Introduction. Andrew Clinton Supply Chain and Manufacturing Operations Specialist Leader Deloitte Consulting LLP

Transcription

1 Introduction Andrew Clinton Supply Chain and Manufacturing Operations Specialist Leader Deloitte Consulting LLP

2 Waste to Energy in the Renewable and Alternative Energy Space Roy Johnston Director Corporate Venturing Waste Management, Inc.

3 Waste-to-Energy: Potential in the Renewable and Alternative Energy Space? Presented to the Deloitte Alternative Energy Seminar September 204

4 Context

5 Macro trends in the generation and disposition of waste 250 Tons (Millions) Landfill Diversion WTE MSW in the United States: Generation and Disposal, M tons (4%) 6M tons (0%) Diversion (recycling, composting, conversion) is up >400% since 985, while landfill volumes are down 2% Landfill volume declined 4% between Total waste generation has plateaued for the first time since Source: Environmental Protection Agency

6 driven primarily by sustainability demands from customers and regulators and developing technologies Sustainability / Efficiency 2 Technology Per Capita MSW generation, lbs/person/day 5 Generation Generation At 4.4 lbs/person/day, per capita MSW is below 990 levels Sort Recover Sell recyclables Dual stream material recovery facilities Single stream material recovery facilities Pre-sorted vs. no sort Convert Sell new product Enabling technologies: gasification, pyrolysis etc. Generation 2 technologies often have alternative energy potential

7 WM is North America s leading environmental service provider 20 $.9B REVENUE $.B FREE CASH FLOW TOP 0% OF S&P DIVIDEND-PAYING COMPANIES $.B CAPITAL EXPENDITURES

8 Waste-to-Energy in the Renewable Energy Space

9 Technology Risk ANAEROBIC DIGESTION COMPOST ENGINEERED FUEL PYROLYSIS SYNGAS TO DIESEL GASIFICATION SYNGAS/ BIOGAS TO ETHANOL CELLULOSE TO INDUSTRIAL SUGARS SYNGAS TO CHEMICALS Energy Potential 2 Technologies Now -5 Years >7 Years Obstacles and opportunities 2 Feedsto ck supplier Technical partner Feedstock: right amount, time, location; consistency of supply etc. Commercial supply agreements help to underwrite project economics Partner with deep technical expertise Technology: flexible, tolerable, optionality Issues to consider Questions of ownership and control Offtake partner Experience with similar systems Partner with intimate knowledge of product market (price drivers, optimal quantity, processing, logistics, Commercial off-take arrangements to remove some risk from project Exclusivity / competiti on Ownership of intellectu al property Preparatio n for future financings Manageme nt decisions

10 Many different materials make up the waste (resource) stream.

11 each with a different energy potential and collectively equal to about 2.6 quadrillion BTUs or quads Material Tons (Thousands) Energy Content (Quadrillion BTU) Paper 68, Glass, Metals 22, Plastics, Rubber & Leather 7, Textiles 4, Wood 5, Food Waste 6, Yard Trimmings Misc. Inorganic, , Other 4, Total 250, Heat Content, by material type Quadrillion BTU Yard Trimmings Food Waste Wood Textiles Rubber & Leather Plastics Paper & Paperboard

12 Perspective: BTU is about the energy on the tip of a match; quad BTUs of energy is about 50 million tons of coal BTU = Energy Content* BTU = 0.25 food calories, or about the energy on the tip of a match,250 BTU = x peanut butter and jelly sandwich,42 BTU = KWH of electricity 25,000 BTU = one gallon of gasoline 20 million BTU = one short ton of coal (2,000 lbs) quad BTU = 50 million tons of coal Approximately, of course Source: Thank you to Peter J Wilcoxen, Associate Professor of Economics and Public Administration at Syracuse University for these handy comparisons:

13 so, the energy potential in waste is ~% of total US energy consumption or ~25-0% of current renewable energy consumption 20 Quadrillion BTU US Energy Consumption, Nuclear Electric Power Renewable Energy Coal 2 Quadrillion BTU 0 8 US Renewable Energy Consumption, Waste Bio-Fuels Wood Natural Gas Petroleum 6 4 Wind Solar/PV Geo-Thermal 0 Consumption 2.64 Waste Potential 0 Consumption, 20 With Waste Potential Sources: EPA, EIA, Waste Management

14 Some of this energy potential is realized through ~700 bioenergy projects (primarily combustion, FOG processing, anaerobic digestion) 2 Source: Bloomberg New Energy Finance Database

15 What technologies exist to extract this energy value? 2 Category Physical Biological Chemical Thermochemical Technology Engineered Feedstock / Fuel Maceration and decontamination Mechanical Biological Treatment (MBT) Mechanical Heat Treatment (MHT) Composting Anaerobic Digestion Fermentation Hydrolysis Hydrotreating Transesterification Combustion Gasification Pyrolysis Torrefaction Smelting Estimated Projects Waste as Feedstock (US/Canada) ,500-4,500 > >25 > () Sources: Bloomberg New Energy Finance, Waste Management, includes pilot & demo plants, as of end 20

16 Technology Risk Technologies continue to develop 2 CELLULOSE TO INDUSTRIAL SUGARS SYNGAS TO CHEMICALS SYNGAS TO DIESEL GASIFICATION SYNGAS/ BIOGAS TO ETHANOL PYROLYSIS ANAEROBIC DIGESTION ENGINEERED FUEL COMPOST Now -5 Years >7 Years

17 but creating new supply chains and business models (rather than pure technical efficacy) are the main challenges Proximity to waste streams Technical scale up risks Financial risks Scale in New Supply Chain Scale out Feedstock management & preprocessing Primary conversion technology Intermediate product cleanup Conversion to final product Variability - pricing Commodity risk Variability - regulations Technology risks - efficacy Proximity to offtake customers In our experience, technical efficacy has rarely been the main obstacle to MSW to biofuels commercialization. Rather, supply chain complexity, scale imbalance, regulatory and commodity risks are proving important issues.

18 Waste conversion pathways to value are complicated Waste stream Sorting / processing Primary Conversion Outputs Conversion to products Technologies Technologies Technologies Technologies MSW Methane capture FT Gas to liquids Diesel Industrial Waste Sort out and shred plastics Pyrolysis Synthetic crude Medical Waste Hazardous Waste Shred and dry material Gasification Mechanical separation Syngas Ethanol Chemicals Biological fermentation Solid Fuel Organics Anaerobic digestion Biogas Auger and water infusion Composting Homogenous bioslurry Electricity Compost and fertilizers

19 Capital flows reflect these challenges $B $6 $4 $2 $0 $8 Worldwide biofuels funding, disclosed After a surge in activity, capital has retrenched and financing for longer commercialization horizons has become more costly and difficult to obtain. $6 $4 $2 $ Source: Bloomberg New Energy Finance: Disclosed funding of worldwide biofuels projects,

20 Lessons learned from steel in the ground

21 Opportunity: good partners are those with important, long-term strategic interests in the project over and above investment return Feedstock supplier Feedstock: right amount, time, location; consistency of supply etc. Issues to consider Commercial supply agreements help to underwrite project economics Questions of ownership and control 2 Technical partner Partner with deep technical expertise Exclusivity / competition Technology: flexible, tolerable, optionality Experience with similar systems Ownership of intellectual property Off-take partner Partner with intimate knowledge of product market (price drivers, optimal quantity, processing, logistics, Commercial off-take arrangements to remove some risk from project Preparation for future financings Management decisions

22 How prevalent will Generation 2 technologies become, particularly MSW to biofuels or other energy feedstock? Generation Technology Sorting and recovery: Generation technologies sort the waste stream and recover components of value. Generation widely deployed: ~650 MRFs in the US; older dual-stream systems are being replaced by automated single-stream facilities with higher yields. Organics are important in Generation : Cities are trending towards food and yard waste bans, pushing organics out of landfills into composting and anaerobic digestion. WM has organics processing facilities. Generation 2 Technology Conversion: Generation 2 technologies focus on the chemical conversion of waste to other products (principally fuel). Development status: Generation 2 technologies are in development, but not widely deployed yet (e.g., Enerkem, Fulcrum, Agilyx, etc.). Fracturing continues: Some Generation 2 technologies will continue the trend of fracturing the waste stream and thus tend to require pre-sorting (Generation technology) for optimal use. MSW to biofuel Gen 2 technologies: feedstock supply is important: presort, recover recyclables, or take unsorted MSW?

23 Technology Risk ANAEROBIC DIGESTION COMPOST ENGINEERED FUEL PYROLYSIS SYNGAS TO DIESEL GASIFICATION SYNGAS/ BIOGAS TO ETHANOL CELLULOSE TO INDUSTRIAL SUGARS SYNGAS TO CHEMICALS Summary Energy Potential 2 Technologies Now -5 Years >7 Years Context Annual WM MSW landfill volumes have fallen 0.4M tons (-6%) since The EPA estimates total MSW generated fell 4M tons (- 0.2%) and landfilled MSW decreased 8M tons (-5.6%) during Themes Obstacles and opportunities Waste stream Value chain Business model Information What we get What we do How we do it What we know The composition and Landfilling as the end New business models Knowledge and volume of the waste of the traditional will begin to replace communication will be stream will continue to waste value chain is the traditional collect the key to success and change under pressure & dispose model sustained advantage Potential Trends Organics Processing Nontraditional analytics Data & E-waste Manufacturin alliances g Customer Recycling/re Closed loop needs/dema covery Conversion nds Value-added New = System Marketing orchestratio needs/dema n / new nds supply chain