The future of waste management in Queensland

WHO SHOULD READ THIS

• Local governments and the private sector in the waste industry.

THINGS YOU NEED TO KNOW

• There are legislative and policy reforms in respect of waste management within Queensland.

WHAT YOU NEED TO DO

• Keep up to date with the legislative changes in respect of waste management.

The Queensland Government has made a range of legislative and policy reforms with respect to the management of the waste industry which will significantly change the way in which we deal with waste in Queensland.

This article identifies the legislative and policy reform introduced by the Queensland Government and considers the emerging trend in waste to energy infrastructure and the issues which local governments and participants in the waste industry should note.

Legislative reform

From 1 July 2018, chapter 5A of the Environmental Protection Regulation 2008 (Qld), which regulates the provision of waste management services for local governments, expires. The expiry of chapter 5A transfers the regulation of waste management to local governments. The Queensland Government has now taken to setting the strategic direction and approach to resource recovery, recycling and waste management for Queensland.

From 1 July 2018, local governments will need to consider regulating the provision of waste management in its local government area by way of a local law.

Policy reform: Transforming Queensland’s Recycling and Waste Industry Directions Paper

The Queensland Government has released The Transforming Queensland’s Recycling and Waste Industry Directions Paper which provides a comprehensive waste management strategy to attract industry investment and innovation, create new jobs, ensure no direct impact on Queensland households, deliver long-term value to the environment and move Queensland towards a circular economy.

The directions paper builds on the Queensland Waste Avoidance and Resource Productivity Strategy (2014 – 2024) (Waste Strategy) which identifies the State’s strategic targets, objectives and priorities for waste management.

The Waste Strategy has set a landfill diversion target to reduce the amount of waste going to landfill by 15% over the life of the Waste Strategy. That target, together with the prioritisation to focus on developing new technology, is aimed at facilitating an opportunity for local governments and the private sector to invest in alternative waste technology such as energy from waste infrastructure.

Changes in the international environment

China was Australia’s biggest market for recycling waste, however the recent ban on the import of Australian plastics, textiles and paper is expected to put pressure on landfill sites in the long-term if alternative solutions are not provided, including the development of micro-industries in recycling and manufacturing.

Queensland State budget

With the introduction of the waste levy, the State has allocated $100 million over the next three years to support Queensland’s resource recovery and recycling industry through the Resource Recovery Industry Program in the 2018-2019 State budget. The program aims to facilitate private sector and local government projects delivering innovative solutions to meet the Queensland’s strategic targets in the Waste Strategy.

Any project which invests in developing alternate waste management technology such as waste to energy infrastructure may be eligible for funding from the Resource Recovery Industry Development Program.

What is a Waste to Energy Facility?

Such facilities convert waste into energy (such as heat, electricity, gas or liquid fuels) where there is an economically viable end use. Waste to energy facilities can include anaerobic digestion, combustion, pyrolysis gasification and plasma gasification.

An example of a waste to energy facility in Australia is the Kwinana project in Western Australia which will incinerate up to 400,000 tonnes of post-recycling municipal solid waste per annum with the capacity of producing 32MW of electricity per annum (which is estimated to power approximately 46,000 households). The Kwinana project was estimated to create 800 jobs during the construction period and 60 operational jobs upon completion.

Key issues for consideration

Waste to energy facilities are an emerging concept within the Queensland environment and have yet to be fully tested, however given the latest legislative and policy reforms it is important for both local governments and the private sector to bear in mind the following when considering any waste to energy facility project:

• Planning and environment – The current legislative framework does not provide for an efficient planning and environment approval process to facilitate the development of a waste to energy facility. It is therefore important that early due diligence is undertaken to ensure the most efficient approvals pathway is identified to facilitate the delivery of a waste to energy facility. Things to consider include the interface with the regulatory framework (including development approvals under a local government planning scheme and environmental approvals under the Environmental Protection and Biodiversity Conservation Act 1999 (Cth)) and the interface with the local community and environment (such as eliminating odour and noise pollution).
• Offtake arrangements – Underpinning the development of the waste to energy facility will be the customers being supplied the energy and other by-products. Will the waste to energy facility, like most biogas and biomass projects, be collocated to a captive customer (e.g. waste from a council owned landfill being converted to energy to fuel council assets) or will the waste to energy facility supply energy back into the national electricity grid at spot market pricing, to a third party aggregator (where a third party manages the sale of the energy combination with other sources of energy) or to a third party under a power purchase agreement? The economic viability of these projects is to be supported by these offtake arrangements and the revenue these arrangements generate.
• Storage – As battery storage technology improves and becomes more widely available, it will be necessary to consider the application of this technology to waste to energy facilities to determine whether there can be improved economic returns from the project.
• Quality and quantity of fuel source – Even though there is the desire to turn waste into energy as part of the solution to recycling and landfill challenges now facing governments, it is still important to understand how such technology will work with the expected fuel sources (being the different categories of waste) and the volume of such waste to ensure the appropriate mix of technology and cost is achieved. Some technology can drive better conversion rates but comes at a higher cost. Some technology will only handle certain categories of waste meaning there still remains a process to filter out waste that either should not be used or cannot be used to convert into energy or other by-products. It will be important to get the specification of this right, as this will be the basis of the design of the facility and the obligation of councils to provide the volume of waste to support the expected revenue streams.
• Contract structure – Setting up the correct contractual framework to design, construct, operate and maintain a waste to energy facility is important to ensure that the following risks for both local governments and the private sector in delivering the waste to energy facility are managed. Some of the key issues to consider include managing service performance, remuneration for the construction and operation and maintenance of the waste to energy facility (e.g. whether there will be ‘take or pay’ arrangements, separate payment of capital costs or traditional utility charges only), insurance, ownership and funding arrangements (particularly where off-balance sheet considerations are necessary and the private sector funds the construction). Additionally, there may be opportunity to obtain separate revenue streams from renewable energy certificates or carbon credit units, which needs to be factored into the remuneration structure, with clear identification of who owns these revenues.
• Managing service performance – Upon the commissioning of a waste to energy facility, the primary focus of the operation and management of the waste to energy facility in respect of contract management is the ongoing provision of waste and payment for the waste management services by the relevant authority and the energy supplied. There are certain key considerations in this respect:
  • firstly, ensuring that the structure of the contract between the relevant parties provides for a payment regime which provides both certainty and flexibility (given the long-term nature of the contract) for all parties
  • secondly, local governments should consider regulating waste management services (through a local law) within its local government area such that there is a steady supply of waste to service the waste to energy facility and optimise service performance, and
  • thirdly, ensuring the remuneration structure and performance framework appropriately incentivises the contractor to ensure the energy production is optimised and the customer (e.g. local government) obtains the benefits from the waste to energy facility (including improvement in the diversion from landfill).

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.