Landscape Study of Potential Investment Funds for Fecal Sludge and Resource Recovery in India
External report

Published in: 2012

Consultancy report commissioned by Bill & Melinda Gates Foundation, Seattle, USA

Menon, M. H.

Content - Summary

India has among the worst sanitation outcomes in the world and faces serious energy shortages that threaten its economic development, yet the area of energy recovery from fecal sludge has received little attention from government, sanitation implementers and funders. While this is largely due to the stigma attached to applications involving the use of fecal waste and the complexities related to its handling, the low salience is also due in part to the relative lack of development in India’s waste to energy (W2E) sector. This is reflected in the low levels of interest among commercial and social impact investors – with waste to energy projects comprising less than 3 percent of overall investments since 2010.

The sources of investor caution can be traced to a combination of factors like regulatory and policy challenges (for instance, the heavy subsidies for solar energy and the variability of tariffs for renewable energy projects across states); logistical issues (for example, the significant constraints to reliable and predictable availability of feedstock for waste to energy plants); and the near absence of business models that lend themselves to scale and sustainability – particularly models that combine revenue streams from power sales, renewable energy credits and bio-­?waste applications like fertilizers. Consequently, there is limited interest even in technology research and development for waste to energy as the business applications are unclear. All these factors are further compounded for fecal sludge to energy (FS2E), which is a marginal topic even for those currently invested in the W2E sector.

However, recent macro-­events in India might portend a positive shift in the enabling environment for the waste to energy space, which could have trickle down benefits for fecal sludge to energy as well. The Government of India is showing signs of raising the priority (and funding) accorded to improving the coverage and quality of sanitation services in urban and rural areas, which could potentially improve the supply chain issue for fecal sludge. Further, the Central Electricity Regulator Commission has notified the issuance and trading of renewal energy certificates1 on energy exchanges to promote renewable energy generation and also notified rules on subsidies and tariffs for renewable energy technologies. At least a couple of organizations are working on demonstration projects for off-­?grid power solutions for rural and urban slums using fecal sludge as the primary feedstock. Finally, at least one company is in advanced negotiations with 1-­?2 urban local bodies to use sewage and fecal sludge as potential inputs for waste to energy projects that will also use municipal solid waste and food waste as inputs.

To be sure, none of these developments will translate into immediate transformative action but a survey of potential funders and investors with existing or potential links to the waste to energy sector indicates real opportunities for an interested organization to catalyze the sector and also highlight the relevance and potential of energy recovery from fecal sludge – an area that is unlikely to receive much attention without such intervention.

In-­depth interviews with a set of commercial, social impact and philanthropic investors pointed to five broad areas of potential intervention – 1) advocacy to elevating salience of the FS2E sector; 2) analytics for market feasibility and sizing; 3) technology evaluation and benchmarking in domestic conditions; 4) develop and incubate scalable business models (supply, demand and revenues) and 5) support flexible financing options for the FS2E value chain. In addition, cross-­?sharing of business approaches and technology deployments with related efforts in other geographies, such as Africa, would likely advance the end objective, which would be to demonstrate one or more proof of concept business models with scalable technology options that can spur investor interest.

Most respondents feel that the Bill & Melinda Gates Foundation is well placed to serve as a catalyst in partnership with select funding agencies, private donors and social investors who might be interested in promoting the W2E and FS2E sectors in India. These partnerships will also be crucial for productive engagement with the Central and State governments. Clearly the Gates Foundation’s plans will be contingent on alignment with its global strategies and objectives and also on forging the appropriate partnerships at the country level. However, as this study indicates (see the Recommendations section) there are some actionable ideas that might be explored in the near term to foster growth of the FS2E space.

Bibliographic information

Menon, M. H. (2012). Landscape Study of Potential Investment Funds for Fecal Sludge and Resource Recovery in India - External report. Consultancy report commissioned by Bill & Melinda Gates Foundation, Seattle, USA


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