Financing a Greener Future – Part 2

Exploring business opportunities in Asia and beyond

Our research analysed 11 country-markets in five regions where the cement industry is expected to grow. We estimated that US$5 billion in investment could introduce about 2 gigawatts (GW) of WHR technology in developing countries. To put that amount in perspective, 2 GW of electric power produced by WHR would be enough to power about 1.3 million – 1.5 million homes.

Spearheaded by Japan in the 1980s, waste heat recovery was introduced to China through a joint venture between Kawasaki Engineering Co., Japan, and Anhui Conch, China. The technology has greatly expanded in China since 1998 in response to escalating energy costs and government policy, including tax breaks and 2011 national energy efficiency regulations, which mandated the technology’s use at newly constructed cement plants. Today, China is the world’s leader for waste heat power generation.

IFC is exploring opportunities to partner with major equipment manufacturers and vendors and otherwise help promote waste heat recovery, drawing on Asia’s experience with the technology. One of the major issues IFC hopes to address is the need to reduce the financial risk of WHR. IFC is building on its experience in structuring project finance to offer new ways to promote waste heat recovery, including off-balance sheet finance models that satisfy cement producers, operators and bankers.

IFC has supported a number of waste heat recovery projects. The China Utility Based Energy Efficiency Finance Program provided access to finance through commercial banks to numerous projects. The World Bank’s China Energy Efficiency Financing Program also supported energy efficiency development. In 2014, IFC provided a US$40 million loan and helped to mobilise US$25 million for energy efficiency improvements, including a WHR project in Turkey at Cimko Cimento ve Beton Sanayi ve Ticaret A.S.

One man’s trash is another’s treasure

The use of waste materials to fuel the kiln is another way cement producers can reduce dependence on fossil fuels and reduce greenhouse gases. This method holds the added environmental benefit of recycling materials that would otherwise need to be processed and eliminated. Waste can be trash collected by municipalities, straw and other agricultural materials, old tyres, forestry byproducts or petroleum-based waste like solvents and paints. The waste becomes a renewable resource, and its use by the cement industry eases pressure on landfills, and reduces risks of groundwater contamination.

Recently, IFC, Proparco and Lafarge agreed to establish a programme for converting municipal trash into fuel in Iraq. The programme’s first project will be located in the Kurdistan region of Iraq, where IFC will help fund construction of a modern landfill and facilities for prepping the waste, which is currently disposed of in a poorly managed landfill that generates significant water pollution. Not only will the renewable energy source displace carbon-emitting fossil fuel consumption, the reduction of landfill waste will emit less methane, a greenhouse gas even more harmful than carbon dioxide.

The sun and wind story

Power reliability can be an issue in almost every region of the world. Businesses worldwide adopt captive use of power to secure electricity supply. The use of renewable technologies can be cheaper than the grid and can be significantly cheaper than diesel generation. Plus, renewables come with significant environmental benefits that allow companies to meet Corporate Social Responsibility goals.

Commercial and industrial installations include photovoltaic (PV) power plants ranging from a few hundred kilowatts to a few megawatts. They can be rooftop or ground mounted, built in six months or less, and can promote independence from unreliable grids or inflated electricity rates. Since 2007, IFC has invested almost US$1 billion in 60 deals across the solar industry supply chain, and we are interested in working with companies to develop the potential for solar in the cement industry.

There are some interesting examples of how it can work in the industry. Lark Energy’s 9 MW solar farm at Hanson Cement’s Ketton plant in the UK covers 10% of the plant’s annual electricity consumption. Emerging market governments are looking at this example for how solar can be deployed for industrial use.

Wind farms must be located in areas of high wind, usually at some distance to the manufacturing facility. The most common approach for wind power procurement is through agreements to take power generated by wind farms and transmitted through the national power grid. For example, in Mexico, Cemex has long-term bilateral agreements to buy power generated by the 250 MW Eurus wind farm in Oaxaca, a project financed by IFC.

Conclusion

Demand for cement is booming in the developing world. Global cement consumption has more than doubled over the last 15 years, reaching over 4.0 billion t. Most of this growth has been in the emerging markets, which consume over 90% of the world’s cement production. New technologies and more efficient use of resources are crucial to help the cement industry fulfil this demand and limit the industry’s environmental footprint. China’s experience shows that regulation can spur investment in efficiency. IFC is committed to providing leadership in developing innovative financing models and advice to promote a greener cement industry.

Note

IFC is the world’s largest global institution dedicated to private sector development. It has a presence in more than 100 countries and a committed portfolio of over US$65 billion. An electronic version of the ‘Waste Heat Recovery for the Cement Sector: Market and Supplier Analysis’ report can be found on the IFC’s website: www.ifc.org.

This is part two of a two-part article written by Michel Folliet for World Cement’s March 2015 issue and abridged for the website. Subscribers can read the full issue by signing in, and can also catch up on-the-go via our new app for Apple and Android.

Read the article online at: https://www.worldcement.com/europe-cis/25122015/financing-a-greener-future-part-1-2/