Much Ado About Scale in Waste Advantage Magazine
Waste conversion, an industry decades into its maturity and widely adopted in Europe, has been struggling to find a foot-hold here in the United States. This is the result of several influences, including: the U.S. is not yet experiencing a critical level of landfill scarcity; dark clouds of myth and misconception hang over the technologies; the investment community is painfully allergic to technical risk and has an aversion to the “serial number one”; and the industry’s marked obsession with scale.
As the number of emerging conversion technologies grow, the quest to find the “holy grail” of scale intensifies. Communities and developers have shifted from whether they should implement waste conversion to the question “Which technology and what scale?” While industry leaders organize and set benchmarks for technologies to determine which should be considered as major players in the conversion space.
One such benchmark, set for waste-to-biofuel projects, defined success at approximately 400 tons per day capacity by stating fuel production would be expected at or above 5 million gallons, annually. The bar was set even higher, at the 500-1000 tons per day range, from a waste journalist who stated the benchmark should be set at tonnages similar to those received at a small landfill.
It is not all that surprising that here in America where “size matters” and we “go big or go home.” But for an industry that has been struggling for headway since the 1970’s, is the “bigger is better” approach the best pathway to market penetration?
The temptation to achieve utility-scale commercial operation and successfully lock down the role of “first mover” is incredibly juicy. The media attention, investor interest, academic accolades and development opportunities that will open up for this “first-of-its-kind” facility will be vast and the companies behind the project will secure a substantial head start.
With the recent climate legislations, rising energy costs and increased tipping fees, a waste conversion revival occurred with enough momentum to get several of these “first-of-its-kind” projects into the construction/planning phase. Yet, all of them have hit significant, time-killing, money-burning barriers in their efforts to get off the ground. Most of these barriers were a product of scale.
First, utility-scale projects are capitally intense ranging in the $150 to $300 million dollar range. Finding investors and financing options at this level, for a “serial number one” is no simple task. Coincidentally, these projects require massive waste and off-take agreements. The facility must be able to secure and contract a long, steady supply of waste. Without these waste guarantees the facility is at risk of falling short of its economic projections resulting in investors bailing and eventual closure. When the majority of waste fluctuates seasonally or is locked up in long-term contracts with waste management giants, finding this steady supply of waste is an arduous endeavor. Often a project finds itself on one of two sides: either competing directly with the waste giants or being dependent on their partnership.
Additionally, facilities at utility-scale are producing critical product quantities requiring complex power-purchase and off-take agreements. If the plant is producing electricity this requires connecting and meeting the regulations of the local utility grid. Utilities are in the business of consistent, stable energy and a plant producing 35 to 70 MW will not have room for error. Biofuels don’t require plugging into the grid, but often still require refining, upgrading, and/or blending by an established off-take customer.
Even when projects are able to get past these initial barriers, they tend to be more susceptible to the dark clouds of misconception. Nearby communities, environmental extremists, competitors, and local legislatures may use general lack of awareness and confusion to build up uncertainty, fear, and frenzy around the proposed facility causing residents, permitting officers, and other city boards to put the project on hold or even derail the project completely prompting companies to abandon U.S. developments and look for international opportunities.
This track record has caused companies like Sierra Energy to seriously question the “bigger is better” approach. The waste gasification company from Davis, California acknowledges the allure that comes with economies of scale and first mover advantage. During their growth, Sierra Energy’s gasifier, a modified blast furnace, has caused the company to consider several large-scale opportunities. However, on a white board at the company’s headquarters, a quote from Albert Einstein is scrawled, “We cannot solve our problems with the same thinking we used when creating them.”
For Sierra Energy, this is especially relevant to how communities have historically viewed and managed waste, and has moved the company to follow a less traditional, community-scale, distributed approach to waste conversion.
“The waste management model where cities are contracted to meet waste quotas, three different trucks drive down the same street for collection, then waste is hauled some 100 miles away to become a mountain of polluting trash just isn’t sustainable,” says Mike Hart, CEO of Sierra Energy. “Yet planting a huge waste conversion facility at the end of that scenario isn’t the answer either.”
Hart believes waste management should happen on the community level, creating a use for non-recyclable waste close to its source and creating jobs and energy right where they are needed and consumed. This has led Sierra Energy to design and develop a compact and modular system that will be sold directly to municipalities, industrial waste producers, and to its first customer—the Department of Defense.
Hart sees the companies who either can only function economically at utility-scale or who are racing to build the first big system as having a long, hard road ahead of them. In the meantime, he sees the opportunity for waste conversion to broadly penetrate the market through small, affordable systems.
Projects at community-scales can be implemented in more places, even rural or geographically limited areas. They require significantly less capital investment which opens up more financing opportunities. Smaller systems also allow for the community to better understand the potential benefits of the system and for the developer to respond one-on-one with any questions or concerns about the solution. Plus, they wouldn’t require direct competition with the waste giants, at least not initially.
The challenge for small-scale systems has been getting the economics to pencil out and the lack of equipment resources for emission control, end-product upgrading, and energy generation at their disposal. However, this is becoming less challenging as companies such as Velocys, GreyRock Energy, Kiverdi, Ballard Fuel Cells, Capstone Turbine, Fuel Cell Energy, and Caterpillar are all developing processes and offering syngas compatible products at the community-scale.
“People are excited about waste conversion and want to put it to application right now. Overall more companies are responding to that demand and, in the meantime, transforming the vision for successful waste conversion installations.” Hart continues. “Building a giant facility is not the only way to reach success.”
An Australian study “Review of Small Scale Waste to Energy Conversion Systems” agrees saying there is no technical reason why small-scale systems could not become more widespread and with the right logistics could be widely accepted as a measure to manage waste. That begs the question, is this scale obsession much ado about nothing?
Written By: Rashael Parker
Published in: Waste Advantage Magazine, January 2013