for investing in co-processing solutions. But To reach a TSR of 20 percent by 2025, total investments for pre- in order for AFR to be competitive, the price difference between processing are estimated at $114 million and may potentially be as traditional fuels and alternative fuels must be taken into account. much as $320 million. This represents a significant opportunity to AFR prices are dictated by factors that include: the amortization of attract investors and financial institutions. Based on the findings of the equipment installed at the cement plant to co-process with either the study, the economic feasibility of AFR pre-processing projects fuel; the operational cost of co-processing (also covers handling (with the exception of TDF) could result in an internal rate of return and maintenance); the cost of procuring the AFR; and the cost (IRR) above 15 percent, and a payback period of three to five years. of potential negative impacts of the AFR on the kiln process and equipment. An economic viability analysis of the four waste streams demonstrates that AFR is commercially competitive with coal. The cost competitiveness of each fuel varies, depending on preparation and processing costs, the price of other fuels and the cost of transport. IFC’s initial analysis shows that for 2015, average AFR pricing was between 5 and 40 percent less expensive per GCal than coal at the burner point. That price difference also reflects pre- processing, handling, transportation, and co-processing costs. The necessary capital investment by a cement plant for co-processing AFR in the kiln ranges from $1 million for agricultural wastes (fine materials) to $4 million for MSW. However, most cement plants needed to make capital investments to burn coal, investments which ranged much higher than that for AFR. For each coal line, the figure varied from $15 to $25 million (excluding land prices).3 The total CAPEX requirements for co-processing varies for each cement plant, depending upon its existing production processes and equipment. Thus, sector-wide estimates are difficult to assess. However, the payback periods for investments required for AFR co-processing are expected to be less than five years. As for pre-processing, which may be led by cement plants or by a third party service provider, the estimated capital investment ranges from $0.6 million for TDF to $5 million for RDF. Figures depend on the waste type, but also the size and complexity of the pre- processing platform. For most AFR types, significant economies of scale exist, particularly for labor intensive preparation of MSW. DSS, Figure 3: The Main Stages of AFR Pre-Processing 3 Estimate for a cement plant producing three million tons of clinker per year and using approximately 400,000 tons of coal. 16 Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 17 AFR Substitution Scenarios capital modifications, acquire needed knowledge and to train their employees. International producers possess this technical knowledge The TSR at each cement plant varies widely, depending on the at the corporate level, and are thus well-placed to lead the market sophistication and co-processing equipment available at each to higher TSR levels. individual cement plant. Most cement plants in Egypt are quite modern, and thus could theoretically accept TSR up to 30 percent As demonstrated earlier, with the exception of tires, all waste without significant kiln modifications and related investments. streams are available in sufficient quantities to partially supply the Though achieving a limited TSR of 5-15 percent is relatively easy, cement industry’s thermal energy needs. Assuming the absence of the path to a higher TSR (> 20 to 30 percent), is long and requires natural gas from the fuel mix, various thermal substitution rates by technical knowledge that needs to be encouraged and developed. volume are presented in Table 2 below, which illustrates that a 20 percent TSR by the year 2025 is a realistic scenario. A 30 percent Growth rates in the average thermal substitution rates will follow TSR is also technically achievable, but only with the implementation a gradual learning curve. Cement producers will need to make of significant regulatory interventions. Table 2: Three Scenarios of AFR Substitution Percentage Reaching the Business As Usual (BAU) 20 percent TSR target by In order to reach 20 percent TSR by 2025, cement plants would 2025 means an additional 13.6 percent in AFR substitution beyond need to spend around $217 million annually on procuring AFR. the current 6.4 percent TSR levels of 2014. However, in order to This could help the cement industry save $51 million annually. It reach this BAU scenario, cement plants must look to a combination would also replace about 1.9 million tons of coal in 2025 and avoid of the various waste streams. No single waste stream could meet the 3.9 million tons of CO2 emissions. demand on its own. In addition, a diversified AFR fuel base would reduce potential supply reliability concerns. 18 AFR Supply Chain concentrated in urban areas. Others, particularly agricultural waste, are geographically distributed and may lack central collection and A key challenge is the lack of an established supply chain to collect, processing points. process and deliver waste to cement plants at the required quality and with a mutually accepted price. In order for AFR to grow, Mitigation: In order to help address this issue, IFC has created a commercially and sustainably, strong partnerships between waste map which indicates the locations of a) cement plants throughout suppliers, waste management operators, and the cement industry Egypt, b) the distribution of various types of crops in Egypt c) must be forged. various sources of AFR and d) locations of the existing waste processing/composting sites, which may be considered as potential International experience shows that there are different levels of AFR future pre-processing locations. The map could be accessed at this pre-processing integration in the cement sector. In general, there are link: http://arcg.is/1ToAspz three levels of integration in AFR upstream activities: i) outsourcing (no integration), ii) partial integration, and iii) full integration. The Qualified investors. Waste markets remain fragmented and cement plant would select the model most relevant by evaluating dominated by informal players, most of which lack the technological the degree of AFR quality control it requires, the scale of investment knowledge and financing to supply a cement company with AFR on a firm can afford, and the complexity of operations it can tolerate. a long-term basis at required quality specifications. The appropriate business model will vary depending on the type of waste stream and the cement company’s risk appetite. Mitigation: This study aims to equip investors in the waste management or cement industry with initial information with However, whatever the type of waste, market players must come which to investigate the potential of investments in the pre- to clear and fair commercial arrangements ensuring a secured processing stage of AFR. The findings of this study indicate that the AFR supply and return on investment, a fair pricing mechanism, investment opportunity can be an attractive one, if the complexities and acceptable quality standards, and economic and regulatory inherent in the various waste streams are managed today. incentives/disincentives. Agreement on quality and secured supply. Almost all potential The majority of the cement companies, interviewed as part of this AFR requires pre-processing to guarantee a more homogenous study, plan to increase AFR thermal substitution rates, but the waste product with characteristics that comply with the technical cement companies increasingly envisage entering into pre-processing specifications of cement production. The cost and complexity as a consequence of the high prices of AFR provided by the existing involved in pre-processing varies for each type of waste. Feedback waste management companies in Egypt, unless competitive options from the cement producers surveyed for the purposes of this can be offered. This represents a potential opportunity to third party study has indicated that both availability and quality of AFR is of waste processing players to bring their expertise forward. unreliable or of lower quality than required. Challenges and Recommendations Mitigation: As will be further elaborated in this report, IFC Alternative fuels for the cement industry represent an immediate recommends that the cement companies contractually agree with and attractive opportunity in Egypt. Nonetheless, there are several AFR suppliers on various standard terms such as a) minimum issues that should be considered carefully and addressed prior to volume off-take, b) pricing, and c) quality characteristics and an investment decision, in order to ensure a long term and more technical specifications of the AFR supplied. The more the sustainable market for AFR in Egypt. These issues include the cement industry can harmonize its requirements from a quality following, along with options for mitigation: and characteristic perspective, the greater the economies of scale. Logistics and transportation costs. Transportation costs can Support from local governments. Cooperation from the government significantly impact the profit margins of an otherwise viable financial is vital to ensure the security of supply and off-take agreements, model. Waste streams like MSW and DSS are overwhelmingly particularly for MSW. If price and volume are fixed under a longer- Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 19 term supply contract to allow for investment cost recovery and waste with an AFR pre-processing plant even with a tipping fee. minimum returns on investment, waste management firms can obtain AFR represents a potential market-based solution to this serious financing and qualified players may be willing to become involved. environmental problem. Mitigation: Local governments are encouraged to see AFR A Sustainable AFR Market in Egypt processing companies as an opportunity to help solve the waste IFC’s analysis underscores the opportunity for the private sector problem, particularly in urban areas where waste endangers to promote and invest in a commercially attractive market for public health. Furthermore, investing in AFR will help minimize alternative fuels in Egypt. If the supply chain for AFR can be public expenditure costs and reduce the environmental impact unlocked by the private sector through developing and investing in of dumping and landfilling. Nevertheless, a viable AFR sector is pre-processing facilities and operations, investors will be rewarded not an opportunity for wind-fall profits. Local governments are with sustainable and long-term demand from the cement industry. encouraged to support potential investors by selecting AFR pre- processing sites and making them available for development. Alternative fuels are already less vulnerable to global price fluctuations than coal and less susceptible to supply volatility. Enforcement of regulations and an efficient waste management Multiple forces in Egypt are pressing for greater reliance on chain. Extensive bans exist to prevent waste dumping and other alternative fuels and multiple stakeholders stand to benefit greatly disposal methods. But, a lack of enforcement impacts the availability from their adoption, not least of which are the multitude of small of AFR supply, as well as the financial margins of co-processing. businesses that can become waste collection agents or pre-processing Existing facilities are currently treating less than 10 percent of facilities along the cement production supply chain. There is a clear generated MSW, which reduces the AFR volumes available to opportunity for the private sector to transform these waste streams interested investors. into a financially sustainable business. Mitigation: After adequate rehabilitation, operation and The challenges in making the switch to alternative fuels are maintenance of existing pre-processing facilities, and the significant. But the rewards far outstrip the hardships of reaching establishment of new ones, illegal dumpers may find it is just the goal. as economical, if not in fact cheaper, to deposit their collected 20 Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 21 Chapter 1: Introduction 1.11 Alternative Fuels as a Viable Option for Egypt’s Cement Industry The successful use of alternative fuels for the cement industry brings The main objective of this study will be to examine in detail the with it potentially significant public and private benefits. The use of financial viability, economic competitiveness, technical feasibility AFR can reduce landfilling, lower carbon emissions by substituting and other benefits of AFR for the cement industry. This report will the use of coal, reduce public costs for waste management, and consider four types of AFR waste streams: a) refuse derived fuel potentially transform waste from a public nuisance into a privatized (RDF) from municipal solid waste, b) dried sewage sludge (DSS) and lucrative solution. The benefits make the investment more than from wastewater treatment plants, c) agricultural waste, and d) worth the effort. tire derived fuel (TDF) from scrap tires. These waste streams have been selected since they meet three essential criteria defined after By removing subsidies on natural gas, and allowing the import extensive consultation with relevant stakeholders. Those are: 1) and use of coal and petcoke in the cement sector for the first time, suitability for use by the Egyptian cement industry; 2) abundance, Egyptian authorities have definitively changed the future fuel mix for relative availability of data, and proximity to cement producers; and the industry. As a consequence of these changes, it is expected that 3) current mismanagement of associated waste streams, leading to heavy fuel oil (HFO) and natural gas will no longer be part of the negative environmental and health impacts. fuel mix. Yet, fuel costs will also remain permanently higher. Even Conclusions can be drawn largely on the price differential between as cement plants complete the equipment investments necessary AFR and conventional fuel, which may depend in large part on to switch to coal and petcoke, this new reality has provoked Egypt’s energy and waste management policies. Expanded use of strong interest among industrial and the Egyptian government to alternative fuels will be further stimulated by the introduction of investigate the competitiveness and attractiveness of alternative an economic framework around waste disposal and recycling. fuels for cement production. A more detailed analysis of the existing regulatory framework, future policies needed and international best practices will also be Alternative Fuels and Raw Materials (AFR) are any non-fossil elaborated upon. based fuels that can replace part of the raw material needed for the production of cement, whether it is used for thermal energy or This report will address the following questions: material recovery. These alternative fuels are derived from waste material, which is plentiful in Egypt. Waste material is also largely • What is the current status of AFR in Egypt and how will it be being disposed of in economically inefficient ways that are damaging affected by the cement sector’s move to import coal? Will the to the environment and public health. At present, regulatory introduction of coal impact the use of AFR? What are the AFR requirements governing the disposal of these wastes are not substitution targets of Egypt’s cement firms, and what is the enforced or are nonexistent. But the creation of an infrastructure for overall potential demand for AFR? channeling these wastes into productive use as fuel sources would • Under the assumption that coal will be deployed in cement yield advantages for the environment, and for the economy generally. plants at significant levels in the near term, what would be The cost of producing cement in Egypt, the 12th largest producer in realistic for AFR use in the cement industry within the next the world, would be reduced by tapping into a sustainably available five to ten years? What is the most likely future fuel mix for the source of fuel. cement industry? Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 23 • What specific waste streams (municipal waste, sewage sludge, streams that can be used as potential AFR (municipal waste, sewage agricultural waste and scrap tires) currently exist in Egypt sludge, agricultural waste and scrap tires). Unlike in other markets, which may contribute to an increase in AFR supply to cement where data is readily available or can be extrapolated, this study plants? What are the supply chains for these four waste relies on primary, original research to inform its conclusions. The streams, and their viability for use as AFR, either standalone scope and nature of the research is the first of its kind for Egypt. or in combination with other waste streams, in cement plants? The first component under the study assesses the baseline situation • How do pricing and other economic factors affect waste of AFR use among cement operators in Egypt. The four white cement sourcing, preparation, processing and transporting? producers were excluded from the 25 existing cement plants in Egypt, as AFR can contain elements (i.e. iron) that could degrade the • How does the location of the various sources and uses of AFR color of the end-product, an outcome which would be undesirable affect the viability of this source of fuel for cement plants? for this market segment. Consequently, white cement producers are usually restricted to the use of non-polluted biomass waste. Of the • What are the opportunities for investors in the supply chain remaining 21 plants, 14 were interviewed between March and May of AFR in providing the cement industry with much-needed of 2015, representing 75 percent of the total Egyptian production reliable fuel sources? capacity, equivalent to an annual production capacity of about 46.8 Based on the assessment of the energy situation in Egypt, the cement million tons of clinker. Ten of the 14 plants interviewed belong to industry’s thermal energy needs, and the current use of AFR, a multinational companies, and four are locally owned by Egyptian realistic energy mix scenario will be developed. This will also involve shareholders. Most interviews were carried out at the plants in order a comparison of the energetic (calorific) value of the various energy to ensure participation of key operational staff able to provide the sources, potential volumes available, and the cost structure. required data. Solutions will then be proposed to bridge the supply and demand Under this baseline survey the current status and planned use of gap between waste generators and cement plants, offering economic AFR, as well as challenges faced by the cement sector for AFR use, and financial analysis of different technical and business models. were identified. The results of the survey will be shown throughout The recommendations for overcoming these challenges will include this study in the following three categories: a variety of interventions, which would also require longer-term • Group 1: cement companies currently using AFR; regulatory reforms. • Group 2: cement companies with AFR investment commitments This study aims to provide a reference for the cement industry, waste or decisions to proceed with AFR; and processing companies, and Egyptian authorities, helping them to understand and identify responsible and sustainable approaches to • Group 3: cement companies that have not yet taken any action the selection and use of AFR in the cement industry in a transparent regarding AFR use. and sustainable manner. The second component of the study comprises an assessment of AFR sources, volumes, quality, locations, and pricing. Available data 2.12 Approach and Methodology on different waste streams have been analyzed to discern gaps in the AFR value chain. The waste streams were selected based on feedback In order to answer the above questions, this study explores the from multiple stakeholders in terms of viability and availability. But current use of AFR in the cement industry in Egypt, identifies major it may also be advisable for cement players to explore other business bottlenecks for expansion of AFR use, and recommends business opportunities in the future, including but not limited to industrial solutions. It explores the main constraints related to specific waste waste, spent oils, spent solvents, and polluted soil. 24 The study relied extensively on dialogue with relevant stakeholders An analysis of supply and demand was completed in order to identify to shape its conclusions and recommendations. Data in the report sustainable investment opportunities in the AFR value chain, was substantiated by participatory interviews, workshops, and a based on different business and operating environment scenarios. full stakeholder engagement process, which included the following These included the current situation (i.e. without any regulatory groups: modification), and what pre-requisites may be needed in order to realize higher AFR substitution opportunities. • Private sector: cement firms and waste management companies (formal and informal) involved in collection and disposal; Finally, this report refers to coal only for purposes of simplification. Though petcoke currently has a lower cost than coal and some • Government stakeholders: relevant ministries, affiliated limited quantities are locally available, it is still being used by a organizations and select municipalities; number of cement plants in Egypt as an alternative to natural gas. • NGOs: organizations working with waste collectors or taking part in collection themselves. This included representatives of Cairo’s informal waste collectors, the “zabaleen”. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 25 Chapter 2: A Changing Energy Picture 2.1 Egypt’s Energy Crisis Historically, Egypt has been a net exporter of oil and gas, as domestic companies, that in turn suspended new investments in the sector consumption was well below production. The Arab world’s most (Kouchouk and Alnashar, 2015). These developments led to populous nation enjoyed considerable energy security during the continuous supply bottlenecks, complicated by deficiencies in power first decade of the 2000s, with widespread access to energy and plants and the energy transportation infrastructure. reliable supply. In recent years, however, this situation has been dramatically reversed. Growing energy demand has put increasing By 2013, Egypt’s oil exports had drastically dwindled and the pressure on available fuel supplies. The sector has been particularly country become a net importer. Energy demand swallowed domestic sensitive to political turmoil and unrest, most notably in 2011 and production (Figure 4). According to estimates from the U.S. Energy 2013. The political unrest revealed large structural and financial Information Administration, exports dropped by an annual average problems, including the accumulation of arrears by the Egyptian of 30 percent between 2010 and 2013 (EIA, 2015). General Petroleum Corporation (EGPC) with international oil Figure 4: Oil and Natural Gas Production and Consumption (Source: British Petroleum, 2015) In 2014, Egypt’s deficit of natural gas stood at 700 MMSCF/day, oil at 2.3 MM tons/day and petroleum products at 10 MM tons/day (GoE, 2015). By the summer of 2014, the situation had become critical, with the country experiencing continuous shortages of electricity, and a power generation deficit estimated at a maximum of 5,300 megawatts in the mid-summer of 2014, equivalent to one-eighth of the country’s installed capacity. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 27 .2 The Cost of Energy Subsidies 2 Similar to other countries in the region, Egypt has long relied on generalized energy subsidies as a central instrument for social protection, economic development, and the sharing of hydrocarbon wealth.4 Subsidies have often been seen as essential for attracting investment in the manufacturing sector. This has, however, led to a policy of buying or producing fuels at international prices and selling at subsidized prices in domestic markets. The low prices elicited a rising demand response from the economy, and the subsidy bill grew at a compound annual rate of 26 percent between 2002 and 2013. As Egypt’s energy demand soared, fuel subsidies produced several unintended consequences. Egypt’s exposure to global market prices at a time when international oil prices were on the rise drove the government deeper into debt. By 2013-2014, fuel subsidies consumed around a third of government revenues, constituting a fifth of government expenditures and over seven percent of Gross Domestic Product (GDP).5 Fuel imports also drained the government’s foreign currency reserves, leading to a backlog of payments to international energy producers. Predictably, foreign oil and gas companies in Egypt reduced their gas production and investment levels, creating a vicious cycle of supply shortages and foreign currency scarcity (SPTEC Advisories, 2014). As domestic production of oil and gas stagnated and energy imports slowed, Egypt began experiencing shortages of electricity, oil and natural gas (Citadel Capital, 2012). In response, the Egyptian government reallocated natural gas away from energy-intensive industrial sectors such as cement and steel, in order to prioritize power generation. In July 2014, the Egyptian government reintroduced major reforms to phase out energy subsidies in a staggered increase of the officially mandated prices of petroleum, gas and electricity (Griffin et al., 2016). The reforms were intended to reduce energy subsidy spending by 44 billion Egyptian pounds ($6.2 billion) by 2015, according to the Minister of Finance. Griffin et al. (2016) estimate that the reforms will reduce subsidies by one-quarter to one-third. .3 Cement Producers and Rising 2 Fuel Costs As energy shortages forced the reallocation of natural gas and other primary energy towards domestic power production, Egypt’s industrial sector suffered. This situation was particularly difficult for the country’s cement sector, which accounted for about 3.7 Figure 5: Comparison of Fuels in Subsidies with Social Sectors percent of Egyptian GDP (Oxford Business Group, 2015), but (Source: Ministry of Petroleum, 2014) almost 7.4 percent of total industrial natural gas consumption and 16.3 percent of the total industrial electricity consumption in 2011/2012 (FEI, 2014). 4 The IMF has estimated that for the MENA region as a whole, energy subsidies cost about $237 billion in 2011, approximately 8.6 percent of regional GDP, or 22 percent of aggregate govern- ment revenue. The figures are the equivalent to a sobering 48 percent of all global energy subsidies. 5 Refer to the World Bank Macro-Economic Bulletin for further details. Griffin et al. put the figure in 2013/14 for combined energy subsidies at about LE150 billion ($21 billion) or 8.5 percent of GDP. 28 The production of cement is extremely energy-intensive. Thermal The proposed use of coal has, however, sparked a highly polarized energy, which is the energy generated in the plant’s kiln by the public debate over potential environmental and health impacts. The combustion of fuels and needed to provide the required heat level to debate around coal use dominated energy policy discussions in Egypt produce clinker, represents approximately 80 percent of the overall during 2014. Criticisms revolved around the externalities of not only energy requirements of cement production. Worldwide, energy the combustion of coal, but also the import of a fossil fuel that is costs account for more than 40 percent of total cement production largely unavailable in the local market, as well as the lack of existing costs (UNIDO, 2009). Natural gas and HFO had been the primary infrastructure to support the switch from natural gas to coal. source of thermal energy for cement producers from the inception of the industry in 1929. Until 2013/2014, the fossil fuel mix in the In response to this debate, the Egyptian government drafted the cement sector has been mainly 60% natural gas and 40% HFO. executive regulation Decree 964/2015, to address mitigation alternatives available to cement companies using coal as a fuel; The severe natural gas shortages between 2013 and 2014 caused a this decree involved both emissions limits and controls over coal 20 percent drop in the cement industry’s average production levels. permits. The import and use of coal for cement production and Some cement companies halted a number of their production lines other industries was approved in 2014 as part of a broader effort altogether. Even as shortages eased in 2014, the announcement that to diversify the country’s energy mix and establish long-term fuel the government would phase out fuel subsidies for energy-intensive source diversification, giving priority to the use of natural gas in industries pushed up prices of natural gas and petroleum products. electricity production (Reuters, 2014). The Ministry of Environment By 2016, natural gas prices were four times higher than in 2010 has stipulated that coal licenses will be granted only to those firms for many industries. For the cement industry, natural gas prices presenting a mandatory greenhouse gases (GHGs) reduction plan. rose by roughly 33 percent in 2014 (World Bank, 2014). Clinker The decision on how such abatement targets can be met is left to the costs increased in tandem. According to the Egyptian Chamber of individual cement firms, based on their operational nature and the Building Materials, clinker imports reached six million tons per year baseline of their emissions. at the peak of the energy crisis, as many plants turned to importing clinker instead of producing locally, due to the shortage of fuel. As of 2015, 19 cement companies had applied to the Ministry of Environment for licenses to use coal (MadaMasr, 2015). Twelve plants have been granted temporary permits to import. Permits issued by the Egyptian Environmental Affairs Agency (EEAA) are .4 Diversifying the Energy Mix 2 valid for two years. During the first year of the new regulations, total coal consumption in Egypt rose by more than 300 percent, from 0.2 million tons of oil equivalent (mtoe) in 2013 to 0.7 mtoe Even as the shortages eased in 2015, domestic energy prices continued in 2014 (British Petroleum, 2015). to rise, a trend expected to remain in place through the foreseeable future until prices reach the cost recovery levels set as a strategic target by the government of Egypt. In addition, renewed availability of natural gas for the cement companies still remains uncertain. As .5 Alternative Fuels: A Key 2 a result, cement companies have been forced to explore alternative Substitute for Coal sources of energy, including imported coal and petcoke, to secure their energy needs. The potential for alternative fuel usage in Egypt is supported by Coal and petcoke have been perceived as the most cost effective ongoing uncertainty about the availability of fuels as a result of option by the Egyptian cement industry. Coal remains the largest foreign currency pressures, the heated political debate over GHGs single source of fuel used by the cement industry internationally, emissions and health impacts, and the overall risks concerning with an annual average consumption of 330-350 million tons the renewal of coal permits. Many cement plants have continued (Davidson, 2014). In Egypt, coal was positioned as a solution due its expanding their use of alternative fuels as a key solution. competitive cost, high calorific value (>6000 Kcal), more consistent Many of Egypt’s key cement players have also committed to quality, and its international availability from a variety of sources alternative fuels in their coal license applications, relying on AFR and markets. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 29 substitution to meet the mandatory GHGs target reductions. It is Egypt’s waste management system faces a number of complex important to note that several cement operators in Egypt belong to challenges, to be explored in depth in the coming chapters. Yet there international conglomerates. As such, many already have corporate- are changing institutional dynamics that may positively impact the wide AFR substitution targets, as well as GHGs emission reduction development of alternative fuel businesses. plans. These standards are mostly based upon their participation in In November 2015, a national Waste Management Regulatory the World Business Council on Sustainable Development (WBCSD)’s Authority (WMRA) was established. Charged with setting Cement Sustainability Initiative (CSI). institutional mandates and developing adequate legislation to Interest in the potential for AFR has been heightened by the successful improve waste management in Egypt, the agency will determine use of AFRs in cement production around the world, most notably in municipal and national responsibilities for collection and processing the EU, where substitution rates of AFR for fossil fuels, or “thermal of waste. One central, self-proclaimed objective is to “transform substitution rate” (TSR), have reached about 39 percent (WBCSD, waste from a burden to an economic and investment opportunity.” 2013). Some plants have successfully reached TSR as high as 100 (Mohsen, 2016). percent under a highly enabling regulatory environment. AFR has WMRA, housed under Egypt’s Ministry of Environment, will not been widely used in Egypt to date, but potential economic, social also produce guidelines and support capacity-building for waste and technological benefits have increased awareness and interest management providers. The authority intends to become a singular on the part of the cement industry, waste management operators, coordination agency responsible for improving the collection government representatives and other stakeholders. efficiency of waste, setting codes for new landfills and composting Besides being less vulnerable to global price and supply volatility, facilities, encouraging investment opportunities in the sector and AFR has the potential to provide a cheap, locally available energy helping determine budgetary needs and funding mechanisms. source for Egyptian industrial actors. Quite simply, Egypt’s large While it is too early to assess WMRA’s impact, the development and constantly growing population ensures a continuous abundance of a central agency to coordinate and supervise waste management of waste material. may offer both cement firms and potential alternative fuel suppliers a clear partner and key stakeholder to collaborate with. At the very least, it is a step towards alleviating uncertainty in the market. .6 Other Market Drivers: 2 This institutional development is especially relevant to a 2015 Prime Regulating Waste Ministerial Decree (964/2015) specifying environmental, technical and permit requirements that cement firms must comply with in As a significant alternative to fossil fuels in the cement sector, order to obtain and maintain the permit to operate the cement kiln AFR is increasingly competitive based on market based dynamics fired with coal, petcoke or waste-derived fuels (for further details on alone. However, a fully thriving AFR market requires an enabling AFR regulations please refer to Annex E). regulatory and professional environment. A key to success for waste-management systems in emerging economies is the ability As previously noted, cement firms are now obliged to provide to aggregate waste into meaningful volumes and to develop an an environmental impact assessment to coincide with their organized supply chain (Engel et al., 2016). This requires a clear application for coal use. Each firm is expected to submit an annual distribution of responsibilities and an institution that directs overall report, detailing environmental performance and demonstrating waste management efforts. commitment to an individualized GHG reduction plan. The permit shall be renewed every two years, subject to EEAA approval. 30 Chapter 3: Co-processing: Making the Most of Resources The use of AFR alongside traditional fuels in the cement In 2009, the European Cement Research Academy (ECRA) and industry, and other manufacturing industries, is known as “co- WBCSD proposed estimates in terms of AFR substitution rates for processing”. Co-processing is defined as the use of waste as raw high-income countries and emerging markets (IEA-WBCSD, 2009). material, or as a source of energy, or both, to replace natural mineral By 2030, emerging markets should have reached 10 to 20 percent, resources (material recycling) and fossil fuels in industrial processes. while developed countries should have achieved targets of 40 to This is primarily relevant for energy intensive industries (EII) such 60 percent. By 2050, estimates predict a substitution rate of 25 to as cement. Co-processing reduces dependence on primary resource 35 percent for the emerging markets and a static rate for the other markets, which may be offshore; saves landfill space; cuts GHG regions (Figure 6). emissions; reduces pollution caused by the disposal of waste and According to the latest statistics from the WBCSD’s Getting the provides a sustainable solution to a local problem. Numbers Right (GNR)6 data for 2013, AFR use by cement plants Alternative fuels are at the heart of the cement sustainability worldwide reached 16 percent (WBCSD-CSI, 2013a). In the EU, initiative (CSI), in which the largest worldwide cement firms have co-processing represented nearly 39 percent of the thermal energy been actively involved under the World Business Council for needs of the cement industry (Figure 7). In fact, the European cement Sustainable Development. industry was responsible for nine percent of all energy recovery inside the European Union in 2012 (EUROSTAT, 2015). Examples In addition to producing fewer polluting gases, especially carbon from cement plants in Germany, Poland and other EU countries dioxide, utilizing alternative fuels can also indirectly lead to show that it is technologically and economically feasible to further emissions reductions by improving refractory usage rates (Benhelal increase these substitution rates, possibly as high as 95 percent (de et al., 2013; Grosse-Daldrup and Scheubel, 1996). Beers and Hensing, 2016). There have been some concerns about the impact of AFR use on .1 International Trends 3 clinker output, but many of those concerns can be answered when AFR quality and characteristics conform to established guidelines, As already alluded to, large percentage of cement manufacturers such as those in the GTZ-Holcim guidelines (Holcim-GTZ, 2006). in Egypt are owned or managed by international manufacturers, The following section will also discuss co-processing technical whose parent companies have TSR targets and wide-ranging considerations. experience in the use of alternative fuels. Globally, Cemex has the highest corporate average TSR rate, nearly 28 percent, followed by Heidelberg with around 21 percent, as summarized in Table 3. 6 The “Getting the Numbers Right” (GNR) is a voluntary, independently-managed database of CO2 and energy performance information on the global cement industry. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 33 Table 3: AFR Use by International Cement Manufacturers (Source: Corporate Sustainability Reports, 2014) a) Average Corporate AFR Thermal Substitution Rates Globally b) Corporate AFR Percentage by Type of Waste Figure 6: Estimated AFR Use Between 2006-2050 (Source: IEA-WBCSD, 2009) 34 Box 1: Success Stories Worldwide, the cement industry is driven to reduce thermal energy costs, in parallel with cutting its carbon dioxide and nitrogen oxide emissions. Alternative Fuels offer a tested method to help achieve both objectives. With energy normally accounting for 30-40 percent of the operating costs of cement manufacturing, any cost-saving opportunity can provide a competitive edge over cement plants using only conventional fuels (Mokrzycki and Uliasz-Bochenczyk, 2003). Substitution rates vary from one country to another, and from one plant to another. Some cement plants have replaced up to 100 percent of their main fuel stream (petcoke and fossil fuels) with alternative fuels. Across the majority of cement conglomerates, an average rate of 10 to 30 percent substitution can be found. The wide variation in alternative fuel usage rates often rests on the type of cement technologies employed, the kiln system used, and the availability of alternative fuels with compatible chemical and physical characteristics. There are many success stories. Since 1990, the Holcim Group has increased its energy consumption by only 45 percent since 1990, while boosting its cement production by 120 percent. Since the group uses AFR, their expansion rests on a mere 25 percent from traditional fuel sources. The Cemex-operated Clinchfield Cement Plant in Georgia, U.S.A, has achieved a fuel substitution rate of 78 percent by burning nearly 90,000 tons of biomass, including peanut shells and wood sawdust, in addition to tire fibres and whole tires. As of September 2013, the factory averaged a monthly substitution rate of a little over 93 percent, with 100 percent reliance on alternative fuels for periods of 24 hours. Although EU average AFR use is nearly 39 percent, some cement plants have reached much higher rates. Examples are two cement plants in Germany owned by Holcim: Rüdersdorf and Beckum. Both use AFR, and in 2011 had TSR rates of 73.8 and 77.5 percent respectively, which meant that around three-quarters of their natural resources (coal and lignite) could be saved. For both plants, this represented 260,000 million tons of coal or 194 railway trains. Another cement plant ENCI, owned by Heidelberg in The Netherlands, reached a TSR of 85 percent in 2013. Such success was an outcome of landfilling fees and strict enforcement of laws on uncontrolled landfilling (Cemex Germany, 2013; Heidelberg SD report, 2014). Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 35 Figure 7: Average Thermal Fuel Mix in Cement Plants at the European Union and Worldwide7 (Source: WBCSD-CSI, 2013a) 3.2 Co-Processing Technical Considerations It will be imperative to consider the criteria for physical and chemical Generally, when large amounts of alternative fuels are used, the properties which the cement industry applies in the selection of production process and the materials have to be monitored carefully the various fuel types used in thermal processes and the technical (Wirthwein and Emberger, 2010). Physical parameters that affect the impacts of co-processing. Any adjustment in fuel type used by a substitution levels of conventional fuels for AFR include the calorific cement plant has an ultimate impact on the efficiency of the process value, the volatility and the burnability of the fuel, and its relative and the characteristics and quality of the end product. moisture content. Furthermore, any impact on the flame shape, as well as on the calciner, are crucial considerations in the decision. When co-processing using AFRs, which can fluctuate in terms of quality, volume, chemical and physical characteristics, plant The best replacement rates are achieved through the use of waste operators must carefully select types of AFR and their respective oils with higher ash content compared to HFO, waste solvent suppliers. Cement plant operators would want to ensure that fuels and petcoke, all of which have a low ash content and very suppliers are able to provide a consistent product in terms of quality good calorific value. The EU Integrated Pollution Prevention and and physical characteristics. When a variation in the ash content Control (IPPC) Directive 8suggests limits to the thermal replacement occurs during the clinker production process, the plant operator of conventional fuels by waste solvent fuels of 40 percent of the must adjust the composition of the raw materials, since variations total fuel used, whereas used oils and petcoke can replace any in ash content affect the clinker quality and the ultimate integrity of the cement product. 8 The European IPPC Bureau was founded to organize the necessary exchange of informa- tion, and produces Best Available Techniques (BAT) and reference documents (BREF) which member states are required to take into account when determining best available techniques generally or in specific cases. The aim of the IPPC Directive is to prevent and control emissions to air, water and soil from industrial installations across the European 7 Data cover about 96 percent of the cement plants in the EU28 and 21 percent worldwide. Union. 36 amount of conventional fuels, provided that sufficient quantities are of waste, the physical and chemical properties of RDF determine available. Other AFRs commonly in the cement sector globally, and whether the raw waste will be recycled, converted to energy, or their impact on the clinker properties, are further described in the disposed of in a landfill. Relative density, humidity and heat content following sections. differ in accordance with the source of waste. RDF is a mixture of fuel materials with low volatility and with some of the constituents of low burnability, which results in lower replacement rates. However, if RDF is used at high temperatures with a sufficient flow 3.2.1 Municipal Solid Waste (MSW) of oxygen, or at the bottom of the calciner, then substitution rates of up to 30 percent are achievable. It is essential in such cases to have Municipal solid waste (MSW) is pre-processed and converted to a fuel with two dimensions and high surface area (pellets are not refuse derived fuel (RDF). In addition to the quantity and quality recommended). Typical sample ranges are given in Table 4. Table 4: Sample Ranges for the Physical and Chemical Properties of MSW and RDF 3.2.2 Agricultural Waste The same replacement rates as for the above RDF case can be achieved through the feeding of biomass such as straw and other agricultural by-products if used under the same conditions as for RDF. The main physical and chemical properties of agricultural wastes include ash content, humidity and heat content, where typical sample ranges are provided, as shown in Table 5. Table 5: Sample Ranges for the Physical and Chemical Properties of Agricultural Waste Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 37 3.2.3 Dried Sewage Sludge (DSS) Despite a low calorific value, DSS has high volatility and burnability and can contribute to the replacement of conventional fuels at rates of up to 30 - 40 percent. The range in calorific values of sewage sludge varies considerably and depends on the characteristics of the wastewater it is derived from, as well as the treatment method used . The calorific value range, water content, and moisture content are provided in Table 6. Table 6: Sample Ranges for the Physical and Chemical Properties of Sewage Sludge 3.2.4 Tire Derived Fuel (TDF) TDF can only be fired at the kiln system entry point, and can lead to replacement levels of up to 30 percent through a valorization processing. The following tables provide general properties of car and truck tires, average weight, and energy content. Table 7: General Material Composition of Tires (Source: ETRMA, 2001) Table 8: Average Tire Weight (Source: Basel Convention, 2011) 38 Table 9: Tires Energy Content and CO2 Emission Factor in Comparison to Selected Fossil Fuels (Source: WBCSD, 2005) 3.2.5 Other Technical Considerations technical specifications of cement production and guarantees that environmental standards are met. In order to achieve positive results with AFR substitution, the cement The four targeted waste streams reviewed for the purposes of this industry must be aware of possible variations in the moisture content study require the following pre-processing activities: of the AFR, any flame shape change, and any calciner rise in carbon monoxide, which would result in a loss of kiln production efficiency. • Refuse Derived Fuel from Municipal Solid Waste When co-processing, operators should use an analyzing system at MSW must be sorted in order to separate the recyclables (metals the kiln entry point which can continuously monitor the oxygen and and some unpolluted plastics, glass bottles, dry unpolluted carbon monoxide levels, in order to prevent any loss in kiln efficiency. cardboard or paper), the inert materials (sand, stones, earth, glass) and the putrescible materials such as food, typically called Aside from technical considerations and the impact on the cement “organics.” The light and combustible fraction, typically 20-30 product and production process, the cement industry should satisfy percent, such as wet and polluted paper and cardboard and all legislative environmental requirements as set forth in the permit plastic films, is then shredded to reach the optimal size. The end granted by government authorities. The main parameters that product becomes RDF. There are technological solutions that typically need to be monitored are the particulate emissions (dust) allow for easier shredding and sorting of waste. Mechanical as total dust emissions and the content of micro silica and heavy sorting and dedicated machinery has been developed to sort by metals in the flue gases. This can be done with special analyzing material. Different drying technologies, thermal or biological, equipment two or three times a year, both with and without AFR are also available. use, to make sure that the emissions fall within the allowable limits. Gases which should be monitored are HCl, HF, NH3, VOCs, PAHs, • Agricultural Waste dioxins/furans, as well as mercury (Hg) and thallium (Tl). The gases Agricultural waste covers a broad range of potential sources. can be monitored using special analyzers; Hg and Tl need to be Pre-processing is not always required (seeds, for example, can measured with separate analyzing methods. be directly co-processed), but size reduction by shredding is common. Pelletizing or drying is also often considered, but can be cost prohibitive. 3.3 AFR Pre-Processing • Dried Sewage Sludge from Wastewater Treatment Plant (WWTP) As described above, the impact of co-processing with AFR, if not Typically, sludge from wastewater treatment plants has a managed correctly, can be detrimental to plant equipment, process moisture content of between 50-80 percent. Before sludge can efficiency, and end-product quality and integrity. Therefore, be co-processed, it must be dried to below 20 percent water most AFR cannot be used without some degree of preparation or content and homogenized. The end product is called Dried processing to ensure fuel quality and homogeneity. This preparation Sewage Sludge (DSS). process is known as “pre-processing.” Pre-processing encompasses all activities needed to transform waste into an acceptable AFR for • Tire Derived Fuel from Scrap Tires cement kiln co-processing. While wastes occur in different forms and If no specific co-processing line for whole tires is installed, scrap qualities, their transformation into AFR produces a homogenous tires must be shredded into chips (between 50mm and 90mm). waste product with defined characteristics that complies with the The end product is called TDF. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 39 Chapter 4: Unlocking Supply Egypt generated nearly 90 million tons of solid waste in 2012. In addition to assessing the quantities of the various waste streams Municipal solid waste and agricultural wastes are among the described in this chapter, the study has also provided a visualization principal types of solid waste generated by volume (Table 10), of the locations of each waste source, as well as locations of all and when combined constitute 59 percent of total annual waste cement plants throughout Egypt on a GIS platform. It allows the generated. Sewage sludge and scrap tires are generated at significantly user to compare the distribution of all waste sources discussed in lower quantities. This chapter calculates the potential quantities to this study, and measure the distances among attributes. The GIS be utilized for AFR, after deducting other possible uses. Details for platform can be accessed at: http://arcg.is/1ToAspz each waste stream are presented in the subsequent sub-sections. Table 10: Volume and Percentage by Type of Waste Generated in Egypt (Source: NSWP, 2013; HCWW, 2014; HCWW, 2016) .1 Municipal Solid Waste (MSW) 4 4.1.1 MSW Supply in Egypt Egypt generated approximately 21 million tons of MSW in 2012; It is estimated that only 60 percent of the waste produced in Egypt with an annual increase estimated at 3.4 percent, it is forecast to is actually collected, of which less than 20 percent is recycled or reach 35 million tons in 2025 (Sweepnet, 2010; Sweepnet, 2014; disposed of properly. While public spaces in some municipalities are NSWMP, 2013). Collection, treatment and waste disposal varies kept clean, less affluent districts are often neglected. A significant among different Egyptian governorates. portion of the waste is disposed of in canals, rivers, streets or open areas without any treatment or preventive measures. This open Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 41 dumping poses harmful threats to public health and negatively Alexandria. In Cairo, for instance, the Zabaleen collect up to an impacts the economy, posing down-stream costs higher than proper estimated 60 percent of the city’s waste, and by their account, waste management would have cost from the outset. recycle nearly 80 percent of this figure. Over time, the Zabaleen have created one of the world’s most efficient and sustainable In some areas, solid waste management can be the single largest resource-recovery and waste recycling systems (Fahmi and budgetary item for local municipalities (World Bank, 2012). The Sutton, 2010); cost of economic losses from inadequate waste management is between 0.4 and 0.7 percent of GDP (World Bank, 2005). WMRA c) private multinational companies collect the waste, clean the even estimates that 2.2 billion Egyptian Pounds (around $248 streets and transport the waste to composting facilities and million) are spent annually on waste management. Across the sanitary landfills under the supervision of municipalities.9 country, there is no primary sorting at household levels, and waste management facilities in Egypt are underdeveloped, inefficient, and The average collection rate is estimated to be 30-95 percent in urban require significant rehabilitation. areas and 0-25 percent in rural areas (World Bank, 2005). WMRA calculates an aggregate of 80.4 percent for urban centers and around Within this context, there are three principal systems for MSW 50 percent for rural areas (Mohsen, 2016). The national average collection: MSW collection rate is 59 percent, equivalent to approximately a) municipality or ‘cleaning and beautification’ authorities for 12.4 million tons annually (NSWMP, 2013). Cairo and Giza hold the main responsibility for collecting, Figure 8 and Table 11 below illustrate the distribution of waste treating, and disposing of MSW in Egypt. Different management generated and collected throughout Egypt. Furthermore, the GIS systems are, however, employed throughout the country; platform displays the geographic distribution of MSW along b) local contractors and informal waste collectors, who manage with other waste sources in Egypt as illustrated at: http://arcg. MSW collection in metropolitan cities, such as Cairo, Giza and is/1ToAspz Figure 8: Total Generated MSW Amounts per Region by Percentage (Source: Sweepnet, 2014) 9 See Zayani and Riad, 2010 for more information. 42 Table 11: Total Annual MSW Generation and Collection Rates in 2012 (Source: NSWMP, 2013) For the purposes of this analysis, RDF10 is calculated as the processed solid, high calorific value fraction remaining after the recovery of recyclable elements of MSW. Therefore, RDF would typically constitute between 10 to 25 percent of the MSW. The processing of MSW usually takes place in sorting and composting plants located near the source of generation or central collection stations or disposal/landfill 10 There is no legal definition of the term ‘Refuse Derived Fuel (RDF)’ and it is interpreted differently across countries. Several countries have introduced quality standards and/or certification labels for RDF to specify product quality requirements (it is sometimes referred to as Solid Recovered Fuel (SRF) to distinguish it from RDF). European Commission, Directorate General Envi- ronment (2004, July), Refuse Derived Fuel, Current Practice And Perspectives, Report No.: CO 5087-4. Retrieved from http://ec.europa.eu/environment/waste/studies/pdf/rdf.pdf Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 43 sites. The final product, RDF, is traded and burnt in installations rejected as feedstock for recycled product manufacturing. This could for power generation or in a manufacturing process where heat increase the “other” waste component to 25 percent. Therefore, the is required, as it is with cement production. Excluding recyclables lower and upper limits of “other” waste could range between 10 prevents any disruption in the activities of informal sector recyclers, and 25 percent. the Zabaleen, and reinforces respect for the principles and rankings It is also worth noting that these calculations presume that the of the waste management hierarchy. organic component of MSW will be used for composting, yet it is theoretically possible that a percentage of such organic waste can Since the organic content of MSW is about 56 percent and the be biologically dried and later used for co-processing purposes by a recyclables are about 29 percent, a conservative estimate for available cement kiln. In the latter scenario, RDF volumes may be significantly RDF would be around 15 percent (Figure 9 and Table 12). This 15 higher. percent may contain inert materials that are not suitable for RDF and therefore the usable component could be as low as 10 percent. The potential RDF quantities will be calculated based upon two On the other hand, since MSW in Egypt is not yet separated at the approaches, (i) the design capacities of existing sorting and source, the contamination level of recyclables is high and could be composting plants, and (ii) total MSW generated in Egypt. Figure 9: MSW Composition in Egypt by Percentage (Source: Sweepnet, 2014) i) Existing Design Capacities of Sorting and Composting urban centers in proximity as well to landfills/disposal sites. These Plants plants have already sorting equipment installed and are mainly operated by the municipalities. RDF pre-processing could take place The sorting and composting plants were selected as a good location in these plants, along with composting of organic matter to produce for MSW access since they are mostly concentrated in the major soil fertilizer and screening of recyclables for sale. 44 Figure 10 below illustrates the location of these composting plants in relation to the cement plant locations, which can also be accessed through the GIS platform at: http://arcg.is/1ToAspz Figure 10: Locations of Sorting and Composting Plants and Cement Factories in Egypt Currently, there are 64 sorting and composting plants throughout typical RDF content of MSW in other countries is usually in the Egypt, of which 46 are operational, with a total design capacity range of 20-30 percent, while in Egypt the most likely scenario is for treating approximately 3.2 million tons annually, equivalent to that RDF represents about 15 percent of MSW content. 24 percent of total collected MSW. The average efficiency of these At the current 59 percent average collection rate, only 1.2 to 3 existing MSW treatment facilities is nearly 70 percent, sorting and million tons of MSW per year could actually be processed. However, treating about 2.2 million tons, or 18 percent of the total amounts due to the low MSW treatment facility efficiency, only 18 percent of MSW collected (MoURIS, 2015). Such a discrepancy in figures of the collected MSW is actually processed at the 46 sorting and clearly indicates that much more can be done to improve the composting facilities nationwide; this means that there is a potential efficiency of these facilities. Table 12 presents the amounts of MSW RDF supply of between 220,000 and 560,000 tons/year. This treated in the sorting and composting facilities, taking into account potential could reach a maximum value of approximately 800,000 the three potential scenarios for RDF production of 10 percent, 15 tons/year if the operational efficiency of sorting and composting percent, and 25 percent of generated MSW. As previously stated, facilities were increased to full capacity (Table 13). Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 45 Table 12: Quantities of RDF Generated at Sorting and Composting Plants Based on 70% Average Efficiency (Source: MoURIS, 2015) 46 Table 13: Quantities of RDF Generated at Design Capacities of Sorting and Composting Plants (Source: MoURIS, 2015) Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 47 ii) Total MSW Generated in Egypt If the full technical potential is unlocked through 100 percent MSW collection rate and improved treatment efficiency, then the total potential of RDF supply in Egypt would range from 2 to 5 million tons annually. This estimate is based on an assumption that 10 percent and 25 percent of total MSW would be convertible to RDF respectively. Potential RDF yields, with optimized collection and processing efficiency, are summarized below: Based on the distribution of waste collected from the various governorates throughout Egypt, the Delta, Greater Cairo and Alexandria present the greatest opportunity for MSW recovery and conversion to RDF in an efficient and least logistically challenging manner. Combined, they represent 83 percent of total generated MSW. The amounts generated in other regions are limited, and pose logistical challenges in collection. Figure 11 and Table 14 below illustrate the distribution of waste generated in these three regions. The potential RDF from Greater Cairo, Alexandria and the Delta, at 15 percent MSW to RDF conversion rate, is estimated at approximately 7,065 tons per day (Figure 12), which is equivalent to 2.5 million tons annually. The average range for RDF production for the three regions is between 1.7 to 4.2 million tons annually. Figure 11: Municipal Solid Waste Generation by Region in 2012 (tons per day) 48 Table 14: Amounts of Potential RDF Based on Waste Composition by Region in 2012 (tons per day) Figure 12: Amounts of Potential RDF in Greater Cairo, Alexandria and Delta Regions from Total MSW Generated (tons per day) Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 49 4.1.2 Challenges in Using MSW for AFR The greatest challenges to the potential RDF supply in Egypt are presented below. Recommendations for addressing most of these challenges are discussed in Chapter 7. • Illegal dumping: The ban on unauthorized landfills must be implemented and hefty fines imposed on the offenders, enforcing the “Polluter Pays” principal. • Underdeveloped and inefficient waste management facilities: Existing facilities are currently treating about 10 percent of the generated MSW. A number of composting plants were shut down before ever beginning operations as a consequence of mismanagement, inappropriate technology selection, frequent mechanical breakdowns and poor maintenance (Elnaas et al., 2014). Most are in need of rehabilitation, and improved operation and maintenance systems. • Lack of a national consensus on a MSW strategy: This includes overlapping and inefficient roles and responsibilities at the central government, governorate, and municipality levels. It is critical to address the lack of enforcement of the existing MSW framework. Primary waste sorting at the household level and promotion of MSW efficiency are also vital. The establishment of WMRA may help in changing this picture. .2 Agricultural Waste 4 Approximately 30-35 million tons in 2012 of different types of agricultural residues were generated throughout Egypt (NSWMP, 2013). Approximately seven to nine million tons, mainly residues from wheat, were used as animal feed. Another four to seven million tons were used as organic fertilizers and around two to four million tons were used by farmers for other purposes (MWRI, 2005; El Essawy, 2014). Approximately 12 to 15 million tons/year of agricultural waste is unused, disposed of, or burned (El Essawy, 2014). This presents enormous untapped potential. 4.2.1 Agricultural Waste Supply in Egypt Burning unused agricultural waste in open fields, especially rice straw, is a common practice among Egyptian farmers, contributing to the seasonal “Black Cloud” phenomenon. Despite the efforts of the Ministry of Environment to discourage this practice, it remains the most convenient way to dispose of waste, given the high cost of collection, storage and transportation. However, there have been some important efforts to collect and process rice straw residues in order to reduce its negative impacts. The EEAA and the Ministry of Agriculture collected and handled 365,274 tons in 2011 (EEAA, 2012). In Egypt, wheat and barley residues as well as rice husk are fully used for animal feeding. For the most part, rice straw, cotton waste, sugarcane residues, corn stalks, and tree pruning wastes are not currently of interest to any other consumers. Approximately 10-15 percent of rice straw is used in the production of compost and in other agriculture-related applications, leading to the yearly open burning of 70-80 percent of the remaining waste. The high silica content of new rice varieties (12-15 percent) renders rice straw inedible. This study selected the following types of crop residues to be considered for AFR: sugar cane, sugar beet, cotton waste, rice straw, corn husk, and tree trimmings from orchards (refer to Annex D for details). According to the primary data collected from the Ministry of Agriculture (Table 15), a total of 21.4 million tons of waste was generated from these crops in 2012. Only about half, or around 10.7 million tons/year, would be available for AFR, because of inefficient collection on the one hand, and alternative uses such as animal fodder on the other. An additional 1.3–4.5 million tons annually are potentially available from other agricultural waste streams (i.e. Casurina, medical and aromatic plants), which were not included in this study. 50 Table 15: Estimated Agricultural Residues Generated and Quantities Available as AFR for Selected Crops in year 2012 (Source: MoA, 2014) There are three growing seasons in Egypt (Figure 13): winter from October/November to May/June, summer from April/May to October, and Nili from July/August to October (FAO, 2016). The summer growing season, which yields maize stover, cotton stalk, sugarcane residues and rice straw, contributes 65-75 percent of total agricultural residues. The Nili (or autumn) growing season involves maize stover and tree pruning, and contributes 7-8 percent of total agricultural residues. The winter growing season contributes only 18-20 percent of total agricultural waste residue, including wheat straw, vegetable straw and tree trimmings. Trees trimmings contribute 6-10 percent of total agricultural residues and are available all year round. Agricultural waste in Egypt is, as one would expect, highly concentrated around the Nile and Nile Delta areas, as seen in Figure 14. Table 16 summarizes the most prevalent sources of agricultural waste for use as AFR in Egypt. Further information on the geographic distribution of agricultural activities and potential waste sources can be accessed at: http://arcg.is/1ToAspz Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 51 Figure 13: Distribution of Agricultural Residue by Growing Season by Percentage Figure 14: Distribution of Agricultural Areas and Residues Generation in Egypt in Proximity to Cement Plants 52 Table 16: AFR Potential By Crop Waste Type Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 53 4.2.2 Challenges in Using Agricultural Waste as AFR Despite its availability in significant quantities, the supply of agricultural waste as AFR is challenging due to the following constraints: • Agricultural residues are usually burned in open fields. o Farmers tend to burn crop waste quickly to remove residues, prepare their limited land area for the next crop, prevent pests and reduce the risk of fire. o There are often no feasible alternatives to burning, as paved roads rarely exist for the heavy transportation of raw waste or for balling equipment to reach the fields. Industry demand already exists to process biomass commercially, except for local composting, which represents between 10-15 percent of the waste materials. o Regulations and enforcement procedures related to the burning of crop residue are often contradictory, due to the involvement of several government agencies. • Collection, storage and transportation are expensive. o Agricultural land ownership is fragmented, and land tenure is primarily made up of small-hold farmers. o The seasonal changes in crop export policies, especially for rice, creates an uncertain situation on the total outputs and the total cultivated land devoted to rice every season, with a minimum of 462,000 - 500,000 hectares per year, in addition to an instability in the cropping areas of corn and sugarcane. Cotton areas are also decreasing. o Rice straw has low bulk densities; the bulk density of chopped straw is 50 - 120 kg/m3, which is very low compared with the bulk densities of coal, which is in the range of 560 - 600 kg/m3 for brown coal and between 800 and 900 kg/m3 for bituminous coal. The low densities of the rice straw complicate their processing, transportation, storage and firing. Special attention should be paid to shredding and balling equipment in order to produce high density balls to reduce storage area and transportation cost. • Interventions by authorities are limited. o There is a signed protocol between the Ministry of Environment and the Ministry of Agriculture to combat the Black Cloud phenomenon and convert rice straw to fertilizers and animal fodder. This “Small Farms Project” aims to recycle 100,000 tons of rice straw produced by farmers who own properties of five feddans or less. Of the total, 90,000 tons is converted into fertilizer and 10,000 into animal fodder. Two options are proposed to the farmers in order to stop their burning of rice straw: either pile up the excess straw to be converted into fertilizers or sell it to companies. The government provides a subsidy of EGP 90 for each ton of rice straw the companies collect and press. o With this intervention, it has been possible to bail up to one million tons per season for rice straw and transfer the baled straw to the side of the field to reduce the storage area. The companies contracted for the work use a maximum of 25 percent of baled straw for composting, but they do not have the capacity for further processing. Consequently, the leftover rice straw that should have been collected and recycled exceeded government capacities, and authorities announced at the end of August 2014 that they were unable to collect all of it. o Many farmers still choose to burn their rice straw, as they need to clear their land of agricultural waste after the rice harvest. Furthermore, fertilizer projects are not economically viable. Roughly two tons of rice straw are used to produce one ton of fertilizer, at a cost of EGP 300 per ton. Yet every ton of fertilizer is sold for only about EGP 150. 54 .3 Sewage Sludge 4 There are 357 municipal wastewater treatment plants under the supervision of the Egyptian National Holding Company of Water and Wastewater (HCWW) throughout Egypt’s 25 governorates. The waste water treatment plants (WWTPs) had a total installed capacity of 13,266,159 m3/day as of 2013. The estimated total annual national sewage sludge generation in Egypt was approximately 1 million tons in 2014. Table 17 describes in detail the quantities of sewage sludge per region. 4.3.1 Sewage Sludge Supply in Egypt Cairo, Giza and Alexandria governorates produce the largest quantities of sludge, as compared to all other governorates. Together, they generate over 50 percent of the total amount of sludge (Figure 15). Upper Egypt produces the least sludge, mainly due to lower availability of wastewater services, and thus low treatment capacities. Sludge generation is expected to continuously grow along with Egypt’s growing population and anticipated investments in new wastewater treatment facilities. But there are shortcomings in the data available. While there are WWTPs located within new urban cities and huge industrial factories, limited information about sludge generation is available. Figure 15: Sewage Sludge Generation by Region in 2013 in Egypt by Percentage (Source: HCWW, 2014) Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 55 Table 17: Sewage Sludge Production By Governorate in 2013 in Egypt (Source: HCWW, 2014) 56 4.3.2 Challenges in Using Sewage Sludge production is one of the most sustainable options for sludge waste management. The high temperature in the kiln will completely destroy the organic content of the sewage sludge and the sludge In terms of sourcing, the quantities of sewage sludge are constant minerals will be bound in the clinker after the cement calcination and sizeable. But the biggest challenge to using sewage sludge as process. AFR is the drying process. Typically, the sewage sludge treatment process in Egypt includes pumping the primary and secondary The regulatory framework is in place to support dried sewage sludge sewage sludge to thickening facilities, where the material will be (DSS) as a thermal fuel in Egypt; therefore, additional regulation concentrated to 4-6 percent dry solids (DS) (Ghazy et. Al, 2009). is not required. But, as discussed above, implementation of the Then the thickened sludge is pumped to natural dewatering units existing legal framework must be enforced to overcome current (drying bed facilities) where it is dried to concentrations of 40-60 illegal disposal and agricultural application practices, which pose an percent DS. On the drying beds, sludge is placed on a bed layer and environmental and health challenge. then allowed to dry either by water draining through the mass and the supporting sand bed, or by evaporation from the surface. The dewatering time is usually 25 days in summer periods and 40 days during the winter. The sludge is stored for 1.5 to 6 months before .4 Tire Derived Fuel (TDF) 4 use. The dried sludge is mainly used for land application; it is rarely dumped into landfills. Tire Derived Fuels represent the most valuable AFR source in Egypt and abroad due to their high calorific value. However, in Egypt this The processed sludge still has high humidity (40-60 percent), and is the most challenging source of AFR for reasons of commercial inert contaminants such as sand and gravel, characteristics that and regulatory barriers. In Egypt, waste tires are classified as are unsuitable for the cement kiln. In order to produce AFR from hazardous waste under Law 4/1994. As such, their use is subject to sludge, it is necessary to identify cost-effective ways of drying strict disposal and/or recycling laws set by the Ministry of State for the sludge to achieve 15-22 percent humidity. Most WWTPs can Environment and the Ministry of Industry and Trade. achieve this percentage. However, in order to do so, they need to invest in upgrading drying beds. Drying beds can reduce humidity Currently, most waste tires recirculate through informal markets. to 30-40 percent, acceptable for agriculture uses. When not retreaded and resold for vehicular use, residual waste tires are partially burned to extract steel wires, and the remaining However, in order to be used for cement kilns, the sludge humidity material is used in the production of intermediate and final products should be reduced to 10-20 percent. Therefore, additional thermal such as briefcase handles, animal-drawn cart wheels and pieces of drying or dewatering processes are needed. These additional conveyer belts. This process involves the uncontrolled burning of drying processes are outside the ordinary scope and budget of the collected tires in open areas, resulting in negative environmental WTTPs’ operators, as their mandate is to treat the wastewater. A impacts. At present, only governmental and industrial entities considerable opportunity for private sector actors would be to set and companies are subject to the hazardous waste law, whereas up partnerships charged with drying. Yet, such agreements would individuals managing illegal tire recycling activities in the informal also be subject to the availability of land, especially attractive if in sector do not face any legal consequences for openly burning tires to close proximity to a cement producing facility. extract steel at the lowest possible cost. In addition to moisture concerns, current sewage sludge treatment processes are unable to provide uniform sludge stabilization, which 4.4.1 TDF Supply in Egypt normally would remove key contaminants. Thus, the quality of the sludge produced in most of the WWTPs is below Egyptian and There are three main supply streams for waste tires in Egypt: international standards, especially concerning limits on pathogens and other metals and minerals. As such, it is unsafe for agricultural • Used tires disposed of at tire shops and collected by garbage use.11 By comparison, the use of sewage sludge as AFR in clinker collectors, to be sold to individuals: According to tire suppliers interviewed for this study, this stream is the most significant 11 Despite these safety concerns, it is at present commonly used in agriculture due to the absence of monitoring and tracking by the WWTP operators of sludge sold to third-party and represents approximately 22 percent of the total annual contractors. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 57 quantities. The source of this stream is discarded tires from Waste tires are sold through auctions or direct spot sales to companies privately owned vehicles and trucks, disposed of by tire that produce industrial floor mats, tire bags, shoe heels, and to firms workshops in open dumps, and subsequently collected by that extract wires from tires, and recycle them. Currently, importing tire-scavengers. The selling price of these tires is very low in waste tires is prohibited by the government; hence, the supply of comparison to the cost of collection, transfer and delivery of waste tires available to the cement industry is strictly local. used tires to end users. The tire-scavengers’ capabilities and collection efficiencies are limited. There are no official statistics on quantities of scrap tires generated in Egypt, but the number of tires can be roughly estimated. • Expired and used tires sold by major tire companies. According to the Central Agency for Public Mobilization and Statistics (CAPMAS), the total number of licensed vehicles in Egypt • Used tires sold by the government or private companies: The in December 2013 was approximately 6.5 million. The following Egyptian Ministries of Interior, Transportation, Industry, and table illustrates the different assumptions used for calculating the Defense sell considerable quantities of waste tires at annual total volume of waste tires. The analysis is based on the numbers auctions. In addition, private companies that have huge vehicle for each type of vehicle and the expected generation of scrap tires fleets sell waste tires. projected for 2015, based on the average lifetime of the tire. Table 18: Number and Types of Vehicles in Egypt and Estimated Numbers of Scrap Tires Produced (Source: CAPMAS, 2013) Extrapolating CAPMAS data in 2014, the estimated total quantity In terms of potential use for AFR, however, scrap tires have many of scrap tires in Egypt was approximately 315,000 tons in 2015 different competing markets and uses in Egypt (Figure 16), including: and expected to grow by 10 percent every year. But, there are other estimates. The Egypt National Cleaner Production Center (ENCPC) • Direct use, re-treading and re-molding of tires: According to is conducting a detailed study about retreading scrap tires to be used tire dealers, at least 10-20 percent of truck scrap tires collected in different sectors in Egypt, such as transport, construction, waste from auctions are directly sold as second-hand tires, or re- collection. According to the draft study, the amount of scrap tires treaded12 and sold as a lower quality new tire. in 2014 is estimated to be 209,000 tons. The methodology used for providing this estimation is based on manufactured, imported and exported data obtained from the Ministry of Industry and the 12 Generic term for reconditioning used tires by replacing the worn tread with new material. it may also include renovation of the outermost sidewall surface and replacement of the Egyptian Customs Authority. crown piles or protective breaker. 58 • Recycling and processing: Rubber manufacturers use scrap tires for producing fine grind mesh crumb rubber that is used in manufacturing a wide variety of products, in addition to exporting shredded and powdered tires, crumb and ground rubber, recycled powder from inner tubes and nylon cord of tires. A large tire recycling facility in Egypt indicated in interviews conducted for the purposes of this study that they are processing approximately two million scrap tires per year, which they usually purchase from special contractors who in turn buy the material at auction. Assuming the majority of these tires are from passenger cars, this is equivalent to approximately 3,000 tons per year or about five percent of the total scrap tire market at a single recycling facility. Figure 16: Estimation of Utilization Percentage of Scrap Tires in Egypt by Percentage In addition to informal or unregistered tire recyclers throughout Recyclers at Kafr Mit El Haroun extract metal wire from the tires the country, a small village called Kafr Mit El Haroun is the main and strip it for further processing. Among the products made from recycling hub for scrap tires collected from Lower Egypt. Scrap tires scrap tires are gaskets, small swivel wheels, briefcase handles, and are pre-processed for various uses at the village, which is referred lining for the wheels of carts. Final residual waste generated from to as Balad El Kawetsh, meaning “Tire Village.” These uses include this pre-processing of tires is then sold per ton as fuel for brick re-treaded tires, material recycling, splitting of scrap tires to produce factory kilns. free metal products and shredding, to produce 5x5 cm chips that are sold to cement factories as a fuel. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 59 4.4.2 Challenges in Using TDF as AFR As noted above, EEAA regards used tires as hazardous waste, and as such the regulations are more restrictive than those of the Basel Convention, which does categorize used tires as hazardous. As such, the intent to provide environmental protection through the regulated treatment of waste tires has prevented potentially more economic uses of this waste stream, and at this time, waste tires may not legally be burned in cement (or other) kilns. The main challenges to increasing the use of TDF as an AFR for the cement sector include the following: • Lack of legal and institutional arrangements for waste tire management, collection, transportation and disposal, as they are considered hazardous waste; • Competitive uses in recycling and rubber manufacturing industries, which have contributed to a substantial increase in scrap tire prices; • Illegal re-treading of scrap tires throughout the country; • Fluctuations in used tire prices due to fluctuations in demand; • Open burning of waste tires, because of a pervasive lack of law enforcement. .5 Summary 4 All of the waste sources which have been reviewed here are available in sufficient volumes to meet the AFR requirements of cement manufacturers, with the exception of TDF, as summarized in Table 19. This will be further discussed in the next chapter. MSW and agricultural waste are available in the largest volumes, but each comes with unique challenges. The current low levels of collection, sorting, recycling and disposal for MSW underscore the low level of organization, oversight and law enforcement in the MSW sector. Attractive investment opportunities for waste operators exist at the 64 government collection sites, although many remain unused or are in need of rehabilitation. For agricultural waste, the residues are voluminous and require little preparation. But the challenge for a supplier would be to organize an efficient collection method and convince farmers to save waste for collection, rather than burning it as they have always done. DSS is available in large quantities with limited or no competing uses. The high calorific value DSS offers makes it an ideal fuel, but investors face technological challenges to ensure the water content of the waste is low enough to be suitable for AFR. Tires are an excellent source of fuel and the most organized of the four potential AFR. Thus, waste suppliers face stiffer demand from competitive uses which puts pressure on pricing and availability. This overview of the AFR supply picture makes it clear that the Egyptian market can meet the needs of the cement sector. However, the cost of these potential fuel options, and the demand by the cement sector for AFR products, must be evaluated. For example, while these various waste streams in Egypt may be plentiful, the costs of pre-processing the waste material to a suitable standard must be considered. Costs of pre-processing vary significantly for each waste stream. Both the demand considerations and the pricing and economic considerations of the AFR solution in Egypt will be explored in the next two chapters. 60 Table 19: Summary of the Availability of the Four Waste Streams as AFR Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 61 Chapter 5: Mapping Cement Industry Demand 5.1 Egypt’s Cement Industry Egypt is the 12th largest cement producer worldwide (Figure 17). It has 25 operating cement plants, 13 of which are subsidiaries of international conglomerates. Together the firms produce the equivalent of 64 percent of installed capacity. The remaining 12 firms are locally owned. For the purposes of this study, three plants have been excluded, as their primary product is white cement, for which AFR is unsuitable. The remaining 22 cement companies have a total annual clinker capacity of approximately 62 million tons and a total annual cement capacity of 68 million tons. Figure 17: World Cement Production Country Rankings in 2014 in Million Tons (Source: U.S. Geological Survey, 2015) The Suez Cement Group13 has the largest capacity, with five plants and around 11 million tons of clinker capacity. The second largest producer is Lafarge, with 8.4 million tons of clinker capacity. 13 Managed previously by Italcementi before consolidation with HeidelbergCement in July 2015. Following the agreement regarding the sale to HeidelbergCement of Italmobiliareia 45 percent stake held in Italcementi, Italmobiliare and HeidelbergCement decided to play an active role in the ongoing consolidation of the construction materials industry by creating the second largest global player in the cement sector, a leader in the aggregates business and the third in ready-mixed concrete. Retrieved from http://www.suezcement.com.eg/ENG/Media+Center/ Press+Releases/20150729.htm Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 63 The cement plants are geographically distributed among the governorates, as shown in Figure 19. A few of these plants are also located inside populated residential areas. Figure 18: Installed Clinker Capacity in 2014 in Million Tons (Source: Cement Egypt Interviews, 2015; Corporate Annual Reports, 2015) Figure 19: Location of the Cement Plants in Egypt 64 5.2 Cement Production Forecast by 2025 In order to assess the potential use of AFR, it is necessary to understand the current and future energy needs of the Egyptian cement industry based on existing and forecast cement production (Figure 20). In 2014, total cement consumption was estimated to be 51.5 million tons per year, representing a 2.7 percent increase over total consumption in 2013 (Carré, 2014). In 2013, the Egyptian cement industry showed a negative growth of -1 percent. As previously noted, the main reasons were severe fuel supply shortages, rising costs (50 percent increases in natural gas and HFO prices) and the volatile political situation, which resulted in a sharp economic downturn from which Egypt hadn’t yet begun to recover (Naeem Holding, 2013). In 2014, the fuel shortage remained severe, strongly affecting clinker and cement production. Capacity utilization rates dropped below 50 percent in some plants; others had to shut down temporarily. Consequently, many cement plants had to import clinker as they could not produce their own, and this led to higher costs (Global Cement, 2015). Figure 20: Historical and Future Estimated Cement Consumption in Million Tons (Bars) and Annual Growth Rate Percent (Lines) (Source: Carré, 2014; Cement Egypt interviews, 2015) Only limited estimates of future cement production are available for Egypt. Where forecasts are available or published, they rarely exceed five-year periods, and many do not disclose the methodology. Egypt’s Industrial Development Authority, the body charged with licensing for new projects, has announced market demand of 80 million tons by 2020, which would represent an average growth rate of 7.5 percent for the next five years (IDA, 2015). Consumption growth stood at only 1.9 percent during the last five year period. This scenario is considered far too optimistic, according to interviews with representatives of the cement industry.14 14 The Egyptian Ministry of Industry and Foreign Trade foresees 90.4 million ton cement consumption by 2022, Daily Star (2016, January 3). Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 65 In the absence of reliable public sources for future cement projections, It is important to note that cement consumption by the end of 2015 the methodology most commonly used to predict future cement was estimated at 51.5 million tons, to be compared with a cement demand is correlation with GDP growth. However, this is not a capacity of 68 million tons. In 2015, there was reportedly only one reliable method in Egypt because of the recent years of unrest, which million tons of imported clinker, compared to several million tons have impacted economic growth more broadly and make projections per year during the peak of the energy crisis. Fuel supply constraints even more challenging. As an alternative, for the purposes of this only slightly affected production in 2015. This signals that the report, another common methodology has been applied in which Egyptian cement industry is currently facing about 16.5 million tons future consumption is projected based on the Compound Annual of over-capacity.15 Assuming that a five percent consumption growth Growth Rate (CAGR) of historical consumption, applying the same per year materializes, over-capacity is not expected to catch up with average yearly growth rate to future years as that observed in past years. In order to corroborate these projections, data collected demand until approximately 2020. through interviews with Egyptian cement industry representatives Thus, in order to determine future thermal energy needs, it will be were then cross-checked with historical CAGR for consistency. necessary to examine and estimate the future fuel mix. As previously It is worthy to note that between 2015-2020, CAGR is estimated discussed, the cement industry has lobbied to switch combustibles at five percent. Estimates for the 2020-2025 period are more from natural gas to coal in response to gas shortages and price conservative, with a CAGR of three percent. On average, between increases (Carré, 2014). 2015 and 2025, a CAGR average of 4.1 percent is projected. By comparison, the cement consumption CAGR between 2004 and All cement plants interviewed are planning to use coal and petcoke 2014 was 6.2 percent; that of 2009 - 2014 was 1.9 percent. as their main combustibles. AFR will be a secondary combustible, depending on cost and availability. AFR substitution rates were on Extrapolating cement consumption based on CAGR leads to an average 6.4 percent across the industry in 2014 (Figure 21). The estimate of 80 million tons by 2025. At the current 90 percent Cement Division of the Federation of Egyptian Industries estimates clinker factor, clinker production would be 72 million tons. this future fuel mix is the most likely scenario. However, if large volumes of coal and petcoke are unavailable, at least in the short to This estimated future cement consumption has been validated medium term, the cement industry is willing to more aggressively through sequential interviews with cement producers in Egypt and engage in the co-processing of AFR. will serve as the basis for determining future thermal energy needs Egyptian cement producers are unlikely to make significant use for the purposes of this report. of other combustibles like HFO because of price considerations. Further, it is difficult to assess whether the recent discovery of large off-shore natural gas reserves may affect the fuel mix, once available. 5.3 Thermal Energy Needs In an interview with the Associated Press, dated August 31st, 2015, Petroleum Ministry spokesman Hamdi Abdelaziz foresaw that Based on interviews with cement producers in Egypt, average Egypt will be energy “self-sufficient” by 2020. However, the future thermal consumption is around 945 Kcal/kg (4 MJ/kg) of clinker price of natural gas will most probably remain above coal prices, (considering only dry kilns), which is 20 to 36 percent more than and Egypt urgently needs to restock its foreign currency reserves. It Best Available Technology (BAT) and 13 percent above the global average of 836 Kcal/kg (3.5 MJ/kg) of clinker produced. The reasons is unlikely that the cement industry will have access to or use natural for this high thermal consumption are described in Annex A. gas in any significant quantities in the foreseeable future. This is particularly the case, as all cement plants have invested heavily in retrofitting to co-fire with coal and petcoke. In 2015, clinker production (not capacity) was estimated by Egyptian cement producers at 48.7 million tons. At the above mentioned thermal consumption rate of 945 Kcal per kg of clinker, the total thermal energy need is for approximately 46 million Gcal per year. By 2025, based on the above estimates, the total thermal appetite of the cement sector would be 15 The recent announcements for new production license tenders may have the unintended consequence of discouraging investments in co-processing, if over-capacity reduces approximately 68 million GCal per year or 284,512 MJ/year cement producers’ margins. It is difficult to project such a correlation. However, several cement players have indicated that unrealistic capacity forecasts may in turn impact their (at 945 kCal/ton of clinker). financial decisions. According to initial media releases, the appetite for the new licenses has been very small. The IDA repeatedly extended deadlines for bids. 66 Assuming that the current 6.4 percent AFR substitution rates remain static, and that all remaining thermal needs for the production of clinker are to be met using coal and petcoke (average calorific value for the purpose of the calculation being 7,000 kcal/kg),16 the theoretical volumes of coal indicated in Table 20 would be needed. Table 20: Theoretical Volumes of Clinker and Coal in 2015, 2020 and 2025 Whatever the fuel mix, which will likely include a combination of diversified sources, 68 million Gcal will be needed to satisfy the cement sector’s thermal demand by 2025. But such energy needs also come with a price. Switching to coal will nearly double the industry’s CO2 emissions. Comparing a CO2 Emission Factor of 216 kg CO2/GCal17 for the combustion of natural gas with 402 kg CO2/Gcal for coal, CO2 emissions18 from 100 percent coal-related consumption would be as follows: Table 21: Forecast of CO2 Emissions in 2015, 2020 and 2025 The amended environmental regulations in Egypt require that any Companies are required to mitigate the difference between assumed cement company applying for a license to import coal must provide GHG emissions from the theoretical consumption of 100 percent its current specific thermal consumption (energy consumed per coal and a hypothetical baseline of 100 percent of heavy fuel oil unit produced), which is capped at 4,000 MJ/kg (equivalent to 956 (HFO) within two years of the date of issuance of the coal license. kCal/kg). This is slightly above the national average of 945 kCal/ HFO was used for this baseline formula to avoid penalizing those kg.  Authorities then calculate the total energy required to produce who were totally or partially using natural gas before the new at nominal cement capacity and issue allowances for the respective regulations. This formula is valid for all cement plants, regardless volume of coal required. of their real fuel mix. 16 Standard average calorific values are: coal 6,000 kcal/kg and petcoke 8,000 kcal/kg. 17 Assuming 120,000 lb CO2/106 scf natural gas and 252 GCal/million scf. Retrieved from https://www3.epa.gov/ttnchie1/ap42/ch01/final/c01s04.pdf 18 The production of cement releases greenhouse gas emissions both directly and indirectly: the heating of limestone through a chemical process called calcination releases CO2 directly, while the burning of fossil fuels to heat the kiln and electricity consumption to operate machinery indirectly results in CO2 emissions. The calcination process accounts for ~50% of all CO2 emissions from cement production, while the combustion of fossil fuels to heat the kiln represents around 40% of cement emissions. Finally, the electricity used to power additional plant machinery, and the final transportation of cement, represents another source of indirect emissions and account for 5-10% of the industry’s emissions. For the purpose of this report, only CO2 emissions and reductions resulting from the combustion of fossil fuels are reported. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 67 This difference in emissions between 100 percent coal and 100 (biomass = 0 kg CO2/kcal, calorific value = 3.5 Gcal/ton) as AFR, then percent HFO by 2025 is equivalent to approximately 5.3 million co-processing of 3.77 million tons per year (13.20 million Gcal per year) tons of CO2 per year sector-wide, based on 324 kg CO2/kCal 19 would fully mitigate the GHGs emissions difference. Most importantly, for HFO, and assuming 72 mtpa installed clinker capacity, which this amount, 3.77 million tons, would constitute only about 35 percent requires a mitigation action plan (refer to Table 22). of the total agricultural waste available in Egypt annually. Companies are free to use various GHGs mitigation measures, No penalty exists yet for non-compliance. However, since the coal including clinker factor reduction, energy efficiency improvements, import authorization is valid for only two years, many cement firms carbon credit purchase, or increased use of AFR. The option of expect that the EEAA may not renew licenses for companies that using AFR may be attractive for this reason. Global estimates do not fulfill their commitments, or at the very least complicate show that alternative fuels can reduce CO2 emissions by 0.1- renewal. This ambiguity must be addressed by regulatory parties, 0.5 kg/kg of cement produced, compared to coal (Worrell et but in the meantime, the uncertainty currently motivates the sector al., 2001). If, for example, agricultural waste only is considered to explore AFR opportunities as a business mitigation option. Table 22: CO2 Emissions Gap Between the 100 Percent HFO Baseline Scenario and the 100 Percent Coal Scenario Forecasted for 2025 Table 23: Mitigation of CO2 Emissions Gap through AFR Amounts (13.2 million Gcal per Year) from Each of the Four Waste Streams20 19 Based on the default value of 77,400 kgCO2/TJ in IPCC, Guidelines for National Greenhouse Gas Inventories Report (2006). 20 RDF figure is based on the emission factor of 27,500 kgCO2/TJ from CEMEX Egypt, AFR CDM project. Retrieved from https://cdm.unfccc.int/Projects/DB/BVQI1273836212.26/view 68 In addition to compliance related drivers to adopt higher TSR rates, 64 5.4 Alternative Fuels Status in percent of installed capacity in Egypt is managed by large multinational cement firms, most of which are also members of the World Business Egypt Council for Sustainable Development (WBCSD) Cement Sustainability Initiative (CSI). The majority of the 14 corporate members of the CSI In 2014, the overall average thermal substitution rate (TSR) across have set emissions reduction targets as part of that initiative. In line the cement sector in Egypt was 6.4 percent or 2.9 million Gcal. with this initiative, most of the multinational cement firms have also For cement plants who said they were using AFR, the TSR was 9.6 set local AFR substitution targets. percent on average per plant; two plants even reached a TSR of 13 Supported by corporate CO2 emission reduction targets, the percent, as shown in Figure 21. For purposes of confidentiality, the potential regulatory-driven demand for AFR for the cement plant names have been represented by numbers. industry is estimated to be at least 5.3 million tons of CO2 by 2025, which equals 13.2 million GCal of AFR per year (i.e. 3.77 million tons of agricultural waste per year). Figure 21: Thermal AFR Substitution Rates for the 14 Cement Plants Interviewed in April 2015 in Egypt (Source: Cement Egypt Interviews, 2015) Results from the cement industry show that in 2014, eight of the 14 cement producers interviewed co-processed approximately 388,000 tons of agriculture waste, 223,000 tons of RDF and 32,000 tons of shredded scrap tires. Table 24 presents the percentages of AFR mix currently applied by the cement plants interviewed. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 69 Table 24: AFR Mix Implemented by Interviewed Cement Companies (Source: Cement Egypt Interviews, 2015) The highest volume of AFR used in cement factories is agricultural motivation had been the absolute necessity of finding energy at any waste, mainly tree trimming residues, because it is not affected by cost to avoid plant stoppages. seasonality and is available in relatively large volumes. Its calorific The cement plants have therefore been categorized into three value is around 3,500 Kcal/ton. Some volumes of bagasse from different groups: sugar cane are also used, although they are only available in limited quantities, have higher water content, and are seasonal. A limited • Group 1: Plants which have already reached around ten percent quantity of agricultural waste such as olive residue, cotton stocks of TSR and could reach 20 - 40 percent goal by 2025. These and rice straw are also used. include eight plants with a total installed clinker capacity of 32.4 million tons, all of which have been interviewed. Some plants are currently using TDF as AFR, despite its prohibition by Egyptian authorities. Other companies surveyed expect to be • Group 2: Plants expected to begin using AFR within the next three years and which could reach 10 - 30 percent TSR able to use imported shredded tires in the near future; however, goal by 2025. These include five plants with a total installed this is uncertain and will depend upon the regulatory framework, clinker capacity of 10.7 million tons; four of these have been particularly given the current classification of TDF as “hazardous interviewed. waste.” • Group 3: Plants not yet considering the use of AFR, but which RDF from MSW comes mainly from areas near Cairo, and primarily could reach a TSR rate of up to 10 percent by 2025. This group through third party producers that conduct pre-processing. Only one includes 13 plants with a total installed clinker capacity of 19.3 cement producer has an agreement to pre-process and produce RDF million tons. Two of them have been interviewed. in partnership with a waste management company. The calorific value of RDF reported in the interviews fluctuates from 2,800 kcal The producers interviewed are planning to expand the national to 4,000 kcal per ton. Some plants reported quality issues such as average AFR use between 15 percent to 30 percent within five high moisture content with the RDF received. to ten years, a five-fold increase from current levels, equivalent to 10.2 – 20.4 million Gcal of AFR in 2025. 5.5 Future Scenarios for AFR Use 5.5.1 Group 1 – AFR Early Movers in Egypt 5.5.1.1 Current Status Eight of the 14 cement plants interviewed are currently using AFR. Of the 14 cement plants interviewed, eight are already using AFR. Four of these are using more than one of the four waste streams Four companies are in preparation stages to co-process AFR, either which are the subject of this study as indicated in Table 24 (Plants in the commissioning phase of co/pre- processing equipment or 1, 3, 4 and 5), demonstrating the cement sector’s appetite for have taken the management decision and allocated a budget for this increasingly diverse sources of AFR. Only one plant within this purpose. This leaves only two plants that have not taken any action, group is commissioning a dry sewage sludge (DSS) line; but it faces indicating that a majority of cement companies are proceeding technical problems which need to be solved in coordination with the with the use of AFR. However, it should be noted that the principal local waste water treatment plant. 70 5.5.1.2 Expected Modifications of Existing AFR Feeding - adding a pre-dosing system for each type of waste, Equipment specifically waste with similar calorific values and densities, which feeds the common conveyer. Group 1 plants are more aggressive with their upgrades, in order to accommodate increasing levels of AFR. Storage capacity for AFR Feeding systems will thus require upgrades through the addition of at these plants will typically be designed to guarantee feeding of the separate pre-dosing systems when TSR increases. kiln, a strong signal of demand for continuous supply. Most of the transport and injection lines which are installed or which have been 5.5.2 Group 2 – Cement Plants Moving to procured by the plants in this group can handle large volumes of Use AFR waste, enough to achieve 30 percent TSR, with a mix of RDF, TDF, and agricultural waste. 5.5.2.1 Current Status Nevertheless, as these plants increase their TSR, the short-term Four of the 14 plants interviewed have not yet started using AFR, but fluctuations of the thermal value of energy supplied to the kiln will have made decisive steps in this direction, such as capex budgeting, gradually impact the clinker process. Therefore, it is common that commissioning and market prospects. a cement plant can hit a limit of thermal substitution rates due to excessively high thermal fluctuations. All plants interviewed in this group intend to use only RDF and/or DSS. None of them were considering agriculture waste or tires, for The following are two of the main sources of the fluctuations: these reasons: • Fluctuation of the fuel supply flow: this is often related to a • Tires: high prices and limited volumes, and weak regulation or automation of fuel supply to the kiln, and/ or poorly designed equipment which can cause “bridging” or • Agriculture waste: collection issues (large volumes but clogging. Sometimes this is also due to a lack of calibration of disseminated over too many locations) and seasonality issues the dosing system, the rate at which the AFR is added to other (the plants can neither absorb all the volume in a short period fuels for feeding to the kiln. of time nor store it during off-seasons, for safety reasons). ŊŊ It can generally be solved with “light” modifications and 5.5.2.2 Expected Modifications in Existing Equipment fine tuning, eventually changing one or another part of equipment. Though this group doesn’t have co-processing lines in place, they have either already ordered the equipment or have at least allocated • Fluctuations of the calorific value of the AFR mix: this is a budget for it. primarily related to the heterogeneity of the waste material. This potential bottleneck is of major importance in Egypt, due During the interviews in 2015, two of the four plants indicated to the variety of waste sources, some of which have specific they will be equipped with a calciner feeding line for coarse solid seasonality. waste before the end of 2015, and one will be equipped in 2016. The ŊŊ Manually mixing different AFR streams, using a front remaining plant should be equipped in 2017, but a commissioning loader, can be an option. However, due to the different date had not yet been given. sizes and densities this is very difficult. These lines are technically similar to the ones existing in the plants ŊŊ The best options for a cement plant when striving to currently co-processing RDF and/or agricultural waste. Budgeted achieve TSR rates of > 10-20 percent include either costs for the two lines currently under construction are 3.0 and 3.9 - working by campaigns of a few days or weeks, co- million $ respectively. The line to be built in 2016 is budgeted at processing one “pure” waste stream after another $6.5 million for two kilns. and adapting the mass flow and kiln parameters. In two plants, which belonged to the same company, DSS injection This approach doesn’t require investment, but it lines were installed. Commissioning is ongoing for one line and will can be challenging in Egypt considering the type of soon start for the other. Unlike RDF and most agricultural wastes, AFR available (seasonality of agricultural waste, low DSS is a fine solid (which can be conveyed pneumatically). density of RDF limiting the storage); or Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 71 Typically such lines are comprised of: 5.6 Assessing Alternative Fuels • a silo with a planetary screw; Market Potential in Egypt • a mechanical feeding of the silo based on a docking station and a drag chain conveyer; In order to better understand the market potential for AFR, three • a lump breaker and a screw feeding an enclosed weigh-screw different scenarios are being assessed (Table 25). A “Best Case” feeder; and scenario involves aggressive AFR market development, supported by • a pneumatic transport to the main burner of the kiln. improved waste management regulations and stricter enforcement. “Business-As-Usual” (BAU) would entail AFR market development Particular attention was paid to containing the explosion risk related to DSS, through explosion venting, and a 10 bars resistant dosing continuing at the current pace. “Worst Case” scenarios reflect system. This risk is in reality rather low, considering the specific potential delays in meeting TSR targets due to market challenges DDS received. The fuel mix line is designed to be extended for a and the lack of an enabling professional, waste management complementary injection to the calciner, and eventually a second infrastructure. dosing unit for feeding a second kiln. Each scenario will present the fuel mix expected by 2025 in volume 5.5.3 Group 3 – Cement Plants Taking No (tons) and in thermal energy (Gcal). The CO2 emissions for each scenario will also be provided. These projections are based on the Action on AFR predicted clinker production levels of 72 million tons per year (see Two of the 14 plants interviewed have not yet considered AFR, Section 5.3) and therefore total thermal needs of 68 million GCal though no specific set of reasons were provided during the interviews. per year. Table 25: Three Proposed Scenarios for AFR Thermal Substitution Rate by 2025 Scenario 1: BEST CASE – Aggressive AFR Market Development Supported by Waste Management Regulations and Implementation Many different TSR targets were provided by cement companies during interviews. Some had an ambitious TSR target of 50 percent, while others remained at 0 percent, resulting in an overall average TSR target of 30 percent by 2025. It should be noted that many of these targets have been communicated to authorities in order to get approval for coal use. However, at the time this report was being prepared, such targets were indicative, not mandatory. 72 It took the EU more than 20 years to achieve an average TSR of 39 2007 and more than doubled to 39 percent in 2010 (Polish Cement percent. Therefore, an average 30 percent TSR for Egypt by 2025 Association). At the same time, landfill fees climbed from EUR 3 per is quite ambitious and would require a significant level of effort ton in 2007 to EUR 24 per ton in 2009 and EUR 26 per ton in 2012. from all stakeholders. This scenario considers a theoretical case, as has been seen in some European countries, in which the authorities The following TSR assumptions have been made under this scenario take aggressive measures to mitigate their waste management issues for each group of cement companies: through stringent policies and regulations. Such policies would need • Group 1 – TSR would reach 40 percent by 2025 to be complemented by attractive economic incentives. • Group 2 – TSR would reach 30 percent by 2025 Poland’s case study (Box 2) has been taken to illustrate this scenario. • Group 3 – TSR would reach 10 percent by 2025 The percentage of TSR in Polish cement plants was 18 percent in Figure 22: Evolution of Landfill Tax on Municipal Solid Waste in Poland between 2002 -2012 (Source: EEA, 2013) In order to repeat this success story, and make this Best Case Scenario feasible in Egypt, some key lessons would indicate that ŊŊ Egyptian authorities should impose a landfill tipping fee, though not necessarily at Poland’s level. In Mexico, according to interviews with cement plants, the tipping fee varies from $5 to $10 per ton, which can be translated into an incentive for those using AFR. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 73 Box 2: IN BRIEF: POLAND’S ALTERNATIVE FUEL SECTOR Cement sector commitment and quick responses to market opportunities have been the key to success in Poland. In 1998, the country adopted its first waste regulation protocol, which included a Marshall Tax on landfilling. Alternative fuel substitution rates grew slowly with that first step. By 2011, the Polish Ministry of Environment launched a target to divert 50 percent of all municipal solid waste from landfills. Their ambitious plan included reducing further landfilling to only 35 percent by 2020 (a 65 percent diversion rate). Moreover, since 2013, Poland has enforced a landfill ban on combustible waste. Close to 25 percent of the MSW is now being converted into RDF. As such, Poland’s cement industry is the highest contributor to the country’s waste reduction targets (Theulen, 2013; Theulen, 2015). Another waste stream – used tires – also saw an important change. With the implementation of an Extended Producer Responsibility principle, tire manufacturers established a joint firm to manage used tires. Collection became more organized and was directly subsidized by the tire sector. In parallel, as competition for used tires and other alternative fuel sources grew, cement plants invested in their own handling facilities for RDF. This move created a spiral impact and boosted demand beyond the local market. The cost- effectiveness of RDF preparation was improved. As time passed, the capacities of RDF production lines reached equilibrium with cement plants’ alternative fuel capacities, allowing cement firms the ability to pressure RDF producers to further improve the quality of their product. RDF suppliers responded, and cement firms developed new tools to improve drying by, for instance, installing thermal dryers that use the waste heat of the cement kiln. Poland had a substitution rate of 45 percent in 2011. Today, the figure has exceeded 60 percent, with some plants boasting thermal substitution rates higher than 85 percent. The Polish example can provide key lessons. Business adaptation to changing market opportunities is essential. Long- term contractual agreements with the waste management sector has also proved to be of central relevance. Quality standards gradually improved under competitive pressure. Finally, the regulatory environment and a government commitment to enforce regulations provided the enabling infrastructure to allow the alternative fuel market the space to grow sustainably and commercially. ŊŊ Egyptian authorities should increase enforcement on the prohibition of uncontrolled landfilling and illegal dumping; A 30 percent TSR in 2025 would require 20.4 million Gcal stop the use of tires by red brick kilns and enforce fines and of AFR (or 5.8 million tons at 3.5 Gcal/ton). The potential penalties on illegal retreading of tires; limit the burning of spending by the cement industry on procuring AFR in this agriculture waste; and prohibit the use of untreated sewage scenario would be $326 million, while savings from replacing sludge as fertilizer, a practice which causes human health coal consumption would be $77 million annually. This in problems and other environmental issues. effect could reduce CO2 emissions from the cement sector by 5.8 million tons of CO2 per year, meeting fully the GHGs In order to achieve TSR rates as high as 30 percent across the entire compliance target set by Egypt’s government. cement industry in Egypt, a regulatory will for reform and market mobility are crucial prerequisites. In the absence of these measures, it is very unlikely this target will be reached. 74 Scenario 2: BUSINESS AS USUAL (BAU) – AFR Market Scenario 3: WORST CASE – Delays in Meeting Targets Due Development Continues at Current Pace to Market Challenges A more realistic TSR objective should be considered, given that This scenario considers that no change takes place in the current regulatory changes, if any, will take time to implement and enforce. situation in terms of waste management, and that implementation Such an objective accounts for the current situation in Egypt, of AFR substitution is slow due to persistent market challenges. particularly in terms of waste management and in terms of existing This implies that no new policy and regulations are established, and market-based drivers as well as the current state of the AFR supply no incentives are provided to the waste supply chain. It would also chain in Egypt. This scenario considers that required normal policies mean that cement companies remain reluctant to incorporate AFR and business models will be implemented at a realistic pace. into the fuel mix. In such a case, AFR pricing is unlikely to compete with coal, given that economies of scale will be lacking. The following TSR assumptions have been made under this scenario for each group of cement companies: The following TSR assumptions have been made under this scenario for each group: • Group 1 – TSR would reach 30 percent by 2025 • Group 2 – TSR would reach 20 percent by 2025 • Group 1 – TSR would reach 20 percent by 2025 • Group 3 – TSR would reach 5 percent by 2025 • Group 2 – TSR would reach 10 percent by 2025 • Group 3 – TSR would reach 0 percent by 2025 Based on these different assumptions per group, and assuming that these 14 cement plants are a representative sample of the entire Again assuming that these 14 cement plants are representative of the sector, the total average TSR for the cement industry could reach 20 whole industry in Egypt, the average TSR could reach approximately percent by 2025. This 20 percent would not only represent the four 13 percent. targeted waste streams, but could also integrate hazardous and non- hazardous industrial waste not included in this study . A 13 percent TSR would require 8.8 million Gcal of AFR, or 2.5 Achieving a 20 percent TSR represents approximately four million million tons at 3.5 Gcal/ton in 2025. The potential spending by tons of waste annually which could be diverted from landfills, illegal the cement industry on procuring AFR in this scenario would be dumps and burning. As of 2014, the current average TSR across the $141 million, while savings from replacing coal consumption cement industry in Egypt was approximately 6.4 percent, equivalent would be $33 million annually. This in effect could reduce to 2.9 million GCal, or 388,000 tons of agriculture waste, 223,000 GHGs emissions by 2.5 million tons of CO2 in 2025, meeting tons of RDF and 32,000 tons of shredded used tires. Chapter 4 has 48 percent of the GHGs compliance target set by authorities. made it clear that AFR sources are available in Egypt which would allow a 13.6 percent TSR growth between now and 2025, a total 13.6 million GCal to reach a 20 percent TSR by 2025. Based on this scenario, by 2025 cement plants could be spending around $217 million annually on procuring AFR (based on an average of $16 per Gcal). This would also represent annual savings for the cement industry of $51 million, in comparison with estimated coal prices. These savings would also obviate spending hard currency needed for coal imports. Emissions could be reduced from the baseline by 3.9 million tCO2 in 2025, meeting 74 percent of the GHGs compliance target set by authorities. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 75 Figure 23: AFR Thermal Substitution Target in 2025 for Each Scenario Waste Requirements by Scenario Table 26 compares the various scenarios, as well as the costs and benefits to the cement sector for each of the scenarios. The table includes an assessment of how much the industry could potentially spend per year in procuring pre-processed AFR, as well as the potential savings in comparison to coal. Table 26: Fuel Mix Forecast in 2025 According to Each Scenario Should the BAU scenario be successful, about 1.9 million tons of coal could be reduced by 2025. In comparison to Scenario 3, where stakeholders do not take the required measures to improve the use of AFR, about 1.2 million tons of coal could be reduced by 2025. Such savings could even reach 2.9 million tons of coal in 2025, if Egyptian stakeholders decide to aggressively reform the current waste-to-energy infrastructure in the country. 76 However, in order to reach this BAU scenario of 20 percent TSR, a combination of the various waste streams would be needed. No single waste stream could meet the demand, as shown in Table 27. Together, the waste streams would offer approximately 13.6 million GCal. In addition, a diversified AFR fuel base would reduce concerns over supply reliability. Achieving the BAU 20 percent TSR target in 2025 will require an additional 13.6 percent in AFR substitution. This would be an equivalent of a 10.7 million GCal increase from current levels. The total calorific thermal needs of the cement sector in Egypt in 2014 were approximately 46 million GCal per year (945 kcal/kg clinker produced). In 2025, it is expected that clinker production will have increased to 72 million tons per year, requiring a total of 68 million GCal per year. Based on the projected thermal demand by 2025, and after assessing the available volumes for each AFR waste stream, can the cement sector realistically reach 20 percent TSR by 2025 in Egypt? Table 27 below indicates an initial answer of “yes.” This is technically achievable based on available supply, but must be further evaluated according to the economics of AFR (see Chapter 6). The assumptions are based on various factors, including a) volumes available, b) accessibility of the waste stream, c) current contribution to the total AFR market and d) calorific values. Table 27: Estimated Additional AFR Volumes Required to Reach 20% TSR by 2025 In conclusion, this chapter has shown that the amounts needed to reach the 20 percent TSR target in Egypt are indeed achievable with the current AFR supply. However, investments and related market building efforts will be necessary in order to tap into each waste stream. Reaching a 30 percent TSR may prove challenging, given the competing uses and (mis)uses of the various AFR waste streams, particularly in the absence of regulatory support. The next chapters will turn to determining if the 20 percent TSR targets are economically viable, and to examining supply chain developments that may be required in order for alternative fuels to become a sustainable industry and fuel source for the cement sector. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 77 Chapter 6: AFR Economic Perspectives 6.1 Introduction The entry of coal into the Egyptian energy landscape can be expected to create fierce competition for other fuel sources, but there is still a market for waste-based alternative fuels in Egypt and a potential appetite for investing in co-processing solutions, if the commercial and business opportunities are captured quickly. AFR could theoretically compete with coal on a large scale as a secondary fuel, provided AFR prices are competitive. But for the two to compete, the price difference between traditional fuels, coal and petcoke, and alternative fuels must take into account the additional costs to be borne by the cement sector. While it is true that coal will have similar cost elements, it will have greater economies of scale. AFR may in the end see greater specific costs and externalities per unit, due to lower quantities used – unless AFR use can be facilitated at a large scale. AFR prices on a like-for- like basis must be less than the main fossil fuel used by cement plants in order to compete. Capital costs (CAPEX) and operational costs Figure 24: Natural Gas Price Increases Pre- and Post- July 2014 (OPEX) for each of fossil fuels and AFR fuel streams are evaluated Government Announcement in the following section. (Source: Ministry of Petroleum, 2014) 6.2 Fossil Fuels 6.2.1 Fossil Fuel Prices and Externalities As previously mentioned, natural gas prices were raised significantly on a complex usage-dependent scale after the Egyptian Government announcement in July 2014 on energy price increase for petroleum products and electricity. Figure 24 shows increases in natural gas fuel prices in Egypt before and after the price increase announcement. Although Figure 24 indicates that the cement sector experienced only modest increases in natural gas pricing in the pre- vs. post- 2014 energy crisis, the overall net impact on the sector is significant because the sector alone consumed 46 percent of all natural gas allotted to energy-intensive industrial sectors in Egypt. In addition, this was the second significant price increase for the cement sector, since as late as 2011/2012 cement companies were paying about Figure 25: Natural Gas Consumption in Energy Intensive $2.5 per MMBTU of natural gas. Industries By Percentage (Source: Hussien, 2015) Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 79 Similarly, prices of HFO in Egypt pre- and post-2014 have risen significantly (Figure 26), depending on the industry. Cement companies, the hardest hit of all energy-intensive sectors, suffered a 50 percent increase. Figure 26: Heavy Fuel Oil Prices in EGP per ton (Source: Ministry of Petroleum, 2014) The interviews conducted in the summer of 2015 with EGAS • Discharge cost and handling cost at port = $13 per ton management indicated that coal and petcoke are likely to become • Taxes = $7.9 per ton the primary fossil fuel for the cement industry. However, as described earlier, limited volumes of HFO and natural gas will be • Transport cost over an average of 200 km = $10 per ton available to the cement sector for the coming several years, until all • Handling, grinding, and storage at plant = $7 per ton cement plants obtain coal and petcoke import authorizations and are equipped with coal and petcoke mills. At the time this report • Total: $109.9 per ton coal with eight percent moisture or was being prepared, only Suez Cement (Tourah and Helwan) and $119.4 per ton dry coal at the burner. National Cement had not yet received coal authorizations, due to In this particular example, port costs are significantly higher than their location and proximity to urban areas. All other plants in Egypt had already invested in the required coal grinding and international standards, for two principal reasons: co-firing equipment, even if not all had yet been commissioned. In (i) Egypt lacks hard currency availability at present. Traditional terms of port capacity, it is still expected that some upgrades will be payment tools like letters of credit are more difficult to obtain, necessary in order to meet full demand. and coal traders increase their margins in order to account for Coal is very new to the market in Egypt; therefore, historical price payment delays or payment in local currency. trends are not available. Based on interviews with cement companies (ii) Egyptian ports lack experience with coal handling, and this conducted as a part of this study, the cost of coal has been estimated affects efficiency and cost, though this is expected to change at approximately $19.8 per Gcal ($119.4 per ton coal) at the burner tip for calorific value of coal at 6,000 kcal/kg. One interviewee with time. provided details related to the cost of coal, applicable in September Cement producers, however, expect that port operations, including 2015: traders’ margins, will decrease to approximately $5 per ton coal as • Cost and freight (CFR) coal price (6,000 kcal/kg) = $72 per soon as Egypt solves its hard currency issue and port operators gain ton 21 experience. 21 Consolidated Bulk Inc. Lebanon. 80 Current prices at the burner tip for fossil based fuels for the cement industry in Egypt are summarized in Table 28. Table 28: Fossil Fuel Prices at the Cement Plant Burner Tip in Egypt in 2015 6.2.2 Coal: CAPEX and OPEX Considerations 6.3 Alternative Fuels for Cement Plants 6.3.1 AFR CAPEX and OPEX Considerations Switching to coal requires investment in a “coal line”, consisting of a preparation line (drying and grinding of raw coal), plus a feeding for Cement Plants line (to feed coal to the injection point); it also requires adaptation A differentiation must be made between pre-processing and co- to the process parameters of the kiln, such as oxygen content at kiln processing equipment. Co-processing equipment is always located inlet and burner settings. at the cement plant and usually comprises AFR storage, handling, Generally, in a modern installation, indirect firing is considered. This dosing and feeding equipment. Pre-processing equipment is usually means that grinding installation is completely separated from the built on an external platform, and is usually owned and/or operated by a third party. kiln. The pulverized coal is stored in an intermediary storage bin and exhaust air from the mill is released through a filter into the The pre-processing equipment, or part of it, is then preferably atmosphere. In this way, kiln operation is totally independent from installed near to the main source of the waste generation or deposit the combined drying and grinding operation. (collection center or landfill/disposal site, for instance), to avoid transporting the portion of waste not suitable for co-processing in Based on interviews, the expected investment for a complete coal the plant. Depending on the type of waste, pre-processing generally line will be approximately EGP 135 million ($19.2 million), but can includes processes and equipment for sorting, size-reduction range from $15 to $25 million, excluding the price of land. This (grinding or shredding) and homogenization (mixing, blending). calculation assumes that a cement plant produces three million tons of clinker per year and uses approximately 400,000 tons of coal. The following section will explore CAPEX and OPEX considerations to co-process AFR. Typically, in a plant with several kilns, only one preparation line is installed and supplies one feeding line per kiln. According to best Co-Processing Equipment practices, coal should be kept in a closed storage space. As AFR co-processing is in its early stages in Egypt, only a small In order to be fired at the kiln burner, coal needs to be prepared by number of plants are already equipped with AFR feeding lines. drying and grinding. To operate safely, avoiding fire or explosion, The variability and limited availability of waste streams generally it should be done under an inert atmosphere (< 10 percent O2). require installing polyvalent coarse solid AFR feeding lines, as The preparation cost for coal depends mainly on the availability of described below, for mechanical feeding of coarse solids to the waste heat (kiln exhaust gases), the cost of electricity and potential calciner. Of the cement plants interviewed in 2015, eight were co- economies of scale on the fixed costs. The typical preparation cost processing AFR. Six plants are equipped with AFR feeding lines and varies between $2 and $3 per Gcal, according to interviewees. two plants have lines in construction phases. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 81 Coarse waste can only be fed to the calciner, or, in a limited way, to the kiln inlet. Coarse solid feeding lines usually consist of: • a storage area – for best practice, it requires enclosed storage, typically a hall operated with a loader, and several pits operated with a bridge crane. Considering the variety and limited size of waste streams in Egypt, pre-blending is generally done manually in the storage space; • a dosing system – generally a belt weigh-feeder; • a mechanical transport to the calciner – generally a tube-belt conveyer or its equivalent. For best practice, it requires a closed system, not a simple belt conveyer to avoid dispersion caused by windy conditions; • an injection system – typically a double or triple flap valve. For best practice, it requires an additional safety (emergency) sliding valve. The typical cost for the coarse solid feeding line22 for one kiln is between $2 million and $5 million,23 depending on the storage capacity, the maximum throughput, and the conveyor length. Significant economies of scale can be realized when such lines feed several kilns, as storage areas could be shared. This system accepts a variety of coarse solid AFR, and a range of consistencies. The use of AFR may make equipment modification necessary to prevent inefficiencies in the feeding line. The other alternative would be to use only specific RDF of a high density and calorific value. One of the cement plants where interviews were conducted is equipped with a HOTDISC that is integrated to the calciner. This system allows for the co-processing of coarser waste, including bigger 3D materials such as full tires, RDF 300-500mm. However, investment in this case was significantly higher: approximately $10 to $15 million. Typical operational expenses for co-processing waste vary between $2 to $5 per Gcal, depending on the volume throughput and labor cost, to be compared with $2.5 per Gcal for coal on average, which includes grinding, drying and storing. Figure 27: Schematic for Loader (top) and Bridge Crane (bottom) Operated Halls 22 Such a system allows for feeding at the calciner with various coarse solid AFR, typically 50-90 mm for 3D material and 100-200 mm for 2D material. The feeding of tire chips, agricultural waste or coarse RDF can be done using the same feeding line. Nevertheless, since the system is designed for a specific volumetric throughput, a very low density of RDF and certain agricultur- al waste (sometimes as low as 0.08 t/m3) can limit the maximum thermal substitution rate which can be achieved, if the system was not originally designed for very light material. Moreover, the blending of waste of different size and density is not very efficient. This explains the existence of bottlenecks in certain plants. The design volumetric throughput of the RDF feeding line can restrict increased AFR use. Without modifying the equipment of this line, the only way out is to use alternative fuels with a higher density or calorific value, such as TDF. Pelletizing RDF could be an option, but is rarely economically feasible. Designing a fully polyvalent feeding line using the full range of AFR in high volumes is technically impossible. Each technology has its own limits in terms of AFR physical characteristics (granulometry, density, elasticity, abrasiveness) and throughput (design capacity). 23 Interview with ATS Group, Mulhouse, France. 82 It is worth noting that co-processing electro-mechanical equipment already present in the plants, which were visited as part of this study, can generally be considered of “high quality.” They are supplied by well-known and experienced suppliers. Only two of the plants interviewed are using basic equipment. One is equipped for DSS, with a very basic injection system: hopper and injection screw feeding the coarse waste conveyer. This is adequate for limited volumes, but is not yet in use. The second plant is equipped with a basic pneumatic injection system for fine agricultural waste (ground rice straw). These two examples can be considered “pilot projects” rather than a true initiation of co-processing, due to the limited throughput and the insignificant impact on the plants’ fuel costs. No real cost savings can be realized at these limited levels. Most Egyptian plants are quite modern, and thus could theoretically accept TSR up to 30 percent without significant kiln modifications and related investments, such as calciner and cyclones upgrades. Only the investment related to the feeding of the AFR would be required. Furthermore, in specific regions, chlorine content in raw materials is high, but all plants are already equipped with a chloride (Cl) by-pass system. This could be an opportunity for profitable RDF use of this available by-pass capacity and related chlorine input capacity. Detailed chloride balances would be required for each plant in order to establish Cl acceptance criteria for AFR use. Though achieving limited five to fifteen percent TSR is relatively easy, reaching high TSR (> 20 to 30 percent) requires technical knowledge that needs to be encouraged and developed in Egypt. TSR development will follow the learning curve, depending mainly on the efforts of the cement producers to acquire this knowledge and train their employees. International producers (which represent the majority of installed capacity) have this technical knowledge at the corporate level,24 and are thus likely to lead the market to higher TSR levels. 6.3.2 Economics of Alternative Fuels Evaluating the economic viability of AFR is a complex task, given the variety of sources and the requirements of pre-processing. However, the following sections will provide an overview of the economics for this waste stream as an alternative to coal and petcoke. 6.3.2.1 Purchasing the Source Material The purchase price of raw and semi-processed AFR materials varies across regions within Egypt, as well as from one supplier to another. The variation is also dependent on the type of AFR. In addition to the purchase price of the raw materials, transportation costs and the calorific value of the AFR are also important cost and value determinates. The prices described in the table below are indicative, representing the average values collected through field interviews conducted in 2015. Purchase Price – MSW and RDF Table 29: Current Price of MSW and RDF (Source: Cement Egypt Interviews, 2015; AFR Suppliers Interviews, 2015) 24 International cement producers usually have large technical research centers and technical departments at their worldwide head offices, and not in each of their subsidiaries. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 83 Purchase Price – Agricultural Waste Table 30: Current Price of Selected Agricultural Crop Residues (Source: Cement Egypt Interviews, 2015; AFR Suppliers Interviews, 2015) Purchase Price – TDF/Scrap Tires generated from passenger cars are costly due to their volume. One Truck tires consist of 25 percent steel wires. Hence, one ton of steel ton of scrap passenger car tires is approximately 150 tires, and one can be extracted from four tons of scrap tires. The price of steel scrap ton of scrap truck tires is approximately 18 tires. As such, a five-ton is around $105 to $155 per ton. Interviewees indicate that scrap tire capacity truck can only transport a maximum of 1.5 tons of scrap prices have increased dramatically since December 2014. car tires. Transportation costs would also vary depending on the volume of tires and whether they have been previously shredded Transportation costs for whole tires is a critical factor that contributes or not. Figure 28 summarizes this dynamic, and Table 31 provides to the price of the tire. Collection and transportation of scrap tires some indicative prices for their transportation. Figure 28: Current Price of Scrap Tires (Source: Cement Egypt Interviews, 2015; AFR Suppliers Interviews, 2015) 84 Table 31: Transportation Cost of Tires Purchase Price – Dried Sewage Sludge • Agricultural Waste Agricultural waste includes a broad family of different The Holding Company for Water and Wastewater sells dried sludge wastes. Its physico-chemical properties can be very different, as compost at an average cost of $8.3 per ton ($3.32 per Gcal or particularly in terms of bulk density, granulometry, moisture $0.79 per GJ). This price is offered at the treatment plant, and does content and calorific values. Moreover, the availability of most not include transportation costs. HCWW is responsible only for types is seasonal, which must be considered when designating loading the truck at the site. storage volume. The design of installations dedicated to the pre- treatment, storage, handling and injection of agricultural waste 6.3.2.2 Pre-Processing AFR and Related Costs is consequently specific to each project, depending on the local conditions, which may include Most AFR cannot be used without some degree of pre-processing, the preparation or processing necessary to ensure fuel quality and ŊŊ Type of biomass (granulometry, shape, density, water homogeneity. Pre-processing produces fuel that complies with the content) technical specifications of cement production and guarantees that ŊŊ Volume available and seasonality environmental standards are met. At the same time, however, ŊŊ Distances between the waste production site, the eventual pre-processing increases the operational (OPEX) and sometimes collection/pre-treatment platform and the cement plant capital (CAPEX) costs of the cement plant. The four targeted waste and transport mode streams in this study require a variety of pre-processing activities, ŊŊ Local weather conditions (rain, wind) as previously outlined in Chapter 3. As such, the expense of pre- ŊŊ Estimated consumption of the cement plant. processing will add to the initial purchase of the raw material. Pre-processing is not always required. Seeds, for instance, can • Refuse Derived Fuel from Municipal Solid Waste be directly co-processed. Size reduction by shredding is the most RDF is one of the most difficult wastes to prepare because common practice. Pelletizing or drying, while also considered, the input (unsorted municipal waste) is often heterogeneous, can be cost prohibitive. Three processes are generally followed and only part of the MSW is suitable for co-processing. The in agricultural waste pre-processing, depending on the waste complexity of this pre-processing requires the waste to go properties and transport requirements: through several preparation phases, thus raising the capital investment and operational costs required. MSW must be ŊŊ Shredding or grinding: to decrease the size, as of wood, sorted in order to separate the recyclables (metals and some or increase the bulk density and the efficiency of baling, unpolluted plastics, glass bottles, dry unpolluted cardboard or as with rice husk. The technology - shredder, chain mill, paper), the inert materials (sand, stones, earth, glass) and the vortext mill - will be selected depending on the waste and putrescible materials such as food, typically called “organics”, any contamination with foreign bodies, such as stones. before it can become usable as fuel. The light and combustible ŊŊ Drying (natural air/solar drying, forced drying): to fraction (typically 20-30 percent), such as wet and polluted eliminate the water content and improve the calorific paper and cardboard and plastic films, is then shredded to value, and to facilitate storage and handling. For economic reach a usable size. reasons, natural or solar drying is generally preferred. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 85 ŊŊ Compaction (baling): to increase the density and to lower the transport and storage cost, as for straw or rice husk. Pelletizing is sometimes considered for specific streams, converting dusty materials such as into a material easy to handle. Its high cost, however, may be prohibitive for co-processing in a cement plant; pelletized fuel is mainly for domestic use and for co-processing in power plants or industrial boilers. • Dried Sewage Sludge from Wastewater Treatment Plants Typically, sludge from wastewater treatment plants has a moisture content of between 50-80 percent. Before sludge can be co-processed, it should preferably be dried to below 20 percent water content, and homogenized. The different options for sludge preparation for co- processing are as follows: Sludge at 80 to 60 percent moisture content ŊŊ If no significant fee is paid, no cement plant will consider co-processing sludge with a moisture content of 80 percent or above because of the difficulties in handling and injection, and the negative impact on kiln process (almost no heating value, loss of production capacity, risk regarding the flame temperature). Sewage sludge with very high moisture can be eliminated through the cement kiln, but since it has almost no calorific value, it cannot be considered as a viable option for energy recovery and thus the cement plant should be fully paid for the service. ŊŊ Sludge can be directly injected into the riser duct using a concrete pump. Sludge at approximately 50 percent of moisture content ŊŊ Pre-processing can occur by co-grinding the sludge together with coal or petcoke in the coal mill. It requires on one hand spare capacity in the coal mill (thermal power) and on the other a limit to the sludge volume so as not to exceed the volatile organic compounds (VOCs) emission limit at the stack of the coal mill. The dried sludge is then mixed with the ground coal, and they are fired together. ŊŊ Pre-processing in a sludge dryer can reduce moisture content to below 30 percent. Various technologies are available, generally with significant investment or significant operational cost. Waste heat from the clinker cooler or from the flue gas of the kiln can be used, as well as biological degradation or solar energy. In Egypt, solar drying is an option. After drying, the sludge is screened, and then co-processed in a standard feeding line (generally using pneumatic transport). Sludge at between 15 and 30 percent moisture content ŊŊ Direct feeding can take place, together with other solid alternative fuels, via a mechanical transport feeding the calciner. This solution would be not be appropriate for dusty dried sludge in typical calciner feeding lines. ŊŊ Direct feeding to the calciner or the main burner can take place using a dedicated line with pneumatic transport. Since sewage sludge can sometimes contain large amounts of pollutants, such as heavy metals or phosphate, a strict quality control system must be in place. • Tire Derived Fuel from Scrap Tires If no specific co-processing line for whole tires is installed, scrap tires must be shredded into chips of between 50mm and 90mm. These waste streams are clearly feasible as potential AFR for the cement industry. The costs of the necessary pre-processing, CAPEX and OPEX, are summarized in Table 32 and Table 33 based on interviews with cement companies and consultant experience. 86 Table 32: Estimate for CAPEX and OPEX of AFR Pre-Processing at Platform or Other Facility (Outside Cement Plant) Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 87 Table 33: Estimate for CAPEX and OPEX of AFR Co-Processing in Cement Plant Taking into consideration the level of CAPEX required to pre-process each waste stream, and the conclusions to be drawn from Table 32, a high level estimate of the total additional investment required by 2025 for BAU Scenario is provided in Table 34. This estimate is calculated by dividing the pre-processing capacity of each waste stream,25 then the result is multiplied by the CAPEX of this specific capacity. For example, for 50,000 tons of tree trimmings pre-processing capacity (refer to Table 32) is divided by 1.5 million tons in volume required in 2025 under BAU Scenario, then multiplied by $1.62 million CAPEX to result in a total investment figure of $49 million (refer to Table 34). Table 34: Estimate of Investment Required for Pre-processing Facilities by Waste Type by 2025 under BAU Scenario 25 Indicated by the volume of waste available in 2025 88 Consequently, the total investment required to pre-process the required AFR amounts to reach a 20 percent TSR by 2025 will range between $100 - 121 million. This investment scale is directly correlated with the increase of the AFR thermal substitution rate. For example, it could reach up to $320 million if AFR pre-processing equipment is newly installed/re-habilitated in the 64 sorting and composting plants currently existing in Egypt (calculated on the assumption that on average $5 million investment would be allocated per plant). While total CAPEX needs for co-processing across Egypt’s entire cement sector have not been estimated,26 this investment picture represents significant opportunity to attract investors and financial institutions to promote the AFR market. In general, the economic feasibility of AFR pre-processing projects, with the exception of TDF, results in an internal rate of return (IRR) of above 15 percent and a payback period of three to five years. However, this estimate should be confirmed through detailed feasibility studies on a project-by-project basis. 6.3.3 Comparison: Economics of Fossil Fuels versus AFR Various fuel types have different calorific values, and so the cost of each combustible is expressed in $per Gcal to be comparable. For example, the average calorific value of heavy fuel oil (HFO) is 9,600 kcal/kg, whereas it is approximately 3,300 kcal/kg27 for agricultural waste. Since the start of the energy crisis, cement plants in Egypt have rarely used only a single fuel type, but rather have been co-processing with multiple fuels. Information gathered during interviews with the cement companies has allowed the 2014/2015 fuel mix cost to be estimated at an average of $30 per ton of clinker, based on a fuel mix including natural gas, other fuels such as HFO and including an overall average of six percent AFR. The price per Gcal of each fuel has been collected from the surveyed cement plants. In Figure 29, the bars represent individual value per plant and the encircled number is the average. Table 35: Average Price of Fossil Fuels and Alternative Fuels at Cement Burner Tip (Source: Cement Egypt Interviews, 2015) 26 Estimates vary for each plant and is subject to criteria such as existing production processes and equipment 27 Based on interviews with cement companies in April 2015. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 89 Figure 29: Average Fossil Fuels and AFR Prices at the Burner per Interviewed Cement Plant (Source: Cement Egypt Interviews, 2015) 6.4 Summary As long as coal is available, it will likely be the primary combustible used by Egypt’s cement industry. This is not simply a product of price competitiveness, but also due to coal’s physical and chemical properties when used in the clinker process. However, it must also be noted that AFR could compete with coal prices and contribute to economic savings for the sector, if produced at scalable levels. To achieve this, the price difference between traditional fuels, such as coal, and AFR must cover the following additional costs borne by the cement plant in procuring and utilizing AFR: • the amortization of the additional equipment that must be installed by the cement plant to co-process the AFR, such as the storage and handling equipment, and the dosing system. • the additional operational cost related to co-processing, including the cost of the utilities (mainly electricity and compressed air), the wear part cost and the labor cost for operation and maintenance. This would also include any negative impact of the AFR on the kiln process and equipment, resulting in increased maintenance of the kiln system. • the cost related to the sourcing of the waste, such as the labor cost of the AFR commercial team, and costs related to the AFR quality assurance lab. • the cost related to the potential reduction of clinker production capacity because of the use of AFR. To summarize, HFO is not widely available and will be unable to compete with coal in terms of price.28 AFR, however, offers a potentially abundant, locally available and price competitive alternative to coal if produced at scale, and at required quality specifications. 28 Future HFO and diesel in fuel mix is not expected to exceed five percent, according to interviews with the Egyptian Cement Producers Association. 90 Chapter 7: Establishing the Supply Chain 7.1 AFR Supply Chain A structured waste supply and value chain is important to the chain management integrates supply and demand within and across success of increased AFR integration into the cement sector’s fuel multiple companies and entities. mix. The value chain involves procurement of waste and services, In this chapter, various AFR business models will be presented, based transformation of AFR into intermediate and final products, and on international experience. The perspectives of multiple actors in delivery to the cement plant. These activities are realized through the supply chain in Egypt will be explored, and suitable integration coordination and collaboration with channel partners, which can be models for each waste stream will be proposed that are suitable for municipalities and other public entities, intermediaries, third-party country-specific circumstances. service providers and cement companies. In essence, effective supply 7.2 International Experience on AFR integration means engaging in downstream activities towards the end-customer. The AFR supply chain is an upstream activity for Business Models a cement company, and therefore backward integration would be applicable in this case. International experience shows that different business models are available for the waste supply chain. The integration models How can a cement plant integrate into the supply chain of usually depend on the strategies of the cement companies. Vertical alternative fuel suppliers and to what degree? Where can waste integration is one strategy used by a company to gain control over management firms be positioned to increase the use of AFR and its suppliers or distributors in order to reduce transaction costs and take advantage of market-based opportunities? In general, options secure supplies or distribution channels. 29 Backward and forward fall under three levels of integration: outsourcing (no integration), integration two approaches. A company that expands backward partial integration, full integration. This is illustrated in Figure 30. integrates into upstream activities in the supply chain, while forward 29 Strategicmanagementinsight.com definition. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 93 Figure 30: Backward Integration Levels into the Energy Supply Chain Figure 31: Viable Integration Levels for AFR 94 Integration Level 1: Full Outsourcing Integration Model 2: Partial Integration In this model, the cement company directly sources “ready to use” In this model, the cement company invests in selected pre-processing pre-processed AFR from a third-party waste management company activities such as sorting, shredding and drying. The cement that is responsible for the entire process, from collection to pre- plant does not collect the waste, but receives “raw waste” or an processing, and in some cases delivery. The cement company needs intermediary product from a waste supplier. The sustainability of only to invest in equipment for the co-processing and storage of the this model requires a long-term commitment between the cement AFR. It defines the AFR acceptance criteria that will be stipulated in company and the waste supplier. the contract. If the AFR supplied to the cement plant gate does not meet the acceptance criteria, then the cement company has the right The cement company must consider the following: to refuse it according to the terms in the purchase contract. The • Advantages: cement plant may, however, be obligated to accept certain “take or o There is direct involvement in waste sourcing, but with pay” arrangements according to expected volumes, in exchange for limited CAPEX and risks. Cement firms are in some ways offloading the quality risk to a third party. protected from price volatility. From the perspective of the cement company, this model has o Logistics are optimized between the pre-processing advantages and disadvantages: platform and co-processing location in the cement plant. o There is better mutual understanding of each partner’s • Advantages: business constraints. o The cement plant does not need to invest in pre-processing activities; thus CAPEX is limited. • Disadvantages: o Sourcing/procurement is easy when the waste is available. o The cement plant does not necessarily have direct access o Fewer human resources are required in the cement plant to the waste generators. This leads to a lack of waste to operate it. traceability and lower profit margins. o Quality control is limited because there is no direct link to • Disadvantages: the waste generator. o There is no traceability and a lack of quality control. o Price and volume control may continue to be an exposure, Thus, there are operational risks due to the uncertain with the cement plant having already made needed capital heterogeneity of the incoming waste. investments. o As all intermediaries will take a certain percentage, the commercial terms of AFR may not be as attractive to the In this model, the cement plant makes the principal investment in the cement plant when compared with coal. pre-processing platform, while the waste management company and o There is a risk of competition for AFR with other thermal other third parties are responsible for the waste collection, sorting energy users, such as power plants, unless there are long- and logistical arrangements. This offers the waste management term contractual agreements on commercial terms. company business opportunities, with lower risks when compared with the outsourcing model. In some cases, a joint venture for a pre- In this model, all the activities between waste generation and delivery processing platform could be envisaged, but it is common practice to the cement plant can be undertaken by waste management for the cement company to retain management and control of the companies and other third parties. However, these companies platform to maintain the desired AFR quality. should have solid knowledge of AFR preparation to meet cement plant requirements. This model will also require long-term upstream Integration Model 3: Full Integration agreements between the waste generator and the management company on the one hand, and downstream agreements between the This model reflects the full integration of the cement company into waste management companies and the cement plant on the other. the waste supply chain, in some cases even participating in the waste Without which, waste management firms would be unable to secure collection stage. There are only a very few cases worldwide, mainly a return on investment. in China and Japan, where a cement plant is fully integrated. In Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 95 those examples, cement plants are located close to a landfill and o The company will be directly exposed to price fluctuations the volume of MSW corresponds to the needs of the cement plant. in the procurement of raw waste materials. Typically, a cement company will not undertake the collection of small volumes of wastes scattered geographically over vast expanses. o The company will need to be involved in national or subnational waste management contracting. This business model requires that the cement firm significantly invest in the supply chain. The pre-processing activities would take o Higher CAPEX and dedicated human resources are place on dedicated land, owned or rented by the firm or inside its required. premises. Usually, this business model has its own profit/loss center, independent of the cement plant. Though the scope of activity for the waste management company is much more limited in this business model, it may still include waste From the perspective of the cement company, the following should collection and logistical arrangements. be considered: Selecting a Model and Meeting Basic Commercial Requirements • Advantages: o The cement company will be able to control and fully trace Each cement plant can select a model by evaluating the following any type of AFR. criteria: (1) price, volume and risk exposure; (2) degree of AFR o Higher margins are expected since there are no quality control; (3) scale of investment required; and (4) complexity intermediaries. of operations. Some cement companies may be more comfortable with increasing their levels of AFR integration if they have been • Disadvantages: successful in other markets. Furthermore, the appropriate o The cement plant will have to invest fully in the sourcing business model will vary depending on the type of waste stream, as and pre-processing activities (and in rare cases in the summarized in Table 36. collection stage). Table 36: Suitable AFR Integration Level by Waste Stream Whatever the type of waste, there are basic commercial arrangements order for both the cement company and third parties to secure that should be in place in all integration models: a return on their investments and ensure the sustainability of their operations, two major agreements are needed: • Security of Supply and Long-Term Pricing Options: there needs o (i) a long-term supply agreement between the pre-processing to be a guaranteed AFR supply through both higher collection firm and the collectors or suppliers (including municipalities), efficiency and long-term contracts of at least five years. In which need to agree on volumes and price; and 96 o (ii) a long-term offtake agreement of the same duration One of the cement producers interviewed is already equipped with a between the pre-processing company and the cement secondary shredder (the last step for RDF production), and receives company. The agreement would specify AFR off-take baled pre-shredded RDF from a third party. Another cement plant volumes and price, and any physical and chemical interviewed has its own RDF production, but on a remote location characteristics such as moisture content, calorific value and and under another brand. shredding size. For the pre-processing company, having both a supply and an off-take agreement could facilitate access to The majority of cement companies interviewed as part of this study external financing. plan to increase AFR thermal substitution rates. Many increasingly envisage entering into pre-processing as a consequence of the • Specifications and Quality Criteria: it is critical for the cement high prices of AFR on offer from the existing waste management firm and the waste management actor to agree on clear companies in Egypt, unless competitive options can be offered. acceptance criteria for AFR. In order to ensure fairness in the execution of the contract, an independent expert should assess None of the cement plants interviewed for this study have considered claims related to AFR characteristics. the “full integration” model, as it would require the cement plant to be located near a large landfill providing enough waste for its needs. Though not necessarily required, economic and regulatory Another major deterrent is that such an approach would force a incentives/disincentives such as tipping fees could increase waste cement firm to enter into MSW management, which is beyond the collection, increase AFR supply, and improve project economic sector’s business scope, interest and expertise. feasibility. Global Trends 7.3 Egyptian Specificities In the sustainability reports, global cement groups usually publish their level of TSR, fossil fuel savings and GHGs reductions, but The following section discusses the divergent opinions of cement do not disclose the economic savings related to the use of AFR. industry actors and waste management companies, as vetted in Further, little information is available on the specific AFR business multiple rounds of stakeholder dialogue conducted in conjunction models followed by each of the global cement groups. However, the with this report. The main constraints and solutions for AFR upscale following trends can be observed: include: • Holcim operates several waste management platforms through Cement Industry its widely-known integrated subsidiary “Geocycle”. During the energy crisis in Egypt, several of the cement companies • Cemex tends to operate according to the outsourcing business purchased AFR at unreasonably high prices in order to be able model. to continue operations. Internationally, the main driver for co- • Lafarge relies on both models. processing of AFR is the reduction of thermal energy costs and the achievement of corporate GHGs commitments. But in Egypt, the These companies could follow different business models according principle motivation was at the beginning one of economic survival. to each country’s waste portfolio. In Egypt, the most common AFR To take advantage of the situation, several AFR providers had business model is outsourcing, where the cement companies simply been selling AFR to cement companies on the same pricing scale source AFR from waste suppliers. ECARU and Cemex follow an as that for imported coal and petcoke (in Gcal). Clearly, this is an intermediate model, where ECARU collects municipal waste and uncompetitive offer. brings the sorted material to Cemex installations, located on ECARU land near a landfill. Cemex has not only invested in the equipment, Several cement producers have stated that AFR use will continue but also produces, manages and transports the RDF. Another only if the thermal cost at injection point will not exceed two-thirds business case model defined as “integrated” is the one of ECOCEM (2/3) of the price of imported coal and petcoke. This difference is (Lafarge). In 2010, Lafarge established a waste management due to the fact that the use of AFR involves CAPEX, operational subsidiary called ECOCEM Industrial Ecology Egypt, dedicated to constraints, additional quality control, emissions monitoring and the management of both municipal and industrial waste. increased process complexity, as previously discussed. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 97 For wider AFR utilization, the cement industry requires: • Waste management providers would like to understand the technical specifications and constraints of cement plants. • sustainable, uninterrupted access to energy to produce cement; • Small and medium sized enterprises lack adequate financial • reliable, sustainable and predictable AFR supply inflow; resources. • stable product characteristics (granulometry, chlorine content, • The waste sector’s expertise on AFR pre-processing needs to be ash content, pollutant content, calorific value, water content); improved. and • AFR costs which are significantly cheaper than traditional • Some firms perceive insufficient AFR demand and expect non- fossil fuels. cement sector clients. The cement industry has proposed the following solutions: Waste management companies have proposed the following solutions: • Clear acceptance criteria as part of contractual purchase agreements; • Issue guidelines on AFR specification and pricing. • Binding long-term arrangements between AFR suppliers and • Provide financial incentives. Specifically, create corporate social cement factories; responsibility funds and clean energy funds. • Cement plant participation in financing equipment upgrades or • Facilitate the issuance of permits for AF producers. technological introductions; • Enable knowledge-sharing in AFR production, including • Guidelines that include potential pricing and specifications in establishing a reliable data base for available waste quantities comparison with fossil fuels; and specifications. • Adoption of the Best Available Technologies (BAT) for AFR • Improve the efficiency of the waste supply chain for better utilization and partnering with qualified experts in knowledge- business. sharing workshops and training programs. • Guarantee minimum contract terms and duration. Waste Management Companies • Establish and support efficient and reliable waste collection chains. Waste management service providers include, but are not be limited to, SMEs working in informal recycling areas, more organized firms This section has thus demonstrated the divergence in view points which may operate locally, and private companies that have not yet on what is needed to ensure commercial viability for the sector. been involved in the supply of RDF and/or agricultural waste, but Alternative fuel providers often have a different perspective from who foresee a possible opportunity. Waste management companies that shared by players in the cement industry. In the next section, aim to produce stable AFR that will be accepted by clients in terms business models will be proposed to bridge this gap and address the of quality and price, and that will generate profits. challenges which have been identified. The perspective of these service providers can be summarized as follows: • Waste management service providers perceive waste as any standard combustible and want to align its price per energy content (in Gcal) to coal and petcoke. • Waste management providers would be willing to invest if the price is attractive enough to make their operation economically feasible. Some of those currently involved in the supply of AFR do not believe that the prices deemed acceptable by the cement industry are attractive enough, especially given the required specifications and the current price of coal. 98 7.4 Proposed Business Models for • The MSW is received at zero cost to the investor. Should there be a tipping fee, about $8 per ton is paid to the investor. Egypt and Recommendations per AFR Stream • The RDF pre-processing facility is located at an existing sorting and composting plant or landfill/dumpsite. The investor is the concession holder at the site and the investment is depreciated 7.4.1 RDF within ten years. Unlike the other waste sources, MSW has a much more complex Five potential scenarios for the RDF pre-processing facility project value chain. In order to be used as a combustible, RDF needs a arrangements are put forward in Table 37 under the assumption that specific preparation process, as described in Chapter 6. It is one of the CAPEX is fixed and MSW is provided to the investor at zero cost the most difficult wastes to prepare because the input (unsorted (except in Scenario 3 where the investor is provided with a tipping municipal waste) is often heterogeneous, and only part of the MSW is suitable for co-processing. The complexity of this pre-processing fee). The scenarios interplay between three main OPEX variables by requires the waste to go through several preparation phases, and which revenue streams can be increased for the investor, which are: i) thus requires substantial investments. The numerous processing improving MSW input through separation from source, ii) payment phases which occur from waste collection through to the point of of a gate fee, and iii) sale of recyclables. These improvements feeding into burn point at the cement plant suggest three main kinds will optimize the RDF fuel source as a commercial opportunity. of integration models, depending upon how a cement plant ventures Source segregation in homes into compostable (organic) and non- into the waste preparation and supply process: compostable materials will reduce the sorting costs to the investor at the pre-processing facility. The tipping fee is paid to the investor • The full integration model: This model is not often encountered by the authorities/municipality or by any private sector waste hauler for RDF and none of the cement plants interviewed are planning seeking to dispose of waste (charged per ton of MSW delivered). The to consider it. Therefore this model will be omitted. investor would pay the same tipping fee on any remaining residual waste material after sorting and processing, which would be sent to • The partial integration model: the cement plant injects the landfill for final disposal. The recyclables are mainly plastics, paper majority of investment into the RDF pre-processing platform, and cardboard, glass, and metals. and the waste management company is responsible for the MSW sourcing and sorting. The pre-processing platform is preferably located on or close to the sorting and composting In brief, the main features of each scenario are (refer to Table 37): plant or landfill/dump site, thus avoiding re-transporting any waste that is unsuitable for co-processing. This model is often • Scenario 1: there is neither separation of MSW taking place seen as optimal by cement companies because the cement plant at homes, nor gate fee is received from the municipality; controls the quality of the RDF it produces. however the investor is fully entitled to the revenues from the recyclables sale. • The outsourcing model: The role is reversed and the waste management company invests in the RDF pre-processing • Scenario 2: there is no additional revenue stream to the investor, facility and undertakes the risk of sourcing raw material, while whether from gate fee, recyclables sale, or reduced sorting costs. the cement plant purchases the ready-for-combustion product. • Scenario 3: the investor will receive a gate fee from the Regardless of whether the partial integration or the outsourcing municipality and a portion of the recyclables sale. model is followed, the economic feasibility of the RDF pre- processing facility for the investor will be examined in comparison • Scenario 4: the investor will have two additional revenue to coal at the burner tip in the cement plant. For example, the RDF streams: reduced sorting costs and recyclables sale. pre-processing facility could have the following characteristics: • Scenario 5: the investor benefits from reduced costs after • A minimum annual volume of 200,000 tons per site (ideally separation of MSW at homes. 300,000 tons) is assumed. Below this volume, operating costs and amortization will be too high to compete with coal. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 99 Table 37: Five Scenarios for RDF Pre-Processing Facilities The economic feasibility of each scenario is assessed based on comparing the final RDF cost to the cost of coal at the burner tip. In Table 38, the RDF cost breakdown is detailed for each scenario along the entire operation chain at the pre-processing facility: from receipt of MSW, to drying, baling, and transport to the cement plant. After this, the costs of RDF storage, co-processing CAPEX, and production losses from water content in RDF are accounted for. In Table 39, the final RDF cost by energy content is compared to the average cost of coal of $19.8 per Gcal. It can be concluded that RDF pre-processing projects, under the five scenarios are in fact economically feasible. Scenario 3 and Scenario 4 are the most economically feasible, while Scenario 2 is the least feasible, at price ranges 51 percent and 76 percent lower to coal respectively. Table 38: RD Cost Breakdown under Each Scenario Along the Value Chain 100 Table 39: Final RDF Cost Comparison with Coal for Each Scenario Therefore, there are significant opportunities for RDF in the short-term which can be pursued by private sector investors, as well as public stakeholders through establishing and securing commercial arrangements. These arrangements include improved investor access to disposal sites, such as landfills and composting sites, and prevailing MSW to investors at zero cost. Scenarios 3 and 4 are the most economically attractive in comparison with coal, since they include additional revenue streams from gate fees and proceeds from recyclables. Even when there is no separation at source under scenario 3, the gate fee and the selling of the small recyclables portion should cover the cost to the investor of sorting at the RDF pre-processing facility. This RDF price under these two scenarios should be the medium- to long-term objective, given the institutional changes required. Two government interventions will be necessary to 1) establish source separation, 2) sustain it through transport to an RDF pre-processing facility, and finally to 3) enforce the payment of the gate fee or tipping fee. The economics could be further improved if a portion of the taxes levied on coal imports could be credited to the cement companies per ton of RDF. The above factors will be further elaborated upon as recommendations for RDF upscale in Egypt. Investor Access to Disposal Sites As described in Chapter 4, a portion of the 60 percent of MSW collected annually in Egypt (equivalent to 12.6 million tons per year) is delivered to the 64 compost plants. The pre-processing of MSW to produce RDF consists of two main steps, excluding the composting processes, as shown in Figure 32: • (i) Sorting of the MSW (sorting plant). • (ii) Shredding of the light combustible fraction of the MSW (shredding plant). Figure 32: RDF Pre-Processing Platform Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 101 Currently, there are 64 composting plants distributed throughout where pre-processing of RDF occurs. The main difference between the various governorates in Egypt (see GIS platform for exact European and Mexican prices is the difference in the level of locations of the composting plants: http://arcg.is/1ToAspz The exact sophistication of the equipment required in order to comply with condition of the equipment on each site is not known, but seems local regulations. outdated based on interviews with stakeholders. As previously discussed, Egypt does not at the moment have a policy Public stakeholders who wish to offer concessions to the private on tipping fees, but it is important to consider that even modest tipping sector for the sorting and composting plants or gain access to landfill fees, as in the case of Mexico, will have a positive impact on the use sites will need to meet certain requirements: of MSW for other uses, offering a market-based incentive for this fuel and its alternative applications. It may be some time before tipping • They must provide a selection criteria when tendering the fees come into effect in Egypt, primarily because only a small fraction management of landfills or sorting and composting plants of all waste is landfilled in the first place. However, the existence of a which includes and evaluates the qualification of the bidder. tipping fee could encourage more efficient waste collection. • Their concessions should be guaranteed for a minimum of 10 There is an abundant supply of MSW throughout Egypt, as indicated years. earlier. However, the lack of consistent collection, sorting, and • Waste collectors within the oversight of, or under contract with, disposal of waste poses a challenge to the efficient use of this resource. the relevant authority, will be required to deliver all collected This waste stream is still usable, nevertheless. Potential investors can waste to the sorting and composting plants or landfill sites. approach local governments with cost effective solutions to dispose • Data on volumes of waste must be delivered to sorting and of MSW, reducing the burden on infrastructure and hazards to composting plants or landfill sites. public health. They can take advantage of the presence of waste processing sites to reduce investment costs and project development • Concessions and access to the sites are to be provided for free efforts. They can also work with waste haulers to agree upon supply or at low cost. arrangements with more logistically convenient drop-off locations, and help them understand the potential fuel savings of using these One of the most important recommendations is that all revenues drop-off/pre-processing locations as opposed to traveling long from any recovered recyclables, or other recoverable materials such distances to dump illegally in off-road areas. as compost, should belong to the concession holder. Cement companies can define quality standards for RDF based on The existing sorting and composting plants under auction are existing environmental conditions and communicate these standards without RDF production facilities, and will need to be equipped to RDF pre-processing suppliers. with new pre-processing equipment. Further, new pre-processing facilities could be installed at or near existing landfills. Therefore, Government stakeholders should in the short term insist upon more landfill sites can also be considered as potential facilities, in addition rigorous enforcement of dumping penalties, while offering waste to the existing 64 composting sites. haulers cheaper solutions. For the longer term, public stakeholders should continue shaping a comprehensive MSW strategy which Tipping Fees: clarifies roles and responsibilities, as well as detailing authorization routes to supply agreements. Egypt’s waste management vision must It is common practice worldwide for waste disposal tipping fees to be adopt a holistic approach that considers the system from household levied in order to recover the costs of waste management. Such costs to disposal. include landfill or processing site capital investment, site operational management, waste separation and safe disposal for final residues and recycling activities, and various other site management costs. Such tipping fees allow RDF to be economically more attractive, which creates a market for alternative uses for waste products. According to the Confederation of Waste to Energy Plants, the average gate fee in 2015 for the EU27 is EUR 87 per ton MSW (CEWEP Landfill Taxes, 2015). Mexico, on the other hand, levies gate fees of approximately $10 per ton MSW in some landfills 102 7.4.2 Agricultural Waste Government authorities should also more strictly enforce bans on open air burning. Agricultural waste is a viable source of AFR, and given its large quantities, the reward of overcoming collection and transport hurdles As it has with RDF, the government could encourage agricultural is immensely promising. Due to seasonality, the diversification of waste usage by directing taxes collected from the cement industry agricultural waste streams is a risk mitigation step needed to secure for coal into the market development of AFR. This incentive can the supply of the waste. However, the selection of the agricultural be allocated per ton of waste co-processed, and its amount can waste types used for co-processing should not compete with other depend on the waste’s calorific value. Authorities should maintain high-value uses, such as animal fodder. the subsidies, facilitate access to storage space (generally a piece of land) for waste management companies, and allow storage under Cement companies do not usually involve themselves in the strict safety conditions. collection and preparation of agriculture wastes. In some cases, the cement plant does the final shredding, due to its in-situ acceptance criteria. Therefore, the outsourcing model is preferred by cement 7.4.3 Dried Sewage Sludge (DSS) companies for agricultural waste. The waste management company Sewage sludge has an important advantage in Egypt, compared should be in charge of the collection, storage, shredding, baling and with other AFR sources: it is under a single holding company for final transport to the cement plant. Shredding, if needed, can also be water and wastewater treatment, without multiple intermediaries done at the cement plant in order to avoid accidental fires during to deal with. But as previously described, the main obstacles for co- storage, and to facilitate transport. Bales are easier to transport than processing of sewage sludge in Egypt are high moisture content and shredded agricultural waste. contamination with inert materials such as pebbles and sand. Collection and storage locations are paramount to the success of The scale of investment and operating costs are directly linked with the business, since most of the cost is related to logistics. Locations final moisture content and environmental constraints such as odor shall be carefully assessed, taking into consideration the location control. There are, however, several drying technologies available. Sun of the targeted cement plants as well as the collection points drying is preferable to the costly investment required for mechanical (farms). Intermediary collection points, to which the farmers bring dewatering through filter presses. Sun drying depends mainly on the their waste, could be sited in areas where crop volumes are very volume of sludge, on the civil engineering cost, and on the need to fragmented. produce DSS during winter months. Winter operations, and odor Though conversion of agricultural waste to AFR offers perhaps the issues, require construction of a greenhouse, a costly investment, and highest potential to local entrepreneurs in comparison with other perhaps also bio-filters to treat the odors. The inert material could be waste streams, it needs government incentives and regulations. The removed simply by setting up a concrete floor when drying sludge. scope of this business for waste management companies would not The sludge can be turned using agricultural equipment, and screened be limited only to the cement sector, but also to other future users, to eliminate pebbles and other inert material. such as power plants. The three potential integration models that are applicable for sewage sludge include: Further Action: • The ‘full integration’ model: the cement plant or its subsidiary Investors in waste pre-processing activities can invest in the AFR company collects the sewage sludge from the waste water development of a collection and supply chain. Ideally, the chain treatment plants, transports it for drying in another location, must reach geographically distributed small-holder farmers, and do and then finally co-processes DSS in the cement plant. This so in a logistically efficient manner. Awareness can be raised in the model requires significant investment in drying technologies, farming community about the potential value of selling rather than land purchase, and transport infrastructure (truck fleet, burning agricultural waste products. pipeline). This could be a viable option if the WWTP is close to Government stakeholders can review regulations governing the cement plant and land is available for drying. the storage of agriculture waste and amend them in order to • The ‘partial integration’ model: the cement plant fully or accommodate the need for large waste volumes. Such regulations should define, among others, the safety criteria for a storage facility. partially invests in drying technologies at the WWTP facility. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 103 Cement plants seldom invest in the WWTP itself, but a JV and/ Government stakeholders can or direct involvement can be considered on a case-by-case basis for the final dewatering system and the logistic optimization, • offer incentives to WTTP operators to invest in drying facilities provided that long term contracts are secured. The drying in order to reduce other environmental hazards and improve process could be operated either by personnel hired by a cement disposal options; plant or its subsidiary AFR company. Alternatively, this role • allocate land for natural drying, in accordance with may be extended to WWTP personnel, under the supervision environmental and social standards. Land allocations should of cement plant experts, to ensure that the DSS achieves the be reviewed for economic viability, with factors such as required quality criteria. transportation costs from the WWTP to the cement plant taken • The ‘sourcing’ model: the most common practice is for the into consideration; cement plant to receive the sewage sludge directly from the • increase enforcement banning the use of non-stabilized sewage WWTP after an auction. However, at present sewage sludge sludge. from WWTP is available at 80 percent of moisture content. The moisture content should be decreased to 20 percent to attract cement plants to source from WWTP. A third-party 7.4.4 Used Tires (TDF) waste management company could be invited by the WWTP TDF is potentially very attractive for co-processing in cement plants to submit proposals to invest and operate the sewage sludge due to its high calorific value and simple pre-processing (mainly drying process, whether at the WWTP facility or at another shredding). Further, scrap tires offer the highest yield for recycling. location, in order to supply cement companies with DSS at acceptable quality. Since recycling is above co-processing in the Waste Management Hierarchy Pyramid (refer to Annex B), it should be given priority. As For future wastewater treatment plant projects, HCWW could with agriculture waste, however, collection of waste tires is a major initiate discussions with neighboring cement plants during the design obstacle that impacts the final cost. phase. Such partnerships can develop mutually acceptable solutions that aim to maximize sewage sludge recovery by minimizing It is difficult to apply the full integration business model, since the the moisture content. This will also help to define the optimum sources of scrap tires are usually too scattered for a cement company investment required for DSS recovery as a fuel and raw material. to enter into collection. The only possible exception would be direct collection from tire dealers, or government and private company Further Action: auctions. The cement plant could adopt the partial integration Investors in AFR pre-processing activities can business model by investing in a shredder near a tire collection • consider co-investing in drying facilities at the WTTP plant center, while obtaining whole tires from the market through tire as a joint venture with the WWTP operator, in exchange for dealers or auctions. attractive terms in the supply contract; Under the outsourcing business model, the cement plant would only • agree with the WWTP operator on the quality and humidity of source pre-shredded tires size 50 mm to 80 mm that are ready to the final product. co-process, should a whole tire feeding line not be installed. The shredding of tires would then be performed by a third-party waste WWTP operators can management company at a collection site. This could be the preferred model since it has a number of advantages for cement companies. • investigate and invest in innovative technologies for sludge treatment to reduce the water content of sludge, including The first is the reduction of logistic costs, as shredded tires are on specially-designed greenhouses or indirect thermal dryers bulk density of 0.6 ton per m3, while whole tires are 0.2 ton per m3. which use less heating (DAAD, 2011). Reducing moisture Further, it allows the use of existing co-processing facilities in the can also make transportation more cost effective, which may cement plant (calciner mechanical feeding systems) and eliminates warrant a premium price and increased sales quantities of the the need for specific investment due to relatively inexpensive storage DSS product by off-takers. (open air storage, limited fire protection). 104 Figure 33: Proposed Scrap Tires Supply Chain Under Partial Integration or Outsourcing Models Box 3 Aggregation Scenarios The supply chain of used tires for cement plants is often based on direct agreements with manufacturers. In cases where there are multiple buyers and suppliers, aggregation emerges as a key route to support material recovery efforts. One case study involved South Africa’s Recycling and Economic Development Initiative (REDISA). Established in 2012 to reduce the environmental and health impacts of poor tire-management practices, the initiative put together a collection network to discourage the opening burning of discarded tires. This aggregation effort helped increase collected volumes from 4 to 70 percent of end-of-life volumes from 2013 to 2015 (Engel et al., 2016). REDISA is working on developing commercial and environmentally sustainable infrastructure for tire treatment. At larger streams, it becomes easier to distribute to processors across South Africa. The success of the TDF business model will be mainly price traceability mechanism for end-use on scrap tire dealers, regulating driven if scrap tires can be collected in greater quantities. If waste and aggregating the collection and disposal of waste tires from tire management companies enter this market, there are opportunities workshops and other sources, and formally registering buyers in tire for them to supply and provide pre-shredding services at acceptable auctions. The budget could be raised by the government under the quality and at lower prices than the whole tires provided by the polluter pays principle, where vehicle owners pay an extra fee for tire dealers. To improve the collection rate, it will be essential to every new tire purchased, to ensure the safe disposal of old tires. divert local scrap tires from burning to co-processing. This would be Similarly, an ecotax imposed on new imported tires would also be more environmentally friendly, and could be achieved by imposing a an option. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 105 In Europe, the introduction of the principle of extended producer but only to registered buyers, who should represent end users like responsibility facilitated the development of this market. In France, recyclers or production facilities able to co-process used tires in an for example, Aliapur, owned by major manufactures, managed environmentally safe method. Dealers who have been reselling used the bulk of tire deposits. In general, supply chains of used tires for tires for open-air burning should be banned from participating in cement plants are based on direct agreement with manufacturers. such auctions to force compliance. Further Action: 7.5 Geographic Distribution Investors in pre-processing can raise awareness on the use of TDF as a fuel in other countries. Logistics challenges constitute one of the most important factors in assessing the economic viability of AFR use in Egypt. Transporting Cement companies can raise awareness with government waste materials, processed and unprocessed, to cement plants stakeholders on the use of TDF as a fuel in other countries, as well involves costly transportation charges. As an example, cement as on environmental mitigation measures. plants are commonly located on the outskirts of the main cities, Government stakeholders can consider aligning with the Basel while MSW sources are concentrated in the inner cities. Agricultural Convention’s categorization of tires, which does not classify waste sources are concentrated along the Nile and Delta region, tires as hazardous waste. They ought to also consider adopting while disposal sites are more convenient to urban needs. environmental mitigation requirements similar to those of cement In order to address these challenges, this study has produced a companies in using TDF as a thermal fuel. Geographic Information Systems (GIS) tool to allow evaluation of Strict governmental auditing and monitoring of the whole process the concentration levels of the AFR sources, and to assess distances will be crucial to the proper implementation of the system. A legal between the supply and demand points. In doing so, the user can framework regulating the collection and disposal of waste tires more effectively assess: must not only be adopted, but rigorously enforced, for the good of • For any given cement plant (or cluster of cement plants), which the environment as well as for commercial advantage. Only at the AFR types will be most appropriate, given the location of AFR government level can the uniform monitoring take place which will sources; equitable application of fee policies, providing financial incentive to waste collectors to improve their efficiency. In addition, the • Where the optimal location might be sited for a waste pre- government will be responsible for increasing the monitoring of processing site, based on proximity to AFR sources as well as workshops, which can be done by monitoring tire imports. buyers (cement plants); The authorities can increase enforcement of the ban on open air • What the road networks and accessibility options are. burning or dumping through regular controls and fines, in particular with regards to the informal sector of brick manufacturers that The Egypt AFR GIS tool can be found here: http://arcg.is/1ToAspz combust scrap tires as fuel. They can formalize the second hand market for waste tires: for example, auctions held by the government on waste tire streams must no longer be open to informal players, 106 7.6 Summary This chapter has aimed to show that structured waste supply chains • DSS: all three business models are applicable for sewage sludge. are an important success factor for AFR projects. While Egypt has The main bottlenecks for co-processing of sewage sludge in yet to develop a fully integrated system, international experience has Egypt is quality-related, due to its high moisture content and shown that there are different commercial models available within contamination with inert materials. The major advantage the waste supply chain. Economic and regulatory incentives and over other AFR sources is that it is under the control of one disincentives, while not mandatory, could increase waste collection, government entity. increase AFR supply, and improve overall economic feasibility for • TDF: the partial integration and outsourcing business models any given project. would be mainly price driven, if scrap tires become more The models reflect three levels of integration into the upstream accessible through higher collection efficiency. This could be activities of the supply chain: outsourcing (no integration), partial achieved by regulating and aggregating the collection and end- integration and full integration. Each has its advantages and use of scrap tires. disadvantages. These vary by waste type in the following ways: There is a need for all stakeholders to react quickly to grasp the • RDF: the partial integration and outsourcing business models alternative fuel market opportunity. Waste pre-processing companies are preferable with this stream. Commercial arrangements have an advantage in shaping and consolidating their positions, but to guarantee improved investor access to disposal sites are they must understand that all cement plants are not equal regarding necessary. Municipalities should provide MSW to the investor their ability to co-process alternative fuels. The success of alternative at zero cost. Cement companies and waste management fuel projects will depend greatly on the establishment of transparent companies can then arrive at agreements on RDF price and dialogue and trust relationships among stakeholders that would quality. Additional revenue streams from gate fees, proceeds allow them to openly assess the type of processes needed, the from recyclables, and separation at source would also improve quality of raw materials, and the nature of the business approach the economies of RDF projects. required. For whatever the type of waste, there are basic commercial arrangements that should be in place. Secure supply, a fair pricing • Agricultural waste: the outsourcing model is preferred by mechanism and acceptable quality will guarantee a return on cement companies as they seldom involve themselves with the investment for each party in the supply chain. collection and preparation of agriculture waste. Since most of the cost is related to logistics, the location of the pre-processing facility should be carefully assessed, taking into consideration the location of the plant as well as collection points. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 107 Chapter 8: Conclusions and Recommendations 8.1 Summary six percent on average in 2015. This move would save up to 1.9 million tons of coal per year30. Egypt’s energy crisis forced cement players into the AFR market. In addition to those recommendations presented in the previous In the search for a combustible to compensate for natural gas chapter, a brief summary of overall key recommendations to unlock shortages, the industry was compelled by economic necessity. Today, the market potential for AFR is presented below. that picture is changing. By removing the subsidies on natural gas, and allowing the use of coal and petcoke for the cement industry, Egyptian authorities have definitively changed the fuel mix for the cement industry in the medium- to long-term. As all cement plants 8.2 Addressing the Supply & complete the equipment investment necessary to use coal and Demand Gap petcoke, the shift is expected to become permanent. It is within this context that any attempt to further the uptake of alternative fuels Egypt’s nascent alternative fuel market started off on difficult must be understood. To be competitive, price, volumes and quality grounds. While there is a significant business opportunity for AFR considerations of alternative fuels must be put at the forefront. waste processing companies in Egypt, waste processing firms and the cement industry do not necessarily understand each other’s Alternative fuels form one of the main levers for carbon dioxide viewpoints. At the peak of the energy crisis, there were too few waste reduction in the cement industry. Co-processing AFR in cement processing players and not enough supply. Alternative fuel products kilns could offset the additional GHGs emissions generated by the were arriving at plants without matching the quality preferences of fuel switch to coal. It can also reduce the volume of waste that is cement manufactures or meeting their expected prices. currently available, but generally (mis)managed, and make efficient use of its energy content. This promises to create sizeable new This experience, however, also offered valuable lessons. Alternative business opportunities for local or international waste management fuels are demonstrably available in sufficient quantities, enough companies that will enter into waste management services dedicated to reach very high levels of TSR rates across the cement sector in to the production of AFR. Further, co-processing reduces the use Egypt. AFR can potentially compete with coal and other fossil fuels if managed throughout the value chain in a prudent and commercially- of raw materials by the cement industry and reduces dependence oriented manner. But this also means that all stakeholders in the on hard currency, at a time when it is critically needed to keep the supply chain must understand that each AFR stream has specific pre- country’s economy afloat. processing requirements. AFR pre-processing activities range between the waste generators (supply) and the cement producers (demand), Egypt’s cement industry has had an advantageous start. A large and involve very different business models and mindsets. The gap majority of cement producers are either already equipped to engendered and exposed by early mistakes in transactions between co-process AFR, or soon will be. As the country’s energy mix cement plants and waste processing firms can be bridged. In fact, is diversified, the sector is in an increasingly valuable position arriving at a common understanding will be necessary to develop in consolidating and shaping the waste-to-energy market more the AFR market. This requires transparency, open dialogue, and a broadly. The TSR goals of up to 30 percent may be ambitious, systematic effort at building trust with and among stakeholders. as compared with European experiences, but the business-as- usual scenario could lead to 20 percent TSR by 2025, up from 30 Savings in coal volume, based on 2025 cement production generated by a 20% TSR. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 109 Table 40 and Table 41 show some of the most significant differences in mindsets and business approaches among the cement industry actors and those in the waste processing business. Table 40: Operational Characteristics of Waste Suppliers Table 41: Operational Characteristics of the Cement Industry 110 It is thus clear that both waste suppliers and cement plants need clear acceptance criteria when sourcing AFR. Precise acceptance criteria will prevent conflicts between the cement plant and the waste provider by defining the conditions under which the cement plant can refuse the waste. Pollutant content, moisture, minimum thermal energy content, particle size and shape will need to be defined. The cement plant will have to be cautious when accepting waste and/or AFR because of the possible impact on emissions, on its kiln and on its final product. Trust will have to be developed during years of collaboration, on a basis of clear and transparent contractual arrangements among all stakeholders. Clear boundaries of responsibility must also be established in order to avoid misunderstandings. 8.3 Recommendations Each of the four waste streams has different characteristics. RDF, DSS, and agricultural waste seem financially attractive, even when compared with coal. Current prices of scrap tires appear to be higher. In order to organize the features of these four streams for more efficient decision- making, they are prioritized below in Table 42. Table 42: Prioritization of the Four Waste Streams as AFR for the Cement Sector in Egypt The first priority should be agricultural waste, as it requires mainly logistical interventions, but limited CAPEX and OPEX. The second priority should be dried sewage sludge, as it doesn’t depend on policy action and also requires limited CAPEX and OPEX. RDF is in third place, as it requires high CAPEX and OPEX. Further, municipal waste availability depends heavily on the improvement of collection rates and the overall management of waste across the country. The lowest priority is scrap tires, as the numerous alternative options to their co- processing in cement kilns make their price unattractive. DSS has the highest potential in the long term. If the largest part of the MSW and agricultural waste could be recycled or used as combustibles in power plants, cement plants would be the most efficient way to eliminate DSS and avoid landfilling. Co-processing of this waste can begin immediately if the WWTP agree to arranging to dry the sludge, according to cement plant specifications or other commercial arrangements, as discussed earlier in Chapter 7. RDF from MSW is usually the most complicated and costly non-industrial waste stream to co-process, because of the heterogeneity of its content. This waste is widely available in Egypt, but will require a combination of financial incentives to become economically feasible. At present, globally AFR from RDF is largely dependent on tipping fees. Therefore, in developing economies where tipping fees are limited, it is recommended to start with waste streams requiring less investment and lower operating costs. The technical complexity of RDF preparation Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 111 requires close collaboration between the waste management ranges solely on their experience or technical know-how elsewhere. companies and the cement plants. Over the long term, there is a Further, the industry should encourage and lead other stakeholders supply risk that RDF could be used in power plants, reducing the in issuing AFR quality guidelines and standards to ensure there is a volume available for co-processing by cement plants. common understanding of the sector’s needs. Agricultural waste can also turn into a major AFR source, once its (iii)( Incentives are more effective than penalties. seasonality is mitigated through adequate baling and storage. Like RDF, agricultural waste could also be used in power plants. Egypt’s alternative fuel market can only grow if ambiguities are removed, uncertainties addressed and market distortions regulated. All three waste streams represent major opportunities for local waste But this cannot be done solely by imposing penalties and increasing management companies, but the sustainability of their investment landfilling costs. While the polluter pays principle must be enforced will need to be guaranteed through long-term supply and offtake to help discourage the illegal dumping and open burning of waste, agreements. Each waste stream requires its own approach. it is also advisable for all stakeholders – specifically regulatory actors – to develop innovative financial mechanisms that would give This study has shown that the success of an alternative fuel project companies interested in establishing AFR projects a helping hand. depends upon a combination of multiple factors: The issuance of permits for AFR producers should be facilitated and (i)( The waste sector needs improved operational efficiency, reliable eased through a single authority that coordinates with other relevant waste collection chains, and more inclusive business models. entities. Egypt must create adequate incentives and methodologies for reliable monitoring, reporting and verification of energy permits. It is imperative to set realistic prices through open dialogue with cement companies and with municipalities. Controlling waste (iv)( Data is crucial, market trust must be developed and technical treatment is critical to the quality and regularity of alternative knowledge across the market needs to be improved. fuels. As such, knowledge of safe waste handling techniques, It is essential that the cement and alternative fuel treatment industries compatibility, and traceability processes are all crucial and need work closely together to secure the quality and consistency of the specific focus. Waste processing firms must understand that in order end product. Gaps in data are an obstacle that must be addressed. for a cement firm to substitute fossil fuels, large CAPEX investments The provision of accurate national data and statistics is crucial to may be required. Thus, the economics of waste-derived alternative enable investors to make informed decisions. There is a great deal fuels have to bring value. But developing the alternative fuel market to be done to raise awareness on global best practices in the use opens a clear opportunity to include new SMEs and involve the of alternative fuels. Capacities must be built across the board, and informal waste collection and recycling sector in the value chain. especially among authorities to ensure the appropriate selection of These new actors are likely to be eager to compete. Finally, a holistic approach to waste management will also translate into shaping and civil servants with adequate technical background equipping them to supporting an integrated waste processing industry. control, supervise and regulate co-processing. Officials across various branches of government need to be able to articulate, monitor, and (ii)( The cement industry needs criteria, longer-term partnerships implement fair, long-term and workable contracts between cement and benchmarks. firms and alternative fuel providers. It is advisable to establish continuous dialogue among stakeholders. This may include regular The cement sector clearly understands that the use of waste is not meetings and workshops, bringing together the cement industry, comparable to the traditional procurement process of fossil fuels, the waste management companies and the authorities, in order to but that alone should not prevent action. It is imperative to adopt jointly remove the barriers impeding alternative fuel usage. new business ideas that may entail more creative partnerships with waste firms. Egypt’s cement industry is well-positioned to share best Egypt’s cement industry is a crucial economic sector that can practices, to help showcase regional and global benchmarks and to lead the way today in demonstrating that overcoming challenges raise broader market awareness on co-processing (both its benefits such as climate change, waste management and pressure on fossil and risks). 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Emberger (2010). “Burners of alternative fuel Current State in Egypt. TriOcean Carbon Short Paper Series, Cairo, utilization: optimisation of kiln firing systems for advanced Egypt. alternative fuel co-firing.” Cement International 8, 4: 42-46. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 117 Annexes Annex A: The Cement Manufacturing Process Cement is the most widely used building material in the world. Raw Annex A.1: Current Characteristics of the materials are limestone and clay. Cement is manufactured in two Egyptian Cement Market stages, the manufacture of clinker and clinker grinding. These differ in terms of process complexity, production and investment cost. According to the Cement Sustainability Initiative’s (CSI) “Getting the Numbers Right” (GNR), the worldwide average thermal energy The cement industry is energy-intensive, with thermal and electric consumption is 836 kcal per kg of clinker produced;32 Egypt uses 945 energy accounting for about 40 percent of total cement production kcal per kg of clinker produced. The average thermal consumption cost. While electrical energy is needed throughout the production and the CO2 production per ton of cement are significantly33 higher of cement, only clinker manufacturing requires thermal energy. than the value provided by the Best Available Technologies (BAT), Thermal energy needs may be most efficiently managed by reducing based on interviews with Egyptian producers. The two main causes the clinker content in cement. The percentage of clinker in cement are the following: can vary depending on the type of cement produced. The Systematic Use of High Rate Bypass Systems Four basic oxides form cement clinker: calcium oxide (65 percent), silicon oxide (20 percent), alumina oxide (10 percent) and iron In most of the country, the raw materials (limestone and clay) are oxide (5 percent)31. In the manufacturing of clinker, raw material is extremely rich in chlorine. During the kiln process, the chlorine fed into a rotary kiln heated to 2000°C. Two processes take place forms salts which coat the cyclone stage walls and hinder or even in the kiln: prevent clinker production. Inside the kiln, the chlorine is volatilized before being condensed, mainly on the fine dust present in the flue • Calcination, which occurs at between 850°C and 950°C. gas and on the cyclone walls. This phenomena is called the “chlorine Limestone (calcium carbonate-CaCO3) is heated to disassociate cycle”. into lime (calcium oxide-CaO) and carbon dioxide (CO2), which chemically react with other oxides; Bypass systems are applied to improve the operation of pre-heater kilns by extracting hot gas (approximately 1000°C), enriched in • Sintering, which binds the calcium oxide with the oxides of chlorine, at the kiln inlet. The hot gas is then reduced to a lower silica, aluminum and iron as they are heated to 1,450°C, temperature, typically by addition of cold air, to condense the forming the clinker. gaseous chlorine (HCl) on the dust present in the flue gas. The In the second phase, clinker is ground together with additives in bypass process allows clinker production to proceed with relatively order to produce cement. Cement is a fine powder used to bind fine high chlorine inputs, but has a negative impact on the thermal sand and coarse aggregates together into concrete. Cement is a consumption of the kiln. It is technically impossible to recover the hydraulic binder, which means that it hardens when added to water. heat of the bypass gas. In Egypt, bypass rates from 10 to 55 percent Cement production is either “wet” or “dry” depending on the water are required, causing significant heat loss. Moreover, the bypass content of the raw material; these two processes involve different dust (volume roughly estimated at over two million tons per year) is kiln types. Dry processes are most commonly used as they require landfilled or dumped and consequently lost and wasted. less thermal energy. 32 GNR WBCSD, 2012 31 Cembureau: About Cement - Cement manufacturing process 33 Typically 15 to 20 percent. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 119 The bypass dust is a clinker dust enriched with chlorine, alkalis, The situation described here can impact AFR use both positively sulfur and sometimes heavy metals, depending mainly on the and negatively, as numerous alternative fuels contain chlorine36. On composition of the raw materials and to a smaller extent on the the one hand, the pre-existence of broadly designed bypass systems composition of the fuels. Bypass dust can be added in the cement reduces significantly the investment required for co-processing mill without impairing the cement quality; it is a common practice alternative fuels such as RDF, making it much more affordable. On in the EU and other countries. The maximum amount of bypass dust the other hand, some of the bypass systems are already operating fed to the mill in substitution for clinker depends mainly on local close to their maximum rate, limiting the maximum chlorine input standards 34 and on its chlorine and alkali content. In Egypt, only related to the fuels37. This issue has to be taken into account when part of the total volume and chlorine content of the bypass dust defining acceptance criteria38, as does the potential impact on the could be recycled in current cement production. However, bypass bypass dust quality, especially if dumped. dust can be useful in higher quantities in hydraulic binders, and can serve for soil stabilization and other low grade uses. The Cement Market, Mainly CEM I (Ordinary Portland Cement or OPC) Encouraging the use of bypass dust in cement production, and for hydraulic binders production, would lead to: All Egyptian cement producers have around 90 percent of clinker content in cement, while the EU average is about 70 percent, • An increased capacity for cement production; according to the WBCSD initiative “Getting the Numbers Right” (GNR).39 • A reduction in the specific thermal consumption35; • A reduction in specific greenhouse gas (CO2) emissions; and • A reduction in the potential impacts of the dumping of bypass dust on underground water. 36 Solid Recovered Fuel (RDF) from municipal waste contains typically 0.5 to 2.5 percent chlorine (wet), coming from both chlorinated plastic (PVC) and cooking salt [sources: information from cement plants; Refuse Derived Fuel, current practice and perspectives (B4-3040/2000/306517/MAR/ E3) Final Report]. 37 The bypass (extraction) of 1% of the total flue gas flow allows an increase in the total chlorine input of approximatively 100 g per ton of clinker. 34 Local cement standards may mention the amount of clinker dust which can substitute clinker 38 RDF can be classified into five categories depending on their quality, according to the standard EN (5 percent weight according to EN 197-1) and the maximum chlorine (0.1 percent and alkalis (0.9 15357:2011. percent for CEM III) contents of the different cement types. 39 Source: World Business Council for Sustainable Development – Cement Sustainability Initiative. 35 The specific thermal consumption is the amount of thermal energy (amount of fuel) required per ton The WBCSD initiative “Getting the Numbers Right” (GNR) is a voluntary, independently-managed of clinker or cement produced. database of CO2 and energy performance information on the global cement industry. 120 Annex B: Co-Processing Within In October 2011, the UN/SBC COP 10, in the presence of representatives from more than 190 countries, endorsed the proposal International Regulations by Chile regarding “Technical guidelines on the environmentally sound co-processing of hazardous wastes in cement kilns”. These The World Business Council for Sustainable Development (WBCSD), guidelines are the legal basis that each country shall refer to when in its “Waste Management Hierarchy” (refer to Figure B-1), classified developing its specific legal framework on co-processing (Basel different ways of handling waste, from the most efficient (preferred) Convention). In March 2014, China, which represents about 60 to the less efficient (to be avoided). Avoiding waste generation and percent of world cement production, implemented its national limiting waste volume are clearly the most efficient ways to deal standard for pollution control on co-processing solid wastes with waste problems worldwide, but co-processing can lead to both in cement kilns, based on the UN/SBC guidelines (Ministry of energy and material recovery: The Basel Convention, under the aegis Environment, China). of the United Nations Environment Program (UNEP), stipulates that “co-processing in cement kilns provides an environmentally sound The European Integrated Pollution Prevention and Control Bureau resource recovery option, preferable to landfilling and incineration”. (EIPPCB) (2010) specifies the main criteria that shall be met in Landfilling is the least preferred solution in accordance with the cement production in order to allow for the co-processing of waste management hierarchy. This objection applies most urgently waste materials (hazardous and non-hazardous) into the kiln via in Egypt, where illegal and uncontrolled dumping prevails. appropriate feed points. They can be summarized as follows:41 Co-Processing Definition • Maximum temperatures of approximately 2,000°C (main firing system, flame temperature) in rotary kilns; Co-processing has been defined by the Basel Convention as the “use of suitable waste materials in manufacturing processes for the • Gas retention times of about eight seconds at temperatures purpose of energy and/or resource recovery and resultant reduction above 1,200°C in rotary kilns; in the use of conventional fuels and/or raw materials through • Material temperatures of about 1,450°C in the sintering zone substitution.”40 of rotary kilns; Co-Processing Recognition within the Global Legal Framework • Oxidizing gas atmosphere in rotary kilns; The first country having specifically developed a legal framework • Gas retention time in the secondary firing system of more on co-processing was Brazil in 1993, followed by Mexico in 1995. than two seconds at temperatures above 850°C; in the pre- In 2003, GTZ and Holcim published a document, “Guidelines on calciner, the retention times are correspondingly longer and Co-Processing Waste Materials in Cement Production.” In 2005, the temperatures are higher; Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD) released its Guidelines for • Solids temperatures of 850°C in the secondary firing system Co-Processing Fuels and Raw Materials in Cement Manufacturing and/or the calciner; (updated in 2014 by WBCSD). • Uniform burnout conditions for load fluctuations due to the Application of these guidelines is part of the commitment in the high temperatures at sufficiently long retention times; CSI Charter. In 2009, all major cement associations, including CEMBUREAU (EU), VDZ (Germany), and Ficem (Latam countries), • Destruction of organic pollutants because of high temperatures officially endorsed the wording “co-processing” for AFR use in at sufficiently long retention times; cement kilns. In 2010, guidelines for co-processing in the cement, power and steel industries were developed by the Central Pollution • Sorption of gaseous components such as HF, HCl, and SO2 on Control Board (CPCB) in India, showing that this concept can be alkaline reactants; applied for different types of energy intensive industries (EII’s). • High retention capacity for particle-bound heavy metals; 40 UNEP, Basel Convention, Technical guidelines on the environmentally sound co-processing of 41 Technical guidelines on the environmentally sound co-processing of hazardous wastes in cement hazardous wastes in cement kilns - October 2011. kilns, 2011 , pp. 4-5. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 121 • Short retention times of exhaust gases in the temperature range In co-processing, the energy content of the waste is used to substitute known to lead to formation of PCDDs/PCDFs; traditional fuel and its ashes replace non-renewable raw material. Ashes are composed of the same elements as the raw material for • Simultaneous material recycling and energy recovery through clinker: oxides of calcium, silica, iron and aluminum. They are fully the complete use of fuel ashes as clinker components; integrated into the clinker. • Product-specific wastes not generated due to a complete As described in material use into the clinker matrix (although some cement • the GTZ-Holcim “Guidelines on Co-processing Waste Materials plants dispose of CKD or bypass dust); and in Cement Production” • Chemical-mineralogical incorporation of non-volatile heavy • Article 52 on “Technical Guidelines of UNEP- Basel metals into the clinker matrix. Convention”; and Egypt’s specific regulatory frameworks and considerations related • BAT (Best Available Technology) guidelines and provisional to co-processing by the cement industry of the four studied waste guidance on BEP (Best Environmental Practices), published by streams are described in Annex E . the Secretariat of the Stockholm Convention. Comparison of Clinker Quality Some may be concerned that the use of waste as fuel or raw material could influence the concrete, and more specifically, that some constituents contained in some wastes could be released from the cement product or concrete. UNEP Basel guidelines endorse the GtZ guidelines by stating that cement quality must remain unchanged with co-processing and the end product must not have any negative impact on the environment. They suggest certain tests which are regulated by the European Committee for Standardization;42 for example, a leaching test to determine the release of dangerous substances from construction products into soil, surface water and groundwater. WBCSD has enumerated a list of different organizations that have published studies on clinker produced with AFR, prominent among them L’Association Technique de l’Industrie des Liants Hydrauliques, Figure B-1: Co-Processing within the Waste Management Construction Technology Laboratories, Forschungsinstitut der Hierarchy45 Zementindustrie, CEMBUREAU, the European Committee for Standardization. Aggressive testing carried out by NSF/ANSI It is not recommended that the following wastes be used for co- Standard 6143 has shown that “metals in the cement become bound processing in cement kilns: in the concrete calcium silicate structure and in this form do not leach from the product.”44 It is therefore strongly recommended that • Radioactive waste from the nuclear industry the final product undergo regular control procedures required by the • Electrical and electronic waste (e-waste) usual quality specifications according to national and international quality standards. • Whole batteries • Corrosive waste, including mineral acids • Explosives and ammunition 42 European Committee for Standardization (2014) - CEN/TS 16637-1:2014. 43 A third party certification process for drinking water pipes in the United States. • Waste containing asbestos 44 Colucci M., P. Epstein, B. Bartley (1993, March), A Comparison of Metal and Organic concentra- tions in Cement and Clinker Made with Fossil Fuels to Cement and Clinker Made with Waste Derived Fuels. NSF International. Ann Arbor, MI. 45 WBCSD co-processing guidelines. 122 • Pathogenic medical waste and as pictured here, co-processing of AFR also results in indirect GHGs savings at landfills and incineration plants, where these • Chemical or biological weapons destined for destruction wastes may otherwise be disposed of. Moreover, it prevents methane • Waste of unknown or unpredictable composition, including emission, a GHG 25 times more potent than CO2. unsorted municipal waste • Waste raw materials with little or no mineral value for the clinker (heavy metal processing residues). These wastes are banned for combustion, not only for health and safety concerns, but also because of potentially negative impacts on kiln operation, clinker quality or air emissions. Co-Processing Benefits Co-processing is based on the principles of industrial ecology, which considers the best features of the flow of information, materials, and energy of biological ecosystems, with the aim of improving the exchange of these essential resources in the industrial world. UNEP, Basel Convention, acknowledges that “the numerous potential benefits possible through the use of hazardous and other wastes in Figure B-2: GHGs Reductions resulting from Co-Processing cement manufacturing processes by the recovery of their material (Source: TNO–LCA of Thermal Treatment of Waste Streams in Cement and energy content include the recovery of the energy content of Clinker Kilns in Belgium, October 2007) waste, conservation of non-renewable fossil fuels and natural resources, reduction of CO2 emissions, reduction in production Co-processing reduces environmental impacts resulting from the costs, and use of an existing technology to treat hazardous wastes”.46 extraction (mining or quarrying), transporting, and processing of This means, in terms of benefits from co-processing, that it preserves raw materials; reduces dependence on primary resource markets; natural (non-renewable) resources of energy and materials, and saves landfill space and reduces pollution caused by the disposal of reduces CO2 emissions. waste; provides a local and sustainable solution to a local problem and completely eliminates the waste. According to the latest available data (2006),47 cement production contributed eight percent of anthropogenic CO2 emissions, or six Some EII’s, such as the cement sector, offer co-processing as a percent of total global emissions of greenhouse gases. Carbon sustainable waste management service. It is usually more cost dioxide emissions arise mainly from the calcination of the raw effective to adapt existing facilities of EII’s, rather than building new materials (60 percent) and from the combustion of fossil fuels (40 waste treatment installations such as incinerators, thereby reducing percent). The CO2 emissions due to calcination cannot be avoided waste management costs to the public. Moreover, co-processing in the production of clinker. Therefore, reducing the percentage of being a local waste management solution, there is no need for clinker in cement (producing blended cement) is the most efficient external transboundary shipment of wastes. way to reduce CO2 emission per ton of cement. Potential Health and Safety Concerns for AFR CO2 emission from the combustion of fuel can be reduced by Health and safety for all employees, contractors, and the population substituting part of the conventional fossil fuels with organic waste. living in the neighborhood are fundamental for the cement industry. Thus, direct CO2 emissions from combustion are reduced, as CO2 The CSI48 and GIZ/Holcim guidelines on safety procedures also emissions from wastes (“waste-to-energy conversion”) are less than address AFR usage. Clear protocols must be in place for the delivery in traditional fuels, and biomass waste is CO2 neutral. In addition, and the reception of AFR. All materials must have an identification 46 48 Health and safety in the cement industry: Examples of good practice- chap 4.3.7. - Cement Sustain- 47 ability Initiative (CSI) - December 2004 Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 123 document. In case a waste doesn’t comply with the contract When beginning AFR use, the following steps are recommended: specifications and local regulations, appropriate protocols should • A specific OH&S directive must be developed for the exist to refuse or renegotiate. pre-processing and co-processing of AFR, based on the recommendations of CSI and GIZ/Holcim; Strict safety rules and procedures must also apply to the storing and handling of any fuel, including AFR. Employees must undergo • Special Health and Safety reporting must be in place to monitor regular training in health and safety. On-site emergency procedures employee health; complying with relevant local regulations must be enforced. • Regular training of all persons in contact with the AFR, and Performance indicators, such as the Lost Time Injury Analysis, Lost specially designed safety training for the project teams, shall Time Injury Frequency Rates and Lost Time Injury Severity Rate, take place; and should be reported on a regular basis. • External independent auditing systems shall take place at regular intervals. 124 Annex C: Emissions Control and limit values. These may apply when meeting the BAT AEL, but would lead to disproportionately higher costs compared to Monitoring for the Cement Industry the environmental benefits, due to the geographical location of the installation, and the local environmental conditions of the Emissions from industries have always been a concern for installation or the technical characteristics of the installation. stakeholders. Cement plants emit a variety of pollutants that are subject to regulations and controls. In general, emission limits for the Table C-1 compares Egyptian standards with those of the EU, large combustion units using traditional fuels (gas, HFO, coal and comparing not only the emission limits but also the emission petcoke), as is the case with the cement industry, refer to the three monitoring requirements. The following is recommended for the main pollutants, NOx, SO2 and dust. Additional limits for metals, new Egyptian regulation: HCl, HF, CO, organic compounds and PCDD/Fs can be found in • Within its permit, Egypt should extend the new regulation to some countries. The limits fixed by the EU regulation 2010/75/EU the use of AFR in the cement kiln fuel-mix. on emissions apply to cement plants using traditional fuels such as coal. The same EU directives also define more stringent limits for • As in the EU regulation, the current Egyptian regulation co-processing of AFR. permitting system must consider more flexibility for SO2 and TOC, taking into consideration sulfur and organic compounds In 2012, the Commission launched the process for transforming coming from the raw material itself. relevant parts of the original cement Best Available Techniques (BAT) reference document (BREF) into BAT Conclusions. In 2013, Emissions must be monitored, some only once a year, others the Commission Implementing Decision 2013/163/EU49 established continuously. The WBCSD (CSI)51 guidelines document (2012), has the Best Available Techniques Associated Emission Levels (BAT made recommendations to fill the gap created by the absence of EU AEL’s), BAT conclusions on industrial emissions in the production requirements: of cement for the relevant date of compliance, 26 March, 2017. EU BAT conclusions are for • continuous emissions monitoring of main kiln stack emissions for NOx, SOx, dust and VOCs; • New installations: that they comply with the BAT conclusions; and • complete emissions monitoring at least twice a year by a recognized institution for the whole set of elements, including • Existing installations: that, according to Article 15(4)50, the heavy metals and Dioxine / Furanes. competent authority may, in specific cases, set less strict emissions 49 http://www.prtr-es.es/Data/images/ConclusionesBATcementoENabril13.pdf 51 The Cement Sustainability Initiative (CSI) is a global effort by 24 major cement producers 50 The European Parliament, The Council of 24 November 2010, Directive 2010/75/Eu Art 15 with operations in more than 100 countries who believe there is a strong business case (4), p 29. for the pursuit of sustainable development. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 125 Table C-1: Cement Kiln Emissions Limits Values: Egypt versus EU52 Table C-2: WBCSD Guidelines for Emissions Monitoring and Reporting in the Cement Industry 52 Based on Egypt coal regulation 2015, EU Directive 2010/75/EU and Chinese directive. 126 ANNEX D: Total Agricultural Waste in 2012 by Type Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 127 Annex E: Regulatory Framework for Alternative Fuels in Egypt 128 Legislation governing waste management in Egypt goes back 50 establishments and public areas. It states that Local Administration years, when Law 38/1967 was drafted, the first piece of legislation Councils are responsible for waste collection and disposal, as well as concerning SWM. It regulates the collection and disposal of issuing licenses for workers employed in waste collection. WMRA is solid wastes from residential areas, commercial and industrial tasked with reviewing all relevant SWM regulations and proposing establishments and public areas. Subsequent legislation has necessary changes. Law 4/1994, amended by Law 9/2009, provided the legal basis for using waste as AFR. WMRA is tasked focuses on the protection of the environment and consequently on with reviewing current legislation and proposing necessary changes. managing hazardous wastes. Under this law, Environmental Impact Assessments are mandatory for all commercial and residential The legal basis for using waste as AFR can be found in Environment developments or industrial projects. In addition, this law establishes Law number 4/1994 and its amendments 9/2009, which encourage the Environmental Protection Fund, a solid waste fund to finance a material recovery. Other laws that govern the solid waste variety of relevant environmental activities. It also offers incentives management (SWM) sector can be found in Law 38/1967 and to institutions and individuals involved in environmental protection its subsequent amendments in Law 10/2005, Law 4/1994, Law projects, especially those dealing with land, water and air pollution. 9/2009 and its Executive, which constitute the legal framework for the SWM sector in Egypt. Law 38/1967, the first piece of A summary of waste and AFR related laws and regulations are legislation concerning SWM, regulates the collection and disposal provided below: of solid wastes from residential areas, commercial and industrial Table E-1: Summary of Waste and AFR Related Laws and Regulations in Egypt Co-processing Law/decree Number Waste Key Relevant Issue Comments Relevance Stream Legal basis for Law number 4/1994 All waste This law is concerned with regulating all issues In general the law offers incentives to usage of waste and its amendments streams related to protection of the environment. institutions and individuals involved in as AFR by law number environmental protection projects through the 9/2009 and its The laws encourage recycling and reuse environmental protection fund. executive regulations activities for the different types of waste EEAA is responsible for the enforcement of the streams. law and its executive regulations. Prime Ministerial Decree 338/1998 Article 37 of law 4/1994 and Article 38 of its A gate fee needs to be imposed on landfilling in amended by executive regulations considers the use of waste order to minimize amounts sent for final disposal decree 1095/2011, as AFR part of the legally approved recycling and allow more recycle and reuse activities. 710/2012 and decree processes. 964/2015 Necessary definitions for the ownership of the waste are recommended, to prevent bargaining by local actors. General Public All waste • This defines “garbage and solid waste” Deterrent fines must be imposed on random Cleanliness Law streams as including both domestic and industrial disposal of waste, to encourage proper disposal. 38/1967 amended by waste. presidential decree Waste segregation must be encouraged at the 106/2012 household level. Requirements Law number 4/1994 All waste The law sets requirements for establishing waste • Technical support is provided for facilities for establishing and its amendments streams management facilities: aiming to enter this business and meet the waste by law number technical requirements of EEAA. treatment, 9/2009 • Approval of the location for waste storage disposal and or treatment facilities by EEAA (Article • A specific guideline is to be developed landfilling 37 of law 4/1994 and Article 38 of the for the EIA studies of waste treatment facilities executive regulation detailed in annex II). facilities. Prime Ministerial • A requirement that all facilities involved • Financial support is provided for Decree No. 964/2015 in waste recycling and treatment conduct innovative projects in AFR through an EIA study to ensure compliance with available financing mechanisms such as all environmental legal requirements. the Environmental Protection Fund (EPF) or other CDM projects. • An environmental management plan, monitoring plan, contingency plan and time frame for removing any violations. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 129 Co-processing Law/decree Number Waste Key Relevant Issue Comments Relevance Stream Requirements Law number 4/1994 All waste The law sets requirements for the operation of • Waste facilities contracts are monitored for operation and its amendments streams waste management facilities: and enforced. . of waste by law number treatment, 9/2009 • Operational permit from the governorate. disposal and • Waste transportation contracts. landfilling Prime Ministerial facilities Decree No. 964/2015 • An environmental register including all operations, follow up forms, delivery and receipts for transported waste amounts. • An approved system for waste collection, transportation, handling and disposal of waste (remains of pre-processing). • An environmental register for handling any hazardous waste generated. • An approved system for final disposal, collection and transportation of any hazardous waste generated. • Regular monitoring of stacks, incinerators and boilers. • EEAA approval of the location of final disposal, controlled landfills. Requirements Law 4/1994 and its All waste All facilities using AFR need to have approval for Amendments streams from EEAA. Monitoring of environmental Facilities using AFR shall be compliant with requirements EEAA requirements for stacks and emissions. for industrial and Law 453 /1954 All waste The law is concerned with environmental commercial related to commercial streams requirements for industrial and commercial facilities using and industrial facilities that are harmful to public health. AFR facilities regulations The law promotes the following: • Identifies technical specifications for selection of location. • Identifies requirements for issuing permits related to safety, civil defence, industrial safety requirements and other special requirements. • Oversees the implementation of these requirements by local administrative units. Law 12/2003 All waste This is the general labor law in Egypt, concerning streams applicable to all activities and facilities. occupational health and safety (labor • Identifies occupational safety requirements. law) • Protects workers in the work environment. 130 Co-processing Law/decree Number Waste Key Relevant Issue Comments Relevance Stream Regulations Law 141/2004 All waste This law is related to establishing SMEs. • The law develops necessary funding that encourage and its executive streams It promulgates the environmental safety mechanisms to finance cement companies investment in regulations based requirements. interested in investing in AF. establishing on Prime Ministerial • It provides funding mechanisms for SMEs waste Decree number who are interested in becoming involved management 1241/2004 as part of AFR supply chain. and waste treatment • It governs the issuance of relevant facilities regulations to formalize the participation of informal actors involved in waste collection. Law 8/1997 and its All waste This law relates to investment guarantees and amendments by law streams incentives. 17/ 2015 Law 38/1967 MSW • This law regulates the collection and The consultant proposes engaging the SMEs amended by law disposal of solid wastes from residential at the level of waste collection, since the legal 10/2005 areas, commercial and industrial framework allows this type of opportunity. establishments and public areas. • It imposes a cleanliness tax on all housing units equivalent to two percent of the This will represent an opportunity to involve rental value. the private sector in AFR, the Zabaleen, for • Law 10/2005 Imposes a new solid waste example, or other SMEs that offer employment collection fee added to the electricity bill, opportunities for youth. which citizens pay according to their residence area and income level, leading to partial cost recovery of money spent on MSW services. • Article 6 of law 38/1967 requires local councils to issue a license for all workers employed as waste collectors. Law 31/1976 MSW • This law specifies the means of transportation, the types of garbage containers and the  frequency of solid waste collection. Decrees number MSW • These decrees set the requirements for the 1741/2005, 5/2011, selection of locations for waste treatment 1095 and 964/2015 facilities, as well as the selection of (amendments for the locations for landfilling. executive regulations • They specify the necessary equipment for of Law 4/1994) waste collection and transport. Presidential Decree MSW • This decree regulates the closure of all 86/2010 existing landfills and dumping sites in Cairo and their rehabilitation. • It allocates five new sorting, recycling and final disposal sites, to be located outside the commercial and residential belt of Cairo. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 131 Co-processing Law/decree Number Waste Key Relevant Issue Comments Relevance Stream Prime Ministerial MSW • This decree requires waste collectors to Decree 1095/2011 maintain their garbage bins and vehicles in a clean state. • It determines the requirements for garbage bins and their capacity and standards as prepared by EEAA. • The garbage containers shall be collected and transported at suitable intervals according to the conditions of each area. Ministerial Decree MSW • This decree promulgates regulations (134/1968) of related to the collection and transportation Minister of Housing of waste generated from domestic and industrial sources. Presidential Decree MSW This decree has established the Cairo and Giza This decree has established financial mechanisms 284/1983 Beautification and Cleansing Authorities, whose to encourage young people to start local waste mandates include the collection of garbage and collection companies, providing the service to solid wastes and their disposal in special areas. homes. As a result, many Zabbaleen have formed co- operatives to be able to buy pick-up trucks to continue their waste collection services. Regulations Law 4/94 amended HW The law stipulates the definition of hazardous • Egyptian regulations forbid the import of related to by law 9/2009 (tires) waste and hazardous substances in Article 1. scrap or shredded tires, although waste hazardous and its executive The Executive Regulations shall designate the tires are not classified as hazardous waste waste regulations competent authority, which, after consulting by the Basel Convention, which entered 1095/2011 amended EEAA, will issue the list of hazardous wastes to into force in Egypt in the early 2000’s. . by prime minister which the provisions of this Law shall apply. decree number 964/2015 issued in • Article 29 forbids the handling of April 2015 hazardous substances and wastes without a license from the competent administrative authority. • Article 30 requires management of hazardous wastes to be subject to the procedures and regulations stated in the Executive Regulations of this Law. • Article 31 forbids constructing any establishment for treating dangerous wastes without a permit from the competent administrative authority and before consulting EEAA. The Minister of Housing, Utilities and New Communities shall assign, after consulting with the Ministries of Health, Industry and EEAA, the disposal sites and the required conditions to authorize the disposal of dangerous wastes. • Article 32 forbids the import of dangerous waste or its entrance into or passage through Egyptian territories. 132 Co-processing Law/decree Number Waste Key Relevant Issue Comments Relevance Stream The law deals with the handling of hazardous • Several companies have applied for waste: permits to import waste tires (or any • Disposal of hazardous wastes shall be form of raisins according to Ministry of according to the regulations stated in the Industry classification of tires as either Executive Regulations. shredded tires or rubber pellets), but none has obtained an approval from EEAA to • The owner of an establishment whose date, and it is not expected that EEAA will activities may result in hazardous wastes permit importing of TDF. should maintain a register of these wastes and the method of disposing thereof, as The Tenders and Auctions Law 89/1998 does well as contracting concerned agencies for not indicate any environmental requirements for receipt of these wastes. scrap dealers who buy scrap tires. • Article 40 requires that, when burning any type of fuel or otherwise, whether for industrial, energy production, construction or other commercial purpose, the harmful smoke, gases, and vapors resulting from the combustion process be within the permissible limits. The person responsible for such activity shall take all precautions necessary to minimize the pollutants in the combustion products. The executive regulations of this law shall define such precautions as well as the permissible limits and the specifications of chimneys and other means of controlling the emission of the smoke, gases and vapors resulting from the combustion process. Decree of the HW • Hazardous materials and hazardous Minister of Industry (tires) waste cannot be handled or imported 7/1999 except with special permits. Regulations All waste • Climate Change Central Department related to GHG streams (CCCD), EEAA, is responsible for Egypt’s – CO2 climate change policies. • Suggested CO2 mitigation options for the cement industry include using either Requirements alternative fuel, sustainable sources of encouraging energy or other measures approved by the use of AFR EEAA. mix to reduce GHG emissions • In Egypt, there is no bottom-up GHG inventory as yet. Companies are not obliged to comply with the monitor report or verify (MRV) of their CO2 emissions. • The operation permit of cement companies does not limit the annual licensed quantity of coal to be used, which is purchased by the installations according to operational needs, a function of the specific thermal energy consumption, the fuel mix and the production quantity of the installation. • Entities using coal as fuel are committed to reducing GHG emissions resulting from combustion processes in accordance with clear procedures. These procedures shall be part of the EIA. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 133 Co-processing Law/decree Number Waste Key Relevant Issue Comments Relevance Stream Requirements Prime Ministerial All waste This decree specifies a number of environmental, This decreee provides for the enforcement and for using coal Decree Number streams technical and permitting requirements that monitoring requirements of permits issued by and AFR 964/2015 cement companies must comply with in order cement companies. in cement to obtain and maintain the permit to operate factories cement kilns fired with coal, petcoke or AFR. • Companies handling coal or using coal as a fuel must obtain a permit issued by the EEAA. • The delivery of the permit is conditional upon the elaboration of an EIA study and the assurance of the fulfilment of the requirements provided by the EIAs. • Companies must submit an annual report on environmental performance of the import, treatment or use of the coal or waste. • The permit shall be renewed every two years after approval by EEAA of the environmental performance reports submitted by the facility. • The Industrial Development Authority (IDA) remains responsible for granting operating permits and licenses for energy supply for industrial enterprises. • Cement companies using coal or waste as a fuel must comply with a number of stack emission limit values (ELV). To this end, the companies must monitor the emissions, either continuously or periodically, depending upon the nature of the pollutant. • The permit shall also define the maximum amount of licensed coal. The annual licensed coal quantities are defined on the basis that the consumption rate of thermal energy does not exceed 4,000 MJ per ton of black cement clinker and 6,200 MJ per ton of white cement clinker. • Facilities using coal as fuel shall control the increase of GHG emissions resulting from burning coal, and describe specific measures to reduce such emissions. This task shall constitute part of EIAs and the environmental performance reports. • Finally, the decree specifies a number of mechanical and technical requirements for the handling, storage, transport and feeding of coal and for the collection, handling, storage, transport and disposal of waste. 134 Co-processing Law/decree Number Waste Key Relevant Issue Comments Rele vance Stream Biomass Prime Ministerial Biomass • This decree is related to regulating the Relevant regulations that can stimulate Decree Number collection of agricultural waste and investment in biomass are related to reducing 1740/2002 banning the burning of agriculture waste. energy and fuel subsidies and also to a lesser extent fertilizer subsidies available for the • The law also bans disposal of agricultural market. waste in locations other than those designated by the competent authority. Law of Environment Biomass • The law prohibits the open burning of It is important to enforce the ban on the burning 4/1994. waste. This applies to agricultural residue of agricultural waste, which would allow a in general. greater proportion of agricultural waste to be available for pre-processing. • It prohibits agricultural residue which is used as animal fodder from being used for other purposes. Directive 63/2002 Biomass • The directive prohibits the growing of The directive defines governmental or approved of the Ministry of rice (except in certain amounts) and areas designated for primary storage of Agriculture and Land the burning of rice straw in Qalyubia agricultural waste on cultivated areas. Reclamation Governorate, to minimize air pollution in Greater Cairo. • The annual land area officially devoted to rice plantation is mandated by a Ministerial Decree from The Ministry of Water Resources and Irrigation (MWRI). • For safety reasons, it is illegal to store agricultural waste on agricultural land. This issue poses a problem of allocating special plots for storage within agricultural lands. Environmental Law Biomass • Article 37 prohibits disposing of any 9/2009 solid wastes, including agricultural solid wastes, outside designated areas, according to the agreement between EEAA and local authority. Ministerial Decree Biomass • The area of land annually allocated from The Ministry of for rice plantation is mandated by a Water Resources and Ministerial Decree from The Ministry of Irrigation (MWRI) Water Resources and Irrigation (MWRI), depending on the irrigation water budget available. Sludge Executive Sludge There is no law or decree that prohibits or Another regulatory issue concerning sludge Regulations issued by prevents the re-use of sludge as alternative fuel. is to reduce GHG emissions, and particularly decree 44/2000 CO2 emissions. Sludge is a biogenic material • The regulations have approved re-use of that is “CO2 neutral.” Use of sludge in cement Law 93 / 1962 sludge in energy production. production to replace fossil fuels can therefore amended by decree reduce the total CO2 emissions per ton of clinker 44 /2000 • They are related to the protection of the produced. public sewer system, and set the conditions for a commitment to the standards and the environmental dimension within the larger framework of sludge management and disposal. Prime Ministerial Sludge • This law approves using sludge as organic Decree 254 /2003 compost according to Egyptian CODE 501/ 2005, concerning the handling and use of treated sludge in Egypt. Unlocking Value: Alternative Fuels For Egypt’s Cement Industry 135 Notes 136 Bryanne Tait Regional Lead Energy & Resource Efficiency Advisory Middle East & North Africa Email: btait1@ifc.org 2005C Cornich El Nil, Nile City Towers, North Tower, Cairo, Egypt Print Right Adv. Tel: + 20 (2) 246150 / 45 / 9140- Fax: + 20 (2) 246160 / 9130-