The Money in Sludge

By Mark Harper 9 April, 2013

Is reusing sewage sludge a new revenue stream plus a solution to China's growing sludge problem?

International best practice views sludge as a resource, but in China this is in its infancy, with 80% sent to landfill
New government policies set national goals of treating 70% sludge in large cities and 50% in small cities by 2015
Chinese government plans to invest RMB 31.2 billion in sewage sludge treatment

In recent years China has made rapid improvements in its sanitary services through the construction of wastewater treatment plants. As a result, urban waste water collection and treatment has risen from 34% in 2000 to 70% in 2010. These improvements have not surprisingly delivered significant benefits to Chinese citizens living in urban areas. This success, however, has a downside, as China’s cities face the challenge of what do with its ever increasing mountain of sludge, just dump it in landfill or turn it into a new revenue stream? This is a concern that is increasingly discussed in the media, journals and academic papers.

To provide some background, sludge is the generic term for the residue that accumulates as a result of the treatment of domestic sewage and industrial wastewater. From municipal works it may contain nutrient rich organic material – bio solids, including fecal matter, and if from industrial waste water treatment, it may have a high concentration of heavy metals.

Wastewater treatment is designed according to the characteristics of the effluent, such that degradation of the biological compounds is performed by specific bacteria which thrive in this environment. Put simply, the bacterial degradation of the biological compounds derived from human waste, food waste etc. will generate suspended matter which will become sludge when separated from the supernatant and further concentrated and dehydrated. Pre-treatment of highly polluted industrial wastewater is usually required as without it treatment can be more difficult and dealing with the disposal/after use of sludge can be problematic.

This leads us on to sludge treatment. Once created, sludge which can be highly toxic should also be treated before disposal, which in many countries is usually via landfill or incineration. Indeed sludge can be reused if treated properly, which can be both environmentally beneficial and cost effective.

Disposed untreated or only partially treated sludge can represent a major environmental and health hazard, due to the high risk of secondary pollution to the soil, atmosphere and local water resources. For example, nitrates, phosphates and heavy metals from the sludge can leach into groundwater. As we know, much of China’s groundwater is already under pollution pressure. A recent study on groundwater quality in the North China Plain conducted by the Ministry of Land and Resources found that over 70% of groundwater in the North China Plain was unfit for human touch. This is particularly worrying as the North China Plain is a major agricultural region, so these toxins have the potential to work their way up the food chain and find their way into our diets. For more information on China’s water pollution crisis please see here.

China, up sludge creek, without a paddle?

In August 2012 China dialogue succinctly highlighted the extent of China’s growing sludge problem It was reported that with nearly “22 million tonnes – of which 80% is un treated toxic sludge” being created every year, cities and provinces from all over China including Beijing, Chongqing, Guangdong, Shanghai, Urumqi and Zhejiang are experiencing sludge management issues.

“22 million tonnes – of which 80% is un treated toxic sludge”

China Dialogue, August 2012

As China Dialogue states, this doesn’t even show the full picture, with only urban household sewage being collected and treated these figures do not include most of the sludge from industrial wastewater or rural household sewage. With an urban population already exceeding 600 million and predicted to reach one billion by 2025, sludge production linked to this urbanization poses a real headache for the Chinese government.

Heavy government investment in sludge treatment

There has however been movement by the Chinese Government on this issue. As China Dialogue point out, in its 12th FYP the central government has stated its intention to invest RMB 421 billion to establish additional wastewater treatment, of this 7.5% (RMB 31.2 billion) will be invested in sewage sludge treatment. Many cities are already planning to invest in sludge treatment facilities:

  • Foshan sludge treatment centre will be built with a RMB130 million investment
  • Wuhan is planning to build eight sludge disposal centres by 2020 and has already secured a loan from Asia Development Bank for its 1.5 Billion RMB investment

What then, are the solutions for disposal?

Sludge as a new source of revenue not just a smelly liability

While China’s growing sludge mountain is generally considered to be a headache, it’s interesting to see how other countries manage this waste product. In fact, current international best practice is to use sludge as a resource and not view is as just a liability. The practice of landfilling sludge could be viewed as wasting a useful resource.

Due to increasing regulatory control and competition for valuable landfill space, many countries such as the UK, Australia, South Africa, India and Japan are phasing out landfilling of sludge in favour of some form of sludge utilisation. According to a study by the Asian Development Bank (ADB)2 sludge utilisation applications include:

  • Land application – application of nitrogen and phosphorus rich treated sludge as a fertiliser and soil conditioner. This is the predominant form globally of beneficial utilisation, and is used extensively in Australia, South Africa, the UK and the USA.
  • Energy recovery – anaerobic digestion of the sludge, with biogas produced as a by-product which can be used for power and heat generation. Utilisation of biogas for power and heat generation is popular in Australia, Europe and the USA. The take up of this process, however, maybe limited by the current low economic value of the product, and the cost and complexity of the equipment.
  • Heat recovery– Incineration is widely used when there is little land available for land application (e.g. Japan and Singapore) or where landfill and land application is banned (Switzerland and the Netherlands). The sludge is incinerated and waste heat captured.
  • Industrial reuse – the most common form of this is using the dewatered sludge or incineration ash in the production of bricks and cement blocks. This is an emerging trend currently found in Japan.

The rates of beneficial sludge utilisation for a number of countries can be seen in the table below.

China falls behind international best practice on sludge utilisation

According to ADB, despite all the benefits of reusing sludge, utilisation is still in its infancy in China, and the vast majority remains untreated and dumped in landfill, this is despite reports of 35% reuse in agriculture (H. Chen et al.)3. The Ministry of Housing and Urban-Rural Development (MOHURD) estimates that 80% of raw sludge in China is dumped in landfill.

“Although most of the modern sludge management approaches used worldwide have current practical applications in the PRC, many are only applied in pilot projects or on a small scale”

ADB 2012

In January 2013 China’s government actually banned the use of wastewater and sewage sludge in agricultural irrigation. Reportedly, municipal wastewater contaminated by industrial sources, has resulted in sludge from Chinese treatment plants being too contaminated with toxic chemicals and heavy metals to be reused as fertilisers on land (Jie Yu4).

“Although most of the modern sludge management approaches used worldwide have current practical applications in the PRC, many are only applied in pilot projects or on a small scale” (ADB). Hangzhou for example uses incineration as the preferred option in sewage management, with the resultant ash being used by a local cement plant, this has also occurred in Jiaxing. In Shenzhen they use a form of steam pyrolysis to treat their sludge (H. Chen et al.3).

ADB, points out however that the government has made some positive steps:

  • The Plan for the Construction of Urban Wastewater Treatment and Reuse Facilities, 2011-2015, reinforces the need for sustainable sludge management strategies and set national goals of treating 70% of sludge in large cities and 50% in small cities by 2015.
  • The Ministry of Environmental Protection, together with MOHURD and the Ministry of Science and Technology published the “Policy on Sludge Treatment and Pollution Prevention Technology in Urban Wastewater Treatment Plant,”5 aims to regulate and promote beneficial sludge utilisation practices.

These plans show government recognition that shifting from disposal to utilisation is compatible with their idea of a circular economy and are a clear signals that sludge treatment and utilisation can have a future in the environmental protection industry.

It would appear some within the investment community are listening.

It’s a dirty job but someone’s got to do it – investors chase new opportunities

Research by Frost & Sullivan titled ‘Significant Sludge Treatment and Disposal Opportunities in China, predicts healthy growth with the sludge market expected to be five times the size it was in 2010 by 2015, presenting exciting opportunities for technology suppliers. The research notes that “Government policies and development plans will lead the market to experience significant growth during the 12th FYP period (2011-2015) … Compulsory installation of sludge treatment facilities will compel the implementation and development of relevant technologies and equipment”. In the first quarter of 2011 shares in companies from the waste to energy sector listed on the Shanghai stock exchange rose by more than 20%.

“Government policies and development plans will lead the market to experience significant growth during the 12th FYP period (2011-2015)”

Frost Sullivan 2011

According to China Dialogue, a number of venture capital groups have jumped on this opportunity. DT Capital Partners, Keytone Ventures, Qi Ming Venture Capital, Lenovo Investment, Sequoia Capital, and Tsing Capital, are all getting ready to invest in the industry.

International key water players are also boosting the sector with their advanced technologies. By the end of 2010, Suez Environment in a joint venture with China Singapore Public Utilities had put into operation a 300 tonne per day sludge drying unit in Suzhou Industrial Park. The plant dries the sludge into small pellets with a maximum of 10% water content, which are burnt together with coal to produce energy. In Hong Kong the government has brought in Veolia and Leighton Asia to build the world’s largest, ‘sewage sludge to power facility’ at Tuen Mun. In addition, Hong Kong University of Science and Technology in partnership with Delft Technical University and KWR Institute are piloting new technology at Sha Tin sewage treatment works to reduce sludge production rates and recover phosphorus from urine for use as fertiliser. See here for more information on this.

A lack of a regulatory and financial support has historically been the primary restraint to entering the sludge market. In a context where landfills are filling up fast and sludge is being produced in ever greater quantities, and where new government guidelines and compulsory policies are emerging, growth in sustainable solutions for sludge treatment could be on the horizon. The RMB31.2 billion state funding from the 12th FYP will also act as spur for the sector and could lead to foreign and local investors seeing more opportunities.

1 China deluged by toxic sludge. China Dialogue. 2012
2 Promoting Beneficial Sewage Sludge Utilisation in the People’s Republic of China, Asian Development Bank 2012
3Utilisation of urban sewage sludge: Chinese perspectives. H. Chen et al. Environ Sci Pollut Res Int. (2012);19(5):1454-63.
4The Foreground Analysis of Sewage Sludge Agriculture Application in China. Jie Yu. Advanced Materials Research Vols. 335-336 (2011) pp 1316-1320
5Government of the People’s Republic of China, MOHURD, Ministry of Environment Protection, and Ministry of Science and Technology. 2009. Policy on Sludge Treatment and Pollution Prevention Technology in Urban Wastewater Treatment Plant (Trial). Beijing
Mark Harper
Author: Mark Harper
Mr Harper has worked for over 15 years in the field of corporate sustainability and environmental engagement. At John Swire & Sons Hong Kong, he is responsible for managing the Group's ESG disclosures and advising Swire companies on their ESG submissions. In addition to his reporting work, Mr Harper is responsible for assisting the Group on policy and strategy development, particularly in the areas of climate resilience, biodiversity, waste, and sustainable water management. He also leads the Research Committee of the Drink Without Waste working group Mr Harper has extensive experience in ESG disclosure standards, such as the UN Sustainable Development Goals, GRI and the Hong Kong Exchange ESG Reporting Guide, in conducting sector-focused benchmarking studies, corporate environmental management, and in organising hands-on corporate citizenship and CSR training programmes for many corporations, including HSBC and HKEx. Mr Harper worked in a number of senior management positions before joining John Swire & Sons Hong Kong in high-profile NGOs, including the Earthwatch Institute, Fauna & Flora International, China Water Risk, and the Business Environment Council, where he was responsible for managing the organisations' advisory services on ESG reporting and corporate sustainability strategy development. Mark was project manager of China Water Risk for 2013 and articles written below were during his tenure at China Water Risk.
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