The Economic Development Benefits of Waste-to-Energy Facilities
The long-term availability of a cost-effective, reliable and sustainable solid waste management system is an important component of the infrastructure needed by a local community to spur economic development. In this regard, municipal solid waste management (MSW) systems that utilize waste-to-energy (WTE) facilities to process nonrecycled waste for energy recovery provide a number of noteworthy economic development benefits which are highlighted in this article.
This article is based on an FY2011 research report developed with input and guidance provided by the SWANA Applied Research Foundation (ARF) WTE Group Subscribers who are listed in Table 1.
The economic development benefits that can accrue to a community which implements a WTE-based solid waste management system include
- long-term savings in waste disposal tipping fees;
- the retention of waste management expenditures in the local community;
- creation of high-quality jobs that cannot be outsourced; and
- the production of base-load renewable electricity.
WTE facilities typically have higher tipping fees than MSW landfills. For example, Biocycle magazine reported that, in 2009, the average landfill tipping fee in the US was $44.09 per ton, while the average tipping fee at WTE facilities was $67.93 per ton (van Haaren, R., Themilis, N. and Goldstein, N. “The State of Garbage in America [17th Nationwide Survey of MSW Management in the U.S.]”, Biocycle, October 2010).
On a long-term, life cycle economic basis, however, WTE facilities cost less than disposing of MSW in MSW landfills. There are two reasons for this:
- The repayment of the WTE facility bonds before the end of its service life
- The control of WTE tipping fees through facility capital and operating costs
A significant portion of the tipping fee of a WTE facility represents the financed capital cost of the facility. Many of the 87 WTE facilities in the US were built in the late 1980s and early 1990s. As a result, the average age of these facilities is 22 years (Energy Recovery Council. 2010 Directory of Waste-to-Energy Plants in the United States. http://energyrecoverycouncil.org/waste-energy-resources-a2985). A number of these facilities were financed with 20-year revenue bonds that have been repaid. As a result, the tipping fees at these facilities are now competitive with and even less than those charged at regional landfills.
In a statement made before the US House Ways and Means Committee in 2005, Mr. Michael Norris, director of business development for American-Ref-Fuel Co., stated: “In the case of the construction of a typical new ‘greenfield’ facility, the capital cost of a facility that converts 2,250 tons of trash each day into 60 MW of electricity is approximately $350 million. The operation and maintenance cost without capital recovery approaches $28 million annually.” (Source: Statement of Michael Norris, Director of Business Development, American Ref-Fuel Co., Montvale, New Jersey, on behalf of Integrated Waste Services Association. Testimony before the Subcommittee on Select Revenue Measures of the House Committee on Ways and Means. May 24, 2005. It is assumed that the $28 million operations and maintenance cost figure quoted by Mr. Norris includes ash disposal.)
These cost figures were used to develop the life-cycle costs (LCC) for a hypothetical WTE facility constructed in 2011. Key assumptions used in this analysis include the following:
- Electricity Revenues—It was assumed that the WTE facility would receive $0.055 per kilowatt-hour (kWh) from the sale of electricity to the local power utility. (The Lancaster County Solid Waste Management Authority [LCSWMA] reported that, in 2009, it received revenues of $11.8 million on the sale of 214,000 megawatt-hours [MWh] of electricity, which equates to $0.055 per kWh.)
- Disposal at a Regional Landfill—It was assumed that the closest regional landfill was 50 miles away and charged a tipping fee of $44.10 per ton. (According to the NSMWA, the average tipping fee at US landfills in 2005 was $34.29 per ton, which, when escalated by the US Department of Labor’s inflation calculator, equates to $41.10 per ton in 2011. [Source: Repa, E. NSWMA's 2005 Tip Fee Survey (Research Bulletin 05-3. Washington, DC: National Solid Waste Management Association, March 2005.]).
The LCC results are presented in Table 2 and Figures 1 and 2.
As shown, the WTE facility starts out with a 2012 projected tipping fee of $53 per ton, which is equivalent to the $53 per ton estimated costs of transferring, hauling and disposing of MSW at the regional landfill. When the WTE facility bond payments are paid off after 25 years in 2027, the WTE facility tip fee drops to $16 per ton (2011dollars) compared to the remote landfill disposal option cost of $52 per ton in 2011 dollars. Over the 40-year life cycle time frame, the WTE facility is projected to save $591 million, or $11.8 million per year.
Another reason that WTE facilities cost less than disposal at regional landfills is that their tipping fees are controlled through costs and revenues negotiated through long-term (20- to 25-year) contracts. In this regard, the tipping fees at WTE facilities comprise three major components: 1) amortized financed capital cost of the facility; 2) the facility’s operating costs; and 3) the revenues received from the sale of the electricity generated by the facility. Each of these components is based on contracted costs or revenues that are tied to published escalation rates. As a result, WTE facility tipping fees are both predictable as well as under the control of the local government that owns the facility.
In contrast, the tipping fees charged at regional landfills are based on the level of competition from other regional landfills and, as a result, are not necessarily related to the cost of disposal. In addition, waste disposal contracts are generally short-term contracts, typically on the order of five years. As a result, the long-term tipping fees paid by a community for disposal of its waste at a regional landfill are neither predictable nor under the control of the local government whose residents and businesses utilize the landfill. (It should be noted that the tipping fees charged at many US landfills do not cover the long-term management costs associated with the site following the 30-year post-closure period prescribed in the EPA’s “Subtitle D” landfill regulations.).
The future tipping fees for landfill disposal presented in Table 2 and Figures 2 and 3 are based on an assumed inflation rate of 3%. However, in reality, since the tipping fees charged at regional landfills are based on marketplace competition, there is no accurate method of predicting what the tipping fees will be at these landfills on a long-term basis. (In this regard, a factor that inhibits competition is referred to in the industry as the “geographic hauling advantage.” This term refers to the natural competitive advantage that one regional landfill has over a distant competing landfill due to the difference in costs associated with waste hauling to each regional facility.)
Waste Disposal Costs Stay in Local Economy
In addition to providing long-term savings in waste disposal costs, the WTE facility option ensures that the monies spent on waste disposal are kept in the local economy. In the above example, these costs are equivalent to $935 million in 2011dollars. The expenditure of these costs on local wages and purchases will create “ripple effects” that will further benefit the local economy.
In contrast, if a community chooses to dispose of its waste in a remote regional landfill versus a WTE facility located in the community, it would transfer slightly over $1.4 billion out of the local economy to the community hosting the regional landfill. (About 90% of the $1.5 billion spent on the remote regional landfill disposal option represents disposal costs that would be transferred out of the local economy.)
High-Quality Jobs That Cannot Be Outsourced
The Energy Recovery Council reports that the average WTE facility in the US is responsible for the creation of 58 full-time jobs (Energy Recovery Council. 2010 Directory of Waste-to-Energy Plants in the United States. http://energyrecoverycouncil.org/waste-energy-resources-a2985). Because these jobs are related to the operation and maintenance of a local facility, they cannot be outsourced. As indicated above, there is every indication that these jobs will be around for at least 40 years. For the most part, these are salaried, skilled positions with relatively high pay.
In addition, the implementation of a WTE facility can create hundreds of construction jobs. For example, in its recent announcement of its decision to expand its current facility, the Solid Waste Authority of Palm Beach County indicated that construction of the 3,000 TPD expansion unit will create employment for 325 onsite construction workers and up to 600 subcontractors at an average pay rate of $23 per hour. Once constructed, the facility will employ 60–70 full time workers at an average salary of around $40,000 per year with benefits (Matchell, C., “West Palm Beach Leading the Way in Renewable Energy,” West Palm Beach Political Buzz Examiner, April 12, 2011).
Production of Base-Load Renewable Electricity
The Energy Recovery Council also reports that the nation’s 87 waste-to-energy plants have a power-generating capacity of nearly 2,700 MW of clean electricity (www.energyrecoverycouncil.org/waste-energy-produces-clean-renewable-a2984). Unlike other types of renewable resources, waste-to-energy is considered baseload power that operates 24 hours per day, 365 days per year. As a result, these facilities reliably generate approximately 17 billion kilowatt hours of electricity per year, enough to power approximately 2 million American homes. This accounts for nearly 20% of all renewable electricity generation in the United States.
Waste-to-energy has been recognized as renewable by the federal government for nearly thirty years under a variety of statutes, regulations, and policies. Twenty-seven states have recognized WTE as renewable under state statutes as well. The renewable status has enabled waste-to-energy plants to sell credits in renewable energy trading markets, as well as to the federal government through competitive bidding processes.
There are two important considerations that merit discussion when considering the role of WTE facilities in local renewable energy programs:
- The classification of MSW as a renewable fuel
- The baseload electricity generation capability of WTE facilities
In May 2007, the DOE’s Energy Information Administration (EIA) published a report that specifically addressed the issue of the classification of MSW as a renewable fuel. (US Department of Energy—Energy Information Administration. Methodology for Allocating Municipal Solid Waste To Biogenic and Non-Biogenic Energy. May 2007 http://www.eia.gov/cneaf/solar.renewables/page/mswaste/msw_report.html.) In this report, the EIA indicated that it classifies MSW as a renewable energy resource only to the extent that the energy content of the MSW source stream is biogenic. The EIA concluded that this approach was more consistent with the definition of renewable energy used by the EIA than alternatives that would either include or exclude all MSW from renewable energy. In 2005, biogenic waste materials were reported to account for 56% of the heat content of the municipal solid wastestream.
As indicated above, WTE facilities in the US currently account for 20% of all renewable electricity generation in the US. Unlike wind and solar, WTE facilities are fully capable of providing baseload renewable electrical power (i.e. renewable power that is available 24 hours per day, 365 days per year).
In this regard, local government energy program managers should be aware of the important role that WTE facilities can play in local renewable energy programs. In effect, by coordinating WTE electricity production with that of wind and solar facilities, program managers can agree to supply base-load renewable electrical power to the local utility. This electricity should command a significantly higher price than intermittently generated power sold from wind and solar projects on a non-aggregated basis.
As an option, the power could be used internally for local public water and wastewater plants to improve the overall economics of the project. In this way, the local government owner of the WTE facility can reap the benefits of the full retail value of the electricity.
To summarize, WTE facilities can play a number of important roles in local community economic development programs.
- Over the life of the WTE facility, which is now confidently projected to be in the range of forty to 50 years, a community can expect to pay significantly less for MSW disposal at a WTE facility than at a regional MSW landfill.
- Of primary importance is the fact that monies spent on WTE will be kept in the local community, while 90% of the monies spent on disposal at regional MSW landfills will be transferred out of the local economy. These monies can represent hundreds of millions to billions of dollars over a 40- to 50-year timeframe. In addition, many goods and services will be purchased from local suppliers, which will further stimulate the local economy.
- The construction of WTE facilities typically requires the employment of hundreds of construction workers while the operation of these facilities requires an average of 58 professional workers. These jobs cannot be outsourced.
- WTE facilities can provide significant quantities of baseload renewable electrical power. In this regard, they can play a critical role in the production and sale of baseload and peak renewable electrical power from a local renewable energy program that consists of WTE, solar, and wind generating facilities.
Author's Bio: Jeremy K. O'Brien, P.E., is director of applied research for the Solid Waste Association of North America.
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