Virginia Beach garbage collection
Garbage is not a sexy topic. Most people don't think much about it. But the cities of South Hampton Roads are about to enter into a new contract for the disposal of their citizens' trash, and tens of millions of dollars are at stake, dollars that come from taxpayers. The organization that oversees these cities' trash disposal has decided to contract with a new company, which plans on using a cutting-edge technology and an untested business model to keep its fees low.
Southeastern Public Service Authority: The regional authority that cities and counties pay to dispose of trash. Chesapeake, Franklin, Norfolk, Portsmouth, Suffolk and Virginia Beach, and Isle of Wight and Southampton counties, have contracts with SPSA through 2018.
Wheelabrator Technologies: The company SPSA has been using since 2010 to dispose of the region's trash. It has a waste-to-energy plant in Portsmouth.
RePower South: The company SPSA has decided to use for waste disposal after 2018. The company plans to build a $100 million plant in Chesapeake that would separate out materials that can be reutilized, according to Jim Bohlig, the company’s chief development officer.
Why did SPSA decide to change from Wheelabrator to RePower?
Money. SPSA calculated RePower's bid would cost cities $56.52 per ton of trash and Wheelabrator's $78.72 a ton. However, Wheelabrator quoted Virginia Beach a price of $65 a ton in a direct bid to the city. Wheelabrator has also presented Portsmouth with a direct offer.
Either way, the cost of picking up and disposing of trash would be greatly reduced for the cities and counties that are part of SPSA. Currently, it costs $125 a ton.
Which municipalities have signed on to the new agreement?
Norfolk, Chesapeake, Franklin, Suffolk and the boards of supervisors of Isle of Wight and Southampton counties. Virginia Beach has conditionally agreed as long as SPSA allows private haulers of commercial waste to use its transfer stations. Portsmouth has delayed a final vote until June. It wants to consider bids from other companies.
This seems pretty straightforward. Why should I care about any of this?
Portsmouth Councilman Danny Meeks warned in February that the disposal company SPSA has decided to go with, Spartanburg, S.C.-based RePower, comes with risks. Meeks, who was in the trash collection business for decades, says RePower's technology and business model are untested. If this doesn't work the way RePower expects, it could end up costing cities more than going with a company like Wheelabrator, which uses proven technology, or just dumping the garbage into a landfill.
Wait, what? How new is this technology?
Bohlig, the company's chief development officer, admitted in February that there is no other facility exactly like what RePower proposes to build in Chesapeake.
The company says that so many people now throw away recyclables rather than putting them in blue bins that it can make money by extracting good stuff from the everyday trash stream. It plans to sell those recyclables on the open market, and turn much of the rest of the paper and plastic into biomass pellets, which could be burned at coal plants. The company would earn revenue by selling both the recyclables and pellets, so it can afford to charge a smaller tipping fee, he said.
While there are no plants trying to do both of these things, RePower has pointed to four plants that have offered one of the components, the extraction of recyclables from waste. One of those plants, Infinitus Renewable Energy Park in Montgomery, Ala., has since closed because of low market prices, which have sunk in recent years for many recyclables.
Are there any problems with the technology?
Mike Benedetto, owner of Chesapeake-based TFC Recycling, said in February his biggest concern would be with how RePower intends to separate out recyclables from the rest of the trash.
“It is proven that when you mix wet and dry waste together, it contaminates recyclables to the point they are no longer marketable, ” he said.
Marco Castaldi, a chemical engineering professor and the director of the Earth Engineering Center at The City College of New York, said the materials would still be marketable, but their value would be decreased and the expense of sorting would be increased.
Bohlig said the U.S. Environmental Protection Agency has approved the company’s product and that coal plants wouldn’t have to make modifications to burn the pellets.
He said the company completed a “full-scale” test of 500 tons of pellets at South Carolina Electric and Gas’ Canadys coal plant before that plant was shut down. That utility owns a small stake in RePower.
Is RePower's business model solid?
Castaldi said in February that RePower’s main challenge isn’t technological, it’s economical.
“There are many companies that have been investigating this all the way from single-stream plastic to these types of mixed polymer (plastic) and fiber types, and demonstration-wise, it works. Technically, it works. Economically, it doesn’t right now, and it hasn’t for the past 10 years.”
Castaldi said profit margins for waste-to-energy facilities, which burn trash to create electricity, are already “razor thin.” A plant such as RePower’s would likely be more complicated and, thus, more costly.
Bohlig said the company’s diverse sources of revenue – a tipping fee, recyclables and pellets – made the business model workable. He said in February that RePower was in conversations with utility companies in the U.S. and Europe but wouldn’t say whether the company had a contract with any of them. A spokesman for Dominion Virginia Power confirmed that utility has spoken to RePower and was "impressed" by its technology, but said Dominion hasn't decided whether to pursue a contract with the company.
So what happens if RePower can't make its operation work?
That's something that some SPSA board members and local elected officials have discussed quite openly. They want to be sure that SPSA has a backup plan. And that backup, at least initially, is to send all of the region's garbage to its regional landfill in Suffolk. But its capacity would be exhausted within a decade if that's where all the waste goes. So SPSA is pursuing a permit from Suffolk to allow a landfill expansion.
What happens next?
Most of the members of SPSA, if not all of them, are staying with the trash authority. Once Virginia Beach is in the fold, which seems likely, RePower is in business. Even if Portsmouth goes on its own, the other cities and counties will be enough for SPSA to make the deal work. A final SPSA board vote on the RePower deal is scheduled for May 25.
Then the onus falls on RePower. Its officials have said the company will need to attract more outside investment – likely through a private bond offering – to get the project off the ground. Its potential bondholders would almost certainly scrutinize RePower's proposal more closely than SPSA before betting their money.
RePower has said it's confident that it'll get the money it needs and hasn't speculated about what it would do if it can't. But one possibility is that SPSA and its member communities might be asked to pay RePower more to give the company's would-be investors more confidence they'll be paid back.