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This article was downloaded by: [41.206.37.141] On: 20 August 2013, At: 09:50 Publisher: Routledge Informa Ltdhttp://www.tandfonline.com/loi/rwin20 Efficiency indicators for waste-based business models: fostering private- sector participation in wastewater and faecal-sludge management Ashley Murray , Olufunke Cofie & Pay Drechsel Waste Enterprisers Ltd. and International Water Management Institute-Ghana, Accra, Ghana International Water Management Institute, Accra, Ghana International Water Management Institute, Colombo, Sri Lanka Published online: 10 Aug 2011. To cite this article: Ashley Murray , Olufunke Cofie & Pay Drechsel (2011) Efficiency indicators for waste-based business models: fostering private-sector participation in wastewater and faecal- sludge management, Water International, 36:4, 505-521, DOI: 10.1080/02508060.2011.594983 To link to this article: http://dx.doi.org/10.1080/02508060.2011.594983 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use of the Content. This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly forbidden. Terms & " id="pdf-obj-0-6" src="pdf-obj-0-6.jpg">

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Efficiency indicators for waste-based business models: fostering private- sector participation in wastewater and faecal-sludge management

Ashley Murray a , Olufunke Cofie b & Pay Drechsel c 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 Published online: 10 Aug 2011.

To cite this article: Ashley Murray , Olufunke Cofie & Pay Drechsel (2011) Efficiency indicators for waste-based business models: fostering private-sector participation in wastewater and faecal- sludge management, Water International, 36:4, 505-521, DOI: 10.1080/02508060.2011.594983

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use of the Content.

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Vol. 36, No. 4, July 2011, 505–521

Downloaded by [41.206.37.141] at 09:50 20 August 2013 Water International Vol. 36, No. 4, July 2011,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 " id="pdf-obj-2-8" src="pdf-obj-2-8.jpg">

Efficiency indicators for waste-based business models: fostering private-sector participation in wastewater and faecal-sludge management

Ashley Murray a *, Olufunke Cofie b and Pay Drechsel c

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 public–private 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 50–85% 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, Ghana’s 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,

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  • 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 public–private 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.

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Methods 1

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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:

required (waste product) receiving capacity of end user; marginal production gain through reuse; market value of marginal production gain; capital cost linked to additional waste reuse; and 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

0.73 m 3 (EAWAG/SANDEC 1998) 0.73 m 3 (EAWAG/SANDEC 1998), 70% captured 26 m 3 (assumes 85 L/p.e./d and 85% return as wastewater)

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.

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)) 100 kg (at 70% dry solids) (EAWAG/SANDEC

2 kg N(Langergraber and Muellegger 2005) 0.34 m 3 (assumes one part public toilet at 100 g/TS-cap-d and two part septic sludge at 20 g

26 m 3 (assumes 85 L/p.e./d and 85% return as wastewater)

69 kg mature compost (Cofie and Kone 2009) 26 m 3 (assumes 85 L/p.e./d, 85% return as wastewater)

Qty input/pe/yr

TS/cap-d)

1998)

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solid fuel/industrial products

Productive use/“output”

household biogas/fuel community biogas/fuel aquaculture/fish

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

soil conditioner/crops

soil conditioner/crops

fertilizer/crops fertilizer and soil conditioner/crops

irrigation/crops

irrigation/crops

Resource (“input”) of primary value

Water, nutrients if undiluted

N N, org. carbon

org. carbon

org. carbon

org. carbon

carbon carbon water, N, P

water

Faecal sludge Faecal sludge Wastewater (in final maturation ponds of a waste-stabilization pond system)

Co-composted faecal sludge Treated wastewater

Dewatered faecal sludge

Dewatered faecal sludge

Direct (untreated) use

Untreated wastewater

Post-treatment use

Urine Raw faecal sludge

In-situ use

Medium

  • 508 A. Murray et al.

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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

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  • 510 A. Murray et al.

1200 1000 urine as fertilzer 800 co-compost as soil conditioner 600 dewatered FS as soil conditioner
1200
1000
urine as fertilzer
800
co-compost as
soil conditioner
600
dewatered FS as
soil conditioner
400
raw FS as soil
conditioner
(un) treated ww
for irrigation
200
ww-fed
aquaculture
0
Land area required (ha)

--------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 3.7x10 5 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

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Table 2. Comparison of required end-user receiving capacity for fuel-based end points for faecal sludge (FS).

Medium and reuse

Receiving capacity of end user

Production equivalent

FS for household (hh) biogas recovery FS for high-density community biogas recovery

Dried FS for fuel

1.2 m 3 biogas demand/d

1200 m 3 fuel demand/d or 125 KW electricity demand/d

3.7×10 5 MJ/d fuel demand

1.5 hr cooking on gas burner (Jha year unknown) 860 hh cooking for 2 hr; or 50 street lanterns of 40-watt-bulb-eq burning eight hours) (Jha year unknown) 90 tons clinker a -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,

and Kone 2009; Zurbrugg et al . Unpublished manuscript) 472,000 (Fytili and Zabaniotou 2008; Cofie and Kone 2009; Adamtey 2011; Zurbrugg et al . Unpublished manuscript) 880,000 (Cofie and Kone 2009; MLGRD and EHSD 2010; Adamtey 2011) 559,000 (Danso et al . 2006; Bahri 2009)

Lemos Chernicharo 2005; Murray

Table 3. Handling costs and revenue potential associated with different productive reuse options for waste streams generated by 100,000 pe/yr. Capital costs 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.

(Fytili and Zabaniotou 2008; Cofie

(DevPart-Nepal 2001; Winrock International 2004) Private Ghanaian contracting firm;

600,000 (Germer and Sauerborn 2006; Fall 2009; Schroder 2010)

Ghana Energy Foundation 220,000 (von Sperling and Augusto de

(Danso et al . 2006; Seidu and

Sources for input data

Drechsel 2010)

458,000 (Adamtey 2011)

2010)

O&M costs linked Hypothetical market Incremental

benefit ($)

559,000

NA

NA

NA

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value of input ($)

193,000 76,000

518,000

73,000

326,000

335,000

52,000

240,000

($200/hh.yr)

NA

NA

4,811,000

150,000 (WSP) +

to reuse ($)

(aq-specific)

43,000 47,000

168,000

110,000

11,000

12,000

0

150,000

660,000

0

54,000

3,750,000 ($150/hh for UDDT) + 6,000 (urine storage)

Capital costs linked to reuse ($)

14,000,000 (WSP) + conveyance costs

14,000,000 (WSP) + 1000 (aq-specific)

In-situ use Household (hh) biogas recovery 8,750,000 ($350/hh)

Centralized biogas recovery (gas 983,000 1,045,000 and electricity, respectively)

93,000

75,000

65,000

0

65,000

Note: UDDT = urine-diverting dry toilet.

Dewatered faecal sludge (as fuel)

Dewatered faecal sludge (as soil conditioner)

Co-composted faecal sludge

Raw faecal sludge On-farm treated wastewater

Direct (untreated) use

Treated wastewater

Post-treatment use

Aquaculture

Medium

Urine

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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 Organization’s (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.

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  • 514 A. Murray et al.

Box 1

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

Organic food e.g. labor, electricity Operating expenses: debt financin $124,000 + biogas $/ton CO 2 OF
Organic food
e.g. labor, electricity
Operating expenses:
debt financin
$124,000 +
biogas
$/ton CO 2
OF
FS
(OF) waste
$962,000
toilet blocks
Community
CO 2 offset
Consumer
CERs
(i.e. carbon credits) to
international market
$/m 3 OF, FS
Private biogas
plant

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 entrepreneur’s monetary demand for FS would incentivize – and make financially possible – the ongoing maintenance and timely extraction of FS from toilet blocks.

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Box 1 (Cont).

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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

1 unit dewatered FS SW sorting, turning, bagging, transport Operating expenses: Solid waste (SW) tipping point
1 unit dewatered FS
SW sorting, turning,
bagging, transport
Operating expenses:
Solid waste (SW)
tipping point (TP 2 )
(e.g. govt. operated)
FS treatment plant
(TP1) (e.g. govt.
operated)
3 unit organic SW
storage)
sorting,
(windrows,
$ for TP 1,2 O&M
facility
composting
Private
$147,000 +
real estate
fertilizer companies,
farmers, plantations,
Consumers:
developers, etc.
CERs
(i.e. carbon credits)
to international
market a
$/ton CO 2
$690,000
CO 2 offset
debt financing
mature compost

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 former’s 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).

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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

Box 2. Dewatered faecal sludge as fuel – one example of a reuse option that appears
$ Transportation “Fuel” Industry $ for O&M $$/MJ Fecal sludge treatment plant
$
Transportation
“Fuel”
Industry
$ for O&M
$$/MJ
Fecal sludge
treatment plant

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 plant’s 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 public–private 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

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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).

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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 public–private 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

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