China's waste-to-power sector is set to see further growth with more financial incentives offered by the government, experts said.

Zhang Dayong, secretary-general of the China Biomass Energy Industry Promotion Association, said upcoming government subsidies will serve as insurance for the industry involved in incinerating waste to generate power and help the sector continue with its steady progress, especially operators facing financial pressure.

"The upcoming financial incentives are also part of China's larger efforts to step up development of the circular economy, and are helpful for companies struggling to meet emissions requirements, which are higher than before as China ramped up environmental protection efforts," said Lin Boqiang, head of Xiamen University's China Institute for Studies in Energy Policy.

The remarks came after the National Development and Reform Commission announced earlier in April that waste-to-power projects that have had generators connected to the State grid after Jan 20 will receive subsidies from the government, but the announcement did not disclose the specific amounts.

Everbright Securities said total subsidies are likely to reach 1.6 billion yuan ($230 million), or if calculated based on a 300-day operation period for grid-connected waste-to-power generators, 0.15 yuan per metric ton subsidies from the central government and grid-connected power generation from daily increased capacity of 130,000 to 150,000 tons.

However, some of the subsidies might be provided by local departments as the national fund for new energy is reportedly experiencing current challenges to meet its budget, Everbright said.

Waste-to-energy, of which bioenergy is a category, has been developing over the past few decades in which products such as excess agricultural products or food scraps are incinerated to generate electricity and heat. Most waste-to-energy processes generate electricity or heat mainly through incineration, or produce combustible fuels such as methane and ethanol.

Compared to hauling garbage to landfills, Zhang said, incinerating waste to generate power is important for China to reduce waste volume, save landfill space, reduce non-biodegradable pollution such as plastics and produce forms of clean energy like biogas.

In 2017, total waste-to-power capacity stood at 84.63 million tons, equal to a daily capacity of 231,900 tons. According to the 13th Five-Year Plan (2016-20), daily capacity will be 591,400 tons by the end of this year, said the National Bureau of Statistics.

China announced that beginning this year, incinerated waste should account for 54 percent of total waste.

Currently 17 provinces, autonomous regions and municipalities have rolled out working plans to promote and regulate waste incineration by 2020 and 2030.

Provinces including Henan, Hebei and Shandong have some of the highest number of newly added waste incineration facilities across the country by 2019, said the China Energy Information Platform.

Last year, there were over 125 winning bids for waste incineration projects across China, the platform said. Total investment in the projects was estimated to have exceeded 60 billion yuan.

The waste incineration market is expected to reach 173 million tons by the end of 2020, and 203 million tons by the end of 2022, the platform forecasts. If calculated based on treatment costs of 70 yuan per ton and 0.65 yuan per kilowatt, total value of the market will exceed 50 billion yuan in the year 2022.

Zhang said that by 2025, China is likely to catch up with the pace of advanced countries in the field.

"Currently those countries incinerate about 65 to 70 percent of their total waste, with daily production capacity reaching about 800,000 tons each. China is likely to hit this level by 2025. Now China's waste-to-power development is seeing steady progress, and has a relatively mature industrial value chain and technologies. Going forward, more effort is needed to advance current technologies to raise incineration efficiency and reduce emissions, as well as reduce costs to promote waste-to-power development in rural, less-developed areas," Zhang said.

Lin said the industry is still facing multiple challenges.

"On one hand, residents still lack awareness of garbage classification, which is a must-have process before waste incineration. On the other hand, further efforts are needed to eliminate pollutants and guarantee harmless emissions to people and the surrounding environment," Lin said.

The waste incineration process might produce dioxins, which can damage the immune system, interfere with hormones and also cause cancer, said the World Health Organization.

The government has also stepped up regulations on emissions to protect the health of nearby residents and the environment, Lin added.