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CONVERSION TECHNOLOGIES MARKET IMPACT ASSESSMENT. Preliminary Results Workshop April 15, 2004 Susan V. Collins Hilton Farnkopf & Hobson, LLC. Study Objectives Overall Approach Assumptions Analysis & Model Development Preliminary Results and Key Findings. PRESENTATION OUTLINE. - PowerPoint PPT Presentation
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CONVERSION TECHNOLOGIES MARKET
IMPACT ASSESSMENT
Preliminary Results Workshop
April 15, 2004
Susan V. CollinsHilton Farnkopf & Hobson, LLC
PRESENTATION OUTLINE
1. Study Objectives2. Overall Approach3. Assumptions4. Analysis & Model Development5. Preliminary Results and Key
Findings
BACKGROUND - AB 2770
The CIWMB’s report on conversion technologies shall contain “a description and evaluation of the impacts on the recycling and composting markets as a result of each conversion technology.”
STUDY OBJECTIVES: Economic and Financial
1. Effects on recycling and composting industries due to increases or decreases in feedstock supply
2. If a tonnage effect, estimate economic gains or losses
3. If a price effect, estimate economic gains or losses
STUDY OBJECTIVES: Institutional
1. Effects on hauler contractual relationships
2. Effects on municipal contractual relationships
3. Effects on regional recycling & composting infrastructure
4. Effects of put-or-pay contracts on recycling & composting businesses
GENERAL ASSUMPTIONS: Assumed Annual Capacities
(tons per year)
2003 2010
Acid Hydrolysis 493, 500 822,500
Gasification 658,000 987,000
Catalytic Cracking 16,450 16,450
TOTAL 1,167,950 1,825,950
OVERALL APPROACH
• Develop CT configuration assumptions & other key modeling assumptions
• Develop baseline projections for recycling and composting
• Estimate impacts of CT on recycling and composting
• A financial model was developed to perform calculations
APPROACH: Data Gathering
• Waste composition• Quantities of paper, plastics and organics
recycled (in-state and exports); • Pricing of recyclables, organics and landfill fees• New diversion program plans• MRF and landfill throughput and capacity • CT feedstock needs• Jurisdictional contracting arrangements• Jobs and revenues per ton for targeted industries
Assumed CT Capacities as a Percentage of Landfill Volumes
2003 2010
Greater Los Angeles
8% 11%
San Francisco Bay Area
20% 29%
FEEDSTOCK METHODOLOGY
• Facility Proponent Requirements (surveys & interviews)
• Jurisdictional Requirements (interviews, document review)
• Composition of Waste Stream (CIWMB, assumptions, SB 1066, calculations)
• Pricing (surveys, interviews, contract review)
GASIFICATION FEEDSTOCK REQUIREMENTS
• Won’t receive C&D and HHW for processing (16% of waste stream in Los Angeles area; 19% in SF)
• Removes glass and metals for recycling and some disposal (10% of incoming waste in LA; 11% in SF)
• Retains paper, plastic, organics, and mixed residue (74% of incoming waste in LA; 69% in SF)
ACID HYDROLYSIS FEEDSTOCK REQUIREMENTS
• Won’t receive C&D and HHW for processing (16% of waste disposed in Los Angeles area; 19% in SF)
• Removes glass, plastics and metals for recycling (10% of incoming waste in LA; 10% in SF) some for disposal (10% in LA & SF)
• Retains paper, organics and mixed residue (65% of waste disposed in LA; 61% in SF)
CATALYTIC CRACKING FEEDSTOCK REQUIREMENTS
• Receives only plastic bags from MRFs
• Plastic film is 3.6% (in SF) to 4.4% (in LA) of the disposal waste stream
CT PRICING & HISTORY
• No operating facilities in US currently; two in development in 2004 (CA & NY)
• Development costs of $40 to 70 million
• Tipping fees of $25 to $65 per ton
• Specific feedstock requirements with put-or-pay provisions highly likely
PAPER BACKGROUND: IN-COUNTRY
• National paper recovery rates (total collected) grew 40% in the 10-year period of 1992-2002, but only 8% in the 5-year period of 1997-2002
• OCC: 74% recovery rate nationally; News: 71% recovered nationally
• CA has greater recycling infrastructure than US average
• Tremendous price volatility; yearly high prices are commonly double that of yearly low prices
• Nationally, paper generation (consumption) is falling slightly
PAPER BACKGROUND - EXPORTS
• Paper exports from LA & SF go to 64 countries
• Four-year growth rates of 58% (LA), 68% (SF)
• ALL of the growth in paper exports went to China
PAPER BACKGROUND - PRICE HISTORY
• Paper prices range from $7.50 to $105 per ton on average; the lowest grade (mixed office) ranged from -$10 per ton to $20 per ton in 2002
• Annual average prices for exports per ton went from $84 (‘98) to $99 (‘00) to $84 (‘02)
• Prices have been positive since 1996/97
PAPER OUTLOOK UNDER CT SCENARIO
• Paper is an acceptable feedstock for two technologies: acid hydrolysis and gasification
• Assuming CT pricing is similar to landfilling, CT will not change current economic incentives to recycle paper
• Exception: if the lowest grade dropped in price to levels too low for cost-efficient recovery, it could be added to MRF residuals for subsequent CT processing. However, CT facilities need consistent quantity and quality of feedstock, so possibilities for rapid switching of feedstock may be limited.
PLASTICS BACKGROUND: IN-COUNTRY & EXPORTS
• Nationally, plastics generation is growing, but recycling levels are flat (recycling rate is falling)
• In CA, bottle bill plastics recovery has grown 68% from 2000 to 2003 (using tons collected)
• Plastic prices are $16 to $40 per ton on average for PET and HDPE flake; the other grades range from $10 per ton to no value at all 2002
• Price volatility
• Nationally, 22% of recycled plastic resins are exported
PLASTICS OUTLOOK UNDER CT SCENARIO
• Acid Hydrolysis cannot process plastics into product; Gasification can
• Catalytic Cracking uses only plastics, and uses the washing process to remove PVC
• The primary feedstock for Catalytic Cracking will be plastic bags, which currently have no recycling market. They could, however, be added to curbside recycling programs for this process
WHY WOULDN’T PAPER, PLASTICS AND ORGANICS
MOVE TO CT?
• CT prices are competitive with landfill prices, which require no sorting or separate collection
• Paper and plastics markets currently have positive prices
ORGANICS BACKGROUND
• CIWMB studies for 2001 & 2003 produced reliable data for each region
• Organics generation (tonnage) is stable• Very stable prices• Prices are slightly lower than landfill
prices; economic incentive to recycle is lower than for paper and some plastics
• Contract prices are sometimes significantly lower than gate rates
ORGANICS OUTLOOK UNDER CT SCENARIO, 1
• Green waste is an acceptable feedstock for two technologies: acid hydrolysis and gasification
• Catalytic cracking can not accept green waste
• Biosolids (sludge) will be used at Masada’s plant
• Green waste tipping fees range from $11 per ton to disposal costs (at $40 per ton); prices are very stable over time
ORGANICS OUTLOOK UNDER CT SCENARIO, 2
• Assuming no diversion credit is given for CT, it is unlikely that green waste will be re-directed to CT facilities– Jurisdictions will continue to require
composting or ADC for diversion credit– Economic incentive for self-haulers to deliver
to lowest-cost facility– Sufficient refuse tonnage exists at higher
prices for CT to use refuse as feedstock
ORGANICS OUTLOOK UNDER CT SCENARIO, 3
• Organics may be re-directed to CT:– If separate collection is changed to co-
collection with refuse for cost savings– If tipping fees are similar to landfills, but
CT facility is closer (cost savings)– If CT offers reduced rates for organics
MRF RESIDUAL ASSUMPTIONS• Sufficient MRF capacity for residuals to supply half of
CT demand in San Francisco Bay area
• Sufficient capacity for residuals in Greater Los Angeles region to supply all of CT demand; but ACTUAL throughputs are unknown
• MRF residuals may not be suitable feedstock for CT
– Materials desirable to CTs are removed by MRFs
– Materials undesirable to CTs are not typically removed by MRFs
• Co-location may provide favorable economics (transportation cost savings)
NET INCREASE IN RECYCLING DUE TO CT SORTING
• Scenarios assumed in this study: – Net positive impact on recycling due to
removal of glass, metal, and some plastics– No re-direction of materials away from
current recycling and composting markets because of price differentials (CT is higher cost)
JOB CREATION/DESTRUCTION UNDER CT SCENARIO
• Additional MRF sorting positions • Additional recovered material• CT facility jobs• Landfill job losses
CURRENT INSTITUTIONAL ARRANGEMENTS
• Municipal • Contract haulers (single or multiple)• Open Competition and Self-haul• Combination is common (one
arrangement for residential, another for non-residential)
HOW CT COULD CHANGE INSTITUTIONAL ARRANGEMENTS
• Municipalities can change arrangements if political will and contract flexibility
• Contract haulers can use CT, but need authority to do so for some contracted hauling
• Open Competition and self-haul have most flexibility, but least volume, and least ability to guarantee volumes to a CT operator
SENSITIVITIES
• No facilities operating in U.S.; some assumptions based on operating information from facility proponents or independent estimates
• Market conditions can change quickly; results are very sensitive to market condition assumptions
• Assumed current diversion activities would continue
• Number of jobs, revenues per 1,000 tons