Navigant Research Blog

Disrupting the Trash Business

Mackinnon Lawrence — May 5, 2014

One of the hallmarks of human society’s advance has been the ability to distance itself from the trash it produces.  This collection and disposal of waste – a role traditionally played by large waste haulers like Waste Management (United States) and Veolia (France) – has historically involved picking up trash from the curb and dumping it in a remote landfill.  As circular economy efforts begin to materialize, however, and emerging technology solutions increasingly target trash as a strategic resource, we are learning to get a little cozier with our trash … with disruptive consequences for the waste industry.

Solena Group’s recent announcement that it has selected a site to build a first-of-kind waste-to-advanced biofuels facility outside of London demonstrates how quickly the waste industry is evolving.  The facility will produce waste-derived aviation biofuels for British Airways and renewable diesel, as well as excess power for the electrical grid, while diverting 50 million tons of municipal solid waste (MSW) from crowded landfills annually.

To be sure, the management of solid waste remains big business.  According to the United Nations Environmental Program (UNEP), Organisation for Economic Co-operation and Development (OECD) countries spend an estimated $120 billion annually on municipal waste management.  In low- and middle-income countries, urbanization and rising levels of affluence are projected to drive a four- to five-fold increase in waste management costs in places where 20% to 50% of recurring municipal budgets are already spent managing waste.  For upstart ventures, the waste value chain is potentially big business.  These entities are causing a disruption mirroring the  impact of distributed generation on the traditional electric utility business model.

Trash Doesn’t Equal Prosperity

The evolution of the waste management industry is precipitated by two key trends.

First, conscientious consumers who aim to trim consumption excess and reduce bulky packaging have contributed to a slow decline in per-capita waste generation in developed economies.  While the total volume of MSW generated globally is expected to nearly double in a little over a decade, the decoupling of waste generation from GDP growth in Europe and the United States is a cause for concern among haulers.  Less waste means less potential revenue from hauling and disposal.  Like electric utilities faced with increasing adoption of distributed energy resources, there is very little waste haulers can do to stem this trend.

The second trend involves the proliferation of zero waste policies seeking to divert waste from landfills.  These policies indirectly bolster waste’s value as a strategic resource, rather than something to be managed for health and environmental reasons alone.  This paradigm shift carves out opportunities for companies, such as Solena Group, that seek to mine trash for strategic resources and carbon, often at the expense of traditional waste management company revenue.

On the Offensive

Waste haulers, seeking to drive new revenue growth, are increasingly going on the offensive.  Since 2007, Waste Management, the largest waste hauler operating in the United States, has been engaged in a multiyear transformation aimed at turning its business model on its head.  Traditionally designed to pick up waste and drop it into a landfill, the company has invested between $300 million and $400 million in a portfolio of startup waste-to-energy solutions providers in order to take waste materials and put them to their highest and best use.  Rather than pick one technology, the company is betting on a suite of solutions gaining incremental market share.

As Navigant Research’s forthcoming report, Smart Waste, will highlight, the parallels between the electric utility and the waste hauler are many.  To maintain market share, both sets of companies are adapting, rather than resting on poles and wire or hauling and disposal laurels.

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