As the waste to energy (WTE) industry braces itself for a new year, uncertainty prevails. Given recent economic trends, some industry members predict mothballed facilities, padlocked gates and municipal defaults. Others foresee a rejuvenation spurred by the recently finalized air quality rules and potential stability in the flow control issue pending legislation from Congress.
Currently, 121 waste-to-energy facilities manage approximately 20 percent of the U.S. waste stream. As the 21st century approaches, the Environmental Protection Agency (EPA) has projected that figure will decline to 16 percent due to source reduction, recycling and composting. In contrast, several investment banking houses and WTE trade organizations had predicted a dramatic increase in the number of plants to be built during the 1990s. However, the steady downturn in plant construction has left many wondering whether the WTE industry will find realistic solutions to meet challenges of today and those of the years ahead.
Air And Ash WTE's regulatory history began in 1988 when the EPA issued draft air emission standards for new and existing facilities. In 1990, Congress enacted the Clean Air Act Amendments, expanding emission limitations for air pollutants such as cadmium, lead and mercury. In addition, the amendments require waste-to-energy facilities to use maximum achievable control technology (MACT), which is based on current operating experience.
Since 1990, EPA has held countless meetings to determine guidelines and standards that are realistically achievable and still environmentally and economically sound. On October 31, 1995, this review process came to an end when the final rules ("Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: Municipal Waste Combustors") were signed.
The new rules reportedly are among the most stringent environmental standards for WTE facilities in the world. Next, regulatory action moves to the states which have a year to incorporate the federal regulations into their State Implementation Plans or to promulgate more restrictive standards.
Many existing facilities already have completed or are planning retrofits to meet the mandates of the new MACT rules. Over the next five years, it's anticipated that hundreds of millions of dollars will be spent to replace existing air pollution control equipment (see chart). Retrofits will include dry scrubbers, baghouses and thermal denox systems to minimize the release of nitrogen oxides; carbon injection systems to control mercury and dioxin; and new instrumentation and measuring devices to help achieve combustion control.
As a result of these massive investments, many communities may be forced to close their WTE facilities, particularly those that process less than 250 tons per day. For example, during 1995 facilities closed in Akron, Columbus, and Dayton, Ohio.
Another hotly debated regulatory issue is the environmental safety of ash residue from waste combustion. In late 1994, the U.S. Supreme Court held that the Resource Conservation and Recovery Act does not exempt ash as a hazardous waste (City of Chicago v. Environmental Defense Fund).
To comply with the court's decision, EPA issued guidelines requiring waste-to-energy facilities to test their ash over a two-week period and to report the results. If one sample failed the test, the facility owners and operators would have to pay to transport all their ash to a hazardous waste landfill. Prior to initiating testing programs, therefore, many facilities installed ash treatment and stabilization systems as well as chemical fixation or immobilization technologies. Consequently, most facilities passed the mandated EPA toxicity test.
In light of these positive results, EPA re-issued its draft policy guideline in July 1995. On the state level, agencies such as the Florida Department of Environmental Regulation recently have issued policy memorandums stating that further ash testing is not required unless the WTE facility owner or operator believes that changes in waste flows have invalidated the past tests.
Florida also is considering allowing beneficial reuse of waste-to-energy ash. Worldwide, ash recycling and reuse programs have been established for decades.
Flow Control Or No? Another critical issue for the WTE industry during 1996 will be solid waste flow control. Since the U.S. Supreme Court's 1994 Carbone decision, which declared legislative flow control unconstitutional, many WTE facilities have lost their waste streams to less costly, often out-of-state landfills. Consequently, tipping fees for the facilities' remaining customers skyrocketed and many facilities have been forced to close.
Meanwhile, Moody's Investors Service has downrated the bonds that some communities issued to finance WTE facility construction. To repay the debt, many communities relied on long-term flow control. If this issue remains unresolved, many in the industry fear it will have severe impacts on municipalities' credit for other public projects.
In response, Congress has moved during its last two sessions to craft a legislative solution. Several associations, including the Conference of Mayors, the Integrated Waste Services Association, the National Association of Counties, the National League of Cities and the Solid Waste Association of North America (SWANA), have lobbied Congress to allow communities to continue providing waste flow to their WTE facilities during the term of the outstanding bonds.
Opponents to this solution, led by the major national solid waste hauling firms, argue that it hinders open competition for all solid waste service providers and, therefore, defies the Carbone decision.
Electric Utility Deregulation In the aftermath of the 1973 Arab oil embargo, Congress enacted the Public Utilities Regulatory Policies Act (PURPA). The act required electric utilities to purchase electric power at rates which reflected the avoided cost of fuel. Dramatic development in the waste-to-energy industry ensued because a steady, viable market for electric energy sales helped to finance facility construction and operation. Many states at that time also enacted legislation mandating preferential treatment for waste to energy and other alternative energy production methods.
General restructuring within the U.S. economy, however, could dramatically alter the future of electric utilities. Just as today's telephone customers can now choose among a broad array of suppliers, a similar change appears to be on the horizon for the electric utility industry - with potentially significant financial ramifications for WTE facilities.
Contentious proceedings currently are underway at state public utility commissions and the Federal Energy Regulatory Commission to determine how to expand competition at the wholesale and retail levels. Further, due to overestimated customer demand, many electric utilities are reducing purchases of electric energy; some recently have issued curtailment orders to cogenerators and small power producers. This in turn affects WTE facilities that depend on energy revenue to keep tipping fees at reasonable levels.
Meanwhile, Congress is debating whether to re-authorize PURPA or to restructure it along the new lines of open competition. This decision may have serious ramifications for WTE plant operators because many 20-year power purchase agreements will be due for re-negotiation in the next few years. It's uncertain whether communities who currently have relatively lucrative power purchase rate schedules will retain the bargaining power to wrest similar rates from electric utilities in the future.
Indeed, it appears that the WTE industry will begin 1996 where 1995 ended. As environmental safety concerns subside due to the finalized MACT and ash handling rules, the debate over free market forces will shift into the spotlight.