A critical analysis of public private partnership model in energy from waste projects

Abstract

The Public Private Partnerships (PPP) and the Private Finance Initiative (PFI) have been significantly adopted over the last three decades as a mechanism for the delivery and financing of projects. Various infrastructure project types in the energy and the transport sectors have adopted this procurement system for their ‘anticipated’ effectiveness in risk distribution and value for money. Yet, their acclaimed benefits, particularly in ensuring value for money in the waste to energy – or energy-from-wastes (EfW) – sector are under significant scrutiny. Governments and investors are increasingly questioning their fiscal efficiency and overall benefit to taxpayers. Despite these concerns, studies investigating whether PFI provides value of money of PFI in EfW are lacking. This study addresses this gap by comparing the PFI models used in the UK and Canada in currently operative EfW projects using mixed risk epistemology approach combining methods that provide both a real and objective evaluation of issues and risks and a subjective (or opinion-based) evaluation. The former is achieved through a quantitative probabilistic model for simulating EfW feasibility at the operation phase. The quantitative probabilistic model is capable to model and capture how operational phase costs and profitability are affected by lifecycle risks (such as quality of service driven by contractual requirements that are usually passed on to the Operation and Maintenance (O&M) contractor) and a range of technical, payment and incentive dynamic variables and their fluctuations. If the impact of these variables is not considered and modelled accurately, the O&M contractor could incur significant losses undermining the viability of the EfW project. The latter employs a psychometric methodology to delve into the primary concerns of professionals involved in EfW projects regarding associated risks. The results show that common O&M risks identified in EfW PPP projects in UK and Canada prevail around unplanned maintenance, infeed waste reduction, market price, unsustainable debts, and policy changes.