Sustainable Business Models for Codigesting Food Waste

Monday, March 19, 2018

The wastewater sector’s “Utility of the Future” (UOTF) initiative envisions the sector’s transformation from managing waste to recovering and recycling valuable resources, thereby creating financial benefits for utilities, as well as environmental and economic development benefits for communities. Adding food waste to anaerobic digesters (AD) processing sewage sludge, a process called codigestion, is a promising UOTF innovation that expands the sector’s potential to recover renewable biogas for heat, power, and fuel, and to extract nutrients for fertilizers and soil amendments.

Yet, U.S. adoption of codigestion remains low: about 1 in 10 wastewater resource recovery facilities (WRRFs) have adopted AD, and about 1 in 10 of those is codigesting. To address this untapped potential, ELI has launched a new project to identify alternative sustainable business models for successful codigestion.

The ELI project is funded by The Water Research Foundation (TWRF), the premier not-for-profit research cooperative advancing the science of water to protect public health and the environment. The research builds on the multi-year research programs of The Water Environment & Reuse Foundation and Water Research Foundation (which recently merged to form TWRF) examining the technological feasibility, economics, and environmental implications of the emerging practice of codigestion.

The anaerobic digestion process, which decomposes organic material in the absence of oxygen, converts 35-50% of WRRF sewage sludge into biogas, which is mainly methane (natural gas) and carbon dioxide. The biogas can then be converted to renewable energy for use at the plant or for sale. The digestion process also stabilizes the remaining solids and permits their beneficial use as fertilizer under Clean Water Act regulations. Because food waste can be converted to biogas at a much higher rate than sewage sludge (86-90% of food waste can be converted to gas), the addition of food waste can dramatically increase the production of biogas, without substantially increasing the biosolids produced. The latter is advantageous because finding beneficial end-uses for biosolids can be a challenge. As a result, biosolids management typically has represented a net cost for the WRRF, though this is changing as new products and markets are developed.

Adopting codigestion can help states and communities achieve a variety of sustainability goals—including expanding renewable energy, diverting food waste from landfills and incinerators, reducing greenhouse gas emissions, and expanding business opportunities in the circular economy. WRRFs are very-intensive users of energy, comprising approximately 30-40% of municipal energy bills. Replacing fossil fuel-based energy with renewable energy from biogas can significantly reduce GHG emissions. Further, producing biogas at WRRFs diversifies community energy sources, increasing the resiliency of the grid, and provides a cost-effective energy source for peak-period demand.

Given that food scraps are the largest component of municipal solid waste (MSW) going to U.S. landfills and incinerators, and only about 5% of food scraps are currently recycled, substantial potential exists for diverting food scraps to serve as AD feedstocks. Codigestion of food scraps reduces the carbon footprint of solid waste management by reducing methane emission from landfills and by sequestering carbon in soils through land application of biosolid-based products. WRRF acceptance of food waste for codigestion also provides an economical and sustainable food waste disposal method for nearby food waste producers. Finally, the production and marketing of new energy and soil nutrient products can create new employment opportunities.

From a utility’s narrow business perspective, however, the critical question is whether adoption of codigestion will improve the utility financial bottom line. Studies demonstrate that the financial benefits of codigestion may include—potentially very substantial—energy cost savings and/or energy revenues; tipping fees received for accepting the wastes; and revenues from nutrient and soil amendments products, as those markets expand.

Further, a number of federal, state, and local policies monetize sustainability benefits, providing revenue streams or grant or loan financing to utilities for renewable energy production, food waste diversion, or greenhouse gas reduction. For example, the federal Renewable Fuel Standard provides a revenue stream for vehicle fuel from biogas; and the majority of states have renewable portfolio standards that provide financial support or improved market access for electricity from biogas.

WRRFs that have successfully adopted codigestion accept a variety of food wastes, including fats, oil, and grease (FOG), food manufacturing residuals, and source-separated food scraps, as feedstocks for their AD. The majority of codigesting WRRFs have adopted the approach within the last 10 years Successful adopters include WRRFs large and small, and WRRFs located in all regions of the country. Some WRRFs are driven to adopt codigestion by rising energy prices or local/state sustainability goals and programs. Others are motivated to provide a service for generators of FOG or food scraps in their community that are facing more stringent regulatory requirements or seeking more sustainable waste management options.

Yet, only about 130 WRRFs out of 1,269 WRRFs with AD have adopted codigestion. Why is there so much untapped potential? In this project, ELI will identify sustainable business models for codigestion of food waste with biosolids at WRRFs, taking into account the triple bottom line—financial, environmental, and social sustainability.

The Innovation EcosystemWe then will apply the “innovation ecosystem” framework, articulated for the Utility of the Future initiative, to identify current drivers and impediments to adoption of these business models, and develop solution strategies tailored to each sector in the innovation ecosystem. The core of the innovation ecosystem is clean water utilities, which are enabled to take and manage risks through the combined efforts of all members, including the solid waste sector, the energy utility sector, technology developers, consulting engineering companies, regulators, and elected officials and other organizations representing the public.

We will focus on financing, contracting, and collaboration strategies to address the most frequently cited barriers to adoption—economic risks associated with new capital investment and with market uncertainty for feedstocks, and energy and nutrient products; and the difficulty in competing for scarce financing against projects more central to the wastewater utility mission.

Finally, we will highlight the key components of the triple-bottom-line framework for assessing financial, environmental, and social returns from codigestion. And we will identify a variety of modeling tools that utilities can use to conduct preliminary assessments of the sustainability of codigestion in their individual context.