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Water International

Vol. 36, No. 4, July 2011, 505521

Efficiency indicators for waste-based business models: fostering


private-sector participation in wastewater and faecal-sludge
management
Ashley Murraya *, Olufunke Cofieb and Pay Drechselc
a
Waste Enterprisers Ltd. and International Water Management Institute-Ghana, Accra, Ghana;
b
International Water Management Institute, Accra, Ghana; c International Water Management
Institute, Colombo, Sri Lanka

Opportunities for publicprivate partnerships based on cost recovery from the reuse of
human waste remain unexplored. In this paper, the authors present four potential busi-
ness models involving aquaculture, biogas recovery, compost production and the use
of faecal sludge as an industrial fuel, and describe their associated financial flows. The
business models are based on efficiency indicators that can provide decision support to
local authorities and entrepreneurs in choosing options that are best suited to local con-
ditions and needs. The ultimate target should be that a portion of revenues from reuse
can help finance less-profitable sections of the sanitation service chain.
Keywords: reuse; urban sanitation; Ghana; decision support; resource recovery; cost
recovery

Introduction
The private sector has an important role to play in improving wastewater and faecal-
sludge (FS) handling in emerging urban areas. Small-scale independent providers (SSIPs)
are already quite active in many developing cities, filling profitable and critical niches
such as cesspit and latrine emptying, and providing pay-to-use toilet blocks (Schaub-Jones
2010). In Latin America and Africa, it is estimated that 5085% of urban residents rely on
SSIPs for sanitation services, although this does not necessarily equate to having access to
adequate sanitation (Davis 2005). Developing-country governments are increasingly look-
ing to boost private participation in the sector (Haarmeyer 1997, UN Millennium Project
2005). For example, Ghanas National Environmental Sanitation Strategy and Action Plan
(NESSAP) puts forward the targets of 100% privately operated desludging (that is, of
household and community septic tanks and latrines) and fully franchised management of
all government-built treatment plants by 2015 (MLGRD and EHSD 2010).
The private sector entered the water and sanitation scene towards the end of the
International Drinking Water and Sanitation Decade of the 1980s. However, poor progress
toward water and sanitation for all, in combination with a shift toward neoliberal (free-
market) economic policies among development agencies and other international actors, led
to an upsurge in private participation (Budds and McGranahan 2003). Private-sector partic-
ipation (PSP) has been carried out through a variety of arrangements (leases, concessions,

Corresponding author. Email: ashley@waste-enterprisers.com

ISSN 0250-8060 print/ISSN 1941-1707 online


2011 International Water Resources Association
DOI: 10.1080/02508060.2011.594983
http://www.informaworld.com
506 A. Murray et al.

build-operate-transfer), all of which involve investment in sanitation infrastructure with


the goal of improving the performance and efficiency of sanitation services by having a
direct role in their provision (for example, billing, maintenance and plant management)
(Davis 2005).
Far from achieving the envisioned scale or impact, private-sector investment and com-
mercial bank lending to the sanitation sector has been in decline since peaking in the
late 1990s (Budds and McGranahan 2003, Hall and Lobina 2008). In particular, low-
and middle-income countries have had difficulty attracting private investment due to the
low probability of cost recovery (Budds and McGranahan 2003, Davis 2005). The fee-for-
sanitation-service model that has governed PSP in sanitation has constrained private actors
to serving only communities and households that have the ability to pay for the full cost
of those services. Cross-subsidization is impossible, since the minority of those who could
pay a higher charge is far too small to subsidize the large majority who are unable to meet
the required fee.
Instead of giving up on PSP in sanitation, it is time to think more creatively about
modes of engagement. We argue that there are untapped opportunities for developing novel
publicprivate partnerships (PPPs) that hinge on resource recovery from human waste.
These partnerships could help incentivize and even co-finance the sanitation sector while
simultaneously promoting small- and medium-scale entrepreneurs (Kone 2010).
In this article, we put forth four waste-based business models that have potential to
simultaneously generate a profit for entrepreneurs and businesses, and help finance a sani-
tation value chain that adequately protects public and environmental health. We arrived at
these business models through developing and applying efficiency indicators, which depict
the physical and financial costs and benefits of reusing wastewater and FS generated by
a standardized population size. Comparing the financial, logistical and market profiles
of an array of reuse options enables us to assess the suitability of different waste-based
businesses in different contexts.
The business models presented here are not only a departure from disposal-oriented
waste management, but also from reuse scenarios that do not allocate revenues back to
the collection and/or treatment of waste. Our intent is to push the limits of conven-
tional thinking on wastewater/FS management and sanitation financing. The examples
we give are far from exhaustive, and could be modified and extended in various ways
to match local conditions. In the Ghana case presented here, the efficiency indicators
were intended to facilitate a quick and quantitative comparison of the merits and require-
ments of an array of possible wastewater and excreta reuse options, including agricultural
(for example, use of urine and faecal sludge for fertilizer, wastewater-fed aquaculture),
domestic (biogas generation from faecal matter and use as cooking fuel) and industrial
(use of FS as a fuel in cement kilns or furnaces). To understand which option is the
most appropriate, the indicators shed light on the financial flows associated with reuse,
as well as the physical land or other form of production factors, resources or capacities
that are required of the end users to productively reuse the waste generated by a given
population size.
While we contend that reuse has substantial benefits, we recognize that some reuses
are more costly, while some may not be applicable. By revealing the allocation of financial
costs and benefits linked to different reuse value chains, the indicators are instrumental in
identifying business models and PPPs that have potential to achieve and to finance, at least
partially, the safe and adequate collection, treatment and disposal or reuse of human waste
while providing profits to entrepreneurs.
Water International 507

Methods1
The concept of the efficiency indicators emerged as a result of a study aimed at compiling
a compendium of reuse cases for wastewater and FS (Murray and Cofie 2010). The study
shed light on the limited utility of such case studies for decision support because there was
not a standardized means of comparing each reuse option, and evaluating their transfer-
ability to a given area or population size. The efficiency indicators are intended to fill that
void and are informed by the vast literature on the design and use of indicators as decision-
making tools (Lundin et al. 1999, Sahely et al. 2005, Murray et al. 2009). We present a set
of five efficiency indicators:

r required (waste product) receiving capacity of end user;


r marginal production gain through reuse;
r market value of marginal production gain;
r capital cost linked to additional waste reuse; and
r operation and maintenance (O&M) costs linked to additional waste reuse.

Data for the efficiency indicators were collected from reuse-oriented sanitation systems in
Africa and Southeast Asia. The indicators are evaluated for 10 potential waste mediums and
five unique reuse options, each characterized according to the point at which the financial
and resource value is recovered: directly without any formal treatment; in situ, occurring
during or simultaneously with treatment; and post-treatment (Table 1). The financial data
were normalized to Ghanaian prices (but reported in US$) so they could be accurately
compared.
The results of the efficiency indicators are presented in terms of 100,000 person-
equivalents (pe) of waste producers. We chose this size because it is representative of a
small peri-urban settlement or the population of a district within a larger city, and because
it is a large enough number to give readers a sense of the scalability of different reuse
options in different urban settings. The spreadsheet model we developed for calculating the
indicators can be used for any population size, and financial data can be easily customized
to reflect local costs.
Most of the reuse options we present have been proven on a variety of scales and in
different locations. One exception is the use of dewatered FS as a fuel (for incineration in
boilers or furnaces), which was included because it appears to be a promising and emerging
option for urban settings. The use of conventional sewage sludge (from activated sludge
systems) as a fuel in industry is a recent trend, accounting for about 2% of fuel substitution
by the global cement industry alone (Fytili and Zabaniotou 2008). Descriptions and data
inputs and assumptions associated with the five indicators are described below and further
detailed in the supplementary information (SI) (Tables SI.1 and SI.2).

Required receiving capacity of end user


Perhaps the most critical condition for implementing a given reuse is the availability of end
users who can absorb the supply of the waste (product). Assuming 100,000 pe (waste pro-
ducers), the capacity requirement indicator quantifies the land-area or daily-fuel demand
that would be required to absorb waste in different forms from that population. Agricultural
capacity requirements are based on best available information from field trials and obser-
vations of selected waste applications, and generally assume that the water or nutrient
application is the minimum requirement for plant growth, given health and environmental
508

Table 1. Description of each human-waste medium, its embodied resource of primary value (input), its productive use (output) and quantity of input
generated per person-equivalent (pe) per year.

Resource (input)
Medium of primary value Productive use/output Qty input/pe/yr
Direct (untreated) use
Urine N fertilizer/crops 2 kg N(Langergraber and Muellegger 2005)
A. Murray et al.

Raw faecal sludge N, org. carbon fertilizer and soil 0.34 m3 (assumes one part public toilet at 100
conditioner/crops g/TS-cap-d and two part septic sludge at 20 g
TS/cap-d)
Untreated wastewater Water, nutrients if irrigation/crops 26 m3 (assumes 85 L/p.e./d and 85% return as
undiluted wastewater)
In-situ use
Faecal sludge carbon household biogas/fuel 0.73 m3 (EAWAG/SANDEC 1998)
Faecal sludge carbon community biogas/fuel 0.73 m3 (EAWAG/SANDEC 1998), 70% captured
Wastewater (in final maturation water, N, P aquaculture/fish 26 m3 (assumes 85 L/p.e./d and 85% return as
ponds of a waste-stabilization wastewater)
pond system)
Post-treatment use
Dewatered faecal sludge org. carbon solid fuel/industrial products 260 MJ (assumes one part public toilet at 100
g/TS/p.e./d and two part septic sludge at 20 g
TS/p.e./d; Assumes 15 MJ/kg DS (Fytili and
Zabaniotou 2008))
Dewatered faecal sludge org. carbon soil conditioner/crops 100 kg (at 70% dry solids) (EAWAG/SANDEC
1998)
Co-composted faecal sludge org. carbon soil conditioner/crops 69 kg mature compost (Cofie and Kone 2009)
Treated wastewater water irrigation/crops 26 m3 (assumes 85 L/p.e./d, 85% return as
wastewater)

Note: N = nitrogen; TS = total solids; cap = capita; P = phosphorus; MJ = megajoule; DS = dry solids.
Water International 509

considerations. For in situ reuses, such as biogas recovery and aquaculture, this efficiency
indicator is not applicable. Table SI.2 details the assumptions used to quantify this indicator
for each waste stream.

Incremental production gain through reuse and associated market value


An important indicator of the financial viability and potential end-user demand for differ-
ent reuse options is the incremental production gain that is achieved, and the associated
net benefit. For agricultural reuses, this indicator captures the incremental yield change
compared to the most likely conditions farmers face without waste reuse. Thus, for land
application of urine, incremental yields could be calculated compared to yields that are
expected from conventional (nitrogen, phosphorus, potassium or urea) fertilizers, or no
extra inputs, depending on local availability and common practices. Where wastewater
allows irrigation, the incremental yields could be compared with rainfed agriculture as
the baseline condition. The incremental yields from soil conditioners, such as co-compost
from organic solid waste and FS, could be compared to cultivation without inputs or to
other inputs relevant in the local context.
The number of studies quantifying the yields achieved when applying excreta/
wastewater in various forms is small (Germer and Sauerborn 2006, Cofie et al. 2008,
Adamtey et al. 2010). We could not identify one crop that has been examined for different
waste streams in the West African sub-region, where most of the cases were drawn from.
Common cash crops usually vary between cereals and vegetables, depending on market
forces and season. Lacking an obvious crop choice, we have chosen maize for our analy-
sis of the land application of FS (fresh, dewatered, composted) and urine. For wastewater
irrigation, we examine the cultivation of a mix of perishable (exotic) vegetables. Typical
yields are taken from various regions of Ghana. Subsequently, the incremental yields and
retail values from different reuses are not strictly comparable. However, in practice, differ-
ent waste streams are applicable for different crops and climate zones. Assumptions behind
the evaluation of this indicator for each reuse are shown in Table SI.2.

Capital, operation and maintenance costs associated with reuse


The costs attributed to this indicator include the capital and operating costs of co-requisite
treatment technologies and any additional costs associated with preparing a waste stream
for reuse. Transportation costs are neglected when they offset a transport cost that would
otherwise occur. For example, the use of raw FS (within the city) could have zero costs
linked to it if we assume that the transport costs to a farm are equivalent to those that
would have been borne of transporting the sludge for disposal. The operating costs include
assumptions about transportation distances (from the plant to point of use) and labour,
based on conditions in Ghana. Assumptions made for costs linked to each reuse are shown
in Table SI.2.

Results
Receiving capacity of end users
Based on our assumptions about the thresholds for different agricultural end uses, there is
a two order of magnitude difference in the land requirement for the reuse of different waste
streams and waste-based products (Figure 1). Land application of urine requires the most
land area. Wastewater-fed aquaculture and wastewater irrigation require the least land for
510 A. Murray et al.

1200

Land area required (ha) 1000 urine as fertilzer

800

co-compost as
600 soil conditioner

dewatered FS as
raw FS as soil soil conditioner
400
conditioner (un) treated ww
for irrigation
200
ww-fed
aquaculture
0
--------Direct reuse---------------------------------In situ-------Post-treatment----------------
REUSE PHASE

Figure 1. Land area required for agricultural reuse of different waste streams generated by 100,000
pe/yr. Land area for wastewater (ww) assumes three crop cycles/ha.yr; urine assumes two crop
cycles/ha.yr; raw FS (faecal sludge), dewatered FS and co-compost assume one application/ha.yr.
(See Table SI.2 for data and assumptions.)

making use of the entire volume of waste generated by 100,000 pe (Figure 1). However,
there may be soils and crops where more nitrogen than we have assumed (100 kg N/ha
with two applications per year) would be appropriate, which would reduce the required
land area (Richert et al. 2010).
For energy-related end uses, the minimum required receiving capacity of end users is
defined as the fuel demand necessary to utilize all fuel/power made available by 100,000
pe of FS. In the case of household-level biogas recovery, cooking fuel demand must equate
to at least 1.5 hours of cooking per day. For a centralized system serving a high density
community, 860 households (hh), each cooking for at least two hours per day, would utilize
all of the gas produced. A more realistic sales option might be commercial food vendors,
who have much higher fuel demands. Alternatively, the biogas could be used to power a
125 KW generator (Table 2). Where FS is used as an industrial fuel, target industries must
have a total daily fuel demand of at least 3.7x105 megajoules (MJ) to absorb all of the FS
generated by 100,000 pe (Table 2).

Incremental value of reuse (product)


Hypothetical market value of input
Each waste medium, if defined as a resource, has a quantifiable economic value as an input
into further production (producing crops or fish, cooking food or powering industry). For
each of the FS-borne agricultural inputs, we have estimated the theoretical value of the
waste product and its added (incremental) value, compared to a scenario without the waste
product, using the most appropriate method. In the case of Ghana, the method was not
Water International 511

Table 2. Comparison of required end-user receiving capacity for fuel-based end points for faecal
sludge (FS).
Receiving capacity of end
Medium and reuse user Production equivalent

FS for household (hh) biogas 1.2 m3 biogas demand/d 1.5 hr cooking on gas burner
recovery (Jha year unknown)
FS for high-density 1200 m3 fuel demand/d or 860 hh cooking for 2 hr; or
community biogas recovery 125 KW electricity 50 street lanterns of
demand/d 40-watt-bulb-eq burning eight
hours) (Jha year unknown)
Dried FS for fuel 3.7105 MJ/d fuel demand 90 tons clinkera -eq (Murray
and Price 2008)

Notes: a Clinker is a mixture of limestone, clay and oxides which is pyroprocessed with gypsum in kilns to
produce cement.

always the same, thus limiting somewhat the comparability of the values we have derived.
However, in our theoretical example, we depict the range of methods that could be applied
(Drechsel et al. 2004). In most cases, we used the replacement cost approach (RCA). For
example, we compared the nutrient content of the FS with that of a fertilizer with known
price (Table 3). Similarly, we used the RCA to value FS as a fuel input by comparing
the expected energy output (in biogas, electricity, steam) to the cost of traditional sources
(Table 3). In the case of FS co-compost, we used data describing farmers willingness to
pay, as those data were available for Ghana. Untreated and partially treated wastewater for
irrigation and aquaculture, respectively, are typically considered free resources in Ghana,
and thus we did not put a value on them (Table 3). The applicability of each method of
value estimation, and the resulting estimates, will vary regionally.
Dewatered FS, as a fuel and co-compost, has high potential market values $335,000
and $518,000, respectively and is perhaps the most marketable product. Household-level
biogas recovery sums to the greatest value, at nearly $5 million (Table 3). However, to
attain this value, livestock waste must be added as a supplement during household-level
biogas generation. This greatly increases the energy content of the waste, in comparison to
community-level biogas systems, which we assume receive human waste only.

Incremental benefit
The value of reuse can be estimated also by quantifying the incremental benefit.
Accordingly, we quantified the additional yield (value) farmers can achieve when wastew-
ater is available. When we applied the productivity change approach (PCA) to each of the
agricultural endpoints, we faced different baselines (for example, no inputs versus con-
ventional fertilizers; see Table 3). Furthermore, crop yields, the number of crop cycles,
and the market prices of crops can vary substantially between locations and across sea-
sons. In addition, crop yields are subject to notable stochastic influences, which we do not
account for in our study. Thus, our goal in this portion of our analysis is to demonstrate the
pertinence of examining incremental values, while not placing too much emphasis on our
empirical results.
Using co-compost on maize fields generates the greatest incremental value of the alter-
natives we consider. The estimated value of $880,000 per year reflects the higher maize
yields achieved by using the co-compost. Direct reuse of urine also generates a large return,
Table 3. Handling costs and revenue potential associated with different productive reuse options for waste streams generated by 100,000 pe/yr. Capital costs
512

assume a one-time outlay; all other costs and revenues are on an annual basis. The PCA data are only partially comparable as they use different baselines.
Capital costs linked O&M costs linked Hypothetical market Incremental
Medium to reuse ($) to reuse ($) value of input ($) benefit ($) Sources for input data
Direct (untreated) use
Urine 3,750,000 ($150/hh for 660,000 240,000 600,000 (Germer and Sauerborn 2006; Fall
UDDT) + 6,000 (urine 2009; Schroder 2010)
A. Murray et al.

storage)
Raw faecal sludge 0 0 326,000 458,000 (Adamtey 2011)
On-farm treated wastewater 75,000 110,000 NA 559,000 (Danso et al. 2006; Seidu and
Drechsel 2010)
In-situ use
Household (hh) biogas recovery 8,750,000 ($350/hh) 0 4,811,000 NA (DevPart-Nepal 2001; Winrock
($200/hh.yr) International 2004)
Centralized biogas recovery (gas 983,000 1,045,000 43,000 47,000 193,000 76,000 NA Private Ghanaian contracting firm;
and electricity, respectively) Ghana Energy Foundation
Aquaculture 14,000,000 (WSP) + 150,000 (WSP) + NA 220,000 (von Sperling and Augusto de
1000 (aq-specific) 54,000 Lemos Chernicharo 2005; Murray
(aq-specific) 2010)
Post-treatment use
Dewatered faecal sludge (as fuel) 65,000 12,000 335,000 NA (Fytili and Zabaniotou 2008; Cofie
and Kone 2009; Zurbrugg et al.
Unpublished manuscript)
Dewatered faecal sludge (as soil 65,000 11,000 73,000 472,000 (Fytili and Zabaniotou 2008; Cofie
conditioner) and Kone 2009; Adamtey 2011;
Zurbrugg et al. Unpublished
manuscript)
Co-composted faecal sludge 93,000 168,000 518,000 880,000 (Cofie and Kone 2009; MLGRD and
EHSD 2010; Adamtey 2011)
Treated wastewater 14,000,000 (WSP) + 150,000 52,000 559,000 (Danso et al. 2006; Bahri 2009)
conveyance costs

Note: UDDT = urine-diverting dry toilet.


Water International 513

even when compared with industrial fertilizer. However, as stated above, much more land is
required when applying urine, than is needed when using other waste streams to generate
incremental value. The other uses of wastewater and faecal sludge as agricultural inputs
generate incremental values ranging from $460,000 to $560,000. This indicator does not
apply to fuel endpoints.

Capital, operation and maintenance costs of reuse


The estimated capital costs associated with different reuse options include $0 for direct
reuse of FS, $65,000 for the use of dewatered FS for agriculture or industrial fuel, $1
million and $8.75 million for community- and household-level biogas systems, and $14
million for wastewater-fed aquaculture (in a waste stabilization pond [WSP]) and irriga-
tion with effluent from a WSP. This wide range of capital and O&M costs can be slightly
misleading, as some of the associated costs, such as those for a WSP system, must be
paid regardless of reuse, and would not necessarily be the financial responsibility of an
entrepreneur. For example, the incremental cost of adding aquaculture or irrigation to a
WSP is trivial, and those activities can provide ways to recover capital and operating costs
of the facility. If a WSP does not exist or has not been built, the capital and O&M costs
for wastewater irrigation are greatly reduced when utilizing on-farm treatment methods.
Such a strategy is consistent with the World Health Organizations (WHO) multi-barrier
approach, when properly implemented (WHO 2006a).
While at the population scale, biogas recovery appears very expensive, when priced per
installation the systems are $350 per household, a cost that can be recovered in fuel savings
in less than two years. The O&M costs associated with reuse also vary widely, ranging
from $0 to about $660,000 for urine recovery as fertilizer.

Discussion
Although the approach requires further fine-tuning and more input data, the application
of different efficiency indicators offers clear decision support for determining appropriate
reuse options, given common constraints, such as the land area or the amount of capital
available. The indicators also offer interesting insights regarding the potential to achieve
closed-loop concepts at scale. In other words, different reuse options support different
stakeholder or decision-maker objectives, such as minimizing land use, maximizing the
amount of agricultural land served, minimizing capital or operating costs, or fostering the
most viable business/private sector opportunities. Our primary goal is to present the indi-
cators as a possible tool to identify opportunities for business-oriented reuse systems that
can help finance and incentivize adequate sanitation.
Based on the outcomes of our efficiency indicators, we map potential business arrange-
ments and financial flow models that could be developed involving public and private
stakeholders (Boxes 1 and 2). Some reuse options including wastewater-fed aquaculture,
biogas recovery and (co)-compost production, appear most easily taken to scale and sus-
tained, if catalyzed by the participation of third-party private actors, whose roles include
adding value to raw or partially treated waste streams before selling their products on the
market (Box 1). Other reuse options, such as wastewater for irrigation, land application of
raw FS, and use of dewatered FS as an industrial fuel, may be amenable to direct partner-
ships involving treatment facilities, FS conveyance companies, and end users. The model
for the latter is presented in Box 2.
514 A. Murray et al.

Box 1
Wastewater-fed aquaculture

Fish
Private wastewater-fed Consumers
fish
aquaculture business
Waste stabilization pond (WSP) $191,000
(e.g. government run)
$ for WSP $19,000
O&M

Operating expenses:
e.g. fingerlings, labour

In the proposed wastewater-fed aquaculture business arrangement, a third-party pri-


vate actor would own and operate a commercial fish farm in the maturation ponds of
a WSP system. As compensation for use of the existing infrastructure (i.e. pond(s))
and nutrient-rich water, which would partially or fully offset feeding requirements,
the farmer would give a portion of his or her revenue to the WSP toward its ongoing
operation and maintenance (O&M) costs. This model is currently being piloted by
Waste Enterprisers Ltd. at a community-scale WSP in Ghana (Murray 2010) and will
be further evaluated through a project funded in 2011 by the African Water Facility.

Community-based biogas recovery

CO2 offset CERs


(i.e. carbon credits) to
international market

Community FS $/ton CO2


toilet blocks biogas
Private biogas
plant Consumer
$/m3 OF, FS $962,000

Organic food
(OF) waste $124,000 +
OF
debt financin

Operating expenses:
e.g. labor, electricity

In the proposed community-based biogas business model, a private entrepreneur


would build a biogas plant for receiving faecal sludge (FS) from multiple
community/public toilets in the vicinity. Additionally, the system could be designed
to accept organic food waste, which would enhance biogas yields. The biogas
entrepreneurs monetary demand for FS would incentivize and make financially
possible the ongoing maintenance and timely extraction of FS from toilet blocks.
Water International 515

Box 1 (Cont).

This reverse tipping fee would be afforded through revenues from sales of the gas.
Based on the local market demand for natural gas products, end uses could include
bagging the fuel in transportable biogas pillows for use as a cooking fuel; conversion
to electricity using a biogas-fed generator; or purification and compression for use
as a transport fuel. To use biogas as a transport fuel it is purified and bottled under
high pressure at which point it is compatible with condensed natural gas vehicles
(Kapdi et al. 2005, Vijay 2007). Thus, based on the demand, additional infrastructure
may be needed to produce a marketable produce an expense that is not captured in
Table SI.2.

Co-composted faecal sludge as soil conditioner

CERs
CO2 offset (i.e. carbon credits)
to international
marketa

$/ton CO2
FS treatment plant
(TP1) (e.g. govt. 1 unit dewatered FS
Private
operated) composting Consumers:
$690,000
facility farmers, plantations,
$ for TP1,2 O&M (windrows, fertilizer companies,
Solid waste (SW) sorting, real estate
tipping point (TP2) mature compost
storage) developers, etc.
(e.g. govt. operated)
3 unit organic SW

$147,000 +
debt financing

Operating expenses:
SW sorting, turning,
bagging, transport

The co-composting business model is similar to the aquaculture and biogas models: a
third-party entrepreneur is the recipient of the waste streams, adds value to them, and
goes on to sell to consumers. Like the aquaculture business, we assume the compost
entrepreneur would partner with a FS treatment plant and as rent would pay a portion
of their revenues to the treatment plant operator to help cover on-going O&M costs.
However, even in the absence of a cash transaction from the composting business
to the treatment plant, the formers demand for dewatered faecal sludge and organic
waste would reduce costs and/or storage burdens on the treatment plant.

a
Waste Concern in Bangladesh, through a joint venture with World Wide Recycling,
established the first carbon-trading-based composting facility (Waste Concern 2010).
516 A. Murray et al.

Box 2.
Dewatered faecal sludge as fuel one example of a reuse option that appears well
suited for direct relationships between FS treatment plants (with drying beds) and
receiving industries.

Dewatered faecal sludge (DFS) as fuel


Fuel
Fecal sludge Industry
treatment plant
$ for O&M $$/MJ
$

Transportation

Using dewatered FS as an industrial fuel may best be realized through direct part-
nerships between treatment plants and the recipient industry. As the FS does not
require treatment or handling beyond the treatment plants normal processes (that is,
drying in open-air beds) to harness its fuel value, there may be less need for a third-
party entrepreneur to catalyze the reuse. However, there may be a role for a private
transporter if neither party has the means to take responsibility.
The price would be set based on the net fuel value of the FS; after covering the
cost of transportation, excess revenues could be put toward o-going O&M costs at the
FS treatment plant.

Of note, each of the business arrangements proposed in Boxes 1 and 2 include a mon-
etary flow that helps to offset the costs of waste collection and conveyance or the O&M
expense at sanitation facilities. The details of the publicprivate partnerships we propose
serve best to illustrate a wider array of arrangements that could be implemented. For
example, in the aquaculture model (Box 1), instead of the fish farmer giving a portion
of his profits to the treatment plant for its O&M costs, the farmer could purchase effluent
from the treatment plant. Alternatively, an aquaculture company could take ownership and
assume responsibility for the treatment plant and the fish farm.

Risks, challenges and sensitivity analyses associated with proposed business models
According to the outcomes of the efficiency indicators, and keeping in mind the limitations,
we have identified what we believe to be promising waste-based business models. However,
each of these options has potentially significant risks and challenges associated with them
that must be mitigated prior to implementing any form of business.

Aquaculture
Market and consumer acceptance of fish grown in partially treated wastewater is criti-
cal (Abdul-Rahaman 2007), as the willingness to pay for the fish is the parameter with
the greatest impact on profit margins, according to our sensitivity analysis. All else being
Water International 517

equal, a retail price of 25% of original estimates is the breakeven point. Indeed, wastewater-
fed aquaculture is widely practised in the world, particularly in Asia (Nandeesha 2002,
Kunong 2007, Marcussen 2007), and it is sanctioned by the WHO, provided that water-
quality and fish flesh quality standards are met (WHO 2006b). Assuming there is a
market for fish grown in partially treated wastewater which could include animal feed
producers one strength of the aquaculture business model is that once the WSP is in
place, the additional start-up and operating costs are small. The business is fairly sensitive
to fish survival, although based on our sensitivity analysis, revenues are positive with only
16% surviving to harvest. Even doubling the operating costs does not endanger solvency
of the business.

Biogas
The initial capital investment required for biogas recovery and upgrading for sales is likely
to be a major barrier to entry for small- and medium-scale entrepreneurs. Further, the cap-
ital cost is particularly sensitive to the required retention time of the FS. If the 12 days
assumed in this study are not sufficient to achieve the projected biogas yields, capital costs
will increase about linearly with increases in retention time. One way to overcome the
initial cost barrier is for sanitation practitioners and policy advocates to engage with micro-
finance and other lending institutions to gain their confidence in such business ventures,
and to use them for identifying and recruiting new entrepreneurs to the sector. If the bio-
gas plant is of sufficient scale, the sale of carbon credits on the international market may
be another financing option (Aziz and Chowdhury 2009). A financial model considering
carbon credits could also be applied to other reuse options, such as co-composting, FS as
industrial fuel, or wastewater irrigation for crops, fodder or forest plantations.
Assuming the biogas production plant can be financed, one risk to the success of the
business is consumer demand for the biogas. Given the challenges of transport and storage,
there should be demand for the gas in the immediate vicinity, if it is used as a cooking fuel.
However, consumers may be reluctant to use biogas sourced from faecal waste for cook-
ing (as found in Ghana and Nepal) (pers. comm. between E. Kwofie of the biogas plant at
Koforidua Polytechnic Koforidua, Ghana, and A. Murray, Lohri et al. 2010). However, with
the appropriate marketing and education, these concerns can often be resolved. If biogas
is produced in sufficient volumes, another endpoint option is conversion to electricity.
This would increase the capital and operating costs, and the process has a conversion effi-
ciency of less than 30%. However, conversion to electricity might create a more marketable
product and thus support a more profitable business.

Co-compost
Evaluating actual market demand may be the most crucial step before launching a compost-
production business. According to our analysis, among capital costs, operating costs and
willingness to pay, business viability is most sensitive to willingness to pay. All else being
equal, if the retail price drops below 29% of our assumed rate, the business will become
insolvent. Similarly, if less than 32% of the compost produced is sold, revenues will be
negative. While ensuring the presence of customers may seem obvious, early instances of
municipal waste composting typically emphasized technical aspects. These projects often
neglected to conduct a market analysis, which should consider not only demand but also
competing products that might jeopardize the viability of the waste composting (Cofie
et al. 2008).
518 A. Murray et al.

We have assumed in our study the use of manual windrows as the composting
infrastructure, which, all else being equal, has a simple payback period of a quarter of
a year. The capital cost of a mechanized system of the same scale would be approximately
15 times greater and the O&M costs would increase by 150% (MLGRD and EHSD 2010).
This would extend the simple payback period to about five years.

Dewatered FS as fuel
The use of dewatered FS as an industrial fuel is less likely to generate the consumer discom-
fort that can challenge the success of wastewater-fed aquaculture and biogas businesses.
Rather, the biggest challenge is that this end use is still an unproven technology. Prior to
establishing operable business models, pilot-scale demonstration projects are needed to
verify the concept, to define operating standards, such as optimal substitution rates and
dry solids content, and to ensure that burning faecal sludge does not cause stack emissions
to exceed air quality standards. For FS treatment plants and recipient industrial plants to
establish successful partnerships, some external support may be required to provide the
necessary training and capacity building for the system design and for ongoing quality
control and monitoring.

Conclusions and recommendations


Historically, reuse has been an afterthought in sanitation planning, included largely for
environmental reasons (for example, resource recovery, closed-loop concepts and green-
house gas mitigation) (Lazarova et al. 2003, Jenkins and Sugden 2006). While those
benefits are numerous, they are not monetized, so many reuse projects remain at the
pilot scale, unless they are subsidized. Our analysis demonstrates that different types of
reuse can serve different situations and publicprivate partnerships. The data show great
potential to channel a portion of revenues back into less profitable parts of the sanita-
tion service chain. Thus, reuse has significant value to offer to the sanitation sector if
strategically employed.
There is a critical need for new financial models in the sanitation sector and for expand-
ing the role of private actors, to promote more rapid and sustained expansion of improved
waste management. We hope the efficiency indicators and waste-based business models
presented here will inspire a new cadre of entrepreneurs and decision makers to initiate
a new cycle of innovation in sanitation. Full-scale waste-based businesses would not only
benefit sanitation locally, but provide important data for refining the efficiency indicators
and strengthening their reliability for future decision support.
Mainstreaming waste-based businesses will require up-scaling and testing of exist-
ing and emerging reuse options, full-scale operation and marketing of various inputs and
outputs of reuse, and the incorporation of the lessons learned into future waste-based busi-
nesses. Local governments and decision makers also have important roles to play in the
innovation process. They must foster an enabling environment for private actors and pro-
mote consumer adoption of waste-based products by providing appropriate pricing and
regulatory incentives, and other supportive programmes.

Note
1. Supporting information on the methodology is available with the online version of this article,
and can be viewed under the supplementary files tab. Please visit the article page on the pub-
lishers website for further information, at www.tandfonline.com/rwin. A copy of the material
may also be obtained directly from the corresponding author.
Water International 519

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