WAT E R G L O B A L P R A C T I C E C A S E S T U D Y Evaluating the Potential of Container-Based Sanitation x-runner in Lima, Peru About the Water Global Practice Launched in 2014, the World Bank Group’s Water Global Practice brings together financing, knowledge, and implementation in one platform. By combining the Bank’s global knowledge with country investments, this model generates more firepower for transformational solutions to help countries grow sustainably. Please visit us at www.worldbank.org/water or follow us on Twitter @WorldBankWater. About GWSP This publication received the support of the Global Water Security & Sanitation Partnership (GWSP). GWSP is a multidonor trust fund administered by the World Bank’s Water Global Practice and supported by Australia’s Department of Foreign Affairs and Trade; the Bill & Melinda Gates Foundation; The Netherlands’ Ministry of Foreign Trade and Development Cooperation; Norway’s Ministry of Foreign Affairs; the Rockefeller Foundation; the Swedish International Development Cooperation Agency; Switzerland’s State Secretariat for Economic Affairs; the Swiss Agency for Development and Cooperation; Irish Aid; and the U.K. Department for International Development. Please visit us at www.worldbank.org/gwsp or follow us on Twitter #gwsp. Evaluating the Potential of Container-Based Sanitation x-runner in Lima, Peru © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. 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Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The  World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@ worldbank.org. Cover photo: © Julian Parker/x-runner. Cover design: Bill Pragluski, Critical Stages, LLC. C ONT E NTS ACKNOWLEDGMENTS • V EVALUATING THE POTENTIAL OF CONTAINER-BASED SANITATION: AN OVERVIEW • VI EXECUTIVE SUMMARY • vii ABBREVIATIONS • xi INTRODUCTION • 1 Background • 1 Study Objectives • 1 Study Methodology • 1 Report Structure • 2 Notes • 2 Reference • 2 CHAPTER 1:  CBS SERVICE AREA CONTEXT • 3 Location • 3 Water and Sanitation Services in Lima • 4 Policy and Regulatory Environment for Sanitation Services • 5 Notes • 10 References • 10 CHAPTER 2: OVERVIEW OF EXISTING CBS SERVICE PROVISION • 11 Background: Brief History of x-runner • 11 Overview of Services Provided • 12 Legal and Policy Environment and Impact on CBS Services • 20 Notes • 21 Reference • 21 CHAPTER 3:  CBS SERVICE PERFORMANCE • 22 Customer Growth • 22 Assessing the Value of x-runner Service to Customers • 23 Notes • 27 References • 27 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru iii CHAPTER 4: FINANCIAL PERFORMANCE • 28 Current Costs and Financing Sources • 28 Improving the Efficiency of Its Operations • 28 Plans for Expansion • 29 CHAPTER 5:  KEY LESSONS • 31 APPENDIX A:  PEOPLE INTERVIEWED • 33 APPENDIX B: X-RUNNER/SANISOL ORGANOGRAM • 34 Figures 1.1 Fecal Waste Flow Diagram for Lima (Citywide) • 6 1.2 Fecal Waste Flow Diagram for Nonsewered Areas in Lima • 7 1.3 Key Institutional Relationships for Sanitation Services in Peru • 8 2.1 Sanitation Service Chain for Sanitation Options in x-runner Catchment Area (as of April 2017) • 13 2.2 Timeline for a Single Rotation of the Collection Service • 17 3.1 Customer Growth since January 2015 • 23 3.2 Cumulative Sales, Installations, and New Customers Added, by Month • 24 Map 1.1 Map of Lima, Showing x-runner’s Current and Potential Service Area • 4 Photos 1.1 The Steep Hillsides and Stairways (inset) of Peri-Urban Lima • 3 2.1a Separett Toilet Installed • 14 2.1b Toilet Inner Workings • 14 2.2 Swapping out Bags of Feces for Fresh Sawdust and Empty Bags • 16 2.3 Customer Services Center in San Juan de Miraflores • 18 2.4 Composting Site • 19 Tables 1.1 Frequency of Different Sanitation Types in Lima • 5 1.2 Frequency of Different Sanitation Types for Nonsewered Households in Lima • 5 3.1 Qualitative Comparison of CBS and Alternatives • 27 4.1 Main Cost Drivers for x-runner Operations • 29 iv Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru A C K NO W L E DGM E NTS This case study was written by Julian Parker (independent consultant) with support from Sophie Trémolet (Senior Economist, World Bank) and Clémentine Stip (Operations Analyst, World Bank). The author would like to thank the x-runner team for hosting the study and facilitating interviews and field visits. Special thanks go out to Isabel Medem and Raúl Briceño, who coordinated the various activities; Mónica Ramos for her work on the cost analysis; Maria Pia, who facilitated the author’s visits to Pamplona; and Nemecio Cóndor, who kindly gave a tour of x-runner’s treatment facility. Special thanks also go out to Malva Rosa Baskovich (Water and Sanitation Specialist, World Bank Lima), who kindly assisted the author with the interviews with officials from SEDAPAL, SUNASS, and the Ministry of Housing, Construction and Sanitation. ­ Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru v E VALUATING TH E P OT E NTIAL OF C ONTAIN E R - BASE D SANITATION: AN OV ERVIE W The World Bank Water Global Practice (WGP) has to support Bank teams and their clients when engaging developed an approach to urban sanitation based on in CWIS. One of the aims of this work is to explore inno- citywide inclusive sanitation (CWIS) principles, which vative approaches to provide safely managed sanitation have been developed in conjunction with sector part- services along the whole service chain and to support cli- ners (Bill & Melinda Gates Foundation et al., 2017). This ents in identifying when such options might make sense. approach aims to shift the paradigm around urban sani- The study “Evaluating the Potential for Container-Based tation approaches in World Bank engagements, promot- Sanitation” aims to answer some of these questions for ing the following principles: container-based sanitation (CBS), an emerging sanita- tion approach. • Everybody benefits from adequate sanitation service delivery outcomes. ­ The objective of this study is to document and assess • Human waste is safely managed along the whole ­ xisting CBS approaches, with a particular focus on eval- e sanitation service chain. uating their safety, reliability, affordability, and financial viability. The report also seeks to identify the circum- • Comprehensive approaches to sanitation improve- stances in which CBS approaches are most appropriate ments are deployed, with long-term planning, and whether they could be considered as part of a port- technical innovation, institutional reforms, and folio of options for CWIS. The study was motivated by financial mobilization. growing interest in the emerging CBS experiences and • A diversity of technical solutions, which are adap- by the fact that many governments, city authorities, and tive, mixed, and incremental, is embraced. financing entities are often not familiar with the approach. • Effective resource recovery and reuse is considered. • Cities demonstrate political will and technical and The study builds on four case studies (Sanergy, ­ Nairobi, managerial leadership, and they identify new and Kenya; Sustainable Organic Integrated Livelihoods creative ways of funding sanitation. [SOIL], Cap-Haitien, Haiti; Clean Team, Kumasi, Ghana; and x-runner, Lima, Peru) to provide insights into these • Both on-site sanitation and sewerage solutions, questions. The present document is one of these four in either centralized or decentralized systems, are case studies. The full suite of documents is available at considered to better respond to realities faced in www.worldbank.org/cbs. cities. • Complementary services (including water ­ supply, drainage, greywater, and solid waste) are considered. Reference As part of the implementation of these principles, the Bill & Melinda Gates Foundation, Emory University, The University of Leeds, WaterAid, Plan International, and World Bank. 2017. WGP is developing a suite of tools and other material Citywide Inclusive Sanitation: A Call to Action. vi Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru E X E C UTIV E SUMMARY This case study, along with three others, is a component Overview of the x-runner Business Model of a wider study by the World Bank of container-based sanitation (CBS) models. CBS consists of an end-to-end x-runner provides a safe sanitation service along the service—that is, one provided along the whole sanitation whole sanitation chain in poor nonsewered neighbor- service chain—that collects excreta hygienically from toi- hoods in the hills of the outskirts of southwest Lima lets designed with sealable, removable containers and for a population that does not have (and probably will strives to ensure that the excreta is safely treated, disposed not have for some years) any safe or hygienic alternative. of, and reused.1 Rather than having to build a sanitation x-runner installs portable toilets in people’s homes that facility, households (or public toilet operators) can sign up are lined with either plastic or biodegradable bags and for the service. The CBS service provider then installs a toi- emptied on a weekly basis. The bags are sealed in a sep- let with sealable excreta receptacles (also referred to as car- arate bucket and deposited to a drop-off point (lockers) tridges) and commits to emptying them (that is, removing by users on their way out of the neighborhood. Buckets and replacing them with clean ones) on a ­ regular basis. are collected by x-runner staff at the drop-off point and then transported through a leased service provided by a The objective of this study is to document and assess registered enterprise, EcoCentury. x-runner also treats existing CBS approaches with a ­ particular focus on eval- the excreta through an innovative process that mini- uating their safety, reliability, affordability, and financial mizes the land requirement for disposal, but it is cur- viability. The report also seeks to identify the circum- rently not allowed to sell the resulting compost due to stances in which CBS approaches are most ­ appropriate regulatory constraints. and whether they could be considered as part of a port- folio of options for citywide inclusive sanitation (CWIS). Over time, x-runner has developed a model that builds on the strengths of its suppliers. By relying on This case study examines the CBS service provided by these partnerships, x-runner has been able to simplify its x-runner in the low-income formal and informal set- business and focus on specific aspects of the sanitation tlements in peri-urban Lima. The objective of this case service chain. The Swedish company Separett provides a study is to better understand how x-runner’s CBS busi- high-quality containment solution at a significantly dis- ness model fits in the overall context of the low-­ income counted price to x-runner (to its credit and x-runner’s ­ settlements in which it operates. x-runner was estab- ability to develop and market its solution). As a result, lished in 2011 and provides portable in-home toilets x-runner has not had to build a toilet manufacturing and a weekly collection system. It is the only CBS model line. Further down the service chain, EcoCentury pro- where the customers conduct the emptying and primary vides a robust and scalable transport solution, removing transport themselves, bringing the feces to a pickup point, the need to obtain accreditations and the extra overhead where it is gathered and transported by truck. The study that comes with monitoring and complying with regu- took place in May and June 2017 and involved inter- latory standards, which EcoCentury does on x-runner’s views with x-runner staff, national and local government behalf. officials, donors, and customers/users. It also involved visits to x-runner’s service area and treatment site and the x-runner’s collection process is the only one among ­ collection and analysis of relevant data and reports. the case studies in which customers carry their feces Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru vii themselves to a pickup point. This approach allows x-runner’s Operating Context them to align better with households’ schedules and to serve areas where access is difficult. x-runner also Despite having more than 90 percent sewerage cover- installs custom-made community lockers in some age, only a little more than half of Lima’s feces is safely areas depending on the timing of pickup (for example, managed. In the nonsewered areas, this goes down to if the truck arrives late in the morning, some custom- about 1 percent due to the lack of fecal sludge empty- ers may have already left their houses) so customers ing and transport services. Most pits are unlined and, can drop off sealed bags and pick up new materials on therefore, leach excreta into the soil. Emptying services their own schedule. It is not currently clear how trans- are expensive and rely on vacuum trucks, which cannot ferable this approach is to other contexts and whether reach households located far from the roads. When pits there are specific factors that make it work in this one. fill up, households have few options other than to dig a Good-quality cover material is obviously essential new pit, despite space constraints. to make CBS work, reducing smells and making the feces seem more innocuous. The use of plain, regular A significant population of Lima’s urban poor—about buckets to transport the feces probably also makes 800,000 people—live in nonsewered peri-urban areas. the process of carrying one’s feces in the street more Many are informal and hence do not have legal status to acceptable. demand access to municipal sanitation. Topography and congestion impede the construction of sewerage lines Sourcing cover material is becoming a challenge. for other areas that have obtained legal status. Sawdust is supplied by a range of small carpentry ­ enterprises from whom the available quantity is unpre- The national sanitation policy of 2017 calls for 100 dictable. For each purchase, the quality of the sawdust percent sanitation coverage for urban p ­ opulations needs to be evaluated and the price negotiated. Cus- by 2021. Although sewerage remains the default solu- tomers resisted attempts to mix/dilute the sawdust with tion for urban populations, recognition is growing of compost, though x-runner staff believe that the result- the need for alternative solutions in areas where topog- ing cover material is at least as good as pure sawdust. raphy and space constraints make sewerage expansion Improving the supply of cover material is crucial to more difficult. Servicio de Alcantarillado y Agua Pota- expansion, given its importance for minimizing smells ble de Lima (Lima Sewerage and Water Supply Service; and flies.2 SEDAPAL), the water supply and sanitation (WSS) util- ity responsible for service provision in Lima, is calling The treatment and composting process x-runner uses for policy change to allow public funds to be invested in is an accelerated process that involves the purchase in-house facilities such as flush toilets, but this has not of effective microorganisms. Although a significant happened yet. There are no fecal sludge treatment facili- expense, this reduces the amount of land required for ties and very little desludging capacity. disposal and removes the need for co-waste (other than for cover material). Current indications are that further Although the policy and institutional framework in process efficiency improvements would be needed to Peru permits the CBS approach, it does not enable make this process cost-competitive against traditional it. Sanitation investment decisions are made on the co-composting with other organic waste sources. How- basis of comparing available options, but this sys- ever, with such improvements, this process could be tem presupposes a project-based approach with rapid of interest for sprawling conurbations where land is implementation at scale in a defined geographical area. extremely scarce. A small company such as x-runner does not have the viii Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru resources to bid for such projects or to scale up so is steadily growing and its precio comunal discount for quickly. Currently, the predictability of x-runner’s mar- customers in communities where x-runner achieves 50 ket assumes that the public sector will not come up with percent or more market penetration results in a signifi- and subsidize an alternative and competing solution for cant price reduction (25 percent). its area of operation. The x-runner toilet service had a total annual cost of a little less than US$336,458 in 2017, with an estimated Assessment of x-runner’s Services 18 percent (a little less than US$60,000) recovered via fees from users. Revenues from the fees charged to The level of satisfaction with the service for ­x-runner service users covered about 38 percent of the costs of customers is high. The high-quality experience appears providing the collection and transport service. However, to be driven by x-runner’s strong customer focus, reuse activities generated some operating costs that did dedicated team of employees, and deployment of a not generate corresponding revenues due to regulatory high-­quality toilet. The Separett toilet does, however, restrictions on the sale of reuse products. constitute a significant risk as the model is provided to x-runner at a highly subsidized price and could impact customer satisfaction were the supply chain to Key Lessons be interrupted. The customer service and teamwork are x-runner is providing a much-needed service in ingrained in the organization and would likely stand up peri-urban areas of Lima, where there are no other to the challenges that come with scaling up. reliable options. Despite the government’s policy to provide improved sanitation solutions to all the urban The number of customers has been growing steadily, population by 2021, there are an estimated 800,000 with an average of around 24 new households per people who are not connected to sewers, and less than ­ month.3 This is a little more than half the sales target 1  percent of the fecal waste flow is safely managed in of 42 sales per month. The sales and marketing process these areas (including a substantial contribution from is refocusing to build more on spreading awareness x-runner services). about incentives/promotions for successfully referring non-customers to the service. x-runner’s operations Customers appear willing to pay for x-runner ser- appear to be facing some bottlenecks in the near term, vices. Though some customers have expressed a feeling including limitations in the sawdust supply chain, a that the price is high, this has not posed a payment issue need to start scaling up collection service capacity while and surveys show they are satisfied with the service. avoiding idle capacity, and constraints on the sale of x-runner’s CBS service appears to be cheaper, or at least compost and the resulting maxing out of storage capacity not more expensive, than operating a pit latrine (with at the treatment site. Robust solutions to these issues are periodic maintenance and emptying). needed to unlock the expansion capacity of x ­ -runner’s operation. x-runner’s collection process, which is the only one in which customers carry their waste to a pickup Although some customers expressed the view that the point, appears to be acceptable to customers and the price for the service is high, they appear to be willing wider community. Two benefits of this approach are to pay it. In a 2015 satisfaction survey by x-runner, only that it enables users to drop off sealed bags and pick 15 percent of respondents raised issues with the price of up new materials when it is convenient for them and the service.4 The CBS service provider’s customer base it allows x-runner to serve difficult-to-access areas. Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru ix The transferability of this approach to other contexts factor for enabling public sector support. This would has not been assessed. The overall hygienic safety of open the door for policies and procedures to determine this approach would also need to be confirmed as which areas and populations it is appropriate for and it appears to be highly reliant on customer educa- the development of service standards. In addition, reg- tion and on customers adopting hygienic practices ulation of fecal sludge reuse (currently not allowed) for handling the waste. There have been cases where would allow x-runner to collect revenues from the pro- customers have lost access to the service due to poor duction of compost, which is currently carried out with hygienic practices. a highly efficient process simply to minimize land use associated with waste disposal, and generates costs but x-runner is leveraging the capacities of suppliers to no revenues. reduce the complexity of its business to a manageable level. Separett’s provision of a high-quality contain- Notes ment solution at a discounted price removes the need for x-runner to build a toilet manufacturing line. Out- 1 In this report, the term excreta is used instead of waste to avoid any potential confusion with solid waste. Tilley et al. (2014) define sourcing the transport portion to EcoCentury means excreta as “urine and feces that is not mixed with any flushwater.” Note that for the four CBS case studies and the main report, the x-runner does not have to procure accreditations and feces and urine are separated using urine-diverting toilet technol- can avoid the overhead associated with monitoring ogies. In cases where only feces are collected by the CBS service provider, this is referred to accordingly as feces. Also note that and complying with regulatory standards. It remains cover material (for example, sawdust or carbon cover) is added to the excreta in all cases. to be seen whether this will impact x-runner’s ability to 2 As of May 2018, x-runner had entered into working agreements improve its cost-efficiency. with three larger sawdust suppliers, which had alleviated this pres- sure on the supply of sawdust. 3 As of May 2018, that number has increased to 35 new households Customer growth is somewhat slow (and below tar- per month. Each household has an average of five people. gets) but steady, and the potential market is large. 4 x-runner surveys 30 percent of its costumers at the end of each year through a combination of face-to-face questions and phone x-runner now has to work on increasing cost-­efficiency calls. Questions focus on the quality of the toilet, the quality of and addressing potential bottlenecks. Similarly to their the ­collection service, ease of payment through local banking agents, and comfort with the overall system, among others. In the approach in refocusing their sales and marketing pro- latest survey conducted by x-runner at the end of 2017, customer satisfaction rate was as high as 95 percent (with a sample size of cess and looking for new storage space, x-runner must approximately 200 households). continue to seek robust solutions to promote the expan- sion of their operation. Reference An explicit recognition of CBS—or a category into Tilley, E., L. Ulrich, C. Lüthi, P. Reymond, and C. Zurbrügg. 2014. which CBS clearly falls—as a viable sanitation sys- Compendium of Sanitation Systems and Technologies. 2nd rev. ed. Duebendorf, Switzerland: Swiss Federal Institute of Aquatic Science tem for the urban poor, would be an important and Technology (Eawag). x Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru A B B R E VIATIONS avg. average (mean) CBS container-based sanitation CFO chief financial officer CWIS citywide inclusive sanitation ECLA Entrepreneurship and Competitiveness in Latin America (Columbia University Business School) EPS entidad prestadora de servicios de saneamiento (sanitation service provider) FSM fecal sludge management GDP gross domestic product GoP government of Peru kg kilogram MHCS Ministry of Housing, Construction and Sanitation m 2 square meters m3 cubic meters min. minimum NGO nongovernmental organization OSS on-site sanitation OTASS Organismo Técnico de la Administración de los Servicios de Saneamiento (Technical Organism for the Management of Sanitation Services) SEDAPAL Servicio de Alcantarillado y Agua Potable de Lima (Lima Sewerage and Water Supply Service) SFD fecal waste flow diagram SUNASS Superintendencia Nacional de Servicios de Saneamiento (National Superintendent of Sanitation Services) t ton UDDT urine-diverting dry toilet US$ United States dollar WHO World Health Organization WSS water supply and sanitation WWT wastewater treatment Exchange rate: US$1 = S/. 3.27 as of June 2017 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru xi INTRODU C TION Background financial viability. The study also seeks to identify the circumstances in which CBS approaches are most appro- This case study, along with three others, is a component priate. The ultimate objective is to identify whether these of a wider study by the World Bank of container-based solutions could be considered as part of a mix of options sanitation (CBS) models. CBS models have emerged for citywide inclusive sanitation (CWIS). over the past 10 years as an alternative model to net- work-based sanitation or on-site sanitation (OSS) ser- The objective of this case study is to better understand vices. This case study focuses on x-runner, a CBS service how x-runner’s CBS business model fits in the over- provider operating in Lima, Peru, since 2011. all context of the formal and informal low-income settlements in peri-urban Lima in which it operates. CBS consists of an end-to-end service—that is, one pro- x-runner provides portable in-home toilets and a weekly vided along the whole sanitation service chain—that collection ­system. x-runner is the only CBS model where collects excreta hygienically from toilets designed with the customers conduct the emptying and primary trans- sealable, removable containers and strives to ensure that port themselves, bringing the feces to a pickup point the excreta is safely treated, disposed of, and reused.1 from where it is transported by truck. Rather than having to build a sanitation facility, house- holds (or public toilet operators) can sign up for the service. The CBS service provider then installs a toi- Study Methodology let with sealable excreta receptacles (also referred to The field work for this case study was carried out in as cartridges) and commits to emptying them (that is, early 2017 based on interviews with key x-runner staff, removing and replacing them with clean ones) on a reg- covering the range of activities and functions of the ­ ular basis. Transport methods can vary (and may involve organization at x-­ runner’s main office and customer tuk tuks, motorcycles, hand carts, and donkey carts) and support center, and local stakeholders. Relevant data adapt to a variety of space and logistical constraints. and documents were collected and analyzed until May Some CBS entrepreneurs build and operate resource 2017, though major developments and updates through recovery facilities, taking advantage of the high-nutrient May 2018 are reflected. The case study began with a content of the relatively “fresh” and undiluted excreta, to meeting with x-runner’s chairperson and the water and produce biogas, fertilizers, or protein for animal feeds. sanitation specialist of the World Bank Lima office, who Some CBS operators manage the entire cycle themselves, supported the study through the facilitation of meetings whereas some partner with other groups or local author- with government and water supply and sanitation (WSS) ities to implement parts of the sanitation service chain. utility officials. This was followed by a guided tour of x-runner’s treatment site and observation of the collec- Study Objectives tion operation. The objectives of the overall study are to document and An initial round of interviews with a community leader assess existing CBS solutions with a particular focus and four customers (one of whom was an ex-leader) on evaluating their safety, reliability, affordability, and was conducted in their homes.2 The interviewees were Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 1 selected by x-runner based on criteria laid out by the characteristics of the Lima city and its low-income consultant, including: areas. Chapter 2 provides an overview of the CBS operation, with a technical description of the different • A customer that had made a substantial complaint components of the operation as well as the manage- to x-runner; ment strategies, systems, and processes behind them. • A household with vulnerable member (that is, dis- The impact of the policy and regulatory environment abled); and is briefly examined, followed by an assessment of ser- • A female head of household. vice performance from the customers’ and the CBS service providers’ points of view. Chapter 3 assesses To solicit additional opinions, impromptu brief interviews the performance of the service from the customers’ were held with five customers and four non-customers points of view and reviews customer growth. Chapter during a collection round. The interviews focused on 4 presents a financial analysis of the operation and satisfaction levels and suggestions for improvement to briefly discusses main cost drivers. Chapter 5 summa- the service. People were generally busy with their morn- rizes key lessons. ing routines and, therefore, a number declined to be interviewed. Notes Representatives of the national government, sanitation 1 In this report, the term excreta is used instead of waste to avoid regulator, and the water and sewerage utility for Lima— any potential confusion with solid waste. Tilley et al. (2014) define excreta as “urine and feces that is not mixed with any flushwater.” Servicio de Alcantarillado y Agua Potable de Lima (Lima Note that for the four CBS case studies prepared for this report, the feces and urine are separated using urine-diverting toilet technolo- Sewerage and Water Supply Service; SEDAPAL)—were gies. In cases where only feces are collected by the CBS service pro- interviewed with the assistance of the water and sani- vider, this is referred to accordingly as feces. Also note that cover material (for  example, sawdust or carbon cover) is added to the tation specialist of the World Bank. Donors had been excreta in all cases. interviewed prior to the case study, during Stage 1 of the 2 The sample size was limited by their availability at home (Sunday mornings only, as Saturdays are taken up with labor on community CBS review, to which these case studies are contributing. projects). Although interviews with eight customers and two leaders were planned, due to time constraints and last-minute unavailabil- ity, the actual sample achieved was less. A list of all interviewees is available in appendix A. Report Structure Reference Tilley, E., L. Ulrich, C. Lüthi, P. Reymond, and C. Zurbrügg. 2014. Chapter 1 describes the CBS operation’s service area Compendium of Sanitation Systems and Technologies. 2nd rev. ed. Duebendorf, Switzerland: Swiss Federal Institute of Aquatic Science and the basic geographic, economic, and demographic and Technology (Eawag). 2 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru C HA P T E R 1 • C BS S E RVI C E AR E A C ONT E XT Location of Callao and Lima, which have a combined total of 49 districts. Peru is a middle-income country with gross domestic product (GDP) per capita a little more than US$6,000 Urban development planning in Lima has been limited, (International Monetary Fund [IMF] 2016). There is and a large part of the population lives in “human set- strong rural-­ urban migration, resulting in an urban tlements” characterized by poor access to services such growth rate of 2.9 percent per annum (Government as water, electricity, and sanitation. These include both of Peru [GoP] 2014). Lima, the capital city on the formal settlements with titled properties and informal central Peruvian coast, is home to a population of a settlements, which are generally located on steep slopes little less than 10 million in 2017. Lima Metropolitan ­ and accessible via steep concrete staircases (Photo  1.1) is composed of the two contiguous municipalities that connect to roads, which contour around the hillsides. Photo 1.1 • The Steep Hillsides and Stairways (inset) of Peri-Urban Lima Source: Julian Parker. Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 3 x-runner provides container-based sanitation (CBS) respectively, whereas for the urban population, the services in such peri-urban settlements in the areas figures are 94.7 percent and 89.5 percent (GoP 2017). shown in Map 1.1. The core service area is in Pamplona Overall, it is estimated that a little more than 8 million in the San Juan de Miraflores district, but x-runner has Peruvians do not have adequate sanitation. identified a wider potential service area in the surround- The government of Peru (GoP) estimated that a lit- ing districts, including Villa el Salvador and Villa María tle more than 800,000 people in metropolitan Lima del Triunfo. are not connected to the sewer network (2017).1 When this is the case, households rely on cisterns and Water and Sanitation Services in Lima pour-flush toilets connected to septic tanks, various types of pit latrines, CBS toilets, and open defecation Water supply and sanitation (WSS) coverage for Peru (see tables  1.1 and 1.2). In the areas where x-runner as a whole stands at 89.2 percent and 74.5 percent, operates, pit latrines are the most common type of Map 1.1 • Map of Lima, Showing x-runner’s Current and Potential Service Area Core service area (Pamplona) Wider operational footprint for current expansion Source: Google Maps. 4 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru Table 1.1 • Frequency of Different Sanitation Types in Lima Sewer into home Sewer to property Latrine Septic tank River/channel None Percentage 87.4 4.3 1.3 2.7 0.4 1.3 Source: Mujica and Uriarte 2016. Table 1.2 • Frequency of Different Sanitation Types for Nonsewered Households in Lima Cistern Pit latrine Pit latrine   Pour-flush VIP latrine CBS toilet Bucket None flush (with slab) (no slab) Percentage 15.6 56.9 2.8 8.1 16.1 0.6 0 0 Source: Mujica and Uriarte 2016. sanitation. In the current national sanitation policy, the This did not happen, either because users were too busy GoP aims to achieve universal access to safe sanitation or they had not been sufficiently sensitized and trained for urban populations by 2021 (and by 2030 for rural on how to do this. Users were also reportedly hoping to populations). have flush toilets in the future (Oswald and Hoffman 2007). Despite the relatively high percentage of sanitation coverage, about only half of the feces is safely disposed Lima lies in the desert coastal strip of Peru, which of in Lima as a whole, as shown in the fecal waste flow is facing increasing water stress. It is in the valleys of diagram (SFD) in ­figure 1.1. This is because almost half three major rivers—the Rímac, Chillón, and Lurín— of the sewage is not properly treated due to inadequate which are the city’s main water sources. The climate is treatment capacity: Some is released untreated to the mild, warm, and humid, yet Lima is the second-driest environment, whereas a slightly smaller fraction reaches capital in the world in terms of average annual rain- the treatment plant but still is not properly treated. fall (after Cairo, Egypt). Dry sanitation systems are, therefore, an important proposition for Lima’s popula- For nonsewered areas, only 1 percent of feces is safely tion. Combined with water efficiency improvements, a disposed (see Figure 1.2), of which ­ two-thirds are reduction in nonrevenue water,2 and new source devel- linked to x-runner’s services. Most households in the opment, this could help save precious water resources. nonsewered areas rely on  pit latrines, which are often Sewerage has been brought to at least one suburb of unlined and, therefore, leach excreta into the soil. Emp- Lima where people could not use their flush toilets due tying services are expensive and rely on vacuum trucks to lack of a water connection (Platzer, Hoffman, and that cannot reach the majority of households not located Ticona 2008). next to the roads. As a result, when pits fill, house- holds have to dig a new pit, despite significant space constraints. Policy and Regulatory Environment for Sanitation Services Dry systems have been tried in the past but have usu- ally failed. These systems relied on users having time and The Ministry of Housing, Construction and Sanitation interest to manage the toilets and the excreta produced. (MHCS) is the lead agency for the water and sanitation Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 5 Figure 1.1 • Fecal Waste Flow Diagram for Lima (Citywide) Containment Emptying Transport Treatment Reuse/Disposal 52% Treated 49% 67% Sewerage 92% Not treated Directly 25% released to the sea 27% Septic tank—FS 3% contained 3% Unlined pit—partly emptiable 4% On-site straight to drain 0.4% 25% 18% Open defecation 1% 1% 0.4% 4% 48% Local area and beyond Receiving waters Key: Safely managed Unsafely managed Source: Mujica and Uriarte 2016. Note: Percentages indicate associated portion of fecal sludge (FS). sector and is responsible for policymaking and coor- In the current national sanitation policy, the GoP aims to dination through its Directorate of Sanitation (of the achieve universal access to safe sanitation for urban pop- Vice Ministry of Construction and Sanitation). MHCS’s ulations by 2021 (and by 2030 for rural populations). The Environmental Unit is in charge of coordinating sanitation policy objectives are focused on expanding coverage for regulation with other ministries. universal access and achieving high-quality and sustainable 6 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru Figure 1.2 • Fecal Waste Flow Diagram for Nonsewered Areas in Lima Containment Emptying Transport Treatment Reuse/Disposal Septic tanks/UDDT— FS contained 1% 1% 1% Unlined pits—partly emptiable 96% Transported Not treated 3% Not transported On-site straight to drain 3% 3% 2% 93% 1% 99% Local area and irrigation channels Key: Safely managed Unsafely managed Source: Mujica and Uriarte 2016. Note: Percentages indicate associated portion of fecal sludge (FS). UDDT = urine-diverting dry toilet. service provision via autonomous enterprises with full cost Water and sanitation services in Peru are to be recovery. When it comes to determining technical solu- delivered by private, public, or mixed organizations tions, the policy states that decisions should be made on the whose exclusive purpose is to provide sanitation basics of minimum economic cost, a point emphasized by a services. These organizations are known as entidades senior official of the MHCS. prestadoras de servicios de saneamiento (EPSs)—­ literally translated as “entities providing [water and] The institutional setup for the sanitation sector is shown sanitation services.” The national water and sanitation in figure 1.3. regulator, Superintendencia Nacional de Servicios de Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 7 Figure 1.3 • Key Institutional Relationships for Sanitation Services in Peru Ministry of Housing, Construction and Peru National Government Sanitation (MHCS) Technical Organism National Ministry of Health Ministry of for the Management Superintendent of (focused on water quality) Environment of Sanitation Services Sanitation Services (OTASS) (SUNASS) National Director of Sanitation (Vice Ministry of Construction and Sanitation) Callao Regions Lima Lima and Metropolitan Municipality Service providers Fecal sludge Solid waste Lima Sewerage and Water Supply Service collection services collection services (SEDAPAL) Key Regulates Oversees organizational development Licenses operations Sets policy Policy under development in 2017: will cover collection, Institution transport, treatment, and reuse/disposal of biosolids Saneamiento (National Superintendent of Sanitation Local governments are the main source of funds for Services; SUNASS), must approve service providers investments in sanitation infrastructure, followed by and their service regulations before they can be con- regional governments and service providers, with a tracted by local authorities. small percentage coming from the national govern- ment. WSS service providers in Peru have limitations Servicio de Alcantarillado y Agua Potable de Lima in their capacity to effectively utilize the funds that (Lima Sewerage and Water Supply Service; SEDAPAL) is they receive from central, regional, and local govern- the municipal water and sanitation utility for Lima and ment budgets, spending on average only 65 percent Callao, the largest EPS in Peru. The Technical Organism of said funds between the years 2011 and 2016. At the for the Management of Sanitation Services (OTASS) reg- same time, willingness to pay for sanitation services is ulates the administration and management of EPSs to low even among higher-­ income households, leading the ensure their financial efficiency and sustainability. GoP to include the development of a culture of valuing 8 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru sanitation among citizens as the sixth area in its latest example, from leaking sewers (Platzer, Hoffman, and sanitation policy (GoP 2017). Ticona 2008). Households may use any sanitation facility that Peruvian law currently does not explicitly cover the ­ provides for safe disposal of excreta if they do not reuse of fecal sludge or excreta.3 The 2015 water and have access to sewerage. Containment (that is, the toilet sanitation law fills a gap in the previous water law passed part of the sanitation service chain) is the responsibility in 1994 by permitting service providers to commercial- of house owners, who are obligated, per the Law for the ize reuse products from wastewater, such as biosolids, Modernization of Water and Sanitation Services (GoP or transfer the solid portion to third parties who have 2015), to connect to water and sewerage services where the resources to provide adequate treatment. There is no they are provided, with any exceptional cases requiring framework for the reuse of excreta, however, which is the approval of the relevant EPS and still complying with classified as toxic waste and can, therefore, only be sent regulations. In the absence of sewers, households are to a landfill.4 There are no fecal sludge treatment facili- allowed to use any system that provides for sanitary dis- ties in Lima at present. posal, though the 2016 legal framework refers to on-site disposal. SEDAPAL estimates that there are 300,000 people in peri-urban Lima who cannot be reached with sewer- SUNASS’s regulatory mandate is limited to the core age due to legal barriers and local conditions. Formal of the sanitation service chain: emptying, trans- land rights are often lacking, creating an additional legal port, and treatment. Containment is the household’s impediment, though a process exists for communities responsibility, whereas excreta reuse is under the remit and plot dwellers to (eventually) get legal recogni- of the ministry responsible for the reuse sector (which tion. It has also been requesting MHCS to get the law is the Ministry of Agriculture for reuse of wastewa- changed to allow public investment in infrastructure ter treatment [WWT] biosolids as organic fertilizer components inside people’s houses, as the urban poor or soil conditioner). As of 2016, the responsibility for are unable to afford the flush toilets required for a sewer rural WSS services was added to SUNASS’s jurisdic- connection. As of early June 2017, the law did not allow tion, which had previously been limited to urban areas this. SEDAPAL’s technical staff has been looking for (GoP 2016). alternative solutions for the hilly peri-urban areas and is open to dry sanitation options. Even in those peri-­ The GoP aims to achieve 100 percent adequate urban areas where sewers are technically feasible (with treatment of wastewater in urban areas by 2021, favorable soil and access conditions), SEDAPAL’s sewer- percent of the treated solid portion with reuse of 50  ­ age network may not reach the population for the next (GoP 2014). The plans do not state which technology five to 10 years. This is due to the length of the project will be used to achieve these targets, though sewers planning process and the need to sequence investments and WWT were to estimate costs and appear to be the despite of limited resources. technology of choice. Intermediate targets for treat- ment and reuse of wastewater, respectively, were 30 Septic tank emptying services in Lima are focused percent and 15 percent for 2012 and 50  percent and on institutions as few households can afford the ser- 30 percent for 2017. Of the current gap in urban san- vice. Two prominent and professional companies that itation, 30 percent is represented by the city of Lima. ­ provide this service are Megapack and Disal. They The only reported reuse to date, however, is unsafe use serve public institutions (schools, hospitals, and gov- of raw fecal sludge to illegally irrigate farmland—for ernment buildings) and industrial facilities. Given the Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 9 lack of a legal framework for fecal sludge management References (FSM) and the perception that households would not Government of Peru. 2014. “National Investment Plan for the Water be able to afford them, they have no incentive to pro- and Sanitation Sector (Plan de Inversiones del Sector Saneamiento de vide services to poor households in peri-urban Lima. Alcance Nacional 2014–2021).” Solid waste management services, which also require Government of Peru. 2015. “Law No. 30045. Law for the Modernisation EPS status, are also carried out by these companies but of Water and Sanitation Services (Ley de Modernización de los Servicios de Saneamiento).” as informal services that do not adhere with regula- Government of Peru. 2016. “Legal Framework for the Management tions and may result in dumping of waste (fecal and and Provision of Water and Sanitation Services (Ley Marco de la solid) outside legal landfills. Gestión y Prestación de los Servicios de Saneamiento).” Government of Peru. 2017. “National Sanitation Policy. (Política National de Saneamiento).” Notes International Monetary Fund. 2016. World Economic Outlook: 1 In the Lima province as a whole, this figure reaches 2 million people Subdued Demand: Symptoms and Remedies. Washington, DC: not connected to the sewer network. International Monetary Fund. 2 Nonrevenue water is around 40 percent, according to SUNASS, the Mujica, A., and Z. S. Uriarte. 2016. Fecal Sludge Management: Diagnostics regulator of water and sewerage services. for Service Delivery in Urban Areas. Case Study in Lima, Peru. 3 Here, fecal sludge refers to the product of on-site sanitation (OSS) solutions. Oswald, P., and H. Hoffmann. 2007. “Results of an Evaluation of Ecological 4 A new law for solid waste management adopted in December 2017 Sanitation Projects in the Peri-urban Settlements of Lima/Peru.” In prioritizes the prevention and minimization of waste generation at International Conference on Sustainable Sanitation: Ecosan. Fortaleza. source and incentivizes the recovery, material, and energy recovery of the waste through reuse, recycling, composting, co-processing, Platzer, C., H. Hoffman, and E. Ticona. 2008. “Alternatives to among other alternatives, provided that the protection of health and Waterborne Sanitation—A Comparative Study: Limits and the environment is guaranteed. However, there remains a legal gap Potentials.” Presented at the IRC Symposium: Sanitation for the for the reuse of human excreta. Urban Poor Partnerships and Governance, Delft, The Netherlands. 10 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru C HA P T E R 2 • OV E RVI EW OF E XISTING CB S S E RVI C E PROVISION Background: Brief History of x-runner hillsides of Lima. The pilot community was located in an accessible and relatively flat area, and the service was The concept for x-runner began with two industrial later introduced into the settlements in the steep hill- designers, one of whom was developing a design for a sides where sanitation is a bigger problem due to the portable toilet for slums as part of her master’s degree difficulty in constructing latrines on the sloped rocky thesis. Austrian investors offered some money in exchange soil. x-runner’s leadership studied the truck-based solid for equity in a company based on the concept. Thus, in waste collection system and decided to improve on it by 2011, “x-runner Venture” was incorporated in Germany taking a more customer-oriented approach. They pro- with a third co-founder and the current chairperson, who vided a free collection service for a month, after which has a business and microfinance background.1 The inves- a monthly fee was introduced. The fee was introduced tors each paid €10,000 for a 1 percent shareholding. early to ensure accountability of the company toward the customers. The portable toilet concept was first trialed in India, but the founders concluded that the market there x-runner’s activities are executed by a nongovern- was too complicated and turned their attention to mental organization (NGO) called Sanisol.2 The Peru. They focused on Lima, a desert city with a large service is branded as Family’s (that is, the English term population of urban poor that they believed had more is used). An organigram for x-runner/Sanisol is shown tools and resources to invest in an improved sanitation in ­Appendix B. The main teams are operations, sales, and service. In addition, x-runner’s current chairperson is solutions. Operations covers the toilet installation, collec- Peruvian and already had established connections half-­ tion service, and the composting/treatment process. The there to help facilitate a startup. sales team consists of three pairs of sales agents (includ- ing the manager) and conducts all community marketing After initially producing its own toilets, x-runner events, door-to-door sales, and follow-up calls. The solu- soon switched to an imported off-the-shelf toilet. tions team is the most recent addition and was created in In Lima, it trialed a new design of a urine-diverting early 2017 to provide a customer relations mechanism, as dry toilet (UDDT) that it had developed with a local previously the principal point of contact with customers designer. After 30 to 40 toilets were installed, x-runner after toilet installation and service commencement was was offered a highly discounted price on high-quality the collection service team. Although this team was able urine-diverting toilets produced by Separett. A fami- to interact with customers during the collection process, ly-owned Swedish company founded in 1976, Separett distracted them from their objective of collecting feces it ­ was inspired by x-runner’s attempt to reach the urban in as short a time as possible. Supply chain is the respon- poor and its ability to offer them a superior solution. sibility of the chief financial officer (CFO). x-runner developed a fee-paying collection service x-runner has an egalitarian culture, in which input focused on the poor living in the steep peri-urban is continually sought from all staff members and Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 11 responsibility for achieving the various targets • A S/. 30 (US$9) one-time discount is given to exist- is broadly shared. The sales and solutions teams ing customers for each referred customer that signs operate out of a customer service center (Centro de up for the service. Family’s) in central San Juan de Miraflores and have • A second toilet in the same house results in reduc- regular joint meetings. The sales team has a combined tion of the monthly fee to S/. 29 per each toilet in monthly target rather than individual targets; staff perpetuity. do not have individual targets and follow up on one another’s leads. The precio comunal promotion was introduced to pro- mote density of users in a given area so that they would benefit from the impact of a sanitized community. This Overview of Services Provided promotion has required a lot of follow-up in the form Figure 2.1 illustrates the sanitation service chain for of community meetings to get the word out. To date, x-runner and the two prominent alternatives in the three communities benefit from this tariff, including one same locality: unlined pit latrines (manually desludged with 80 percent coverage. x-runner has also designed or replaced) and flush toilets connected to the sewer an initiative to raise awareness and promote its service system. through ambassadors—customers who will be trained to provide ongoing promotion of the benefits of the service in their community. Given their central role in com- Sales and Marketing munity customs and communication, and the fact that they spend more time around the community physically, The sales strategy initially relied heavily on door-to- ambassadors tend to be women. door sales but shifted in 2015 to promoting referrals and reaching out through community meetings and Going forward, x-runner is planning to focus on incen- community leaders. However, door-to-door sales visits tivizing and following up on referrals. In a satisfaction remain a key activity to follow up on interest expressed survey conducted at the end of 2017, the solutions team at community meetings and to reach people that do not included questions to determine the level of awareness attend these meetings when service is introduced to a users had regarding referral incentives. new neighborhood. The six people on the sales team conduct household visits in pairs. They have a team sales The preferred and main method of payment is through target of 42 per month, which is not broken down into bank agents. Customers need to go to a shop affiliated individual targets because they rotate around geographic with Peru’s largest retail bank to pay their monthly fee. areas, hence they follow up on one another’s earlier sales Many Peruvians already pay their electricity, TV, and efforts. other bills via the same system. This system reduces the cost (and risk) of payment collection and allows x-runner x-runner has introduced an array of promotions and to formalize a service in an entirely informal area, thereby continues to introduce new ones. Promotions can generating trust. It also creates a first link between these include the following: people and the banking system, which they are not always a part of yet. Some customers have reported problems pay- • The initial S/. 99 (US$30) installation fee is removed. ing at times because the bank agents have a daily limit for • The S/. 39 (US$12) monthly fee is reduced to S/. 29 overall bill payments (once it is exceeded, they are not able (US$9) when 50 percent or more of a community is to receive payments until the next day) or because cus- using the service (precio comunal).3 tomers have difficulties connecting due to the remoteness 12 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru Figure 2.1 •  Sanitation Service Chain for Sanitation Options in x-runner Catchment Area (as of April 2017) Service chain Demand creation Containment Emptying Transport Treatment End use/Disposal Separett-brand UDDT Users remove Composting using Compost produced Single 4x4 truck but not sold on Door-to-door sales containerized toilet plastic bags Probac effective Technical details (initial focus) containing feces, Lockers are provided microorganisms open market Feces bucket/bag tie the bags, and on request for Small quantities sold place them into a Three months in plastic Currently increasing customers to leave Urine piped out to bags (anaerobic) Added to sawdust focus on community different-shaped feces in the buckets infiltration pit, latrine cover material meetings bucket to carry to for collection Two weeks pit, or container (contains active the truck later in the morning in a windrow microorganisms) x-runner CBS service chain Avg. 122 toilets Three bags of waste emptied per day 12 t compost placed in larger Quantities produced in Sales target: Min. 737 toilets/customers Feces: 1.2 t/day bokashi bags 7-t truck capacity April 2017 42/month in May 2017 Urine: disposed of (around half of mass in May 2017 5 liters of Probac Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru on-site through of waste collected) added per bokashi infiltration Team leader, Installations: one five sales agents, head of installations Conducted by Collection team: one Composting expert, Personnel solutions manager, and maintenance, users—no staff collections manager, treatment plant manager, payment collections one installation required three operators three treatment operators assistant, technician, (including driver) solutions assistant two part-time staff Untreated waste to Household Unlined pit Manual desludging Indiscriminate environment or None initiative latrine or none dumping or none unsafely covered Alternative sanitation in the household services Household Cistern flush Discharged treated SEDAPAL Sewer connection or untreated to initiative toilet treatment plant environment Municipal/ UDDT toilet with User empties and Discharged treated SEDAPAL government education feces and brings containers Transport by truck or untreated to treatment plant initiative urine storage to collection point environment ­ rine- Note: Avg. = average; min. = minimum; SEDAPAL = Servicio de Alcantarillado y Agua Potable de Lima (Lima Sewerage and Water Supply Service); t = ton; UDDT = u diverting dry toilet. 13 of the area. x-runner has established a customer service the two-person team can install as many as six toilets phone line so that customers can report issues, and pay- in a day. Mototaxis (rickshaws) transport the team for ment can also be made at the Family’s customer service installations, but x-runner is hoping to purchase a van center in San Juan de Miraflores. for this purpose. x-runner imports an off-the-shelf UDDT, having had Containment an unsatisfactory experience with manufacturing its own model. This earlier model was twice as expensive Once a customer has signed a contract for x-runner’s as the discounted price it pays for the Villa model of the service, the installation team conducts an inspection Separett toilet, which is currently used (see Photo 2.1). of the house to make a plan for installation, noting It also required intensive supervision for a (slow) man- whether the floor is soil or cement, how urine will be ual manufacturing process, and the attempt at local disposed of, and where the vent pipe will exit the wall. factory fabrication did not work out when the manufac- In older properties, the space available can be limited, turer could not deliver the promised service. and in a few cases, walls or floors need to be rebuilt with improved materials or a second floor added. x-runner’s The Separett toilet has a fixed urine-diversion mech- toilet installation can easily be adapted in line with these anism, with a connection for a narrow diameter pipe upgrades. Installation takes 45 minutes to one hour, and to carry the urine away. A plastic flap covers the feces Photo 2.1a • Separett Toilet Installed Photo 2.1b • Toilet Inner Workings Source: Julian Parker. 14 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru hole and opens when weight is applied to the toilet seat. Emptying Inside the toilet, a 23-liter plastic bucket lined with a plastic bag lies below the feces hole. The bag itself is Feces is transferred from the feces container in the lined with sawdust and is usually biodegradable. These toilet to a sealable bucket for carrying to the collec- bags are purchased from a Peruvian company that tion point. The bucket that comes with the Separett imports them from the United States and have a storage toilet does not have a handle and has a relatively wide life of six to eight months. However, during the summer diameter and low profile, which makes it inconvenient (mid-January to March), they start to degrade in the for carrying. Therefore, customers are provided with heat and may break, so they are replaced with standard two additional 22-liter buckets with handles, a narrower non-biodegradable bags. In previous summers, x-runner diameter, and greater depth to carry full bags of feces/ had provided households with extra biodegradable bags sawdust to collection points. These buckets are off-the- so that they could change the bags before they got too shelf, ordinary-looking buckets with lids that seal. The heavy or full. bags of feces are sealed again before being transferred in order to maintain a safe transportation chain (that is, There are several options for urine disposal. Most house- during transportation, the feces is double-sealed). holds in the area accumulate the urine in a bucket and dispose of it on the street. In other cases, they dispose of Collection and Transport it in either an existing latrine pit (when they have one, though the pit is often full or unhygienic) or an infiltra- Collections are conducted once a week for each ­customer, tion/soak pit filled with stones, constructed by x-runner area by area, over five days (Monday to Friday). The col- prior to ­toilet installation. lections start at 6 a.m. and last for as long as five hours. Customers carry their sealed buckets of feces to the collec- Obtaining sufficient quantities of sawdust was becom- tion truck as it passes by, or they drop them off at a locker ing a problem for x-runner in early 2017. It was when leaving their houses. The buckets are handed to one obtaining sawdust from a range of relatively small-scale of the collection staff, who passes it to a colleague in the furniture makers, none of whom could reliably supply truck (see Photo 2.2), who then removes the bag of feces predictable quantities. Obtaining the cover material, and drops it into a 240-liter wheelie bin before placing a therefore, involved inquiring as to the amount available, sack of fresh sawdust and two toilet bags into the bucket. checking the quality (that is, texture), and then negoti- ating a price. In May 2017, x-runner had concerns that When observed on two occasions in different areas, it might be approaching a bottleneck in its ability to the collection process had all the appearance of being source increasing quantities of sawdust for an expanding a normal, everyday activity, as if the feces being moved operation. It experimented for a time in mixing its com- was relatively innocuous, like garbage. There was practi- post with the sawdust, as the former has good physical cally no smell (less than a solid waste collection truck), properties for absorbing water from feces, as well as a and the collection crew noted that smell emanating from range of good microorganisms that prevent smells from the buckets would signal improper use of the toilet. The developing. This approach was dropped, however, due to truck plays a jingle to alert people of its arrival. When unpopularity with the customers, who seemed to view it customers have to leave their houses very early in the as a cynical cost-cutting measure, rather than as a nec- morning, before the arrival of the collection truck, they essary one.4 As of May 2018, x-runner had entered into may leave their buckets in front of their houses. Where working agreements with three larger sawdust suppliers, several neighboring households are in this situation, which has alleviated this pressure. x-runner provides wooden lockers for them, which have Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 15 Photo 2.2 • Swapping out Bags of Feces for Fresh Sawdust and Empty Bags Source: Julian Parker. capacities of as many as 10 full buckets. Each customer which is fully licensed as an entidad prestadora de has a key for the locker and places their bucket of feces in servicios de saneamiento (sanitation service provider; it when leaving home then collects the emptied bucket, EPS) in Peru. The Peruvian EPS licensing regime which has been filled with new bags and sawdust, when covers the drivers, who are EcoCentury staff and they return. Cleaning the buckets is the responsibility of must receive  regular training plus have the required the customer, which raises a potential health risk. insurance. EcoCentury has the capacity to provide replacement trucks in case of breakdown and to con- The collection truck is a leased service that, since duct maintenance during the  night. Therefore, its September 2016, has been outsourced to a  Peru- service significantly reduces the potential logistical vian waste management company, EcoCentury, and regulatory risks for the collection service. 16 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru A 7-ton, four-wheel-drive truck is used for the collec- the treatment plant and the area of collections are fixed, tion and transport service. It is fitted with 11 240-liter unless a new treatment site were to be obtained, in which wheelie bins, into which bags of feces are deposited. At case they would very likely get longer. The efficiency of the start of the collection service, the wheelie bins are the collections service could be improved if one truck loaded with the bags of sawdust that are to be distributed and crew could do two rounds of collections in a day and during that day. For this reason, the larger 1,000-liter collect more feces per round of collection. This would wheelie bins available from the company are not used as require changes in the personnel structure and physical the collection staff cannot reach into the bottom of those equipment for the collections as well as changes in the containers to remove sawdust bags. Optimization of the density and behavior of customers, including: usage of the vehicle space would require a redesign of the wheelie bin–container system and would allow the • Refitting the trucks to increase capacity; collection capacity to increase from about 200 house- • Introducing a system that allows trucks to be loaded holds to about 230 (a 15 percent increase). As of May with containers that are prepared with bags of saw- 2018, x-runner is looking into doing this. dust and empty toilet bags by a separate team (for example, having containers that can be rapidly Once the capacity of the existing truck is exceeded, swapped out with those in the truck); there are various options for increasing the collec- • Densifying customers to allow more feces to be col- tion capacity. One would be to introduce collection lected per stop; and rounds on the weekend. This would incur additional • Minimizing the wait time at stops by expanding the labor costs as labor rates must be increased (50 percent system of lockers so that all customers can leave extra on Sundays) in accordance with Peruvian law. their feces ahead of time. On the other hand, it does allow a small-step increase in capacity without a major jump in operational costs. In November 2017, x-runner was accepted into a one- A second truck could also be introduced. To avoid year program at Columbia University Business School’s major overcapacity, two smaller trucks might be a better Entrepreneurship and Competitiveness in Latin Amer- option, though these would need to be outfitted with an ica (ECLA) program. As a result, the x-runner CEO optimized storage system. A third option would be to has been receiving classes and mentorship to improve introduce a second rotation of collections per day. the operational efficiency of the collection service and reduce the cost per household. As its customer base expands, x-runner is considering various options for increasing the transport capacity The collection service had been the main interface and eliminating underutilization of the space inside between the customers and x-runner, with collection the truck. An approximate timeline for the collection ser- staff fielding questions and issues raised by customers to vice is illustrated in figure 2.2. The travel times between the rest of the team. This slowed collections down, hence Figure 2.2 • Timeline for a Single Rotation of the Collection Service Collection: Travel to treatment site: 4.5–5 hours 35 minutes Travel to service area: Unload: Prep for next day: 35 minutes 1 hour 2 hours Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 17 Photo 2.3 • Customer Services Center in San Juan de Miraflores Source: Julian Parker. the solutions team has taken on the role of interfacing Probac contains a mixture of anaerobic, aerobic, and with the customers. A customer service center has been facultative (anaerobic or aerobic) ­ bacteria. Unlike opened in central San Juan de Miraflores (see photo 2.3), some formulations, it does not require preactivation or where people can visit to talk with x-runner staff; view refrigeration in storage. The black bags are sealed and the toilet, compost, and other products; and get more left for several months (previously six months but now information. This has facilitated the collection team’s three) for the anaerobic degradation process to take work but has not significantly reduced collection times. place. This process breaks down the complex materials Through the ECLA program mentioned, x-runner is in the waste to simpler materials, while the proliferation analyzing some of the factors that could further impact of anaerobic bacteria leads the fecal pathogens to die. the time spent in providing this service. The bokashi bags are stored in batches of 1,200, or about Treatment 35 tons (each bag weighs around 30 kilograms [kg]). When a batch of bags is opened, the waste is placed into At the end of a day’s collection run, the truck delivers a windrow,5 where another dose of Probac is added. The the feces to x-runner’s treatment site (see photo 2.4), a windrow is turned manually on a daily basis (three to 1,000-square-meter (m2) fenced-off piece of land. The four hours work per day) for one week and then left for first stage of the treatment process is an anaerobic com- a week to rest. Facultative and dormant aerobic bacteria posting system called bokashi. The bags of collected feces in the waste become highly active at this point, helping are placed into larger plastic bags (240-liter-­ capacity to outcompete pathogens for nutrients and raising the bokashi bags), three bags of waste per black bag, where temperature in the windrow, thus contributing to further they are slashed open and 5 liters of activated Probac pathogen kill. Ten tons of feces (mixed with sawdust) effective microorganisms are added as a liquid. produces approximately five tons of compost. x-runner 18 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru Photo 2.4 • Composting Site Source: Julian Parker. piloted using boxes instead of the black bags for the treat- assessment and the chances of being granted a license are ment process but found that they took up too much space. low as the law currently does not cover reuse of excreta for agricultural purposes. Superintendencia Nacional Reuse de Servicios de Saneamiento (National Superintendent of Sanitation Services; SUNASS), the regulator, has no x-runner is not able to sell the compost on the open mandate to regulate reuse of fecal sludge. After the aer- market as it does not have a license to do so and the obic process in the windrow is complete, the compost current legal framework does not currently support it. is placed into sacks and stored. Due to the high cost of Getting a license would require an environmental impact the production and storage of compost, x-runner has Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 19 been sending the waste to a landfill since May 2017 and is that the small land footprint of the bokashi com- was expecting to do so up to December 2018. (During posting process makes it amenable to a decentralized this time, it plans to conduct research and development approach and/or sprawling conurbations where land is on the treatment process and on the legal requirements extremely scarce and the distance from the service area needed to meet to treat and commercialize with pro to the peri-urban area (where land is available) is large. bono support from Estudio Echecopar, an established law firm.) The waste is stored in a shipping container Legal and Policy Environment and Impact on at the treatment site, and every nine days, a contractor transports it to the landfill. CBS Services x-runner presents a significant advance in terms x-runner sells small quantities of the compost at US$3 of well-managed on-site sanitation (OSS) s ­ervices for a 20-kg bag and estimates the price for larger quanti- for the urban poor in low-income neighborhoods ties to be US$75 per ton. As of April 2017, x-runner was in Lima, but this has not ­ translated  into active sup- producing about 12 tons of compost. The estimated 2016 port from policymakers or from the main service compost production from collected waste was 120 tons provider, Servicio  de Alcantarillado y Agua Potable for the year. At US$75 per ton, this has an approximate de Lima (Lima Sewerage and Water Supply Service; value of US$9,000. The amount spent on consumables SEDAPAL). A  city sanitation service delivery assess- was about US$6,650, and the total cost of the reuse oper- ment by the World Bank gave poor ratings and a score of ation was about US$24,000 (ignoring any overheads zero to the city for all but four of the 45 indicators. One that should be allocated to this activity). In other words, of the four non-zero scores—for containment—was “due the cost of the additional inputs for the bokashi com- to x-runner’s provision of on-site sanitation facilities in posting process are valued at a little less than 75 percent urban poor areas” (Mujica and Uriarte 2016). SEDAPAL of the current estimated market price of the compost. has an interest in alternative solutions for areas that are (This would decrease to 45 percent if the compost could difficult to sewer and has been considering the inclu- be sold at the highest price reported for other contain- sion of dry toilets in its plans. At the time of the study, it er-based sanitation [CBS] service providers of US$400 was still analyzing options and working through policy per ton.) Therefore, at this time, it does not look likely issues with the Ministry of Housing, Construction and that the additional cost of consumables for the bokashi Sanitation (MHCS). composting process will yield sufficient returns to bring the reuse product to profitability. Even if the land cost As a result of this policy vacuum, there is no way for a could be reduced to virtually zero with the increased small sanitation service provider such as x-runner to land efficiency of the bokashi process, the cost of the delineate a catchment area with a predictable market consumables, labor, and maintenance would exceed the size. Sanitation investment decisions are made by com- value of the compost sold. paring the options available, but this system presupposes a­project-based approach with rapid implementation at The bokashi composting process still remains of inter- scale in a defined geographical area. A  small company est, however, for three reasons. First, there is likely to such as x-runner does not have the resources to com- be ample room for further process efficiency improve- pete/bid for such projects or scale up so quickly. ments, and second, reuse products do not need to be profitable to be economically viable—rather, the net loss This suggests that an explicit recognition of CBS— should be less than the cost of alternative treatment and or a category into which CBS clearly falls—as a disposal. The third and perhaps most important reason sanitation system for the urban poor would be viable ­ 20 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru an important  advance. This would open the door for use, for example. Reviewing legislation to redefine fecal policies and procedures to determine which areas and sludge and its potential for reuse—instead of its cur- populations such services are appropriate for, as well as rent classification as toxic waste that can only be sent to the development of standards. Currently, the predictabil- landfill—would also be an important step forward. ­ ity of x-runner’s market assumes that the public sector will not come up with and subsidize an alternative and Notes competing solution for its area of operation. 1 x-runner has since reregistered in Switzerland, where the company is now domiciled. On the reuse side, Peruvian law allows the reuse of 2 For simplicity, Sanisol is simply referred to as x-runner in the wastewater but not of fecal sludge. This  appears to remainder of this case study. 3 Communities develop spontaneously as people settle on the hill- be linked to a current low demand and usage of fecal sides, self-organize, and later seek legal recognition. A typical com- sludge management (FSM) services. There are no fecal munity size is about 60 households, according to x-runner. 4 Customers generally believe that x-runner is making handsome prof- sludge treatment plants in Peru, and fecal sludge from its from its CBS service. This perception is in part due to the belief septic tanks is reported to be illegally disposed in landfill that sanitation service provision is the government’s ­responsibility— and for a private actor to be providing the service means that it is sites, SEDAPAL sewers, or open areas. Septic tanks are a profitable one. In other cases, the presence of NGOs distributing materials and conducting programs for free has led to a negative relatively rare in Peru, including in Lima, and are used comparison with x-runner’s fee-for-service approach. mostly by institutions. Households that have pit latrines 5 Windrows are long rows of (mixed) materials piled together to com- post aerobically. They are turned periodically to ensure that, over rarely have them desludged, hence the demand for FSM time, all parts of the pile are exposed to the required conditions (aer- has been low. This could change in the medium to long ation and high temperature) for pathogen destruction and break- down of the material. term as low-­ income households fill their latrines and run out of space to replace them and/or if water stress continues to increase. In such an event, allowing reuse Reference of treated fecal sludge would open the possibility for Mujica, A., and Z. S. Uriarte. 2016. Fecal Sludge Management: Diagnostics x-runner to market its reuse products for agricultural for Service Delivery in Urban Areas. Case Study in Lima, Peru. Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 21 C HA P T E R 3 • C BS S E RVI C E PE RFORMAN C E This section examines customer progression, the factors available, between June 2015 (January 2015 for sales) affecting this progression, as well as customer percep- and April 2017. The new users added each month tions concerning the service. would be expected to track installations closely, and the difference between the two represents uninstallations, which are mostly due to people moving (with a few due Customer Growth to customers who failed to observe adequate standards of hygiene and who did not respond to hygiene pro- x-runner’s customer base has grown relatively slowly motion visits from x-runner staff). Installations would but steadily during the period from January 2015 to be expected to track sales, with a short lag time for the May 2017, at which time x-runner had 739 toilets in preinstallation survey and potential dropout of a few operation.1 Growth has been more or less linear during customers who did not have a suitable space for instal- this period, with on average 24 new customers per lation. Data from x-runner show a growing gap between month (ignoring the data for March and April 2017, cumulative sales and cumulative installations. which were anomalously low), or around 290 per year. This is illustrated in figure 3.1. Uninstallations between January 2016 and February 2017 totaled 84 (ranging between three and 15 per Until 2016, x-runner was relying on spreadsheets, doc- month with an average of six per month). The reasons uments, and Google Earth maps to manage information for service termination or toilet removal were: and organize its processes. Hence, some key data such as customer numbers prior to 2015 were not available. • People moving away; In the second half of 2016, it began using Salesforce, a • Family emergencies that severely disrupted their cloud-based customer relations management software, personal finances so that they could no longer and finished migrating the data by early 2017. afford x-runner’s service; The number of 24 new customers added per month is • Consistent failure to meet expected standards significantly below the current sales target of 42, and of usage despite several attempts by x-runner to x-runner has higher targets in its projections for the encourage/demand change; and future. x-runner faces a number of logistical challenges • Debts—unmanaged missed payments of x-runner as it continues to expand, including increasing instal- service fees. lations capacity (without increasing costs), sourcing sufficient quantities of sawdust, and increasing collec- x-runner will work with customers to reschedule tion capacity. Therefore, it may face headwinds for a payments, but sustained debts result in termina- while that constrain its ability to increase its growth rate. tion of service. From January 2016 to February 2017, A linear growth model continuing the current trend an average of 17 percent of customers were more than might be more realistic. one month late with payments (ranging between 16 and 26 percent), which could indicate an issue with the Figure 3.2 shows the growth in sales, installations, affordability of the service. If customers have not paid and the customer base for the period for which data is for more than one month, x-runner staff discusses the 22 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru Figure 3.1 • Customer Growth since January 2015 900 800 700 Toilets (= customers) 600 500 400 300 200 100 0 15 5 15 15 15 5 16 6 16 16 16 6 17 7 17 .1 .1 .1 .1 .1 n. ay y p. n. ay y p. n. ay ar ov ar ov ar Jul Jul Ja Ja Ja Se Se M M M M M M N N Date Total customers Linear growth at 24 new customers Estimated users based per month on sales data Source: Author elaboration based on x-runner data. Note: The lighter dashed blue line represents an estimate based on sales data from January to May 2015, for which actual figures for total users and installations are not available. The figures for this period were derived by subtracting the previous months sales from the June total and then progressively subtracting the sales data for May, April, and so on until January. As the sales data generally exceed the new users added, the dashed line will overestimate new users each month and therefore underestimate the total users (as the sales were subtracted). This explains the apparently steeper curve here. situation with them and offers the opportunity to cre- Quality and Reliability of Services ate a payment plan. If a payment plan cannot be agreed upon, or if debts accumulate for two months or more, Customers were motivated to adopt x-runner’s service x-runner terminates the service. x-runner’s solutions after problems with smells and flies with their house- team is tasked with developing mechanisms for manag- hold pit latrines, as well as the embarrassment they ing and minimizing debts.2 felt when guests would need to use these facilities. The people interviewed were introduced to the x-runner service through recommendations from relatives, mar- Assessing the Value of x-runner Service keting events by the x-runner sales team at community to Customers meetings, and, in one case, a visit to the Family’s cen- ter in San Juan de Miraflores. x-runner’s solutions team This analysis shows that CBS services provided by also conducts random phone calls to customers to verify x-­runner are appreciated by customers and offer a sound proper use of the system and inquire about their satisfac- alternative to other forms of sanitation in informal tion with the service. settlements where difficult access and restrictions on water availability currently create challenges for these All users expressed satisfaction with the x-runner toi- alternatives. lets due to the reduction or elimination of smells and Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 23 Figure 3.2 • Cumulative Sales, Installations, and New Customers Added, by Month 800 700 600 Toilets (=customers) 500 400 300 200 100 0 Jul 5 Au 15 Se 15 O 15 N 15 De 15 Ja 15 Fe 16 M 16 Ap 16 M 16 Jun 6 Jul 6 Au 16 Se 16 O 16 N 16 De 16 Ja 16 Fe 17 M 17 Ap 17 17 .1 1 .1 y g. p. ct. . c. n. b. . r. ay y g. p. ct. . c. n. b. . r. Jun ov ar ov ar Date Cumulative sales Cumulative installations New users since June 2015 Source: Author elaboration based on x-runner data. flies and improved perceived hygiene. However, a few that they accepted the price and were willing to complaints were raised: keep paying it. By comparison, households inter- viewed were generally paying between S/. 35 • Two users reported that plastic bags had broken. (US$11) and S/. 45 (US$14) per month for water, According to x-runner, the issue was that biode- so the S/.  39  (US$13) standard monthly price of gradable bags become weak in summer’s high tem- runner service for a household of one to six the x-­ peratures. As a result, non-biodegradable plastic people is comparable to that. bags are now used from mid-January to March. At • The bank agents through which customers generally the time of this case study, x-runner was still using make their service payments are not always able to normal bags in early June as summer had lasted lon- accept payments. ger than usual but was soon to revert to biodegrad- able ones. Most customers interviewed were satisfied with • One of the community leaders mentioned that cus- the collection service. The collection service was tomers in his community believed that the mix- observed on two occasions in different locations and ing of compost into the sawdust was resulting in a appeared to run smoothly. One leader remarked that ­ poorer-quality cover material. sometimes there is not enough time to prepare even • Several people thought that the price of service though the music is heard ahead of time (the acoustics was too high, notably those with only one or two of the hillsides seem to be fairly good for transmitting people in the household. All conceded, however, sound). Another person interviewed mentioned that 24 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru the collection service was late once due to heavy rains. water availability was also seen as another impedi- The dynamics of the collection are different from those ment to this. of other container-based sanitation (CBS) service pro- viders in that it is the customer’s responsibility to get the waste to the collection point and the collection route is Cost to Service Users more straightforward. x-runner has customer lists for each stop to check that everyone has dropped off their The majority of households are paying US$12 per waste, as well as the phone numbers of customers in case month (US$144 per year) for x-runner’s service, but it misses a collection. It is worth noting that the con- this drops to US$9 per month (US$108 per year) once tract for services is clear on collection times, and usually 50 percent or more of a community has subscribed. missed collections are due to the absence of a customer In the medium to long term, therefore, a rate of US$9 at the agreed-upon pickup time and therefore not linked per household could be realistic for most people if to a complaint. As of May 2018, the percentage of missed x-runner continues to grow and increase market pen- collections was 4 to 5 percent on a daily basis. etration in each community. Larger households (more than six people) pay US$15 per month. These fees are Currently, customers view x-runner’s service as similar to what households pay on a monthly basis for the only solution that works—that is, one that pro- water provided by water tanker. For households that vides them with a hygienic solution that removes have a connection to the SEDAPAL piped network their waste without undue inconvenience or effort (which are very few in x-runner’s service area), the on their part (flush and forget). The five customers price of water can be lower. (of which two are also current or past leaders) inter- viewed in-depth were asked whether they considered Operating and maintaining a pit latrine appears to be x-runner’s service to be a transitional or long-term marginally more expensive for users than x-runner’s solution. Currently, they do not see a better alterna- service, even ignoring the upfront capital cost. Mujica tive. Most mentioned that the government/Servicio and Uriarte (2016) provided average costs for latrines and de Alcantarillado y Agua Potable de Lima (Lima Sew- latrine maintenance and emptying, based on a sample of erage and Water Supply Service; SEDAPAL) plan for 360 households in nonsewered areas of Lima: The average sewerage, but they also said that they have waited cost of constructing an improved (lined) pit latrine was for many years for such a long-term solution and US$283 versus US$48 for an unimproved pit latrine. The construction of infrastructure takes time. So for one average cost of repairs (to the toilet, superstructure, and ex-leader, there is no long-term solution. drainage) was US$110 for the year prior to the study (hence an approximation of the annual average). The average cost In Lima, the concept of having a complete bath- of emptying was US$136.50, and from a small subsample room with toilet and shower facilities is strong at of eight households that had emptied their latrines (others the policy-, service provider-, and household-level, had not experienced pits filling or had constructed new but it does not appear to obstruct the acceptance ones), the average period between emptying events came of dry toilet solutions. A community leader raised to 2.9 years. This produced an average emptying cost of this issue, without prompting, during an interview. US$49 per year. Therefore, the operational cost alone of a The others, when prompted on this issue, focused on latrine—if operated properly with regular emptying—was how unrealistic this was for them. All would desire it, estimated at approximately US$159 per year. Annual costs but none had sufficient space for such a setup; they to x-runner’s users fell between US$108 (with the com- currently bathe using a tub in the bedroom. Limited munity discount) and US$144. Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 25 If water and sewerage could be brought to house- and the majority of the population of x-runner’s holds, monthly fees would be cheaper than what service area, but this solution may not reach many residents of peri-urban settlements are currently peri-­urban settlements in the foreseeable future. The paying for water alone, for pit latrines, or for con- sewer network would need to be extended uphill from tainer-based sanitation (CBS). The social tariff for its upstream peripheries, and new trunk mains would sewerage (that is, for 0 to 10 cubic meters (m3) per be required. The populations of many peri-urban hill- month) is US$0.17 per m3. A monthly fixed charge side settlements have been waiting as long as 20  years of US$1.60 is added. The social tariff for water is for sewerage, which will be more difficult and expensive US$0.38/m3 (SUNASS 2015). Households interviewed informal settlements. to construct in the ­ were using about 1 to 3 m3 per month without flush toilets. Even if water consumption increased to 10 m3 Urine-diverting dry toilets (UDDTs), with three- per month, the total water and sewerage cost would be month storage capacity, receiving municipal around US$7 per month (US$84 per year). This is less emptying and transport services have been iden- than the amount people are currently paying for water tified as a potentially effective and cost-­ conscious alone in informal ­ settlements without piping, where solution. However, the actual implementation of the 3 they need to purchase water from tanker trucks for solution is still pending. The required storage identi- about US$10 to US$15 per month. fied (600 liters for urine and 90 liters for feces) would be difficult to construct in the context of the human settlements on the steep peri-urban hillsides around x-runner Services vs. Available Alternatives in the Lima, though urine could probably be infiltrated into Service Area the ground in some areas. The emptying process would prove to be the biggest challenge as most houses are The only current alternatives for x-runner’s areas of between 10 and 50  meters from the nearest drivable operation that provide a full sanitation service chain road, so significant hand cartage would be required solution are public pour-flush toilets connected to for the first step in the collection chain. Therefore, this sewers or lined pits whose waste is safely emptied, solution would not work for most of the population transported, treated, and disposed. Public pour-flush targeted by x-runner. toilets connected to sewers would mostly be limited to peripheral areas of the settlements, to which they Table 3.1 compares the safety of the x-runner’s CBS could provide a safe sanitation service if the wastewa- service with the alternatives at each point in the ter treatment (WWT) plant was functioning properly sanitation chain, as well as their potential reach— ­ 100 percent of the time (which it currently is not). that is, how well they can ­ penetrate the informal Lined pits with manual emptying do not provide a settlements. safe sanitation chain, as the emptying is unsafe for the operators and there is insufficient space to construct As shown in Table 3.1 and throughout this section, CBS them in some places (and excavation of pits is not pos- services provided by x-runner offer a sound alterna- sible in some areas). tive to other forms of sanitation in areas where difficult access and restrictions on water availability render the Sewerage provision is seen as the most effective roll-out of these alternatives complex and/or unlikely in ­ sanitation solution by government and utility officials the near future. 26 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru Table 3.1 • Qualitative Comparison of CBS and Alternatives Safety of sanitation service chain Containment Emptying Transport Treatment Disposal/reuse Potential reach x-runner CBS CBS In sealed containers (double- Composting—if regulation can be Extensive sealed with plastic bag) established Sewer-based Household flush Sewer WWT plant River Difficult to reach all toilet areas Municipal UDDT with Manual Truck Composting—if regulation can be Medium—requires UDDT three-month established space and access storage Note: Green = safe; yellow = partially safe; UDDT = urine-diverting dry toilet; WWT = wastewater treatment. ­ eographical area. Note on potential reach: Potential to provide defined sanitation service to all households in specific targeted g Notes References 1 The number of customers had risen to 800 by December 2017. Mujica, A., and Z. S. Uriarte. 2016. Fecal Sludge Management: Diagnostics for Service Delivery in Urban Areas. Case Study in Lima, Peru. 2 As of May 2018, it had reduced the percentage of customers late in  their payments to 11 percent by applying various p­ ayment strategies. The team is also conducting different activities to ­ Platzer, C., H. Hoffman, and E. Ticona. 2008. “Alternatives to increase customer satisfaction and monitor more frequently, and Waterborne Sanitation—A Comparative Study: Limits and in a more personalized way, how costumers experience the toilet Potentials.” Presented at the IRC Symposium: Sanitation for the and the collection service. Urban Poor Partnerships and Governance, Delft, The Netherlands. 3 Proposed as a suitable fecal sludge management (FSM) system for SUNASS. 2015. “Management Goals, Tariff Formula, and Tariff low-income areas of Lima by Platzer, Hoffman, and Ticona (2008) Structures for 2015–2020 for Potable Water and Sewerage Services and later by Mujica and Uriarte (2016). Provided by SEPADAL: Metas de Gestión, Fórmula Tarifaria y Estructuras Tarifarias en el Quinquenio Regulatorio 2015–2020, Para loa Servicios de Agua Potable y Alcantarillado Que Brinda SEPADAL S. A.” Resolución de Consejo Directivo No 022-2015-SUNASS-CD. Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 27 C HA P T E R 4 • FINAN C IAL PERFORMAN C E This section reviews the financial performance of Improving the Efficiency of Its Operations x-runner using available data and analysis provided by x-runner. The main cost drivers—that is, the items that most influence the total costs—are the toilet purchase and installation and the consumables for the toilet service. Current Costs and Financing Sources The larger list of main cost drivers and their percentage contribution are given in table 4.1. The x-runner toilet service had a total estimated annual cost of a little less than US$336,458 in 2017, The purchase and installation of toilets is the most with 18 percent (a little less than US$60,000) recov- expensive part of the operation at 19.4  ­ percent ered via fees from users. Revenues from the fees charged (US$70,077), of which 66 percent (US$46,447) is the to service users covered about 38 percent of the costs of cost of purchasing and importing the toilet. The toilet providing the collection and transport service. However, price is already heavily discounted from the U.S. retail reuse activities generated some operating costs that did price. x-runner pays US$80 plus about US$35 for impor- not generate corresponding revenues due to regulatory tation costs compared to a retail price of US$1,389 in the restrictions on the sale of reuse products. United States, though the model provided to x-runner x-runner’s operation has been funded by private is a stripped-down version with several parts removed, and government foundations with approximately including the electric fan. Still, the customer base for US$300,000 to US$400,000 per year. Financing has x-runner is used to this high-quality product, and largely been provided from two types of foundations: there would be a high chance of rejection were it to be those linked to private companies (mostly Swiss com- replaced with a product of a similar price at market rates. panies) and government-backed foundations (such as x-runner’s own fiber-glass precursor toilet cost around Grand Challenges Canada). The former provide more twice as much as the Separett one. Although there is no flexible funding as they do not have restrictions on the reason at this time to assume that anything will change funding of staff salaries, whereas the latter do. Private in the supply relationship that x-runner has with Sepa- donations and, at one point in 2015, a crowdfunding rett, it does constitute a risk for the company. campaign have provided funding injections that— The consumables for the x-runner toilets represent though smaller than those of foundations—have bridged 12.6 percent of the total costs. The biodegradable bags critical gaps for x-runner’s operations. (and plastic bags for three to four months in the sum- This level of funding has been sufficient for x-runner mer) used to line the toilets and hold the waste represent to get by, and x-runner has restructured with a view 64  percent of this cost center, and sawdust makes up to focus more on optimizing its processes. In order to most of the rest. Given that x-runner has faced challenges achieve a more sustainable expansion and innovate with getting adequate quantities of sawdust, and the fact for a more sustainable financial structure, higher that the biodegradable bags cannot be used year-round, funding levels are needed to support the changes and there is a case for researching and testing alternatives. experimentation required. x-runner does not have For example, x-runner could look at reusable (that is, commercial debt. washable—if the water supply and economics work) 28 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru Table 4.1 • Main Cost Drivers for x-runner Operations Cost categories Amount (US$) Percentage of total 2016 budget Toilet purchase and installation (including payroll) 70,077 19.4 Consumables for toilet service (sawdust and 45,420 12.6 plastic bags) Sales and marketing (mainly sales team payroll) 37,619 10.4 Composting operation 24,763 6.9 Leasing of transport service for collections 22,632 6.3 liners, and it should carry out additional research into reuse would generate revenues from this activity, which the option of mixing the sawdust with other materials is currently merely a cost center. At present, the commer- and how to win acceptance of this through awareness/ cialization of fecal sludge byproducts is not prohibited promotional campaigns or incentives. Sawdust supply or illegal per se, but it is not specifically covered in the could potentially be outsourced in different ways—for regulatory framework. This complicates the possibility example, experimenting with a franchise to multiple of selling compost, fuel briquettes, or biogas to any large suppliers to reduce x-runner’s overhead for this activity. organization as it would limit opportunities for exports. The sales and marketing cost is largely composed of The transport leasing increased significantly in 2017 payroll for the six-person sales team. Increased focus from 2016 following a change of service provider to on incentives such as the referral scheme and the wom- EcoCentury. As of May 2018, x-runner has been able to en’s networking initiative could prevent the sales and improve its efficiency significantly with careful optimi- marketing cost from rising as quickly as the customer zation of truck capacity, the number of trucks, number base and revenue, thereby reducing the cost per capita. of rotations per week, daily schedule, and organization Improving the efficiency and effectiveness of the sales of the preparation process. However, it still sees poten- and marketing operation appeared to be a principal tial for improvements in optimizing the added space focus at the time of the field study in May 2017. in the trucks with the placing and distribution of the containers. The composting process represents a relatively small percentage of the overall costs. The land-related costs and consumables (bokashi bags and Probac effective Plans for Expansion microorganisms) together form a little less than 60 per- cent of the treatment costs. The use of Probac reduces For the foreseeable future, x-runner plans to limit the land required for disposal; therefore, it would appear itself to the low-income areas of southern Lima, that reducing one of these cost components would result despite ad hoc requests to bring its service to the north- in the other increasing. Given the relatively small pro- ern part of the city (where the context is quite different). portion of the costs represented by the treatment process It is planning to focus on further market penetration in overall, it does not appear that there are opportunities for the area of Pamplona in the San Juan de Miraflores dis- significant cost-cutting here. From a regulatory perspec- trict, while expanding out also into the Villa María del tive, however, authorizing sales of fecal sludge byproduct Triunfo and Villa el Salvador districts. Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 29 The strategy for expansion is to improve the effective- Without an explicit legal or policy framework for the ness and reach of its sales processes while working on sale of reuse products from fecal sludge, x-runner can- the efficiency of operations and sales. Its major costs are not sell its compost on a commercial scale. The storage all variable, including its main capital costs—the toilet capacity for the bagged compost product at its treat- units. Therefore, x-runner is able to expand its operation ment site is full, and at the time of the case study (June without any major hurdles to overcome—there is no new 2017), it is paying for the waste to be collected for final toilet factory to build at a particular scale, for example. disposal at a landfill. Should x-runner be able to start There are also no plans to purchase a truck as transport selling compost commercially in the future, it would services are currently leased to a regulatory approved need a larger composting site. Initially, it could expand entidad prestadora de servicios de saneamiento (sanita- by about 50 percent into the land adjacent to its current tion service provider; EPS) and x-runner does not have site (owned by the same landlord), but it would soon the funds and was not planning to invest in the approval need to move to a larger site that would likely be farther process as of June 2017. away from its toilet service area. In this case, unit land prices would likely be a bit lower, but the transport time A big question over the future operation is whether and distance would go up, altering the cost structure, but the current treatment process will be maintained. probably only marginally. 30 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru C HA P T E R 5 • K E Y L E SSONS x-runner is providing a much-needed service in x-runner is leveraging the capacities of suppliers to peri-urban areas of Lima, where there are no other reduce the complexity of its business to a manage- reliable options. Despite the government’s policy to able level. Separett provides a high-quality containment provide improved sanitation solutions to all the urban solution at a very discounted price (to its credit and to population by 2021, there are an estimated 800,000 peo- x-runner’s ability to develop and market its solution). ple who are not connected to sewers, and less than 1 per- This removes the need for x-runner to build a toilet cent of the fecal waste flow is safely managed in Lima’s manufacturing line. In addition, EcoCentury provides nonsewered areas (including a substantial contribution a robust and scalable transport solution, removing the from x-runner services). need to obtain accreditations and the  extra overhead that comes with monitoring and complying with regu- Although there seems to be a feeling among some cus- latory standards, which EcoCentury does on x-runner’s tomers that the price for x-runner services is rather behalf. It remains to be seen whether this will impact on high, they appear to be willing to pay it. x-runner’s x-runner’s ability to improve its cost-efficiency. container-based sanitation (CBS) service appears to be cheaper, or at least not more expensive, than operating Customer growth is somewhat slow (and below targets) a pit latrine (with periodic maintenance and emptying). but steady, and the potential market is large. ­ x-runner The CBS service provider’s customer base is steadily now has to work on increasing cost-­ efficiency and growing and its precio comunal discount for customers addressing potential bottlenecks. x-runner has averaged in communities where x-runner achieves 50 percent or 24 new customers per month since 2015. This is a little more market penetration results in a significant (25 per- more than half the sales target of 42 sales per month. The cent) price reduction. sales and marketing process is being refocused toward spreading awareness about available incentives and pro- x-runner’s collection process, which is the only one motions for successfully referring non-customers to the in which customers carry their waste to a pickup service. x-runner’s operations appear to be facing a num- point, appears to be acceptable to customers and the ber of bottlenecks in the near term, including limitations wider community. This approach allows x-runner to in the sawdust supply chain, a need to start scaling up col- better align with household schedules, as users can lection service capacity while avoiding idle capacity, and drop off sealed bags and pick up new materials on their ­ constraints on the sale of compost and the resulting max- own time, and to serve areas where access is difficult. ing out of storage capacity at the treatment site. Robust It is not clear how transferable this approach is to other solutions to these issues are needed to unlock the expan- contexts and whether there are ­ specific factors that x-runner’s operation. sion of ­ make it work in this one. The overall hygienic safety of this approach would also need to be confirmed, as it An explicit recognition of CBS—or a category into appears to be highly reliant on customer education and which CBS clearly falls—as a viable sanitation on customers adopting hygienic practices for handling ­ system for the urban poor would be an important the waste. There have been cases where customers have factor for enabling public sector ­support. Although lost access to the service due to poor hygienic practices. the policy and institutional framework in Peru permits Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 31 the CBS approach, it does not enable it. Currently, the development of service standards. In addition, regula- predictability of x-runner’s market assumes that the tion of fecal sludge reuse (currently not allowed) would public sector will not come up with and subsidize an allow x-runner to collect revenues from the produc- alternative and competing solution for its area of oper- tion of compost, which is currently carried out with ation. A recognized CBS category would open the a highly efficient process simply to minimize land use door for policies and procedures to determine which associated with waste disposal and generates costs but areas and populations it is appropriate for and the no revenues. 32 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru A P P E NDIX A • PEOP L E INTE RVIE W E D Organization Designation Name x-runner Chairperson Isabel Medem x-runner Chief executive officer Raúl Briceño x-runner Chief financial officer Mónica Ramos x-runner Chief operating officer Maria Pia Quiroz x-runner Customer relationship manager Natalia Benavides x-runner Head of installations Celi Sedano x-runner Head of sales Esther Calderón x-runner Waste treatment plant manager Nemecio Cóndor World Bank Lima Office Water and sanitation specialist Malva Rosa Baskovich Via San Juan Community leader Rogelio Servicio de Alcantarillado y Agua Potable Head of Investigations, Innovation Oswaldo Hernán de Lima (Lima Sewerage and Water Supply and Standardization Team Vargas Cuellar Service; SEDAPAL) Ministry of Housing, Construction and National sanitation director Oscar Pastor Sanitation Superintendencia Nacional de Servicios de Tariff Regulation Management Ana Vergara Saneamiento (National Superintendence of Supervisor II Sanitation Services; SUNASS) SUNASS Tariff Regulation Management Luis Acosta SUNASS Tariff Regulation Management Arturo Lázaro SUNASS Tariff Regulation Management Gretelina Castañeda Grand Challenges Canada Consultant Alyse Schrecongost Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru 33 APPENDIX B • X-RUNNER/SANISOL ORGANOGRAM Chief executive officer Chief Chief Human Solutions Sales financial operating resources manager manager officer officer expert Payment Installation Supply Waste collection Customer expert and Plant Composting Sales agent chain collection and Assistant service technical manager expert (5) management manager technical expert assistant assistant Collection Plant Customer personnel personnel service Brand Installer (3) (3) agent (2) manager Installation team Community (part-time) manager (2) Key Current positions Future positions 34 Evaluating the Potential of Container-Based Sanitation: x-Runner in Lima, Peru W18040