Serving customers’ needs should be a top priority for power companies, irrespective of the regulatory construct and business model. Transformation doesn’t change this basic fact, but how do we...
Technology and regulation changes the outlook for garbage burners.
the risk of service interruptions.
A fragmented market also has hindered traction with landfill owners. Although managing the environmental impact of landfill gas is a major concern for landfill owners, in many cases the annual revenue generated by energy sales from these systems is equivalent to what a landfill owner makes in one week in waste disposal fees. These projects are perceived as more of a risk than a major revenue stream. As such, landfill owners seek market leaders with a long operating history and a well-established track record.
Larger landfill-gas-to-energy players would also improve project economics. Larger players have standardized operating procedures, buying power with vendors, and can reduce project specific risk through portfolio management. Overhead can be spread over a large base and larger players can more likely fund projects internally lowering the cost of capital as compared to finding external capital. The small size of landfill gas to energy projects also makes it difficult to take advantage of the tax incentives provided to all renewable energy by the federal government. If the project developer doesn’t have the tax appetite to benefit from the incentives, as is often the case, the developer must find a third party to participate as a tax equity investor. However, the transaction costs to set up the correct structures to include tax equity players aren’t worth the benefit for such small projects.
Consolidation can improve the ability of the industry to develop projects with landfill owners, develop relationships with offtakers for the energy produced, and improve project economics. There’s evidence that industry consolidation is underway as six of the top 10 operators are backed by private equity and two of the largest players have explicitly stated their intentions to grow through acquisition.
Big Trouble for Trash Burners
Burning trash before it’s even disposed in a landfill is another approach to recovery of energy from trash. There are currently 76 U.S. waste incineration plants, which burn municipal solid waste in boilers and recover metals, producing 2,600 MW of power. Areas with high landfill disposal fees have historically been related to more waste incineration development (see Figure 4) . In other words, areas with the most constrained landfill capacity have introduced waste incineration solutions. However, no new waste incineration plants have been built in the U.S. in more than a decade. Several reasons suggest there will be a revival in waste incineration power production.
Over the years, waste incineration has been met with opposition from environmental groups for the toxins emitted from the incineration process. This negative reputation has made permitting new facilities with this technology difficult. For example, in 1989, Mayor David Dinkins of New York City proposed a waste management plan which included plans for a number of incineration facilities with advanced air pollution control systems. However, when Mayor Rudy Giuliani came into office he scrapped these plans primarily as a result of opposition from environmental organizations that were concerned about emissions. The environmental argument, however, was based on data from the emissions of incinerators in the 1980s, which was before Environmental Protection Agency regulations