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Successful Business Strategies for Codigestion at W&RRC Copyrighted January 6, 2020 City of Dubuque Consent Items # 8. ITEM TITLE: Successful Business Strategies for Codigestion at Water and Resource Recovery Facilities SUM MARY: City Manager providing a copy of an article on Successful Business Strategies for Codigestion at Water and Resource Recovery facilities as published by BioCycle November/December 2019 that references the City of Dubuque. SUGGESTED DISPOSITION: Suggested Disposition: Receive and File ATTACHMENTS: Description Type Successful Business Strategies for Codigestion at Supporting Documentation W RRFs Successful Business Strategies For Codigestion At WRRFs New report's primary focus is on codigestion strategies that water resource recovery facilities can develop to create value, and to manage the associated finaMial risks. Carol Adalre]onec aaqsk xo.emueNo«emue.xoas,va.m xo.&o��i Edldor's Nole: Th/s article ls excerpted!rom a soon-to-be-publlshed repat for the Water Research Foundatlon on buslness strateg/es for codlgestlon of food waste at wastewater resource recovery facllltles(WRRFs). It summarizes Me repaYs key MMings about WRRF codlgestlon experlences and sucresslv/buslness strateg/es, lncluding sWutlons to lmpedlments and nsks Mat have slowed Me adoptlon of codlgestlon. ��. �� _ A new � - ' I�'' "eFood 1'"��lJ f�:'YY�"ej� F�P".x' 'r — � f �; � � � . .� ' r4h�i � ��':�d .�a :�� i','4::��,j�j.. ...-_—_ - '� � . waste T , • .�1� '-_""q ' _ � Dl 13L'Ql IC �' - -_ � �� VA A I I K � Kb�(tt-RCP. � . � It� < <��I 't1 � ' r I .�ri y ^_r�.. —� ... -- - .�� - _ �". ,::;�- .�,� . _�� -�. . - . - _ .._ ,... _ The Clty of Dubuque utlllzed an opportunity to Indude InveStment In AD and energy generatlon as part of a very large-swle oplWl Improvement pro]ect to update Its WV✓rP. Photo courtesy of Clty of Dubuque, Iowa Codlgestlon at Wastewater Resource Recovery Facllltles: Buslness Case Malysls"— represeMs the last loglwl Ilnk In a 5erle5 of topl6 Covered In the Water Errvlronment and ReuSe Foundatlon (now the Water ReSearch Foundatlon (WRF)) progrdm of research exploring the technology and economlcs of Implementing codlgestlon. Other researth In the serles examined strdtegles to address operdtlonal and regulatory rlsks (Van Home M al. 2017, ApplMon M al. 2017). These studles were motivated by the unreallzed potentlal for codlgestlon In the wastewater sector. Though codlgestlon wn provlde Flnanclal beneFlts to wRRFs,as well as a broad rdnge of envlronmenWl and community beneFlts, fewer than 1 In 10 of the 14,000 wastewater treatment plants use anaeroblc dlgestlon (AD) to process wastewater sollds,and fewer than 1 In SO of those codlgest food waste. The Ilterdture has Identlfied varlous Flnanclal, operdtlonal, regulatory, sW keholder/polltlwl, and organlzatlonal rlsks and Impedlments to adoptlon of codlgestlon and energy generatlon pro]ects,whlch are outslde core wastewater treatment servlces. The new report's prlmary focus Is on strdtegles WRRFs wn develop to veate value,and to manage the assotlated Flnanclal rlsks. These rlsks may Include Issues of Inadequate,and/or uncertaln, financlal benefit streams (e.g.,due to lack of rellablllty In quantlty,quallty and/or prlce of feedstxk supply; or ladc of rellablllty In quantlty produced and/or sales prlce of WRRF end-products); and uncertalnty about access to wplWl, and related challenges In getting approval of InvestmeM pro]ects,Flnancing,and rdte Increases. The report Is concemed wlth other sMs of Impedlments and rlsks (studled In prlor reports In the WRF serles) to the extent that they affect the economlcs or access to wplWl. Our Initlal hypothesls was that we could Identlry altemative buslness models Por codlgestlon at wastewater treatment plants from whlch utllltles could select to sult thelr coMext. However,we qulckly concluded there Is no strdlghtPorward menu of optlons. Rather eaCh utlllty needs to Wllor Its buslness 5trategy to Its misslon, re5ources,and SCale,as well as Its extemal markM and pollcy envlronments. The report offers generdl printlples and wse study examples of how to create value and manage rlsks In a food waste codlgestlon progrdm, plus a frdmework for utlllty self-assessmeM to analyze the opportunitles and the buslness wse Por codlgestlon. Slx ma]or wse studles, plus 25 thumbnall skMches,are reported, whlch together represent the full ydnge of wRRFs based on wRRF charaCterlstics (slze, reglon), pollCy and markM errvlronments,and 5trdteglc cholces In food waste feedstxks,energy uses, blosollds uses, contrdcting and Flnantlng optlons. The report also provldes examples of WRRFs that detlded agalnst adopting codlgestlon,or that have suspended or cutback progrdms In place. To Infortn our analysls, structured interviews were conducted with more than 65 organizations, including wastewater utilities, and representatives from the solid waste, energy, technology, project development, and government sectors. WRRF Codigestion Experiences The report summarizes key takeaways from our study of over 30 WRRFs. Table 1 summarizes findings for the six major case studies in the report. Financial Drivers: Most frequently mentioned by WRRFs were rising energy costs, and financial support programs to promote greenhouse gas mitigation, renewable energy, and food scrap diversion. Some also cited their opportunity to add investments to support codigestion as part of large facility upgrade investment projects, which allowed them to scale planned AD, energy, and/or biosolids management investments to accommodate codigestion. For example, the City of Dubuque, Iowa, capitalized on an opportunity to include investment in AD and energy generation as part of a very large-scale investment project to upgrade the outdated and inefficient wastewater plant. Incorporating resource recovery and transforming the plant into a Water and Resource Recovery Center addressed the City's sustainability goals. Operational Drivers: These included underutilized AD or energy infrastructure, more stringent requirements for biosolids management, and the need to divert growing quantities of pretreatment program wastes to AD in order to preserve wastewater treatment capacity and the economic development potential to attract new"wet" businesses to the area. For example, Stevens Point, Wisconsin, considered codigestion to be essential to process the dramatic increase in brewery pretreatment wastewaters that resulted from the escalating expansion of its local brewery. Environmental and Community Drivers: Examples include: providing a service to FOG (fats, oils, grease), food processing and food scrap waste generators (particularly ones from their service area) that are facing more stringent regulatory requirements; supporting economic development; and contributing to community goals for sustainability, renewable energy, greenhouse gas (GHG) reduction, and food scrap diversion. The Los Angeles County Sanitation Districts (LACSD) is a joint solid waste-wastewater agency. Its codigestion initiative is motivated in part to serve the needs of its solid waste stakeholders, now required to comply with a statewide food scrap recycling mandate. LACSD created its own food scrap slurrying facility at its Puente Hills Material Recovery Facility, so that small to medium-sized hauling companies could have an affordable processing option that would allow them to remain competitive (see "Sanitation Districts Gears Up For Food Waste Codigestion'�. Decision Criteria For Investments: Many codigestion projects were required to meet return on investment (ROI) or payback period tests, though the thresholds for approval varied widely. For non-core mission projects, LACSD uses 5 to 10 years as a maximum payback target, whereas Stevens Point requires a robust ROI on a 20-year cash flow analysis. WRRFs also placed different requirements on these projects in non-core business lines, including maintaining or improving water quality, no detrimental impact on facility operations, and no impact on water rates. Project Scope And Costs: Successful codigestion programs are typically implemented over time in a series of projects or phases. The scale of investment for the initial project varies tremendously across WRRFs, depending upon the facilities currently available, the type and quality of incoming feedstock supply, and the stage of commitment to codigestion. For example,the Victor Valley WRA (WWRA) spent $10,000 to convert an existing tank to a FOG receiving station, whereas Central Marin Sanitation Agency in San Rafael, CA, spent$2 million on a new organics receiving station, which includes a 300,000-gallon tank, mixing pumps, rock trap grinder, paddle finisher and odor control system (see"Codigestion At Water Resource Recovery Facilities"). Among energy projects,the costs of renewable natural gas (RNG) pipeline injection vary widely depending upon interconnection requirements — which vary across states and utilities — and pipeline proximity and the related factors that affect the cost of pipeline access. Cost Savings and Revenues: The sources of financial gain most frequently cited by WRRFs included: tip fee revenues (which can contribute revenue streams to support major AD upgrades, as well as receiving station investments), energy cost savings and/or revenue, savings in wastewater aeration costs by diverting liquid wastes from the headworks to the digester, and savings in biosolids management costs by supporting thermal dryers to create Class A EQ biosolids. Also cited were financial incentive programs providing grants or green payments. Biogas and Biosolids Production: Biogas production increased substantially from the addition of codigestion substrates, with rates of increase depending upon share of high strength organic wastes (HSOW) in digester feedstocks, and share of total digesters involved in codigestion. Plant managers for four out of the six major case studies reported biosolids did not increase with codigestion. Resource Recovery Product Lines: As innovative arrangements are being introduced to supply food scrap slurries, more WRRFs are slowly beginning to tap into the underutilized potential of food scraps as AD feedstock. When the relative values of energy subsidy programs shifted more in favor of production of vehicle fuel a few years ago, many more WRRFs began evaluating projects to produce RNG for use as vehicle fuel or pipeline injection (typically for vehicle fuel) as an alternative, or as a complement, to producing renewable heat and power. Current uncertainties in the federal TaEle 1.Oata imm 6 ma�or nae stuAfx Ciry of Ciryo7Siev¢ns OubuqueQA) DTMA LACSD Charaaeristic WWRA' Poinl(WpWTP WpflC WTF� CMSA� JWPCP� WWTreatm^n1�MG0� 113 28 ] 4 ]5 280 avq amry tlry�veaIDertlow (��oD�ng lee ralos FOG�9gap o0G proppeGfOGlor 0.06 1]6 Slbinqsok-006 � mortvalWbk (Ins11500paIJ feeistocks toiroc�aipe p 15.OW gM.l Fooapmcessinp OOE 00O606Jmm 003-006 003I8 NA � reudwls�5lgal) semcearea, 0 03988,iram OYISItl¢RrviR dRd Foodicropsslurry�$/pal) 004 NR NA 00318 0093A YS�on�0021/qal. 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WflflFSM1art BioPesourzes basedcanlracllar CleanEnerqy 2�NepauaCinBa cossoiaeema�ea �elopmentlor expanUeacotlipesuon pbywrcaninep UBFOMwil�Aeuerga O�M�iMdN50W flNG0i0ebne uneerPennsylwnla's �aFNGp:peline r<ceMn0541ion in�ecuon GESA Mjec�ion BiosoliOs�.C�anqewi�A Noclanpe 12%incr¢ase MinimalcMnge 159iinaeau MinimalcAaiqe NoOelecablechanpe caEiqeslbn �tlemo p�ojecp F'awropanEGranb' PnvMesectorP3 1�Wrsconsnkwsan SlaleFnaNlnq 17MumcipalboMt: UI�IiryGepilai �nterna�luntls, ��^aM9��9raMs Eneryy9nnts.Buila FuNlmns 2�Municipaltwas. Imeslmentaccounts CAgrams FinavaBanas�, PennsyNaniaGrem 2�WICkanWala EnerqyGmn� Fu�M oonhs Key�.CMP'.[ombne4�ealanADa��',OBFOM'.OesiqmUuOa�hnance�operate�mainlam:FOG'.Fals,oilgrease',GESA. PennsylvaniaiGuarznleedEnerAYSaWipsAcl: HSOW:Hqh s�ren9t�wgank wasle.MOU.Memo a�Untlers�anUiip�.NA'.Nol AOOlicade:PPA�.Power purc�ase aBreemenL RNC.Peaerva�le nalmal qas'.SCFD:slaMartl �� n reay 'W WRA:Vic�ar Vaqey Wale�flxlanallon AUl�oiiry.Viclorville.CA:'OTMA:Derry TovmsMp Munlcipal AUI�oAry Wasle Teealmenl Fxdily.Ners�ey.PA','CMSP'.CenVal MaOn$inildtlan Ap¢My.San PalaU.LA;4AC50'.LOS Mpdes CooMy�CA)Sanila4on Dlshiqs Jdni Wikt VdlufM COnUoI Pbnl','G2E GnM b EnelpY'�`i$$:IOWI 5usp.nded 5oli�Js.T'JS�.Iolal aelaltlf solids�. ��.2'i an0 3;�relei fo3epaia[e cotl g.ot:.��io�e:t5ifl anJ 2�ielgi to seC��a�e��oUipuhon u'�'jects. —� Renewable Fuel Standards' RIN prices due to � Administration policies have engendered a wait �� I s and see attitude for WRRFs planning energy � ��_ � projects a few years down the road. (For i.� 7 - _______ :_ �+.�:� T" „_;� details, see"BiogasTo RNG Projects: What, �' � �_� � ._--- � „ - .y Why And How"and "Market Outlook For Low � __. �� ,�-, Carbon Fuels'�. � �,;r � +" Evolving Trends: Though WRRFs have been , ��,� reluctant, and in some cases prohibited by � p �-� ` � ��Ti�� : charter, to engage in Public-Private- � `:.,; � % Partnerships (P3) in the past, they are moving w x �,~��"' �_ ,.•, � � into pertormance-based contracting for new b . projects outside their core area of expertise, Y? ��s. '�j7 -�;.�„' ` notably energy projects, and especially RNG �� ,�� .J��- �� - N� � projects. Benefts of entering into a P3 cited by � � � ' .�l � ' WRRFs include accessing expertise not � �s 1.�, � ��.� - +: available in-house, shifting risks, and, ` t; � �`t�- infrequently, accessing private financing to . �li�v�r�" . , ��_,... �i. ,�� y,� ` ,-'�,� . �,�,� 4�:, � circumvent public capital constraints and �N� �,d�"',4'� . ` �' � r + ,� `r- - � potentially long and politicized approval " �.��:��`�'�- -yJi�z�! x�� .�:_.� .'� . <,;e r� -._. , Processes. Food waste prior to preprocessing into a slurry at the Los Angeles For example,the Derry Township (PA) County Sanitation Districts' Puente Hills MRF. Photo courtesy of Los Municipal Authority (DTMA) is developing a Angeles County Sanitation Districts pertormance based contract with Energy Services Group for expansion of AD and feedstock ,. ..,; ;,R�,,.-�.. �.,-..__._:. supplies. Its contract will provide guarantees for tip fee " . � � � � revenues. WWRA has used P3s for both of its energy � - ' � �-�� development projects, and is the one example in the � � . � -�,-�-z.�. report of using P3s for financing as well as construction -- • �� _ �` =�� and operations. �` �' �.�� "*`�.s . .s � ; "€3' �w�` ,� `�°;� .�i.;' 3 'o-��,� :. '�'�yM"'i y� Codigestion No-Goes "�' "' ' ' « �..�r� Among WRRFs that evaluated codigestion,the primary �;� �r.� �:�,- � * � �em 4 � y�t„ reason offered for not going forward is the lack of ` ��',�,�y,,�.. �"•^�.<; "y�� sufficient economic retums. Contributing factors cited � +��r ,„ � �'`` �'" '��''�"11 include uncertain or low feedstock supply and revenues, �� - low energy prices (and, as a result, low energy savings), -= ' � 9 � '� scale too small to attain economies of scale, and lack of ` • � � incentive programs to provide fnancial support. $�1;� • _ �`�� , �„,+ � 1�� Nonfnancial reasons offered for no-go decisions include #�� 3 ,,;,.°�, . 4-��' NIMBY(not in my backyard) concems and changes in �� ' - .i political leadership, with resulting changes in priorities. .o ��I ��I; `l,�`� + 4� �„` ' � . � Plants have suspended codigestion due to changes in -.�, �-<..e� feedstock or energy markets that reduced revenues or ��`�� savings, problems with feedstock quality or availability, �:E�,.;_ and unanticipated requirements to invest in additional � . � �a � equipment. Plants have cutback codigestion due to the � : - loss of a major supplier(s) (and no progrem to develop � ��-;�� c �� feedstock supplies). Othere cite the loss of capacity to — � recycle biogas or biosolids, and the lack of capacity to The Victor Valley Water Reclamation Authority (digesters make needed investments for additional capacity, at least shown) has used public-private partnerships for both of its in the short run. energy development projects. DTMA stopped accepting food scrap slurries after losing part of its capacity to manage biosolids when its thermal dryer was taken out by a flood, but continues to accept FOG and food processing residuals. The dryer's replacement is in the capital budget schedule for approximately 5 years in the future. Successful Business Strategies — Essential Elements The buslness challenge wRRFs face Is to veate a balanced system across all - �' '� the elements requlred to recycle food waste, recover products and create r� �°"�� value. These elements Include coordlnating plant AD wPacltY, feedstodc supplles and feedstxk recelving sWtlon opaclty —wlth plant wpaclty to � recycle the blogas and blosollds Into valuable products. Por each WRRF, the �,^r , speclBcs of a successful buslness strdtegy for codlgestlon vary depending r� upon the pollcy and markM envlronmeM In the reglon,as well as utlllty > long-tertn strdteglc goals,organlzatlonal culture,and resources. ``� �iY �""X.��; '�' " y To create a succes5ful codl estlon g progrdm, a utlllty needs to have certaln : �- . �� - elements In place: \ • CAdlgestlon champlon In the utlllty or munlclpal govemmeM. � � 1., '�' _ • Enough slte space for vehlcles to dellver feedstxks and Por Mher ��ry }� �� " . ,y." equlpment needs ' � 1 ��_ �� j • Buslness mindsM to resource recovery �� ,7 } • Vlslonary utlllty board or munlclpal declslon-makers who wlll support pro]ects beyond the core wastewater misslon that make economlc sense to � rdtepayers ` � • Locatlon wlth aaess to a sufflclent supply of feedstxk at a good prlce �. �t� � Key elements of a suaessPol buslness strdtegy Include the following: ' �� '� . The buslness 5trdtegy ensures Codlgestlon operdtlons wlll not comproml5e plant compllance wlth Its envlronmeMal pertnits,and the WRRF's responslbllltles Por publlc health and envlronmental quallty, whlch are centrdl �� to Its misslon. `�,-, � � . , / • The buslness strdtegy employs a Ilfe cyde perspective,taking Into aaount - revenues and costs from the tlme of Initlal Investments through repalr and replacement Irrvestments. The full beneFlts of codlgestlon typlwlly wlll rwt � -' aarue untll the wRRF has achleved a mature progrdm wlth a balanced sM �.� of AD,energy generatlon,and blo5ollds managemeM Wpaclty. Identlrying 1,�,.�� . � the full costs necessltates dellneating the opltal requlrements for �III"'�""- � --- - malnWlning and upgrdding the assets that support codlgestlon. i. ,� .. . • The buslness strdtegy leverdges avallable drlvers In sync wlth the wRRF - misslon. Drlvers Include markM-based opportunitles to generate revenues and cost savings, pollcles regulating wastes, polltles provlding green --- --- r payments to support IrrveStments In su5talnablllty,as well as utlllty and Source separdted Pood waste collected yy community commltments to envlronmental and community servlces. Marin Sanitary Servlce Is preproCessed on • The buslness 5trategy InCorpordtes elements to mltlgate flnanClal rlsks. a sorting Ilne and In a vertlol grinder(1), Optlons Indude dlverslying sources and product outlMs,esWbllshing long- then hauled to the Centrdl Marin tertn contrdcts for purchasing feedstxks or selling produQs, bullding In SanlWtlon Agency's WRRF (2) where It Is equlpment redundancles to allow for scheduled or unscheduled unloaded Into a recelving Wnk (3). malntenance,and using publlc-prlvate partnershlps/contrdcts to share Anaeroblc dlgesters at CMSA (4). construCtlon and operdting rlsks wlth the prlvate SeCtor. • A buslness wse for Investment wplWl that on be successNl Is to hlghllght the financlal value codlgestlon wn contrlbute to larger Investment pro]ects requlred Por regulatory compllance or for regularly scheduled malntenance and upgrddes In the utlllty asset management plan. Further Important envlronmenW I and community goals to hlghllght Include provlding a servlce to FOG,food processing and Pood scrdp waste generdtors (particularly ones from thelr servlce area) that are facing more sMngent regulatory requlrements, and conMbuting to community goals Por sustalnablllty, renewable energy, GHG reductlon,and food scrdp olverslon. As a WRRF leams fi'om experlenCe over tlme and Is able to Improve eCorwmlc pertortnance fi'om resource reCovery,the strateglc que5tlons evolve. For example, Por AD Wpatlty,the Poas evolves fi'om Identlrying excess opaclty,to rdtloning wpaclty to the hlghest value sources,and Flnally to examining the poteMlal Por codlgestlon to support expanslon In AD wpaclty. For energy,the Poas evolves from achleving onslte energy neutrdllty,to breaking down bartlers to accessing the power grld,to exploring the potentlal Por supplying RNG to the markM. Conclusion Codlgestlon at WRRFs wn be successful where there Is a fit wlth the organlzatlon's culture, support from the utlllty deClslon-makers for pro]eCts outslde of the core misslon area,and markM and pollCy opportunitles to create eCorwmlc value. It is important to recognize that codigestion does not fit in all circumstances. In some contexts, the business case analysis will indicate that the best option, under the current understanding of life cycle potential, is to not move forward at this time. It may also provide insights for a path toward a future successful codigestion program. Caro/Adaire7ones, an environmental economist, is a Visiting Scholarat the Environmental Law Institute (ELI) and co- leads its Food Waste Initiative. She was the Principal Investigator on the WRF study. Coauthors were Co-Principal Investigators Craig Coker(Coker Composting & Consulting) and Ken Kirk(former Executive Director of National Association ofClean WaterAgencies); and Lovinia Reynolds (ELI). Literature Cited Appleton, A. and T. Rauch-Williams, 2017. Co-Digestion of Organic Waste Addressing Operational Side Effects. WERF. Van Horne, M., Stone, L. and Muster, T., 2017. Lessons Learned: Developing Solutions to Operational Side Effects Associated with Co-Digestion of High Strength Organic Wastes. Alexandria, VA.: The Water Research Foundation. How To Resolve Codigestion Impediments And Risks Q The lack or high uncertainty of economic returns has stymied codigestion project development. How does my utility respond to these concerns, which include access to capital? A Explore all business options to generate cost savings and/or revenues, including tip fees, energy cost savings, and sale of energy and/or RNG and nutrients. Also explore possible grants, green payments, below-market Clean Water State Revolving Fund loans, the use of internal capital reserve funds and access to private funds through Public/Private Partnerships (P3). Q What are options to address variable and uncertain quantity, quality and price (tip fees) of feedstock supplies? A Conduct a market assessment of potential feedstock supplies, and implement a program for market development and supplier retention. Leverage regulations for more stringent requirements for FOG, liquid industrial wastes, and food scraps to attract more suppliers, and consider partnering with haulers or generators of food scraps in order to reduce contamination and ensure a reliable supply. Consider private market sources of slurries, or installing onsite depackaging and slurrying capacity to create your own. Explore collaborations with solid waste agencies as a processor for collected organics and encourage them to enforce recycling mandates where they exist. Establish long- term contracts where possible. Finally, diversify food scrap sources to avoid reliance on a single anchor supplier. Q What impact does accepting food scraps have on our biosolids management program? A To manage the impact on quality and quantity of biosolids produced, optimize feedstock types and solids processing. Not all cases of codigestion result in additional biosolids. It will depend upon the relative share of high strength organic waste feedstock. With regard to quality, evaluate opportunities for producing new products from nutrients to address potential increases in nutrient loading. Q Codigestion is a cultural shift for my wastewater agency, which tends to be risk-averse. What are approaches when introducing them to codigestion? A For framing, develop a "Utility of the Future" perspective, shifting from a focus on disposing waste to managing critical resources — water, energy, and nutrients; focus on local benefits that will accrue, including jobs, greenhouse gas emissions mitigation, economic development, and community sustainability. Tap into available codigestion "best practice" resources. Conduct feasibility studies, and implement codigestion projects in stages, with pilot and demonstration projects providing an opportunity for stakeholders to provide feedback to improve processes and create buy-in. And involve employees in implementing codigestion and improving the process. Note: Q&A is excerpted from Ta6le 11-2, Chapter 11 in Full Report. This entry was posted on Wednesday, December 4th, 2019 at 10:20 am and is filed under Current Issue, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. Comments are closed .