Talking Points

Several different industry sectors are involved in the emerging effort to convert discarded materials into sources of energy. Bringing together leaders from several of these sectors to compare notes and exchange ideas was one of the goals of a Renewable Energy from Waste Roundtable, held in early May.

The roundtable discussion benefitted from the presence of representatives from several major solid waste and recycling companies, an energy-from-waste plant operator, a technology provider, a project financier, a trade association chairman and a leading solid waste industry consultant.

Joseph Vaillancourt of Waste Management Inc., Jim Little of Waste Connections Inc. and Jim Bohlig of ReCommunity represented the solid waste and recycling sectors at the Roundtable. Eric Herbert of ZeroWaste Energy LLC offered the viewpoint of a conversion technology provider while Ted Hansen of Greenwood Energy represented an up-and-running energy-from-waste producer.

James Stewart of the BioEnergy Producers Association offered the view of an association chairman trying to create change in the California regulatory and statutory climate in particular, and Harvey Gershman of Gershman, Brickner & Bratton Inc. was able to share some of his knowledge gathered during decades as a solid waste industry consultant.

Participants gathered in Las Vegas during WasteExpo, which took place April 30-May 3, 2012. Following is the first of two excerpted portions of the Roundtable, featuring remarks from these industry leaders on the state of the energy-from-waste sector and its near-term prospects.

REW: Thank you for taking the time to be part of this discussion today. We very much appreciate it. How would you characterize the progress that has been made in the last five years in the overall effort to convert wastes and residues into energy?

HG: Well, we’ve had a bunch of money thrown at technologies and companies that want to make energy and fuel, funded by the federal government—that has been a major catalyst. Some of those plants are starting to come up out of the ground, and we’re anxiously awaiting the results on how they run and what their costs really will be. We did a forecast for a client that identified about 35 projects that are in advanced development or coming out of the ground—that’s incredible. It’s a very exciting time and we’re positioned for this new technology to come online in the next handful of years, and we’ll find out what the numbers really are. We’ve still got a lot of waste going to landfill, but it’s great to see Waste Management trying to change their paradigm in how they talk about waste and getting away from the landfill orientation.

TH: In the business sector, I describe it as a great awakening. Three years ago when we contacted businesses and industries about avoiding landfill they would ask, “How much money are you going to save me?” They weren’t interested in doing anything themselves. Now, three years later, there is still that element of “How much are you going to save me?” but they also are desperate for solutions and they are aggressively going after them. So on the industry side of waste generators, there is this great awakening.

JV: From Waste Management’s perspective, clearly there has been an awareness shift that I think is important. People have sort of always been anecdotally interested in solutions, but not committed either behaviorally or financially to it. But I think in the last five years, between the capital and some of these other corporate sustainable initiatives, it has really provided some awareness. So I think this movement—or however you want to describe what is going on—is here to stay and it will happen.

EH: I remember for the first projects trying to get financing in the MRF (material recovery facility) recycling space, the banks would never sign off on any value on recyclables. Those first MRFs [charged] processing fees that were twice what disposal fees were. That’s how they were all built, but people wanted it—they wanted that ability to recycle. Those original curbside programs that went in, it was $2 to $3 more per house to serve them. In the state of California, they had the foresight to say, “This is a positive thing,” and they did create a stick to force communities to comply. And frankly it also gave the waste industry an impetus to go do something. There were companies that were saying, “We don’t want to do anything, this is stupid.” But a lot of companies looked at it as being a really good business opportunity—a place for them to carve out more business for themselves. I see this exactly the same way. There will be those companies and entrepreneurs who find a way to deliver. I don’t believe there is one single silver bullet. We’re creating another element within the industry that I think is super positive.

JB: I think that 2012 is really going to be the year that is looked back upon in which there was a turning point. The turning point is coming from strong market signals that are occurring. The first market signal is that we have many large brands that have basically adopted an irreversible sustainability brand. And they really can’t go back, even though that brand adoption is way ahead of technology and capabilities. I think we’re nearly within a year of seeing customers and particularly communities—who are really the customers—signaling that they really do believe in zero waste and that they are prepared. I’ve built and operated landfills and I know exactly what the cost is, the dollar per ton. What people don’t understand is that it is the least valuable recovery technology. In time, the financial community will understand that a 48 percent EBITDA margin doesn’t mean anything if you put 90 percent of that back in the ground in the next cubic yard. My experience in my life is that industries always follow the dollars, so eventually the market will start to follow that. We have a lot of really important market signals that are occurring this year, including the largest waste company clearly articulating a vision different than might have been articulated 20 years ago, and great compliments to Joe and Waste Management. This is a whole new model. [and] I think the entire waste stream will be exploited. Long-term, I believe that we’re really turning a corner. I don’t think we’re going back—this isn’t a false start. The great part of the story is that every one of these multi-national brands in this country, all of their growth is going to come from emerging economies. And all of them have know they have to figure out a way to make consumption sustainable. One of the critical gates to consumption not being sustainable in most of these countries is the failure to deal with waste. So waste is going to become central to our economic growth at the local level in terms of the ability to solve that. And as people develop those solutions, they won’t be applicable only to North America, but they’ll be applicable to the rest of the world. That will, I think, help as opposed to retard progress. I think we’re really there and I don’t think it’s going back. It’s going to be ugly for a while. We’re going to have to figure out innovation and financing. That’s a big issue, but it will happen.

REW: What remain as some of the barriers to the establishment of these conversion technologies?

JS: The BioEnergy Producers Association is devoted to addressing the challenges, regulatory and statutory, that apply to the organic waste-to-energy sector. Back in 2003 and 2004, those of us who were trying to advance the cause of individual technologies realized that, particularly in California, we had a repressive statutory and regulatory climate which fundamentally was discoursing any emerging bio-based technology from operating in the state, primarily because of economics and time to market—and the uncertainty of permitting in California was so extreme that no young company could afford to invest in that. As a result, in the state of California over the last five years, we can calculate at least $1 billion in capital expenditures for emerging technologies that either were moved out of California or were sited in other states. Enerkem is an example. They told the city of San Diego that unless a legislative package could be passed in 2009 or 2010, they did not feel that they could operate in the state of California, and they’re just one example. In California, we have a scientifically inaccurate definition of gasification, which requires zero emissions of the bio-refining process. Very few companies have been willing to take the risk to try to build a plant in the face of that, because they know a legal challenge could stop their entire project. Our focus has been on a statewide basis rather than federal. Where the real work has to be done is with the states, to create an environment where rapid permitting of individual plants can occur. There are very positive signs in the industry right now. Oregon is working through a rule-making process for conversion technologies, defining what a bio-refinery is and setting standards for performance, rather than trying to categorize or regulate by definition of technology, which is what has been going on in California for the last 10 to 20 years. I’m very optimistic and I agree with Jim—I think 2012 is the year of change. I think that’s a matter of seeing numerous projects now either going into construction or nearing completion or going into commission. As we are able as an industry to point to successes of operating plants, that’s going to change the entire atmosphere. That’s going to cause cities and jurisdictions to want to move forward knowing there is a greater sense of certainty in performance, and I believe this is the year that we’re going to start to see that confidence building around our industry.

REW: When companies consider whether to take a risk on a certain technology what are some of the barriers that would cause them to decide ‘not right now,’ or ‘not this project?’

JL: There is clearly stratification of the waste stream. That is either accelerated or decelerated by local government. So the speed with which we get to the next level is at a point where state and city governments have decided to take it upon themselves—they’re getting it. They’re deciding whether we take big steps or big strides to take on the whole waste stream, or whether we go after the low-hanging fruit, if you will. The anaerobic digestion (AD) technologies of the world prove that the latter type projects are happening, and they’re happening at a nice pace right now. We’re walking very briskly. The question is, will the government continue to stratify the waste stream [when it comes to] energy conversion? I think it all relies on government at various levels. There is a lot of uncertainly all over the U.S. on how that’s going to happen.

TH: From our perspective, a barrier now clearly is low energy prices. The environmental permit is the second barrier. Any waste stream that’s been processed enough that it can be proven to be clean is probably the best waste stream to work with right now. MSW may be the holy grail, but those streams that are getting processed sufficiently that they can be designated by the EPA as a non-waste fuel [are most desirable].

HG: The oxymoron of enlightened elected officials is another one. Having worked on a number of waste-to-energy (WTE) projects in my lifetime, in a successful one there is always an elected official who is taking the time to understand and who will accept responsibility. Are there enough elected officials out there like that who will step forward?

JV: We’ve learned the hard way, there is no one solution. Even if you find one [technology] that works really well, the waste stream in Florida with high chlorine content is very different from than what it is in Arizona. And the pricing is very different. Your off-take contract available options are very different. We look at this as a puzzle without a picture. We’re just trying to create optionality to present to the customers. What we’re really trying to do today is help these technology companies get to efficacy so we can help offer the solution in a larger development, because that’s really what they lack. They know their reactor really well, but they don’t really know how to come to the market and build plants, which is what is going to get the financing sources comfortable.