Risk Analysis of Public–Private Partnership Waste-to-Energy Incineration Projects from the Perspective of Rural Revitalization
Abstract
:1. Introduction
2. Literature Review
2.1. Risk Management of PPP Projects
2.2. Risk Management for PPP WTE Incineration Projects
3. Research Methodology
- Step 1: Identify the preliminary risk list of the PPP WTE incineration project through a comprehensive literature review. After reading the related journal papers, it was found that most PPP risk management papers are related to infrastructure projects rather than WTE incineration projects. 8 papers are selected as the sources of risk identification for preparing the preliminary risk list.
- Step 2: Refine the risk list through a focus group discussion with domain experts. 8 experts were invited to examine the preliminary risk list. In particular, the experts were asked to provide new risk factors.
- Step 3: Conduct a structured questionnaire survey to collect the frequency and severity of the final risk list. The questionnaire is designed on the basis of the final risk list. The designed questionnaire was distributed to the 135 stakeholders of PPP WTE incineration projects. A total of 111 questionnaires were collected. 11 records are invalid according to the filtering criteria, so a total of 100 questionnaires were verified for further analysis.
- Step 4: Analyze the risks of PPP WTE incineration projects based on the survey. The internal consistency and reliability of the survey were first tested. After that, risks were analyzed based on the survey result from the perspective of risk frequency, risk severity and overall risk impact.
4. Risk Identification of PPP WTE Incineration Projects from the Perspective of Rural Revitalization
4.1. Preliminary Risk List from Comprehensive Literature Review
4.2. Final Risk List from a Focused Group Discussion
- First, PPP WTE incineration projects could enhance local economic development. In the construction phase, the local construction industry can get benefits as PPP WTE incineration projects usually consume a substantial amount of capital investment. In the operation phase, PPP WTE incineration projects could provide tax and other financial support to local government authorities. It is denoted as R37 in Table 3.
- Second, PPP WTE incineration projects could enhance local employment. On the one hand, local people can participate in the construction of PPP WTE incineration projects during the construction phase. On the other hand, the operation of PPP WTE incineration projects requires a large number of laborers—especially skilled laborers. It not only provides more opportunities for local employment but also improves its quality. Employment is an important indicator of social influences [22,89]. It is denoted as R38 in Table 3.
- Third, PPP WTE incineration projects could improve the appearance of rural villages. They take the generated solid waste of nearby villages as the raw materials for power generation and thus reduce the storage of rural solid waste. The reduction of storage could effectively improve rural appearance. It is denoted as R39 in Table 3.
- Local government succession risk refers to the change of leaders in local governments. In China, main government leaders usually stay in one position for around five years, while most PPP WTE incineration projects last for around 20 years. In this regard, main government leaders may change four or more times for a specific project. The new leaders may not be familiar with the projects and thus influence their normal operation. It is denoted as R40 in Table 3.
- Location risk is location selection by both public sectors and private sectors. In case of inappropriate locations, the infrastructure and logistics may be influenced dramatically. It is denoted as R41 in Table 3.
- Government intervention (R11). This risk is usually duplicated with other ones, for example, contract change, government decision-making, etc. In this regard, it is suggested to eliminate it from the list.
- Nationalization (R12). With the development of the legal and regulatory system, it is believed that nationalization (R12) is not possible in China. In the worst case, the government authorities will purchase the projects by soliciting the agreements of the private sector.
- Inadequate supervision (R33). As PPP projects increased rapidly in the last decade, government authorities issued a lot of policies to guide their behaviors [36]. At the same time, two platforms were developed to increase the transparency of PPP projects [37,38]. Currently, inadequate supervision may not happen with a very high probability.
- Transfer risk (R35). Government authorities play a significant role in the contractual relationships with the private sector. Once the concession period reaches, it is hard for private sectors to default on the contract.
- Competition risk (R36). It is common sense that waste handling is one kind of public service and thus is the responsibility of government authorities. As PPP contracts are usually exclusive agreements, competition cannot happen between PPP ones and private ones.
5. Questionnaire Survey and Risk Analysis
5.1. Questionnaire Survey
5.1.1. Sociodemographic Analysis of the Respondents
5.1.2. Reliability and Validity Test of the Questionnaire Survey
5.2. Analysis of Questionnaire Survey Results
5.2.1. Analysis Method of Questionnaire Survey
5.2.2. Analysis from the Perspective of Risk Frequency
- The top three risks regarding risk frequency are rural appearance, local employment and local economic development with 3.32, 3.26, and 3.15, respectively. It shows that all three values are more than three, while risk frequencies of other factors are lower than three. It shows that the respondents are confident in PPP WTE incineration projects for rural development.
- The payment risk follows as the fourth. It is one of the biggest concerns from the perspective of the private sector. In reality, delayed payment often occurs due to the financial constraints of many local governments.
- The fifth and sixth are construction cost overrun and operation cost overrun, respectively. Since the financial feasibility analysis of a typical PPP WTE incineration project is usually submitted before its start, the costs may increase due to the price increase of raw materials, human resources, etc.
- Local government succession and price change rank seventh. Due to the long concession periods of PPP WTE incineration projects, a lack of familiarity or understanding of projects by local government leaders may lead to difficulties in operation. In addition, on October 20, 2020, MOF, NDRC and NEA issued a supplementary notice. It states that the reasonable utilization hours of biomass power generation in the whole life cycle are 82,500 h and the financial subsidy will be stopped after 15 years from the date of grid connection no matter whether the subsidy hours reached 82,500 [91].
- The ninth risk is waste supply. Waste for the PPP WTE incineration project comes from the surrounding towns and villages and depends on the collection and transportation to a relatively high degree.
- The 10th risk is project revenue, which is the key to ensuring the continuous operation of the PPP WTE incineration project. It will be affected by a variety of uncertain factors, so the probability of occurrence will also increase.
5.2.3. Analysis from the Perspective of Risk Severity
- Regarding risk severity, the risks with high ranks are associated with the public sector. The payment risk, government decision-making, government credit and local government succession are ranked first, second, third, and fourth, respectively. It shows that government behaviors have significant impacts on PPP WTE incineration projects. In particular, subsidies for power generation for PPP WTE incineration projects are usually paid by government authorities. If the payment is delayed or canceled due to various reasons, the operation and development of projects will be seriously affected.
- Another fourth risk is waste supply risk. In the PPP WTE incineration projects, the subsidy is calculated by the amount of waste handled. Therefore, the waste supply risk directly affects revenue and endangers the daily operation of projects.
- Revenue risk and operating cost overrun rank sixth. For a specific PPP WTE incineration project, sustainable development depends on two important aspects: one is revenue, and the other is cost.
- The eighth is land acquisition risk. It occurs at the very beginning of projects and directly leads to the delay or cancellation of projects, so its severity is high. However, as the questionnaire is distributed to PPP WTE incineration projects in rural areas, the severity of land acquisition is lower than that of Wang and Zhang (2017) [46].
- The ninth is rural appearance. PPP WTE incineration projects can effectively absorb household waste in rural areas. Otherwise, the waste in rural areas will occupy farmlands and cause environmental pollution.
- The 10th risk is construction cost overrun, which could lead to extending the concession period if the contract has a flexible term clause.
5.2.4. Analysis from the Perspective of Overall Risk Impact
- Among these risks, three ones are proposed by the focused group discussion, that is, rural appearance, local employment and local economic development. The survey results confirmed that PPP WTE incineration projects can effectively promote local development in rural areas.
- Another observation is that government authorities have a significant impact on PPP WTE incineration projects. On the one hand, these projects are highly dependent on the subsidies provided by government authorities (payment risk). On the other hand, the sustainable development of projects requires the support of local government authorities.
- Economic risks are of great concern. PPP WTE incineration projects are the collaborative efforts of both government authorities and private sectors. The objective of government authorities is the proper handling of solid waste with a huge amount of capital investments and high management skills. However, the objective of the private sector is a reasonable rate of return on investments. In this regard, economic risks are important for both government authorities and private sectors.
5.3. Analysis of Risk Categories
6. Conclusions
- An extensive list of 36 risk factors was obtained through a comprehensive literature review and focused group discussion with eight experts. The literature review identified 36 risks as the preliminary risk list. The focused group discussion provided five new risk factors and eliminated five inappropriate risk factors. The systematic process could improve the completeness and accuracy of previous risk identification methods including case studies and literature reviews.
- A structured questionnaire survey was conducted to collect opinions regarding risk frequency and risk severity. A total of 100 valid questionnaires were collected. In particular, project staff are from PPP WTE incineration projects in rural areas. The research could get the options of related stakeholders from the perspective of rural revitalization.
- Survey results were analyzed with respect to risk frequency, risk severity, risk impact and risk category. The top 10 risks were examined in detail. It was found that (1) PPP WTE incineration projects in rural areas do effectively accelerate the local rural development through improving rural appearance, enhancing local employment and promoting local economic development; (2) government authorities play a significant role in the success of PPP WTE incineration projects; and (3) the risk preference of their sustainable development is social, economic and environmental risks.
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Acknowledgments
Conflicts of Interest
List of Main Abbreviations
WTE | Waste-to-energy |
PPP | Public-private partnership |
FIT | Feed-in tariff |
MOF | Ministry of Finance |
NDRC | National Development and Reform Commission |
TGC | Tradable green certificate |
NCCPC | National Congress of the Communist Party of China |
CCCP | Central Committee of the Communist Party |
SC | State Council |
NEA | Nation Energy Administration |
RSI | Risk significance index |
RI | Risk impact |
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No. | Name of Risk | [45] | [86] | [46] | [43] | [87] | [35] | [44] | [88] |
---|---|---|---|---|---|---|---|---|---|
R01 | Government decision-making | √ | √ | √ | √ | √ | √ | √ | |
R02 | Government credit | √ | √ | √ | √ | √ | √ | √ | √ |
R03 | Legal and regulatory | √ | √ | √ | √ | √ | √ | √ | √ |
R04 | Technical | √ | √ | √ | √ | √ | √ | ||
R05 | Contract change | √ | √ | √ | √ | ||||
R06 | Environment | √ | √ | √ | √ | √ | √ | √ | √ |
R07 | Public opposition | √ | √ | √ | √ | √ | √ | √ | |
R08 | Waste supply | √ | √ | √ | √ | √ | √ | √ | √ |
R09 | Payment risk | √ | √ | √ | √ | √ | √ | √ | √ |
R10 | Revenue risk | √ | √ | √ | √ | √ | √ | √ | |
R11 | Government intervention | √ | √ | √ | √ | √ | |||
R12 | Nationalization | √ | |||||||
R13 | Land acquisition | √ | √ | √ | |||||
R14 | Administrative approval | √ | √ | √ | |||||
R15 | Local infrastructure | √ | √ | √ | √ | √ | |||
R16 | Inflation risk | √ | √ | √ | √ | ||||
R17 | Financing risk | √ | √ | ||||||
R18 | Construction completion | √ | √ | √ | √ | ||||
R19 | Market demand | √ | √ | √ | |||||
R20 | Price change risk | √ | |||||||
R21 | Force majeure | √ | √ | √ | √ | ||||
R22 | Organization risk | √ | |||||||
R23 | Construction cost overrun | √ | √ | ||||||
R24 | Operation cost overrun | √ | √ | √ | √ | √ | |||
R25 | Operation performance | √ | √ | √ | √ | √ | |||
R26 | Private sector decision-making | √ | √ | ||||||
R27 | Private sector credit | √ | √ | ||||||
R28 | Interest rate risk | √ | √ | √ | √ | ||||
R29 | Exchange rate risk | √ | √ | √ | |||||
R30 | Equipment risk | √ | √ | ||||||
R31 | Safety risk | √ | √ | √ | |||||
R32 | Design risk | √ | √ | √ | √ | ||||
R33 | Inadequate supervision | √ | |||||||
R34 | Waste collection and segregation | √ | |||||||
R35 | Transfer risk | √ | |||||||
R36 | Competition risk | √ |
No | Institution | Qualified Background |
---|---|---|
Expert #1 | Associate Professor; Top university | 10 years PPP experience; 8 years PPP WTE experience |
Expert #2 | Manager; Private sector | 10 years PPP experience; 9 PPP WTE incineration projects |
Expert #3 | General manager; Project company | 8 years PPP experience; 8 years PPP WTE experience |
Expert #4 | General manager; Project company | 10 years PPP experience; 5 PPP WTE incineration projects |
Expert #5 | Government officer | 12 years PPP experience; 12 years PPP WTE experience |
Expert #6 | Government officer | 10 years PPP experience; 5 PPP WTE incineration projects |
Expert #7 | Government officer | 5 years PPP experience; 5 years PPP WTE experience |
Expert #8 | General manager; Consulting company | 11 years PPP experience; 50 + PPP projects |
No. | Name of Risk | Action Type |
---|---|---|
R37 | Local economic development | Add |
R38 | Local employment | Add |
R39 | Rural appearance | Add |
R40 | Local government succession | Add |
R41 | Location risk | Add |
R11 | Government intervention | Delete |
R12 | Nationalization | Delete |
R33 | Inadequate supervision | Delete |
R35 | Transfer risk | Delete |
R36 | Competition risk | Delete |
Category | Type | Frequency | Percentage |
---|---|---|---|
Affiliated organization | Government officers | 11 | 11% |
Private sector | 13 | 13% | |
Project company | 60 | 60% | |
PPP consult company | 3 | 3% | |
Academic researcher | 5 | 5% | |
Others | 8 | 8% | |
Age | 18~25 | 2 | 2% |
26~35 | 37 | 37% | |
36~44 | 41 | 41% | |
45~60 | 20 | 20% | |
PPP working experience (Unit: Year) | Less than 2 years | 13 | 13% |
2~4 years | 37 | 37% | |
5~10 years | 36 | 36% | |
11~15 years | 11 | 11% | |
More than 15 years | 3 | 3% | |
Number of PPP projects involved | 1~2 | 66 | 66% |
3~5 | 21 | 21% | |
6~10 | 7 | 7% | |
11~20 | 3 | 3% | |
More than 20 | 3 | 3% | |
Number of PPP WTE incineration projects involved | 1~2 | 73 | 73% |
3~5 | 14 | 14% | |
6~10 | 9 | 9% | |
11~20 | 1 | 1% | |
More than 20 | 3 | 3% |
Item | Cronbach’s Alpha | KMO | Bartlett’s Test of Sphericity | ||
---|---|---|---|---|---|
Approximate Chi-Square | Degree of Freedom | Significance | |||
Risk frequency | 0.978 | 0.936 | 4121 | 630 | 0.000 |
Risk severity | 0.980 | 0.914 | 4812 | 630 | 0.000 |
No. | Risk | Risk Probability | Risk Severity | RSI | RI | RI Ranking | ||
---|---|---|---|---|---|---|---|---|
Probability | Ranking | Severity | Ranking | |||||
R39 | Rural appearance | 3.32 | 1 | 2.40 | 9 | 7.97 | 2.82 | 1 |
R09 | Payment risk | 2.93 | 4 | 2.70 | 1 | 7.91 | 2.81 | 2 |
R38 | Local employment | 3.26 | 2 | 2.32 | 20 | 7.56 | 2.75 | 3 |
R37 | Local economic development | 3.15 | 3 | 2.29 | 22 | 7.21 | 2.69 | 4 |
R40 | Local government succession | 2.80 | 7 | 2.51 | 4 | 7.03 | 2.65 | 5 |
R24 | Operation cost overrun | 2.83 | 6 | 2.46 | 6 | 6.96 | 2.64 | 6 |
R08 | Waste supply | 2.75 | 9 | 2.51 | 4 | 6.90 | 2.63 | 7 |
R23 | Construction cost overrun | 2.86 | 5 | 2.38 | 10 | 6.81 | 2.61 | 8 |
R10 | Revenue risk | 2.72 | 10 | 2.46 | 6 | 6.69 | 2.59 | 9 |
R20 | Price change risk | 2.80 | 7 | 2.35 | 13 | 6.58 | 2.57 | 10 |
R01 | Government decision-making | 2.53 | 16 | 2.58 | 2 | 6.53 | 2.55 | 11 |
R02 | Government credit | 2.49 | 21 | 2.53 | 3 | 6.30 | 2.51 | 12 |
R14 | Administrative approval | 2.67 | 11 | 2.34 | 15 | 6.25 | 2.50 | 13 |
R25 | Operation performance | 2.67 | 11 | 2.33 | 17 | 6.22 | 2.49 | 14 |
R13 | Land acquisition | 2.53 | 16 | 2.45 | 8 | 6.20 | 2.49 | 15 |
R07 | Public opposition | 2.60 | 14 | 2.36 | 12 | 6.14 | 2.48 | 16 |
R41 | Location risk | 2.65 | 13 | 2.31 | 21 | 6.12 | 2.47 | 17 |
R17 | Financing risk | 2.58 | 15 | 2.37 | 11 | 6.11 | 2.47 | 18 |
R31 | Safety risk | 2.50 | 20 | 2.35 | 13 | 5.88 | 2.42 | 19 |
R26 | Private sector decision-making | 2.49 | 21 | 2.33 | 17 | 5.80 | 2.41 | 20 |
R27 | Private sector credit | 2.45 | 24 | 2.33 | 17 | 5.71 | 2.39 | 21 |
R18 | Construction completion | 2.53 | 16 | 2.24 | 25 | 5.67 | 2.38 | 22 |
R05 | Contract change | 2.49 | 21 | 2.23 | 27 | 5.55 | 2.36 | 23 |
R06 | Environment | 2.29 | 29 | 2.34 | 15 | 5.36 | 2.31 | 24 |
R16 | Inflation risk | 2.52 | 19 | 2.10 | 30 | 5.29 | 2.30 | 25 |
R32 | Design risk | 2.27 | 31 | 2.25 | 23 | 5.11 | 2.26 | 26 |
R21 | Force majeure | 2.28 | 30 | 2.24 | 25 | 5.11 | 2.26 | 27 |
R34 | Waste collection and segregation | 2.45 | 24 | 2.07 | 32 | 5.07 | 2.25 | 28 |
R19 | Market demand | 2.37 | 27 | 2.13 | 29 | 5.05 | 2.25 | 29 |
R03 | Legal & regulatory | 2.24 | 33 | 2.25 | 23 | 5.04 | 2.24 | 30 |
R28 | Interest rate risk | 2.44 | 26 | 1.98 | 34 | 4.83 | 2.20 | 31 |
R22 | Organization risk | 2.30 | 28 | 2.08 | 31 | 4.78 | 2.19 | 32 |
R04 | Technical risk | 2.16 | 35 | 2.17 | 28 | 4.69 | 2.16 | 33 |
R15 | Local infrastructure | 2.26 | 32 | 1.98 | 34 | 4.47 | 2.12 | 34 |
R30 | Equipment risk | 2.16 | 35 | 2.06 | 33 | 4.45 | 2.11 | 35 |
R29 | Exchange rate risk | 2.22 | 34 | 1.78 | 36 | 3.95 | 1.99 | 36 |
No. | Number of Risks | Average RI | Ranking |
---|---|---|---|
Social risks | 3 | 2.68 | 1 |
Social and economic risks | 3 | 2.56 | 2 |
Social and environmental risks | 1 | 2.47 | 3 |
Economic risks | 13 | 2.46 | 4 |
Social, economic and environmental risks | 10 | 2.40 | 5 |
Environmental risks | 1 | 2.31 | 6 |
Economic and environmental risks | 5 | 2.18 | 7 |
Total | 36 | 2.43 |
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Cao, G.; Guo, C.; Li, H. Risk Analysis of Public–Private Partnership Waste-to-Energy Incineration Projects from the Perspective of Rural Revitalization. Sustainability 2022, 14, 8205. https://doi.org/10.3390/su14138205
Cao G, Guo C, Li H. Risk Analysis of Public–Private Partnership Waste-to-Energy Incineration Projects from the Perspective of Rural Revitalization. Sustainability. 2022; 14(13):8205. https://doi.org/10.3390/su14138205
Chicago/Turabian StyleCao, Guoxian, Chaoyang Guo, and Hezhong Li. 2022. "Risk Analysis of Public–Private Partnership Waste-to-Energy Incineration Projects from the Perspective of Rural Revitalization" Sustainability 14, no. 13: 8205. https://doi.org/10.3390/su14138205