Rotting Garbage Will Light 80,000 Aussie Homes

Australia’s poor recycling track record has an upside.

Cleanaway Waste Management Ltd., the nation’s largest garbage company, has the potential to extract enough gas from rotting rubbish to produce electricity for as many as 80,000 homes, according to Chief Executive Officer Vik Bansal.

“Twenty years ago, this was all going to waste,” Bansal said in an interview last week in Melbourne. The gas was getting “flared up in the environment, now it’s creating electricity,” he said.

Australia is the eighth-largest per-capita producer of municipal waste among developed economies, according to the Organization for Economic Cooperation and Development. A report last year by the Australian Council of Recycling showed the nation recycled just 41 percent of that waste, compared with Germany on 65 percent.

That’s proving a boon for companies such as Cleanaway, which extracts gas from landfill sites to power engines, in turn generating electricity that’s sold to the national grid. It’s adding innovative, if relatively small, supplies of power as Australia debates its future energy mix and seeks to curb emissions.

Melbourne-based Cleanaway sold 145,000 megawatt-hours of electricity to the grid from 120 million cubic meters of captured landfill gas last financial year, according to its annual report. The company has 11 of its own landfills, seven of which are providing electricity, Bansal said.

The company isn’t alone in turning rubbish to power.

Suez, Veolia

Paris-based Suez generated 263,000 megawatt-hours of electricity from its Australian landfill sites in 2014, according to the company’s website. Veolia Environnement SA says it currently captures enough gas to power 2,500 homes from a site in New South Wales state and within 10 years will power an additional 12,000 from a facility in Queensland.

Cleanaway says it has doubled capacity at its largest landfill site in Melbourne to 8.8 megawatts, which will come online by October. Within 20 years, depending on the volume of waste it collects, it could produce enough electricity nationally to power as many as 80,000 homes, Bansal said.

It’s a “good little investment” for the company, said Nathan Lead, a senior analyst at Morgans Financial Ltd. who rates the stock as a hold. Even so, the electricity produced is a “drop in the ocean” of Australia’s energy demands, he added.

Australia is one of the world’s biggest suppliers of gas and coal, yet is struggling to find enough fuel to meet its own demand. Electricity price spikes and outages have raised concerns the nation’s energy security is deteriorating.

Read more: Why resource-rich Australia faces energy supply shortages

While the government has committed to cutting greenhouse gas emissions by at least 26 percent on 2005 levels by 2030, politicians are divided about how to get there. Lawmakers are currently battling over Chief Scientist Alan Finkel’s recommendation for a clean energy target that could limit the role of coal.

Recycling Business

The company, which collects rubbish from more than 90 municipal and 120,000 commercial and industrial customers, seeks to recycle between 60 percent and 95 percent of discarded material before it reaches landfills, Bansal said. 

Cleanaway got A$87.9 million in underlying earnings before interest, tax, depreciation and amortization from processing solid waste last financial year, a 47 percent increase on the prior year, according to its annual results. It doesn’t break down earnings from electricity generation.

The company is investing more than A$100 million in facilities for recycling liquid and solid waste and has been researching recycling and sustainability models in Europe and the U.S., Bansal said. The company provides sustainable waste management for customers including Chevron Corp. and Brisbane City Council.

“Every company now talks about sustainability,” said Bansal, who’s seen the company’s share price double since he became CEO in August 2015. “Nobody can achieve sustainability without managing waste. You’ve got to manage your waste because that is a massive carbon footprint.”

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