Landfill gas generates healthy profits
As high oil prices fuel the race for alternative sources of energy, the
solid-waste sector is turning to landfill gas-to-energy projects to provide
power and profits.
Waste Management Inc., the nation’s largest solid waste company, already
has 100 landfill gas-to-energy facilities in operation. The Houston-based
company expects to have 60 more facilities by 2012. Lynn Brown, vice president
of corporate communications, said 10 more facilities would go on line by
the end of the year.
With 10 other landfill gas-to-energy facilities also under
development, Waste Management plans to commission new gas-to-energy projects
at landfills in Texas, Virginia, New York, Colorado, Massachusetts, Illinois,
“Consumers and utilities are showing strong demand for green energy,
which has created a new market for landfill gas-to-energy projects,” Brown
“Generating electricity from landfill gas-to-energy makes economic
sense, with prices for this form of energy on par with wind-generated power.
Climbing energy prices mean Waste Management can generate more revenue than
was previously possible.”
The landfill gas-to-energy facilities provide valuable
sources of energy for utilities because the gas produced provides a dependable
base load of power. This contrasts with the often intermittent nature of
other renewable energy sources, like wind and solar, Brown said.
Waste Management expects to eventually generate more than
700 megawatts, enough to provide power for more than 700,000 homes or replace
8 million barrels of oil per year, noted Stewart Scharf, an analyst with
Standard & Poor’s
Corp. in New York.
“With 281 landfills, the most of any landfill operator in the United
States, the company is well positioned to expand its renewable power generation,” Scharf
There were 375 landfill gas-to-energy facilities in the
United States in 2005, generating electricity or providing a direct-use energy
source for boilers, furnaces and other applications, according to research
by Leone Young, an analyst with Citigroup Inc. in New York. There were 423
gas-to-energy facilities open by June of this year.
Landfill gas-to-energy facilities currently generate 1,180
megawatts of electricity per day, according to Young’s research. She noted that the Environmental
Protection Agency estimates that there are roughly 570 additional landfills
that could be developed into gas-to-energy facilities, producing another
1,370 megawatts of energy per day.
Young estimated each project costs around $5 million. While
a big project generates $1 million in revenues a year, a more typical project
“It is important to note, however, that besides very high incremental
margins, these projects at the very least defray the cost of current regulations,” Young
Regulations already on the books require landfill operators
to capture methane at large landfills, requiring expensive piping systems,
Young noted. In the past a lot of the methane was flared off, because it
was often uneconomic to do anything else with it.
“Now with the high price of energy, tax incentives, and the likelihood
of some tighter regulation these projects increasingly make economic sense,” Young
With Waste Management’s plans to develop 60 landfill gas-to-energy
projects over the next 5 years, the company may spend up to $400 million
during that time, Young noted. She said that this would account for roughly
5 percent of Waste Management’s capital expenditures budget, estimated
at $1.35 billion for 2007.
“The initiative has a number of very tangible but difficult to measure
benefits. It’s terrific public relations, given the concern over greenhouse
gases and global warming, and enhances the green image Waste Management has
been cultivating,” Young said.
“It also tends to build community relations. Given the increased economic
value proposition, all the solid waste players are pursuing these projects
Allied Waste Industries Inc., based in Phoenix, Arizona,
has 52 landfill gas-to-energy facilities. Tim Ralston, manager of landfill
gas development at the country’s second largest solid waste company, said 17 more projects
are in development.
Power from existing facilities could heat 339,270 homes,
while reducing emissions equivalent to nearly 3.3 million cars on the road
each year, Ralston said. “Landfill
gas-to-energy projects are the ultimate in recycling, as gas created as a
byproduct of waste decomposition is captured and used as an alternative fuel
Each project must conform to strict air emission regulations
and Allied Waste must respond to local market concerns during the permitting
process, Ralston said.
“Most communities can appreciate the benefit of these projects,” he
said. “Each landfill gas-to-energy project is different, but these
projects are profitable and typically generate very good returns on invested
capital, while having the added benefit of providing a renewable energy source
and managing harmful methane gas.”
Landfill gas-to-energy projects make sense economically
for solid-waste companies, said Corey Greendale, an analyst with First Analysis
Corp. in Chicago. “They
wouldn’t do it if they weren’t going to make money off of it,” Greendale
If the price of electricity drops it might not make economic
sense, however. “They
might not be able to generate enough revenue from it,” he said. But
with the current high price of oil, Greendale said he does not expect such
a scenario to happen anytime soon.
Landfill gas-to-energy facilities also help with public
efforts, Greendale said. “If you are hoping to get expansion permits
at landfills, it helps if people see you as a friend of the environment,
as opposed to somebody who could harm the environment.”
Republic Services Inc., the third-largest solid waste company
in the United States, operates eight landfill gas-to-energy facilities. Will
Flower, vice president of communications at the Fort Lauderdale, Florida-based
company, said Republic Services has a dozen more projects under development,
with three already under construction.
Flower said that the projects currently under consideration
are running into very little, if any, opposition. “If anything, our opponents to the
landfills seem to like our program, which creates clean and reliable energy
from society’s waste,” Flower said.