While the nature of the industries may be different, the regulatory environment surrounding the solid waste business and the energy production industry is very similar. The solid waste business is made up of vertically integrated steps that span from the collection vehicles on the street, to the processing, segmentation and consolidation of the materials, to final disposal (or commodity sales). The energy industry is also made up of integrated stages starting with generation, and moving to transmission, distribution and retailing. Both industries are engaged in providing critical services to individual and commercial consumers, and are therefore classified under the general category of utilities, where it is typical that consumer rates are established by third party governmental, or impartial bodies. Similarly, both industries face the task of substantially re-inventing an old business model under the pressure of the depletion of natural resources critical to their respective industries, and recognizing the finite nature of the product they have been marketing. As a result, regulation is now in place across North America that forces both industries to shift their thinking, more effectively utilize their assets and stimulate innovation in order to continue to survive.
In 1997, the Kyoto Protocol presented to the United Nations Framework Convention on Climate Change, sought to implement sweeping reform on a world-wide basis to stabilize greenhouse gas (“GHG”) concentrations in the atmosphere to a level that would prevent dangerous anthropogenic interference with the climate system. The basic tenets of the Kyoto Protocol became effective in 2005, and are focused on the reduction of four GHG, including methane and carbon dioxide, which are natural by-products of modern landfills. Public agencies charged with regulating the solid waste industry are now requiring contractors to implement sustainable practices, including route optimization tools to reduce route carbon footprints to alternative fuel vehicles. Intermediate solid waste facilities such as transfer stations and material recovery facilities are likely to take on greater importance in the future, as they will add energy conversion technologies to their current recovery activities. New and innovative practices have started in the solid waste business that are changing the way things have been done in the past and recognizing waste as a resource that can serve as an essential element of the process to produce energy.
As a result of the change in the way municipal solid waste is viewed, many local governments have re-focused their attention on the waste system, particularly processing and disposal, realizing that it is moving towards a commodity based feedstock that has value. While the waste industry is in the process of re-inventing the optimal structure, the energy industry has been faced with responding to the inevitability of further regulatory mandates brought about by the realization that their primary resource is finite in quantity, while the demand for it has never been greater. Renewable energy sources have long been a focus of the industry, with many viable new technologies being developed. However, in most cases, the economics have failed to make these new technologies competitive. The introduction of the American Recovery and Reinvestment Act (ARRA) of 2009, provides significant incentives designed to stimulate innovation, in part, to push sustainable technology to the next level. The combination of financial incentives brought about by ARRA, added to traditional tax incentives and low interest technology loan programs, may be the difference maker on some innovative ideas that otherwise would not have gotten off the ground, among them waste to energy conversion technologies. Zada partners works closely with our partner companies, Columbia Business Resources and Harvest Moon Partners, to locate incentive programs that fit the needs of the specific projects of our customers.
The push to develop renewable energy sources has come about in combination with the introduction at the State level of Renewable Portfolio Standards (RPS), or regulations that require the increased production of energy from renewable energy sources, such as wind, solar, biomass and municipal solid waste, among several others. This mechanism generally places an obligation on electricity supply companies to produce a specified fraction of their electricity from renewable energy sources. Certified renewable energy generators earn certificates for every unit of electricity they produce and can sell these along with their electricity to supply companies. Supply companies then pass the certificates to the appropriate regulatory body to demonstrate their compliance with their regulatory obligations. Approximately twenty-nine states have adopted some form of RPS with most obligations based on percentage increases over a base year. Supporters of the RPS mechanisms believe that market implementation will result in competition, efficiency and innovation that will deliver renewable energy at the lowest possible cost, allowing renewable energy to compete with cheaper fossil fuel energy sources.
Energy derived from solid waste as a feedstock is an attractive option to government regulators and the energy industry for a variety of reasons, including:
General support of government towards the development of such technology because it is consistent with public policy and allows for ease of regulation
conversion technology effectively turns a cost into a revenue source
Municipal solid waste is typically a steady stream of volumes that will generate a reliable source of energy in most geographic areas
Infrastructure to house conversion technology generally already exists and would need to be retrofitted rather than constructed as a green field project, limiting initial capital
Solid waste facilities are rarely closed for economic reasons since they are regulated and tied to public health and safety obligations; and
The avoidance of future costs of transportation and disposal as well as the reduction of GHG generation, by processing locally
Renewable energy capacity is likely to come from a variety of sources and technologies, with economics almost certainly driving the market. The per kilowatt hour cost to produce energy utilizing wind, solar and a variety of other sources has proven to be significantly higher than the cost associated with simpler technologies such as anaerobic digestion. Waste-to-energy models developed by key partners of Zada Partners have the additional advantage of being able to charge an input fee (gate fee), relatively low costs associated with processing, and three separate and distinct output revenue streams in the sale of energy, recyclable commodities and high grade compost. Zada Partners believes that energy generated from the anaerobic digestion conversion of the organics component of municipal solid waste, clearly carries the lowest net production cost per kilowatt hour of any alternative, including wind, solar and biomass