Energy Recovery from the Organic Fraction of Municipal Solid Waste: A Real Options-Based Facility Assessment

Luigi Ranieri, Giorgio Mossa, Roberta Pellegrino and Salvatore Digiesi
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Luigi Ranieri: Department of Innovation and Engineering, Università del Salento, 73100 Lecce, Italy
Giorgio Mossa: Department of Mechanics, Mathematics and Management, Politecnico di Bari, 70126 Bari, Italy
Roberta Pellegrino: Department of Mechanics, Mathematics and Management, Politecnico di Bari, 70126 Bari, Italy
Salvatore Digiesi: Department of Mechanics, Mathematics and Management, Politecnico di Bari, 70126 Bari, Italy

Sustainability, 2018, vol. 10, issue 2, 1-15

Abstract: During the last years, due to the strict regulations on waste landfilling, anaerobic digestion (AD) of the organic fraction of municipal solid waste (OFMSW) is increasingly considered a sustainable alternative for waste stabilization and energy recovery. AD can reduce the volume of OFMSW going to landfill and produce, at the same time, biogas and compost, all at a profit. The uncertainty about the collected quantity of organic fraction, however, may undermine the economic-financial sustainability of such plants. While the flexibility characterizing some AD technologies may prove very valuable in uncertain contexts since it allows adapting plant capacity to changing environments, the investment required for building flexible systems is generally higher than the investment for dedicated equipment. Hence, an adequate justification of investments in these flexible systems is needed. This paper presents the results of a study aimed at investigating how different technologies may perform from technical, economic and financial standpoints, in presence of an uncertain organic fraction quantity to be treated. Focusing on two AD treatment plant configurations characterized by a technological process with different degree of flexibility, a real options-based model is developed and then applied to the case of the urban waste management system of the Metropolitan Area of Bari (Italy). Results show the importance of pricing the flexibility of treatment plants, which becomes a critical factor in presence of an uncertain organic fraction. Hence, it has to be taken into consideration in the design phase of these plants.

Keywords: waste management; energy recovery; anaerobic digestion; real option theory (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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