nwra update friday 515
TRANSCRIPT
1
THE COSTS AND ECONOMICS OF RECYCLING & DIVERSION
Michael R. TimpaneVice President
Cost of Recycling WebinarMay 14, 2015
22
Providing
solutions in
sustainability,
resource
management
and waste
recovery for
clients and
their supply
chains
33
-Recycling Value Chain- Concepts in the Cost of Recycling
Basic Look at Cost Terms in in Recycling Program Costs In Recycling
Processing Costs
Macro Economic Look at Different Recycling Questions
TODAY’S AGENDA
01 02 03 04
44
• Voter Demand
• Environmental Mitigation
• Landfill cost
• Zero Waste/Diversion
mandates
• Customer Demand/competitive advantage
• Avoid Regulatory risk
• NGO pressure• Sustainability
Concerns• Protect 1 way
packaging
• Response to Environmental Concerns
• Price
• Thrifty/Conservation
• Product Feature
Markets/Manufacturers
Brands
Retailers
Consumers
Municipalities
MRF
Re-processors
Haulers
Converters
• Material cost savings• Reliable Supply & Quality• Customer Specification
RecyclingValue Chain
DemandMotivations
• Material cost savings• Supply & Quality• Customer Specifications
55
• Service Providers
• Revenue from both inbound and
outbound customers
• Pay for Play
• Less powerful position
Markets/Manufacturers
Municipalities
MRF
Re-processors
Haulers
RecyclingValue Chain
DemandMotivations
Recycling should be free
advantage of inelastic demand
Take more materials
More and tougher quality specs
Minimize my riskMarket risk is on
you
Long-term contract terms with dynamic material streams
No long term contracts
66
“Valuing” Recycling Today
“(the) local curbside collection program is only the beginning of a recycling loop. At present, the cost of collecting and processing recyclable materials far outweighs their value as a commodity that can be sold back to industry.
77
“Valuing” Recycling Today?
“(the) local curbside collection program is only the beginning of a recycling loop. At present, the cost of collecting and processing recyclable materials far outweighs their value as a commodity that can be sold back to industry. Unless consumers buy recycled products, the markets for the material they put out at the curb” will not grow.
HBR- 1993
8
Average*** Single Stream Collection vs. Garbage Costs
Garbage CollectionRoute Truck Cost $850 ($100 for 8.5 Hrs)Route Truck Yield 10 Tons Can be up to 13 TonsCost Per Ton $85
Single StreamCollectionRoute Truck Cost $850 ($100 for 8.5 Hrs)Route Ratio 1.25
25% More RoutesTotal Route Cost $1,063Route Truck Yield 9 Tons Can be up to 11 tonsCost Per Ton $118
Pass-by’s
can also
be minimize
d through
proper
periodiciti
y
9
+
Truck Capital Cost for Capturing Single Stream
10
Cart Capital Cost for Capturing Single Stream
$40-60 per Cart for 96 gallon
11
CONCEPTS IN RECYCLING REVENUE (TS)
Blended Value, Average Value, Average Commodity Value, Average Market
Value
$76.44- 4 year
slide
12
CONCEPTS IN RECYCLING REVENUE (TS)
Blended Value, Average Value, Average Commodity Value, Average Market
Value
1994
1995
1998
2001
2006
2007
2008
2009
2010
2012
2013
2014
2015
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$ per Ton
13
RESID
UE
CONCEPTS IN RECYCLING COST
Tons Received Tons Sold
Work, transformation, heat, unusable materials, contamination
14
4,800 TPM- 70% Participation Single Stream
$/Tons Processed 100,000 Households
Reported Range ($45-65T) 70% of 100% 80% of 100% 90% of 100% 95% of 100%
$55.00 70% 80% 90% 95%
Tons Sold $78.57 $68.75 $61.11 $57.89
4800 $353,571 $309,375 $275,000 $260,526
Yield 3,360 3,840 4,320 4,560
Cost for Capturing Recyclables
15
Cost for Capturing Recyclables
20,250 TPM Mixed Waste Processing$/Tons Processed 100,000 Households
Reported Range ($35-60T)
40% of 40%
50% of 40% 60% of 40% 65% of
40%
$47.50 16% 20% 24% 26%
Tons Sold $296.88 $237.50 $197.92 $182.69
20,250 $961,875 $961,875 $961,875 $961,875
Yield 3,240 4,050 4,860 5,265
16
Residue
Non-
recyclables
Unavailable
recyclables
Contaminants and
hazardous materials
CONCEPTS IN RECYCLING COST
17
CONCEPTS IN RECYCLING COST
2007 2012 2014-20155%
7%
9%
11%
13%
15%
17%
8%
13%
16%
Average Residue at Single Stream MRFs
Sources: 2007 Comparative Study on Public vs. Private MRFs, 2012 GAA study on Wisconsin-Area MRFs, ISRI Moore Presentation April 2015
18
CONCEPTS IN RECYCLING COST
Year
Percent
Residue
Total ImpactComparative $/T (Current
LF $/T)
Avg. MRF/Yr.
2007 8%$82,320,00
0$3.92
$131,292
2012 13%$133,770,0
00$6.37
$213,349
2014-2015
16%$164,640,0
00$7.84
$262,584
1919
SENSITIVITY TO RECOVERY: SYSTEM COST – SS & MWP
20
ECONOMIC DEFINITIONS
21
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Evolving Packaging Stream – 2012 vs. 1990 Baseline
Increasing prevalenceDeclining prevalence
Ch
an
ge
from
19
90
-2
01
2
Flexible packaging is now displacing both traditional packaging as well as rigid plastics.
22
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
RRS, 2014
Recycling Rate Relative to Packaging Stream 2
01
2 R
ecy
clin
g R
ate
Most not collected thru curbside
Core Commodities
Increasing prevalenceDeclining prevalence
23
• Enerkem• Abengoa• Fulcrum • Fiberight • Navitus• ZWE &
Anaerobic Digestion• Approved
projects Hawaii to Maine
THE PROMISE: TAPPING THE ENERGY POTENTIAL OF THE ORGANIC FRACTION
Issues are scale and throughput
24
HISTORICAL ECONOMIC RISKS- Ceiling of Recovery
25
Mixed Waste Processing Facilities (MWP)- Economics depends on the Purpose of its Deployment
Primary Means of Recycling (Savings
on collection costs)
• Savings on collection costs
• Household maximization of utility
• Recovery rate
Preparation of Fuels and energy
feedstocks
• Historical RDF • Compacted Fuel
Pellets• Gasification,
sacharrization, production of fuels and natural gas
MRF of Last Resort
• Residual MRF• Multiple options
deployed prior• High tip fee, high
diversion goals
26
ONE BIN VS. SINGLE STREAM: Case: Primary Means of Recycling vs. Single Stream• Ranges, not real numbers• Assumptions must be local• Best operating practices• No green waste• Costs applied to recycling tons only• Costs include capital
27
One Bin vs. Two Bin $ Revenue Yield3 yr. Average $100 T through Nov 2014
One Bin (Recycling Portion)$/Inbound Ton $60 T 60% * $100
Two Bin (Single Stream)
$/Inbound Ton $85 T 85% *$100
Yield Difference ($25) T
28
One Bin vs. Two Bin DisposalOne Bin (Recycling Portion)
T&D Residuals ($45T x 40%)
$18.50/Ton $/T Disposed $33-65 Range
Two Bin (Single Stream Recycling portion)T&D Residuals ($45T x 15%)
$6.75/Ton $T Disposed $33-65 Range
29
One Bin vs. Two Bin Processing- $/T ReceivedOne Bin (Recycling Portion)
Tons Recovered
$/Inbound Ton $45 Ton $T Received $40-60 Range
$/Recovered Ton
$75 Ton Cost per ton recovered at 60%
Two Bin (Recycling portion)Tons Recovered
$/Recovered Ton $62 Ton $T Received $50-60 Range
30
Category $/T Single Stream
Rev. from Commodities
$74
Disposal ($6.75)
Collection Cost
($118)
Processing Cost
($55)
NET PROGRAM COST $100
Single Stream- Net Costs
At 65% $107 for One Bin
31
Considerations Single Stream
One Bin
Higher Tonnages, Higher Quality XSecondary Processing required for Organics- net cost
X
Mixed Paper may not be available or marketable
X
More upside/less downside from Commodities
X
ECONOMICS: SINGLE STREAM COMPARES FAVORABLY WITH ONE BIN
32
Mixed Waste as Diversion StrategyMICRO-ECONOMIC FRAMEWORK
33
An Investor’s View of Recycling Cost/Benefits
“As demand for recycling grows, a waste company must demonstrate economic profits throughout a commodity cycle before it can claim recycling as a true moat-building competitive advantage.”
Economic Moat
Creation
Switching Costs
Intangible Assets
Cost Advantage
Efficient Scale
Network Effect
34
Investor’s View of Recycling Cost/Benefits to an Integrated Waste Company“Growth in recycling has not enhanced industry-wide
profitability”
“Moat” -access and control landfill of the disposal asset diminished- No competitive advantage - Loss of pricing power, lack of pricing discipline- Recycling actually increases the cost of overall system execution
35
Investor’s View of Current Recycling
• Number of MRFs were down 3% in 2014- mid-640 range to ~620
• Pipeline of Greenfield conventional MRF “lowest in years”
• Expectation is more closures this year with consolidation and unprofitability (up to 10%)
• No new large providers or consolidators on
• Recyclable volume reported by public companies is down in the first quarter
36
Externalities: Recycling Value Chain - Critical Link in the Circular Economy
• U.S. one-way consumption not sustainable - >4#/day
• Modeled on nature. When materials are recycled, energy consumption lowers, productivity optimizes, and stability accrues
• Keep products, components and materials at their highest utility at all times.
• Putting monetary value and costs for execution difficult. Today they are absorbed as social costs.
Lyle, McDonough, Braungart, et.al – ‘Cradle to Cradle, Industrial Ecology, Biomimicry, Blue Economy, Natural Capitalism…”
37
CircularEconomyIn Theory
“Sustainable Consumption”
“Sustainable Production”
c
38
Managing Externalities: Policy-Maker’s View of Cost/Value of Recycling“”Avg. ton of material diverted to recycling …from region solid
wastes has an estimated environmental value of $220T.“- Metro Portland, 2009.”• Properly engineered
residential recycling programs costs(collection, disposal and administration) = net cost to C+LF
• True value of recycling has tangible benefits to the environment today
• Other models have pointed out recently (advanced LCA’s) that there may be some corrections to some of the premises used.
39
A Policy-Maker’s View of Cost/Value of Recycling
.”
c
40
A Policy-Maker’s View of Cost/Value of Recycling
.”
Recycling Program Net Costs Today
Externalities or Social Cost Mitigation
• Stabilizing consumption• Lowering pollution costs• Saving natural resources• GHG savings• Future Generation gains from
robust system
41
Tons Processe
d
PROCESSING DIVERSION CURVE 2009 COUNCIL OF U.S. MAYORS
Requires add’l secondary processing
42
1. Multiple “stacking” of collection/ processing technologies, i.e. – MWPF unders to
Anaerobic Digester
– Solid waste composting with pre-MRF
– Food waste separation and processing
2. High regulatory costs including mandatory separation, heavy outreach, and local enforcement
42
LIMITS TO RECOVERY (RECYCLABLES): PROCESSING DIVERSION CURVE
43
LIMITS TO RECOVERY
44
Altamonte Springs
Thurston, WA
Montgomery Co, MD Average
Paper 29% 17% 26% 24%
Film 7% 6% 8% 7%
Plastic 9% 7% 7% 8%
Metal 3% 5% 4% 4%
Glass 3% 4% 3% 3%Recyclables 51% 39% 47% 46%
Food 7% 24% 21% 17%
Wood 3% 2% 3% 2%
Other Organics 8% 6% 2% 5%Organics 17% 32% 26% 25%
Other 29% 24% 25% 26%
Special Wastes 3% 5% 3% 4%Non-Recyclables 32% 29% 27% 29%
LIMITS TO RECOVERY THREE US CITIES