Energy demand is unlikely to soften in 2014, while producers in several sectors compete to expand their market share.
Energy efficiency has been accepted as desirable by an array of constituencies, particularly when it comes to cutting back on forms of energy that pump carbon dioxide (CO2) into the atmosphere or otherwise have potential negative effects on the environment.
That broadened outlook has helped spur spending on energy efficient products as well as research and development (R&D) and investments in nonfossil fuel energy alternatives—including energy from waste (EfW).
Nationally, electricity usage measured by kilowatt hours (KwH) has been in the 3.8 to 4.0 trillion range since 2005, having stabilized because of a combination of energy efficiency techniques and flat economic conditions. Those same two factors have combined to lower U.S. gasoline consumption from 142.3 billion gallons in 2007 to 133 billion gallons in 2012, according to the U.S. Energy Information Administration (EIA).
Globally, however, electricity and transportation fuel demand is surging, causing exploration activity and prices (for some energy commodities) to remain elevated.
On one hand, the world’s unceasing demand for energy provides a ready market for energy created from waste. On the other hand, global demand has encouraged other energy sectors to reinvigorate their exploration efforts and boost production levels, causing a competitive market for energy-from-waste producers.
Revenge of the fossils
For much of this young millennium, momentum has been building in the United States around the ideas of energy independence and alternative, renewable forms of energy (most closely associated with solar and wind power).
While this momentum helped lead to the appearance of windmills throughout the U.S., the growing use of solar technologies and considerable progress in the waste-to-energy (WTE) sector, major developments in North America’s oil and gas sector have had an even bigger influence.
Increased oil production in Texas and in the 21st century oil boom state of North Dakota has caused the United States to defy the “bell shaped curve” model of oil production formerly assigned to geographic regions. Newer drilling and extraction technologies receive much of the credit for the boost in U.S. oil production.
New extraction technologies also receive the credit for the massive boost in natural gas production in the U.S., particularly in the Marcellus shale region running from western Maryland to eastern Ohio.
The resulting domestic oil and gas boom has made energy scarcity less of a problem, at least in the near-term, has kept oil prices stable and has lowered the cost of natural gas in much of the U.S.
While this can sometimes be a disadvantage for energy-from-waste project viability, sources contacted for this article also point to positive aspects of the natural gas boom in particular.
“Shale gas development will have a positive impact on energy initiatives for Ohioans,” says Mel Kurtz, president of Quasar Energy Group, Cleveland. (Quasar, which designs and builds anaerobic digestion systems, was profiled in the May/June 2013 issue of Renewable Energy from Waste magazine article “Pioneering Change,” www.rewmag.com/rew0613-quasar-energy-group-profile.aspx.)
Kurtz says the widespread acceptance of compressed natural gas (CNG) as a truck and vehicle fuel can be particularly helpful in making waste-to-fuel projects viable. “We believe the availability of natural gas from Marcellus shale will accelerate adoption of compressed natural gas as an alternative to traditional transportation fuels because of its lower long-term cost and increased availability,” he comments.
Anne Germain, director of waste and recycling technology with the National Waste & Recycling Association (formerly the Environmental Industries Associations), Washington, D.C., says the solid waste industry has been among those showing support for CNG vehicles. “CNG vehicles are increasingly purchased for waste and recycling [fleets],” she remarks.
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Unfavorable Tide
As the United States has worked to diversify its energy portfolio in the wake of carbon emissions reduction goals and a desire to be less reliant on imported energy, nuclear power seemed poised to be a beneficiary.
Much of the momentum that was building toward a nuclear energy revival however, was undone by the tragic earthquake and tsunami that hit northern Japan in March of 2011.
When tsunami waters hit the Fukushima nuclear power plant, engine generators that powered the pumps which circulate cool water to keep nuclear fuel rods from overheating were flooded, resulting in hotter fuel rod temperatures and subsequent radioactive water leaks.
The potentially negative scenarios that could have developed from the Fukushima incident (and according to some critics, could yet develop) helped turn the entire nation of Germany away from nuclear power and effectively halted several nuclear power projects being considered in the U.S., including the cancellation of two new reactors in Texas.
The Solyndra bankruptcy of 2011 provided ammunition to solar power detractors, but that sector seems to have weathered the controversy. California’s peak solar power generation level increased by 150 percent in 2013, causing the state energy agency there to consider investments in batteries to store daytime solar power.
The California Solar Energy Industries Association estimates that rooftop solar installations in the Golden State in 2013 matched the capacity of installations in the previous 30 years combined.
In Hawaii, solar panels are proving so popular that the state’s regulated electric utility has asked for a moratorium on installations until it can be assured of a business model that will allow it to effectively adjust its management of the electrical grid.
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Low natural gas prices make CNG use attractive and widespread, but higher prices are nonetheless welcome when costing out specific projects, according to Eric Herbert, CEO of Zero Waste Energy LLC, Lafayette, Calif. “The prices [for natural gas] have been very low but are rising. This seems to help us with renewable biomethane as an alternative,” he says.
The U.S. Department of Energy estimates there are now 66,000 CNG vehicles on the road in America. Major customers include UPS and Waste Management Inc., while CNG provider Clean Energy Fuels, Newport Beach, Calif., has set up some 400 fueling stations in the U.S. to support an initial national distribution infrastructure.
Kurtz is among those who are optimistic that such distribution growth, coupled with low natural gas prices, boosts the long-term viability of waste-to-fuels projects across the country. “The increase in low-cost natural gas will expedite the confidence consumers will have for all [alternative] energy resulting,” he states.
That optimism does not necessarily translate to the mass burn WTE electricity production market, according to John Carlton of Gershman, Brickner & Bratton Inc., Fairfax, Va. “High supply and low prices for natural gas are driving down the price for electricity,” says Carlton. “Because electricity is generally the primary offtake from WTE systems, it has a significant effect on the economics of these plants,” he adds.
In the electricity market coal remains the dominant energy source, although coal-burning power plants are under increased emissions scrutiny.
The natural gas boom and coal-burning environmental restrictions have essentially created a stagnant (but still substantial) market for coal, with the EIA forecasting flat coal production levels in the U.S. for the next 25 years.
The cost-avoidance hedge
Investors in alternative energy projects take risks tied to conditions in the dominant fossil fuel markets over which they have no control. A factor in favor of EfW investment, however, is the cost-avoidance aspect of installing such systems.
The cost-avoidance aspect is unique to EfW and may help buffer it from an overreliance on subsidies. (See the sidebar “Tilting at windmills” on page 23). And while waste can still produce a “not in my back yard” reaction from neighboring property owners, such problems for EfW projects seem manageable compared to the potential threats encountered by nuclear energy producers. (See the sidebar “Unfavorable tide” below.)
“If corporations or municipalities have a consistent and reliable quantity of organic waste and are paying a tip fee to get rid of it, then alternative options might be worth considering,” says Germain.
As one of the technology providers offering such an option, Kurtz says he is seeing waste generators following up on those considerations. “We have seen an exponential increase in inquiries from corporations and municipalities over the last six months,” he states.
In the anaerobic digestion sector, Kurtz says success is breeding success. “As more high-solids anaerobic digesters come online, corporations with organic waste streams are becoming more confident that we are a long-term alternative to landfill disposal.”
The math involved in calculating return on investment (ROI) for EfW can be complicated and is subject to variable factors, says Germain. “The ROI on WTE (or EfW) systems can vary significantly depending on the waste stream. Landfill gas – if there’s enough of it – can deliver a fairly rapid ROI, and the technology is mature,” she says.
“Mass burn WTE facilities have mature technologies but have such high capital requirements that the ROI will inevitably be lengthy,” Germain continues. “Some of the new conversion technologies seem to promise a quicker ROI, but they’re haven’t been tested or may have specific feedstock requirements that might lead to expensive preprocessing.”
Herbert in California, much like Kurtz in Ohio, is nonetheless seeing companies and municipalities with waste streams exploring or committing to EfW projects. “We see a strong interest in the sustainability value and of [avoiding] disposal in landfills as a strong incentive,” he remarks. “However, our solutions must have economic viability to succeed,” he adds.
Regional disparities
Economic viability in the EfW market is by no means identical from state to state, say sources, with both state policies and regional energy costs providing variable factors in 2014.
A particularly proactive state government can help boost an EfW market, notes Herbert. “California, Connecticut and Massachusetts have developed strategies to support organic waste-to-energy programs,” he comments.
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Tilting at windmills
As 2014 began, the U.S. Congress had yet to extend an estimated $6 billion per year subsidy for the wind energy sector.
The wind Production Tax Credit (PTC) has been in place since 1992, providing an incentive for land owners, industrial power consumers and utilities to invest in windmills that have become an increasingly common sight on the U.S. landscape.
The clean energy method has at times enjoyed bipartisan support, but at least 10 U.S. senators have gone on record saying it’s time for the wind power subsidy to end.
According to a late December 2013 article from NewsMax Media Inc., nine Republicans and one Democratic senator sent a joint letter to the Senate Finance committee seeking an end to the wind tax credit. “Our nation’s energy policy must make economic sense for taxpayers and not manipulate the market,” the letter states in part. “Continuation of the wind PTC not only picks winners and losers, it is distorting our energy markets. After more than 20 years and tens of billions of taxpayer dollars, it's time to let the wind PTC expire and continue to invest in new technologies.”
The wind tax credit still has friends in Congress, however, with 24 Democratic and Independent senators writing to the same committee saying that wind energy is still “scaling up” and that the tax credit helps to “drive down the cost of clean energy technologies.”
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Food scrap diversion mandates can be one such method, says Germain. As organic waste is targeted for diversion, anaerobic digestion and other waste conversion methods are likely to benefit. “States like Vermont and Connecticut have passed food waste diversion mandates that require organics from large commercial generators to be diverted from landfills if a licensed recycling facility (waste-to-energy, composting, etc.) exists within a certain proximity,” she says.
“New York City Council recently passed a similar mandate,” Germain continues. “These early adopters indicate what will most likely be the next wave of a national recycling movement—organics recycling for energy generation. The opportunity to have a fixed disposal cost and ‘do the next right thing’ is exciting and creates incentive for everyone to do the same.”
In the power market, more than 35 states also have a renewable portfolio standard (RPS) for utilities operating within their borders.
“According to the Center for Climate and Energy Solutions, 37 states and the District of Columbia have an RPS or alternative energy portfolio standard specifying that electric utilities deliver a certain amount of electricity from renewable or alternative energy sources,” says Kurtz.
“States that have an RPS provide incentives for developers,” says Germain, “but the requirements vary by state, ranging all the way up to 40 percent, and compliance dates vary as well.”
Carlton points to Maryland as a state that has positioned WTE as part of its RPS in a favorable way. “Maryland has WTE technologies classified as a Tier 1 renewable energy source under its RPS,” he says. “This way the WTE plants can receive the highest renewable energy credit support, the same as wind and solar projects.”
As well, utilities in states with a strongly enforced RPS may be more likely to work with waste generators and waste conversion technology providers to help smooth the way for a proposed EfW project.
Even so, ROI is always part of the picture and low energy costs in some regions have the potential to stretch the ROI timeline beyond practicality. “Natural gas prices here in the Washington D.C. area have traditionally run higher than the national average,” says Germain. Recently, though, she says prices in the region “have reached a point where there is no premium any longer and projections expect that local pricing will eventually fall below national averages. Generally, the viability of projects is razor thin, so investors can be leery of large price fluctuations.”
Backward or forward?
The uncertainty of ROI timelines may be a hindrance to some EfW projects, but a positive counterbalance is the diversity of energy and fuel types that can be produced from waste.
“For anaerobic digestion facilities, energy costs play a big role in determining the best end use for our renewable energy,” says Kurtz, “and unlike many types of renewable energy, biogas has multiple end uses (electricity, cooling and heat, natural gas and alternative motor vehicle fuel).”
That diversity has helped maintain an active EfW investment climate, says Germain. “I don’t think the investments have fallen,” she comments. “It seems as if the investment is continuing.”
Carlton says municipalities are often slower to act than corporations to finally make such an investment. “Given the economic conditions municipalities face, they are looking to ultimately lower the costs of waste management through WTE systems combined with more aggressive recycling,” he says. “However, the risk-averse nature of municipalities is causing these developments to occur slowly.”
Kurtz, who has many customers in Ohio, says factors in that state are tipping investments in favor of the waste-to-fuels market and the investments are continuing. “As waste-to-fuel research and investment continues to gain momentum, it is less likely to be impacted by the fluctuating price of gasoline,” he notes. “Waste-to-fuel technologies are long-term alternatives to traditional fossil-based fuel sources. CNG is less expensive than gasoline or diesel and burns cleaner. Not to mention it is made locally from waste that would not only be wasted, but [generators pay] to waste it,” says Kurtz.
The natural gas and oil boom is bringing more domestic energy to the U.S. market, but it does not seem to be reducing the desire of waste generators to divert material from landfill and capture its energy value.
The author is editor of Renewable Energy from Waste and can be contacted at [email protected].