CONTAINER REDEMPTION SYSTEM OPTIMIZATION STUDY
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1 January 14 th, 2014 CONTAINER REDEMPTION SYSTEM OPTIMIZATION STUDY Commissioned by the Glass Packaging Institute with the engagement from other stakeholders in the beverage container recycling industry
2 Disclaimer This Study was prepared for the client by Resource Recycling Systems (RRS), gathering and utilizing data from sources cited, using the metrics defined throughout the Report. To the extent that statements, information and opinions provided by the client or others have been used in the preparation of this report, RRS has relied upon the same to be accurate, and for which no assurances are intended and no representations or warranties are made. RRS makes no certification and gives no assurances except as explicitly set forth in this report. All known limitations to the Report are noted within, as appropriate. As noted in the Executive Summary, this Study is not intended to evaluate existing state recycling or deposit programs, nor is it intended to promote or advocate for any specific recycling system, and instead offers a path forward toward an optimized bottle bill. As with any recycling system, implementation of a system similar to the one outlined in the Study will require diligence to achieve success.
3 PRESENTATION OUTLINE
4 The models were developed as a tool for policy makers to understand the interaction between a bottle bill system and a comprehensive single stream system. This is not a standard BB system instead a model of an optimized system Optimized bottle bill system would include: A network of convenient container recycling depots, in addition to retail locations, where consumers can redeem their containers A provision to compensate curbside collection programs and/or material recovery facilities Retention of the unclaimed deposits and the material values within the system to create a sustainable funding mechanism
5 The models focus on actual capital and operating costs for each system, but do not attempt to quantify system administration or operational mechanisms for payments between parties The single stream model includes all capital and operating costs to: Collect material curbside or drop-off Transfer and process material at a single stream MRF The optimized bottle bill (OBB) models include capital and operating costs to: Collection of material at redemption centers or from retail locations. Those costs include capital, operation and maintenance for RVMs and operational costs to run the collection system. Processing and marketing of recovered containers. However, No costs are attributed to residents driving to redemption centers or retail locations, since those costs would not be paid by a system operator No costs are included as payments to retailers for their space
6 Purpose of the Models What The Models Do Provide useful information to stakeholders and decision makers in evaluating beverage container recycling options What The Models Are Not Intended To Do Evaluate existing state programs Assess how reimbursing current beverage container recyclers using unredeemed deposits affect overall costs Propose specific, operational mechanisms for ensuring fair reimbursement to recovery partners Quantify the costs of an optimized system and evaluate the impact of an OBB on curbside recycling Quantify the system administration or recommend a management structure
7 SINGLE STREAM MODEL OVERVIEW
8 Used existing MRFs &Transfer Stations Minnesota Existing MRFs & Transfer Stations from RRS MRF database
9 Curbside Service was assumed for all areas within 60 minutes of a MRF or TS Minnesota Modeled Curbside Collection Costs Service Area 30mins or less $ $/ton Service Area 30-60mins $ $/ton RRS internal curbside collection models including capital and operating costs
10 Outside of the curbside areas, drop-off locations were sited in each of the county subdivisions Minnesota Drop-off service cost estimated based on: Average handling cost/ton + Actual drive time to nearest recycling facility RRS internal curbside collection models including capital and operating costs
11 Tonnage for each household was estimated based on strong and comprehensive single stream programs Household Type Single Stream Recovery Weight per Household With OBB MN - No OBB VT - No OBB Units Curbside Single-Family Household lbs/hhld Curbside Multi-Family Household lbs/hhld Drop-off Household lbs/hhld Total tons for MN: 516,966 annually Total tons for VT: 71,197 annually Recovery projections based on RRS database of program performance and "2010 Beverage Market Data Analysis," The Container Recycling Institute,
12 An optimal hub and spoke network was created to transfer materials into large efficient MRFs 12
13 Same type of modeling for VT as in MN In Vermont, Curbside is hauled directly to MRFs with no transfer to larger MRFs, and Better data was available on existing drop-off stations, therefore actual locations were used Source: Earth911 and Local Solid Waste District Websites 13
14 Processing cost at each MRF is pulled from a Cost Curve $160 Capital and Operating Cost per Ton ($/ton) $140 $120 $100 $80 $60 $40 $20 $- - 50, , , , ,000 Annual Throughput Capacity (Tons/Year) Datapoints from RRS internal MRF models including capital and operating for single and two-shift operations
15 Single Stream Model is premised on state-wide service and an optimal transfer and processing network Existing MRFs and TSs in the state 30 & 60mins driving distance to determine curbside and drop-off areas Recycling drop-offs placed at either existing locations or in each census block Input max haul distance for each existing facility based on size Collected tonnage and cost associated with each household Estimated material flowing to each existing MRF and TS in the state Determine optimum number of MRFs to service the state with others transferring material 15
16 Material Revenue from a Single Stream MRF is reduced when an OBB is put in place based on an average Commodity Revenue for a Standard Blend of Materials Material 5 Year National Average Pricing FOB MRF Price/ton % of 1 MRF ton % of 1 MRF Ton (w/ OBB) ONP $90 38% 44.7% Mixed Paper $80 15% 17.6% OCC $118 12% 14.1% Glass (Tri-Mix) $ - 24% 14.1% Aluminum Cans $1,486 1% 0.2% Steel Cans $127 2% 2.4% PET $ % 1.6% HDPE $ % 2.9% Mixed Plastics $ - 1% 1.2% Carton/aseptic $19 1% 1.2% Totals $ $99.11 Reducing amounts of glass, aluminum and PET in the single stream mix increases the relative amounts of other commodities Average ton of single stream material is estimated to be 5-8% less with an OBB and will depend on local material revenue Source: Recyclingmarkets.net 5yr, national average for individual commodities
17 Table of Initial Single Stream Model Results for both MN & VT Minnesota Vermont Total Cost Cost/Ton Total Cost Cost/Ton Collection $95.6 M $185 $11.9M $167 Transfer/Processing $45.3M $88 $10.3M $145 Market Value ($59.4M) ($115) ($8.2M) ($115) Net Cost $81.4M $158 $14.0M $197 Collection costs are lower in Vermont due to reduced curbside. Processing costs are higher due to using smaller single stream MRFs.
18 OPTIMIZED BOTTLE BILL MODELS OVERVIEW
19 Optimized bottle bill system assumes carbonated beverages as well as non-carbonated beverages focused on PET, Aluminum and Glass: Carbonated soft drinks Beer Domestic sparkling water Domestic non-sparkling water ( 1 gal) Sports drinks Flavored and enhanced water Fruit beverages Ready-to-drink tea Energy drinks Domestic table wine Spirits (liquor) Does not include pouches or aseptic cartons due to lack of current technology to handle these packaging types in the BB system
20 Existing retail locations in each state were utilized Retail locations from InfoUSA, 2013
21 Estimated number of bottles through all retail locations was determined based on population density and average generation Source: US Census and "2010 Beverage Market Data Analysis," The Container Recycling Institute, 2013.
22 Population in each census block would bring bottle material to the nearest retailer (or redemption center) Source: US Census and "2010 Beverage Market Data Analysis," The Container Recycling Institute, 2013.
23 Population in each census block would bring bottle material to the nearest retailer (or redemption center) Example: Rutland, VT
24 Redemption centers were placed in areas where at least 750,000 bottles were generated in a 3-mile radius
25 Retail locations within 1.5 miles do not take back containers and those within 1.5 to 3 miles take back small loads only Only required to take back small amounts of bottle bill material Don t need to take back bottle bill material
26 Description of each of the redemption locations and data source High Volume Redemption Center (RC) The highest capacity location is modeled after Oregon s Pilot program and is placed in optimal locations where a minimum of 2.5 million containers per year would be available. Cost data was developed based on conversations with local experts. RVM Redemption Center (RC) This facility is similar to a California Convenience Center in that it is a standalone facility with RVMs. In the model, this type of facility is used when a minimum of 750,000 containers per year would be available but less than 2,500,000 in a 3 mile area. Cost data was based on direct costs only from the report for Businesses and Environmentalists Allied For Recycling in 2002 by RW Beck. RVM Retail Location Similar to retail locations in Michigan and Vermont that have RVM machines inside their stores. The model only places these in retail locations in stores that are over 10,000 square feet or have a significant amount of employees (over employees) if under 10,000 square feet. Additionally, the location must have enough population nearby to support at least 750,000 containers per year. Cost data was based on direct costs only from the report for Businesses and Environmentalists Allied For Recycling in 2002 by RW Beck. Manual Retail Location Similar to retail locations in Michigan and Vermont that manually handle redemption containers. All retail locations that do not fit into the Retail RVM Location criteria are characterized as handling manually with distributer take-back. Cost data was based on direct costs only from the report for Businesses and Environmentalists Allied For Recycling in 2002 by RW Beck.
27 Recovered bottles were directed to nearest bottle return location and costs to handle were applied Collection-Processing Costs Location Type Manual Retail Location RVM Retail Location RVM Redemption Center High Volume Redemption Center Minimum Containers 1 10,000 10,000+ (depends on scenario) 750,000 2,500,000 2,500,000+ (no upper limit) Cost per Container High volume redemption centers (similar to those piloted in Oregon) are still new and operators believe they can get costs below 1.7 per container Average costs were utilized across each type of facility No detailed capital and operating cost for each facility Does not fully capture price variation within the system Source for Costs per Container: Businesses and Environmentalists Allied For Recycling 2002 (Only direct capital and operating costs included), and interviews with experts
28 Bottle Bill Model Flowchart Existing retail locations in the State Return to Retail Model Estimated bottles directed to the nearest retail location Redemption Center Model Retail stores classified as Manual or RVM based on # of containers received Redemption Centers optimally placed where more than 750k are available in a 3-mile radius Cost per container applied to each container processed at each retail location Outside of redemption areas, retail locations still accept containers and are classified as RVM or Manual Cost per container applied to each container processed at each retail location and redemption center 28
29 The modeled redemption center system reduced the number of containers that are returned to retailers by over 80% in MN Minnesota: Containers processed through each type of optimized bottle bill return site 68% 15% 76% High Volume Redemption Center RVM Redemption Center RVM Retail Location Manual Retail Location 9% 9% Redemption Centers 24% Return to Retail
30 In VT, due to the smaller population, the modeled redemption center system reduced the number of containers that retailers had to handle by 50% Vermont: Containers processed through each type of optimized bottle bill return site 34% 58% 20% 23% 24% 42% High Volume Redemption Center RVM Redemption Center RVM Retail Location Manual Retail Location Redemption Centers Return to Retail
31 Modeled costs are for collection/processing, including all capital required, but do not include additional handling fees as they are negotiated costs and not consistent across programs State California.859 Handling Fee per Container Connecticut Beer 1.5, other beverages 2.0 Hawaii Iowa Massachusetts Maine Michigan Variable fee of paid to redemption centers from the state 1, paid by distributor to retailer or redemption center 3.25 (Redemption Centers); 2.25 (Retailers) 4 (0.5 less if part of qualified commingling agreement) None New York 3.5 Oregon Vermont None 4.0 for brand-sorted containers and 3.5 for commingled brands
32 Value of Material in the OBB System Material Revenue per Ton Glass Clear $ 22 Glass Brown $ 12 Glass Green $ 5 PET $ 461 Aluminum $ 1,514
33 Bottle bill systems can be run profitably if unredeemed deposits are kept in the system and in some cases even with only the scrap value of the material Minnesota - Optimized Return to Retail Redemption Centers Total Cost Cost/Ton Total Cost Cost/Ton Collection/Processing $50.6M $318 $61.9M $389 Material Value ($58.1M) ($365) ($58.1M) ($365) Net Cost ($7.5M) ($47) $3.8M $24 Unredeemed Deposits ($35.5M) ($223) ($35.5M) ($223) Net Cost ($43.0M) ($270) ($31.7M) ($199) * Total Tons: 159,099 based on 5 bottle deposit ** The system has between $32M and $43M to pay the MRFs for lost material value and others for soft costs. This works out to per container available.
34 The economics of the system are less positive in VT due to higher projections for generation and the particular sales mix of beverage containers and higher recovery overall Vermont - Optimized Return to Retail Redemption Centers Total Cost Cost/Ton Total Cost Cost/Ton Collection/Processing $6.7M $232 $7.9M $274 Material Value ($7.4M) ($255) ($7.4M) ($255) Net Cost ($0.7M) ($23) $0.5M $15 Unredeemed Deposits ($3.7M) ($126) ($3.7M) ($126) Net Cost ($4.4M) ($149) ($3.2M) ($111) * Total Tons: 28,853 based on 5 bottle deposit ** The system has between $3M and $4M to pay the MRFs for lost material value and others for soft costs. This works out to per container available.
35 SYSTEM INTERACTION
36 OBB Supports Reinvestment in Single Stream SS loses material to OBB Increased recovery However additional material is diverted from disposal
37 Optimized bottle bill systems are estimated to increase statewide recovery by 11% over a comprehensive single stream system and recovery of bottle bill materials by 162% 700,000 Minnesota: Statewide Tons Recycled 600, , , , , ,000 - Single Stream Only SS with Return to Retail OBB SS with Redemption Center OBB Return to retail and redemption center systems were assumed to have the same recovery
38 Optimized bottle bill systems can be comparable in cost to single stream even if unredeemed deposits are not kept in the system Millions $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- Minnesota: Total Collection/Processing Costs incl. Scrap Value $83.3M $82.2M $93.4M Single Stream Only SS with Return to Retail OBB SS with Redemption Center OBB
39 If bottle bill systems use a portion of the unredeemed deposits to pay MRFs for lost material value, they can still be lower cost than single stream alone Millions $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- Minnesota: Net Cost Incl. Payments to MRFs for Lost Scrap Value $83.3M $58.3M $69.6M Single Stream Only SS with Return to Retail OBB SS with Redemption Center OBB
40 On a cost per ton basis, the system is 20-30% lower cost if unredeemed deposits are kept in the system and MRFs are kept cost neutral $180 $160 Minnesota: Net Cost per Ton Incl. Payment to MRFs for Lost Scrap Value $157/ton $140 $120 $100 $80 $60 $40 $20 $95/ton $114/ton $- Single Stream Only SS with Return to Retail OBB SS with Redemption Center OBB
41 OBB Supports Reinvestment in Single Stream
42 Including payments to the MRFs, the OBB system is still profitable Minnesota OBB Return to Retail Total Cost OBB - Redemption Centers Total Cost Collection/Processing $50.6M $61.9M Material Value ($58.1M) ($58.1M) Unredeemed Deposits ($35.5M) ($35.5M) Net Cost ($43.0M) ($31.7M) Payment to MRFs $11.6M $11.6M Net Cost ($31.4M) ($20.1M) The MRFs and Communities would both be cost neutral. After payments to the MRFs and Communities, there would be an additional remaining to potentially compensate retailers for space used for nonredemption center returns or other policies and optimizations.
43 Including payments to the MRFs, the OBB system is still profitable Vermont OBB Return to Retail Total Cost OBB - Redemption Centers Total Cost Collection/Processing $6.7 $7.9M Material Value ($7.4) ($7.4M) Unredeemed Deposits ($3.7M) ($3.7M) Net Cost ($4.4M) ($3.2M) Payment to MRFs $1.9M $1.9M Net Cost ($2.5M) ($1.3M) The MRFs and Communities would both be cost neutral. After payments to the MRFs and Communities, there would be an additional remaining to potentially compensate retailers for space used for nonredemption center returns or other policies and optimizations.
44 VARIATIONS ON THE MODELS
45 2 Major Variations to the Models were explored: Carbonated Beverage Only Optimized Bottle Bill Reduces the total tonnage collected in the bottle bill system 10 deposit OBB Increases the recovery rate of each of the materials Reduces the unredeemed deposits available for funding the system
46 Each state utilized recovery metrics specific to the state. VT had less variability due to their already high recovery under a 5 deposit Material Type Glass PET Aluminum Average Recovery Vermont Recovery 5c: 93.6% 5c EBB: 93.6% 10c: 93.6% 10c EEB: 93.6% 5c: 76.6% 5c EBB: 76.6% 10c: 76.6% 10c EEB: 76.6% 5c: 91.3% 5c EBB: 91.3% 10c: 95% 10c EEB: 95% 5c: 89.7% 5c EBB: 85.8% 10c: 92.0% 10c EBB: 87.4% Minnesota Recovery 5c: 80% 5c EBB: 80% 10c: 90% 10c EEB: 90% 5c: 70% 5c EBB: 70% 10c: 75% 10c EEB: 75% 5c: 90% 5c EBB: 90% 10c: 95% 10c EEB: 95% 5c: 84.8% 5c EBB: 82.2% 10c: 90.5% 10c EBB: 93.0% Material Weight per Container.469 lb..069 lb..030 lb. National Bottle Bill Average Recovery: 82% Michigan (Only 10 System): 96% Containers in Vermont System 5c: 65.8 million 5c EBB: 88.0 million 10c: 65.8 million 10c EEB: 88.0 million 5c: 35.6 million 5c EBB: million 10c: 35.6 million 10c EEB: million 5c: million 5c EBB: million 10c: million 10c EEB: million Containers in Minnesota System 5c: million 5c EBB: million 10c: million 10c EEB: million 5c: million 5c EBB: million 10c: million 10c EEB: million 5c: 1,866.2 million 5c EBB: 1,955.1 million 10c: 1,969.9 million 10c EEB: 2,063.7 million Source: "2010 Beverage Market Data Analysis," The Container Recycling Institute, 2013.
47 The carbonated beverages only optimized bottle bill performs similarly to the expanded optimized bottle bill in each scenario Overall effect on the state recovery rate is reduced 8% increase in statewide overall recovery (down from 11% with expanded bottle bill system) 40,000 tons less through bottle bill system No operational benefits for this system Net profit is reduced by 25% with a corresponding decrease in tonnage processed Less likely to reach efficiencies of redemption centers with less material
48 In Minnesota, the 10 deposit increases recovery, but does not improve overall system economics Overall recovery is increased by 10% and costs are increased by 8% over the 5 deposit system Due to increased recovery, there are less unredeemed deposits 5 Deposit - $35.5M in unredeemed deposits 10 Deposit - $24.1M in unredeemed deposits This reduces the amount available to pay MRFs and other stakeholders per container is available before paying MRFs Payments to MRFs also increase by $1.1M. Overall the system is still a net positive after payments are made to MRFs
49 At 10 the system is still profitable, however, if recovery rates are greater than 95% the system risks being unprofitable Minnesota OBB Return to Retail Total Cost OBB - Redemption Centers Total Cost Collection/Processing $54.8M $66.5M Material Value ($61.7M) ($61.7M) Unredeemed Deposits ($24.1M) ($24.1M) Net Cost ($31.0M) ($19.3M) Payment to MRFs $12.5M $12.5M Net Cost ($18.5M) ($6.8M) The MRFs and Communities would both be cost neutral. After payments to the MRFs and Communities, there would be an additional remaining to potentially compensate retailers for space used for nonredemption center returns or other policies and optimizations.
50 CONCLUSIONS
51 Conclusions Optimized bottle bill systems can increase recovery and create a sustainable funding source for recycling OBB systems in conjunction with optimal single stream systems result in lower net costs overall If material scrap value and unredeemed deposits stay in the system, there is enough revenue to pay MRFs/Communities for material diverted to the OBB system Redemption centers can cost-effectively reduce the impact of a bottle bill on retailers. A 5 deposit results in the strongest economic return for the system
52 APPENDIX 52
53 VERMONT: Optimized bottle bill systems are estimated to increase statewide recovery by 22% over a comprehensive single stream system and recovery of bottle bill materials by 214% 100,000 Vermont: Statewide Tons Recycled 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - Single Stream Only Return to Retail Redemption Centers Return to retail and redemption center systems were assumed to have the same recovery
54 VERMONT: Optimized bottle bill systems can be comparable in cost to single stream even if unredeemed deposits are not kept in the system Millions $16 $14 $12 $10 $8 $6 $4 $2 $- VERMONT: Total Collection/Processing Costs incl. Scrap Value $14.0 $14.3 $13.2 Single Stream Only Return to Retail Redemption Centers
55 VERMONT: If bottle bill systems use a portion of the unredeemed deposits to pay MRFs for lost material value, they can still be lower cost than single stream alone Millions $16 $14 $12 $10 $8 $6 $4 $2 $- VERMONT: Total Cost Incl. Payments to MRFs for Lost Scrap Value $14.0 $12.5 $11.4 Single Stream Only Return to Retail Redemption Centers
56 VERMONT: On a cost per ton basis, the system is 20-30% lower cost if unredeemed deposits are kept in the system and MRFs are kept cost neutral $250 VERMONT: Total Cost per Ton Incl. Payment to MRFs for Lost Scrap Value $200 $197 $150 $132 $145 $100 $50 $- Single Stream Only Return to Retail Redemption Centers
57 Summary of Minnesota system interaction Single Stream Only Single Stream w/5c EBB Single Stream w/10c EBB Return to Retail Redemption Centers Return to Retail Redemption Centers Single Stream Tons 531, , , , ,315 OBB Tons 159, , , ,611 Total Tons 531, , , , ,926 Single Stream Collection ($98,121,296) ($97,705,901) ($97,705,901) ($97,670,970) ($97,670,970) Single Stream Processing ($46,325,000) ($41,497,347) ($41,497,347) ($40,763,090) ($40,763,090) OBB Collection & Processing Single Stream Material Value ($50,634,349) ($61,884,494) ($54,786,945) ($66,537,449) $61,130,198 $49,526,954 $49,526,954 $48,650,621 $48,650,621 OBB Material Value $58,140,449 $58,140,449 $61,701,598 $61,701,598 Unredeemed Deposits $35,460,511 $35,460,511 $24,132,177 $24,132,177 Payment to MRFs ($11,603,244) ($11,603,244) ($12,479,577) ($12,479,577) Net System Cost ($83,316,098) ($58,312,927) ($69,563,072) ($71,216,185) ($82,966,689)
58 Summary of Vermont system interaction Single Stream Only Single Stream w/5c EBB Single Stream w/10c EBB Return to Retail Redemption Centers Return to Retail Redemption Centers Single Stream Tons 71,197 57,703 57,703 57,647 57,647 OBB Tons 28,853 28,853 28,975 28,975 Total Tons 71,197 86,557 86,557 86,622 86,622 Single Stream Collection ($11,880,863) ($11,800,840) ($11,800,840) ($11,800,300) ($11,800,300) Single Stream Processing ($10,306,521) ($8,391,144) ($8,391,144) ($8,382,882) ($8,382,882) OBB Collection & Processing Single Stream Material Value ($6,729,457) ($7,904,597) ($6,861,864) ($8,037,662) $8,187,639 $6,304,088 $6,304,088 $6,297,881 $6,297,881 OBB Material Value $7,483,738 $7,483,738 $7,592,509 $7,592,509 Unredeemed Deposits $3,650,674 $3,650,674 $3,253,849 $3,253,849 Payment to MRFs ($1,883,551) ($1,883,551) ($1,889,758) ($1,889,758) Net System Cost ($13,999,745) ($11,366,493) ($12,541,632) ($11,790,566) ($12,966,364)
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