The Recycling Today Media Group will host our annual conference in the fall as we usually do. However, as you may have noticed by now, we’ve changed the name slightly to the Paper & Plastics Recycling Conference, which we believe better reflects the overall scope of the event and the realities of operating material recovery facilities (MRFs) and commercial recycling operations in the current environment.
The conference will be Oct. 8-10 in Chicago at the Marriott Downtown Magnificent Mile, which has been the home of the event for the last four years.
Those of you who have attended the conference during that time know that our programming has long embraced materials beyond paper. Plastics are undeniably a growing part of the recycling stream, and we felt it was time for our conference to reflect that reality explicitly in terms of the event’s name as well. By changing the name of the event, we hope to better communicate the conference’s breadth to those who have not regularly attended.
As the mix of materials processed by MRFs changes to reflect consumer habits and brand owner preferences, municipal recycling programs are seeing less newspapers and printing and writing papers while the volume of old corrugated containers (OCC) and consumer packaging made from plastic and mixed materials continues to grow. MRFs have had to retool to address these changes and the widespread use of single-stream collection.
Of course, consumers of recyclables also have been affected by many of these same changes and have had to adjust their operations as well.
You can read more about the agenda and the speaker lineup in the feature “Relevant material,” beginning on page 112, but I’ll share one programming highlight with you here.
Ron Gonen, founder and CEO of the Closed Loop Fund, will be on the keynote panel, Wednesday, Oct. 8, beginning at 4 p.m. He will be joined by Kerry Getter of Balcones Resources and Al Metauro of Cascades Recovery and Green by Nature EPR to discuss the effects of sustainability on brand owners’ packaging decisions and on MRF operators. The panel is sure to provide a lively discussion on the effects of EPR and sustainability on the supply chain.
This is one of many sessions we’re excited about at the 2014 Paper & Plastics Recycling Conference. I think you’ll feel the same when you visit www.RecyclingTodayEvents.com to learn more about the event.
For a snowboarder, “shredding” means making wonderful, athletic moves on the way down a ski hill. For a recycler, shredding is a profitable way to process plastic scrap into valuable pellets. However, recyclers must make some important moves to ensure that both their facilities and their end products represent peak performance.
With its processing plant in Charlotte, North Carolina, Engineered Recycling Co. (ERC) is among the leaders in the recycling of HDPE (high-density polyethylene) scrap, whether in the form of intermediate bulk containers (IBCs) or as loose or baled HDPE bottles.
The ERC-Charlotte facility is a 210,000-square-foot specialized industrial building. According to ERC, it is home to the two largest single-shaft shredders in North America, each capable of shredding or grinding as much as 20,000 pounds per hour or more, depending on product mix and sizing screen.
“In total we process a little under 6 million pounds per month,” says Peter Suttoni, president of ERC.
HDPE, fractional-melt HDPE and polypropylene (PP) are the main materials that go through ERC’s shredders.
The company bills itself not only as an expert in HDPE recycling but also in plastics processing. “We thoroughly understand what it takes to make premium plastic products,” Suttoni says.
Among the products ERC produces are postindustrial, HMW (high molecular weight) 4 to 7 HDPE pellets; postconsumer, fractional melt HDPE; and postindustrial, HWM 9 to 12 HDPE pellets.
Scrap materials are shipped to the company’s recycling facility in bales. After the bales are broken open, the next step is to do an initial size reduction and liberation of foreign materials.
“We use powerful magnets for metal removal and trommel screens for polypropylene separation and removal,” Suttoni says of the company’s equipment.
The video, “Beyond Recycling: Recovering the Energy in Non-Recycled Plastics,” http://bit.ly/1p7SUFY, shows processes for recycling plastics and converting those that can’t be economically recycled into energy, including oil, gas, electricity and liquid and solid fuels.
The ACC says the video was designed to help policymakers, regulators and waste management officials see the potential of used plastics.
“Our high-speed wash lines are custom engineered, and our extrusion lines are specially designed for the type of material they process,” he adds.
Until recently, the company had a second recycling operation in Chicago. However, the two operations were consolidated at the North Carolina location, and the equipment from the Chicago plant was relocated to Charlotte.
“That gives us three very large single-shaft shredders here in Charlotte,” Suttoni says of the consolidated operation.
Two of the shredders are set up to process HMW HDPE. A third is set up to process fractional-melt HDPE that is gathered from curbside collection programs.
A typical truckload of HDPE bales coming into ERC might have been purchased from anywhere in North America.
A hydraulic tipper allows the company to take in large quantities of product, push a button and have the rest of the system automated for proper handling. It is a bit more complicated than that, of course.
“Bales are broken in trommels,” Suttoni says. The material is processed under magnets to remove any ferrous metallic contamination and then enters the shredders unwashed.”
In addition, any foreign material or fines are liberated from the plastic. Paper labels are a major concern, and the system handles them after size reduction but before final processing. The aspirator pushes the paper scrap and fines out of the material flow. While not every piece of paper is caught at the beginning of the process, almost all of it is pulled away from the underlying plastic by the time the process concludes, Suttoni says.
“We aspirate all plastic and fill supersacks that we track by lot codes as we move the material through the plants,” he says. The end product is washed and extruded to pellets.”
He continues, “At the heart of the system are two Vecoplan VAZ 2500-T shredders.”
The size of the company’s shredded material is confidential. “We don’t normally identify the size of our shred material as we feel it is a competitive advantage,” Suttoni says.
What he will say, however, is, “We prefer the Vecoplan shredder. Their machines are durable, and service is strong.”
Suttoni says “size, throughput and price” are his primary considerations when designing a processing line for ERC and when shopping for shredding equipment for the operation.
The two VAZ 2500-T shredders from Vecoplan, Archdale, North Carolina, used at ERC’s Charlotte operation are identical. The shredders have rotors that are 98 inches wide and 25 inches in diameter. Each of the units is equipped with 171 cutters and each cutter is 40 millimeters square.
The drive on the shredders is the patented Vecoplan HiTorc electromagnetic drive.
“The drive will provide a speed range of 30 to 300 rpm,” says Bob Gilmore, sales director at Vecoplan LLC.
The preferred speed is selected by the operator. The faster the drive goes, the faster the rotor moves, and the faster the machine processes. However, many factors downstream from the shredder will guide the operator in selecting the ideal speed for the shredders on any given day. Since it offers a continuous range of speeds, the operator can set the process to run at the best rate for the equipment and the product being produced. The drive is designed to allow quick reversing action and controlled stopping.
“You get tremendous torque values from the HiTorc units,” Gilmore says. “It has all the advantages of a hydraulic drive without the disadvantages of a hydraulic drive,” he adds.
The HiTorc drive is designed to offer other advantages besides its speed range. As one example, the shredder is designed to be energy efficient. Any motor rates a minimal amount of amperage even when idle; while the HiTorc has a rating of 300 horsepower, it only pulls single-digit amps when it is idling, according to the manufacturer. “That’s similar to what a home hair dryer pulls,” Gilmore says.
The drive can be programmed to maximum ramp-up speed. Although not an overriding concern at ERC, in many areas of the country electricity is billed at peak usage. The units ERC uses can be programmed not to exceed a certain draw on the grid, thus operating at a cheaper rate.
The manufacturer claims a power savings of 58 percent, or $7 per hour. Here are the numbers: With the HiTorc drive operating on a grid billed at 8 cents per kilowatt hour, and figuring 250 kilowatts and 0.3 average loading, consumption would be 75 kilowatts. Running 24 hours per day, seven days per week, and figuring an 85 percent run time, the machine would consume 10,710 kilowatt hours per week at a cost of $857.
A conventional AC drive running at 223 kilowatts with an 0.8 average load would consume 178 kilowatts. With the same run time, the machine would consume 25,418 kilowatt hours per week at a cost of $2,033, more than twice the cost of the HiTorc drive.
Of course, when handling the volumes of material that ERC processes, keeping the equipment up and running is vital.
One key to keeping the machinery in good shape, Suttoni says, is continual rotation of the cutters.
“Our people do a considerable amount of welding to keep the rotors and cutter holders in specification,” Suttoni adds.
On top of that, there is the usual maintenance to cutting teeth. However, maintenance on the drive is minimal.
“Compared to a typical drive system, the HiTorc system has no moving parts,” Gilmore says. In a usual operation, there is a motor, drive shaft, clutch, gear reducer and the like. Each of those parts has moving parts of its own. With the HiTorc drive, only the electromagnetic motor is connected directly to the rotor.
One benefit of the company’s shredder type and its maintenance program is that ERC easily can change from one material to another when necessary. This is just another example of the productivity built into ERC’s system—from material flow to energy savings, the shredders at ERC are able to handle a mountain of material effectively and efficiently.
The author is a freelance writer based in Cleveland and can be contacted via email at firstname.lastname@example.org.
Demolition activity, closely tied to the health of the construction industry, has lagged behind as a source of scrap metal as the U.S. economy has slowly rebounded from the financial crisis and recession of 2008 and 2009.
Demolition contractors, even more so than the scrap recyclers who buy the metal they generate, have been awaiting a sharp upturn since the 2008 economic slowdown, but no such spike in activity has occurred.
However, national construction statistics and the viewpoint of the National Demolition Association (NDA), Doylestown, Pennsylvania, point to a slow buildup in demolition activity that is resulting in additional scrap flowing into the yards of processors.
The slow climb back
“Demolition activity is definitely up in 2014,” says Michael Taylor, executive director of the NDA. “Most economists believe that when we suffer a major event like the recession of 2009 and 2010 it can take almost 10 years to completely dig out,” he adds. “If we’re now five years away from the worst part of the great recession, I think that’s probably true.”
Taylor, who says he consulted with NDA board member Drew Lammers of the scrap company Cohen Bros. Inc., Middletown, Ohio, before providing comments on the scrap market, says Lammers also sees positive signs. “We’re in agreement that things are definitely getting better for the demolition industry in the U.S. and Canada,” Taylor remarks.
As the U.S. economy has limped through its recent no-growth or slow-growth years, the number of abandoned buildings has increased in part because of the building boom of 2001 to 2007, which created an overcapacity of certain types of structures and dwellings.
“The volume of work has increased [in 2014], mostly because of pent-up demand,” Taylor says. “Both nations simply didn’t demolish much for almost three years during the recession, and now there are tons of projects that are finally coming online,” he says of the U.S. and Canada. “In general you can say that things are much improved, and we are looking at a multiyear run of decent volumes of work,” he adds.
For scrap processors, the amount of demolition scrap they see flowing into their yards in 2014 can vary greatly from region to region. “Regional activity is still king,” Taylor says. “California has finally begun to dig out, as they seem to have addressed some of their short-term financial problems in Sacramento,” he continues. “The South is doing well, and we are seeing a good amount of activity in the Midwest and Northeast.”
As Taylor notes with California, one of the regional variables can involve the budgets of state governments. “Governments are beginning to spend money again as tax revenue from increased business activity has increased,” he comments. “Pennsylvania recently passed a multibillion-dollar capital program to address its massive transportation infrastructure problems.”
In the Keystone State, “the commonwealth will fund this work with a 28-cents-per-gallon—over five years—increase in gas prices,” Taylor notes.
Many school districts also have begun to improve their facilities in some regions, he says, before adding that the rebound of the private sector remains pivotal.
“The major push for demolition activity is the private sector—industrial retooling, removal of excess inventory and development of new facilities as unemployment drops,” Taylor says.
Regional variations in the health of state budgets and the investment decisions of the private sector can be seen in the construction industry employment figures calculated by the U.S. Department of Commerce and analyzed each month by the Associated General Contractors of America (AGC), Arlington, Virginia.
In May 2014, 40 states plus the District of Columbia employed more people in the construction sector than they did one year earlier in May 2013, according to a June 2014 AGC press release.
“With demand for construction growing in most states, many firms are slowly rebuilding their depleted payrolls,” says Stephen E. Sandherr, AGC chief executive officer, of the May construction employment figures.
Among the U.S. states experiencing the highest percentage of construction employment growth (and potentially demolition job growth) were Nevada, with a 12.5 percent (7,000 jobs) boost between May 2013 and May 2014; Florida, with 9.8 percent (35,300 jobs) growth; and Minnesota, with a 9.7 percent (9,700 jobs) increase.
In sheer numbers, California added the most new construction jobs in the 12-month span, with 37,700 additional jobs, followed by Florida’s 35,300 new jobs in the sector, Texas’ additional 26,500 jobs and New York’s 12,000 new jobs.
Still trying to find a construction sector rebound were West Virginia, losing the highest percentage of jobs (down 6.8 percent, or 2,200 jobs); New Jersey (declining 6.2 percent, or 8,500 jobs); and Montana (down 5.7 percent, or 1,400 jobs).
The pent-up demand for construction and demolition activity that Taylor refers to has not yet kicked in across all building sectors, but several sectors are showing signs of life.
The federal government’s bipartisan squabbling has endured for several years now, often resulting in red lights to developers and state project managers who may otherwise serve as sources of construction and demolition activity.
The winding down of military activities in Iraq and Afghanistan, however, is spurring some demolition activity, according to the NDA’s Taylor.
Fewer soldiers on active duty and renewed efforts to consolidate military bases are already leading to armed-forces-related bidding processes for demolition contractors, Taylor says. “The U.S. Army Corps of Engineers will be making a presentation in Nashville next March at our 42nd annual convention about its next phase of removal of base housing,” he says.
The Department of Defense, Taylor says, “is committed to decreasing its real estate footprint and consolidating its operations in smaller bases.”
A bridge too close
Among the high-profile demolition projects in the summer of 2014 is the dismantling of the Innerbelt Bridge in Cleveland, which formerly carried several lanes of traffic across the Cuyahoga River valley near downtown.
Half of the new span that is being built to replace the Innerbelt Bridge is in place. Half of the Innerbelt Bridge, meanwhile, is now being dismantled, while the other half continues to carry vehicle traffic.
The stage-by-stage construction and demolition of the busy highway bridges in proximity to each other has presented challenges of the contractors, who so far have been able to overcome them all.
A video report on the project by Kristin Smith, managing editor of Recycling Today Media Group publication Construction & Demolition Recycling, provides an overview of the project and an interview with a project manager.
The video segment can be found at www.cdrecycler.com/innerbelt-bridge-demo-video-report.aspx.
The space program has been another victim of government austerity. “NASA (the National Aeronautic and Space Administration), with the end of the Space Shuttle program and the privatization of our space program, is looking to shed a lot of its real estate holdings,” Taylor says.
He adds that the Department of Housing and Urban Development (HUD) “has had a program for years to get out of the public housing business by providing vouchers to low-income people, so I think you will continue to see the demolition of public housing high-rises or the rehab of these units into low-income senior citizen housing.”
Taylor continues, “Long-term, government work is always a good part of the demolition mix. It’s difficult right now as the governments—federal, state and municipal—are still looking to increase their revenue before embarking on any large capital projects.”
In addition to providing demolition bidding opportunities (and the resulting scrap metal), Sandherr of the AGC says the government also can spur activity by catching up on infrastructure spending.
“Quickly passing a long-term highway and transit bill will give many construction employers the security they need to begin adding to their payrolls,” he says. “It is hard to hire someone if you don’t know what the market conditions will be like next year, or even next month, which is exactly what many highway and transit contractors have to cope with right now.”
Sandherr says the AGC is in favor of a new surface transportation bill as way to provide “a lot of stability to what has been a very uneven construction recovery.”
A busier scale
Although a major uptick in construction and demolition activity may not be in the offing for 2014 or 2015, the current pattern should result in a little more demolition scrap moving across scrap yard scales.
For demolition contractors, the slow climb back has not been easy, and the second half of 2014 does not bring the promise of vigorous profitability. “Margins remain tight and there are still some nondemolition entities bidding our work,” says Taylor.
“You can still see some general contractors at job walks on larger projects, but the recent building boom has decreased that somewhat,” he says. On smaller projects, Taylor says, experienced demolition contractors have been subject to competition “from small general contractors, swimming pool installers, land clearing companies and the like.”
The money earned at the scrap yard scale house has remained a positive for demolition contractors, according to Taylor. “The market for scrap is solid, not 2006-to-2008 numbers, but [there] are still people ‘buying’ demolition jobs to gain access to the scrap.”
Scrap metal yields alone may not be enough to give a demolition project the green light, the way they did six or seven years, ago, Taylor adds. “The major factors influencing this real estate decision are probably a desire to get the structure off the tax rolls and new opportunities to develop the site,” he comments. “I do think that some [property] owners are removing structures from their portfolios because scrap prices are solid. Scrap is still important, but a growing economy and a demand for new buildings is probably the greatest factor pushing demolition.”
The slow-growing economy of 2014 has made Taylor and NDA members more optimistic than they were five years ago. “Things are better. People in our industry are busier. Competition is fierce, but I think there is a new sense of optimism about the future.”
The author is editor of Recycling Today and can be contacted via email at email@example.com.
The U.S. economy may finally be showing signs of improvement, but primary and scrap copper markets continue to languish.
The red metal has descended from the heights it reached several years ago, when China’s consumption of copper helped drive prices to record levels.
Those days are long gone, however. While China continues to buy copper scrap from the U.S., its overall consumption has declined. As well, the amount of available copper scrap in the United States is constrained by the lackluster economy. As a result, margins are extremely tight for copper scrap processors.
While China’s Operation Green Fence generated a lot of press over the last two years, it has had a middling impact on the copper market, sources say. One factor, however, that has created logistical problems is the scrutiny of inbound shipments, which has slowed the flow of copper scrap (as well as a many other commodities) through China’s ports.
Dealers say copper markets have been moving in fits and starts. In late spring and into the early summer, prices were heating up, fueled by renewed optimism and encouraging news. China, which continues to be the primary factor influencing the market as it consumes 40 percent of the world’s copper, appeared to be getting its proverbial house in order after an economic slowdown that hammered the metal. The country also was expected to benefit from an economic stimulus package introduced by the Chinese government.
While most metals analysts said they did not expect China’s economy to return to the double-digit growth seen through most of the first decade of the 21st century, there was a sense that the stimulus package could steady the economy, which had slowed quite sharply in a short time.
This infusion of spending was expected to act as some sort of adrenaline shot that would boost infrastructure spending in China, which would ultimately boost demand for copper and copper scrap.
However, several sources say the stimulus package was far less ambitious than originally expected. Copper markets, which saw a fairly pronounced run-up in prices in expectation of a sharp boost in demand, have declined in reaction to the actual stimulus package.
The stimulus package was expected to focus on infrastructure spending, including building construction, which consumes a significant volume of copper and thereby copper scrap. Analysts with Goldman Sachs estimate that roughly 61 percent of China’s copper consumption is related to housing and property activity. Of that amount, nearly half is related to telecommunications, lighting and local power infrastructure.
However, according to news reports, a number of new commercial and residential buildings throughout China remain empty. This news, plus the news of a Chinese builder that has warned of a possible bond default, has concerned companies that have pinned their hopes on the return of the Chinese housing sector.
The Chinese company Huatong Road & Bridge Group indicated in a mid-July statement to the Shanghai Clearing House that it might be unable to meet a $64 million bond payment that was due by the end of July. While the company was able to avoid the default, according to a report in The Wall Street Journal July 23, it was the first company to announce a possible default in China’s interbank market—its largest bond market. According to several published reports, as the Chinese economy continues to struggle, other firms could follow suit.
Additionally, if the widely held perception that China has a huge oversupply of housing results in other firms halting construction activity, demand for copper and copper scrap could slow further.
Goldman Sachs analysts believe this excess inventory will lead to falling copper prices over the next six to 12 months. The analysts write, “Importantly, we find strong empirical evidence for the relationship between completions strength and copper prices, with our China demand indicator based primarily on this, and our global demand indicator having a very strong relationship with copper prices.”
Supporting the lackluster outlook for copper consumption in China, a recent report from China’s General Administration of Customs reveals that China imported 350,000 metric tons of copper goods in June 2014, nearly 8 percent less than in the prior month.
The cancelling or postponing of many previously announced building projects has led China’s Ministry of Industry and Information Technology to call for the closure of more than three dozen copper smelters, many that consume copper scrap, by the end of 2014.
One U.S.-based scrap exporter says that even after these announced closures, “there is still an overcapacity in China.”
Another issue contributing to the uncertainty surrounding China is the reported practice by some traders of using the same stockpile of copper as collateral on loans with multiple lenders.
According to The Wall Street Journal, “Western banks are looking into allegations that a Chinese trading company illegally pledged metals as collateral to more than one lender. The operator of Qingdao Port, the eastern Chinese port where the metals are stored, has confirmed that Chinese authorities are investigating allegations of fraud relating to stockpiles of metals.”
The June 19 article continues, “An estimated one-third or more of Chinese metal imports are believed to be used as collateral for loans from China’s ‘shadow banks,’ a vast network of loosely regulated lenders. Rather than being used to meet actual demand, these stocks are imported into so-called bonded zones, areas where import taxes don’t apply, and re-exported when they are no longer needed as collateral.”
After learning about this practice, many banks have begun to withhold letters of credit that are used in commodities financing, The Wall Street Journal reports, which has slowed the overall movement of copper and other metals into China.
According to multiple reports, Chinese government officials have begun an official investigation into the matter. Perhaps 3,000 metric tons of copper (as well as roughly 10,000 metric tons of aluminum) may have been pledged several times, these reports note.
In related news, the Industrial & Commercial Bank of China has applied for the right to not settle a letter of credit (LoC) it had issued that was tied to copper shipments into Qingdao Port.
Another challenging factor affecting scrap and prime copper markets has been investment community activity.
Several years ago when copper prices were soaring to record highs, many physical handlers of the metal blamed the activity of trading houses for much of the volatility. However, following the economic downturn, many of these same investment tools related to copper and other metals dissipated. More recently, several scrap metal dealers say investment operations are returning to the market, contributing to the current uncertainty.
According to some observers, investment groups may re-enter the base metals markets to take advantage of the expected rebound in China’s economy. This could help to firm up pricing for the metal by 2015, which analysts say they expect to see.
No longer super
One class of pessimists sees the downward trend in copper arising from the perceived end of the commodity “super-cycle,” which has buoyed pricing for many commodities.
Many metals, including copper, more than doubled in price throughout the 12 years through 2010 as China’s growing demand met with supply constraints, according to a Bloomberg article dated July 16. However, many of these same metals have declined in price since then.
The Bloomberg article says banks such as Citigroup Inc. and Deutsche Bank AG have called an end to the so-called commodities super-cycle.
The article cites a recent Goldman Sachs report, “Emerging Market Forex and the End of the Commodity Market Super-Cycle,” which states, “A prolonged period of elevated commodity prices has catalyzed a supply response. We do not expect a collapse in global commodity prices. But we do anticipate substantial declines.”
Closer to home
All the machinations on the global stage have left many domestic scrap dealers with whiplash. China slowing its purchases of copper scrap has changed the landscape in the United States, with a number of domestic scrap dealers saying they are having an easier time finding copper scrap, especially insulated wire, which is typically a material Chinese consumers seek.
One scrap dealer selling into domestic, high-end applications says the market in the Northeast U.S. is in decent shape. “Our customers are doing well.”
Another source says domestic conditions have improved, though margins continue to be the biggest challenge. With fewer offshore end markets for copper, domestic consumers can squeeze prices, shrinking margins even more, he says.
“We can get it, but we can’t sell it,” a scrap dealer in the Northeast says.
A scrap dealer in the eastern U.S. agrees. “It is easier to find copper, but it is much harder to find the buyer for it.”
He continues, “Copper consumers can be far more selective with what they will buy. They may go to their preferred suppliers and have better control over prices they are willing to pay.”
Better luck next year
Copper scrap likely will be locked in a tight trading range throughout the rest of 2014. But analysts say they expect 2015 to be a much better year for the metal. The global economy likely will strengthen by next year, and new mining capacity, which added significantly more copper to the global market, will have been absorbed, they say.
Additionally, many of the uncertainties concerning the Chinese economy should be resolved, which should provide more clarity to the market.
Despite the outlook, one scrap dealer says copper scrap will remain in demand over the long term given its varied uses.
“The reality is that copper has a role to play,” another scrap metal dealer says.
The author is senior editor of Recycling Today and can be contacted via email at firstname.lastname@example.org.
The first several years of the new millennium witnessed a sharp rise in the use of newly popular terms such as “energy independence” and “energy security.”
In the wake of the Sept. 11 attacks, the war in Iraq and rising petroleum prices, energy conservation enjoyed several years as a bipartisan cause. Concerns about greenhouse gas emissions and the role of coal in particular were less bipartisan (and have differed by geographic region as well), but they likewise helped to spur new ways of thinking in the U.S.
Laws put in place in some states rewarded companies that took measurable steps to conserve energy in their plants, warehouses and offices. Recyclers—large-scale users of power for shredding, baling and other processing operations—were among those companies that took advantage of these programs.
A combination of shifting priorities, second thoughts from utility providers and successful lobbying more recently has led to a repeal of some of these programs. Their brief existence, however, further may have helped recyclers and other major energy consumers to make conservation of this resource a priority.
Incentives to lose
Electrical power service, even in an era of deregulation, still involves close interaction between power plant operators, transmission line owners, customers and a government regulatory authority, usually at the state level.
Not long into the maturity of the electrical power industry, some advantages of having a regulated monopoly rather than competing sets of power lines and coal-powered plants began to gain adherents.
The long-term pattern of power providers operating within a regulatory framework helped lead to the paradoxical situation of utilities rewarding customers who made investments to use less of their product (electrical power).
Energizing Indiana (https://energizingindiana.com), implemented in 2012, is one such program. During its brief tenure, industrial energy users could receive rebates for retrofit projects that effectively slashed their use of electricity.
In March 2014, the Indiana legislature passed a law, which was subsequently signed by Gov. Mike Pence, to terminate the Energizing Indiana program at the end of this year.
A March 2014 article published by Midwest Energy News (www.midwestenergynews.com) reported that several of the Hoosier State’s largest corporate citizens (some of which manufacture energy-saving technology) were not in favor of the repeal. From their points of view, not only were large companies benefitting from the energy saving incentives but so was the economy of Indiana.
Johnson Controls, Honeywell, Siemens, Ingersoll Rand and United Technologies were among the multinational companies that sent a joint letter to Pence March 7, 2014, urging him not to sign the bill repealing the Energizing Indiana program.
The companies contend that “ending this initiative would eliminate approximately 381 direct program jobs, over 1,200 indirect jobs and over $500 million of economic investment each year that the [Energizing Indiana] programs are not operating,” their executives say in the letter, posted on the Citizens Action Coalition website at www.citact.org.
At least one of the state’s utilities, NIPSCO (Northern Indiana Public Services Co.), Merrillville, Indiana, has announced that it intends to continue some aspects of the Energizing Indiana program through 2015 and possibly beyond.
Less efficiency required
Neighboring Ohio, like Indiana, has pared back a statewide energy efficiency incentive system. In June 2014, Ohio Gov. John Kasich signed Senate Bill 310, designed to “freeze state rules requiring electric utilities to sell more power generated by wind and solar and to help customers use less electricity,” according to the Plain Dealer newspaper of Cleveland.
The law passed in Ohio maintains the state’s program at its 2014 levels and may have more to do with allowing coal and natural gas producers to retain their market share versus discontinuing the incentives for energy savings.
Both Indiana and Ohio currently have Republican-majority legislatures and Republican governors who are repealing laws enacted when power was shared by Republicans and Democrats, and some critics on the other side of the aisle say the bills have been passed as a favor to supportive campaign contributors.
It appears that state energy savings programs, especially if they are linked to renewable energy programs, are becoming an increasingly partisan issue rather than a (rare) meeting place for bipartisan agreement.
In terms of votes cast in the marketplace, some recycling firms have proven eager to adopt renewable energy options, including collection fleets fueled by converted landfill gas (Waste Management Inc. and others) or installing a wind turbine, as is planned at the Sims Recycling Solutions material recovery facility in Brooklyn, New York.
On the political front, recyclers throughout the United States may need to keep an eye on news from their state capitals to determine whether engaging in energy savings will be its own reward or whether additional incentives will be available in the future.
On the auction block
If your business is located in an area where energy has been deregulated, identifying and locking in the lowest electricity and natural gas rates is, of course, the prudent thing to do. The benefits of energy deregulation include offering consumers choice when selecting an energy provider.
There’s usually no risk in selecting one provider over another, thereby making price the only variable when selecting an energy provider. In an attempt to get the lowest and most competitive electricity or natural gas rates, some business owners request rate quotes from several suppliers and then simply select the lowest rate.
Unfortunately, shopping for energy rates in this manner has a number of disadvantages:
If you are using this method, I suspect that yes, even after all the effort you are putting in, you probably are overpaying for energy. The average energy customer that is using this approach is overpaying by 5 to 10 percent.
So, what’s the solution? I recommend an approach called an energy reverse auction. It’s an approach where energy suppliers in your area bid against each other for your business in a five-to-10 minute online auction.
The auctions are usually free to the energy customer and there is no obligation to bid. This procurement approach, because of its transparency during the hyper-competitive bidding among suppliers, remains an effective way to extract the absolute lowest rates from energy suppliers.
Energy reverse auctions, which are now available to businesses of almost all sizes, have been growing in popularity as a procurement approach by government entities, towns and large industrial companies for almost a decade.
Robyn Rocke of Rocke Wildlife Studios in Eureka, Illinois, portrays his involvement: He was offered a competitive 12-month renewal rate of 5.073 cents per kilowatt hour (kWh) by his current energy provider. He instead chose to have multiple providers compete against each other in a live five-minute auction and ended up with a rate of 4.631 cents per kWh for 24 months. This produced a rate that is 8.71 percent lower, which over time will be create significant savings.
What are the potential downsides of reverse auctions? There are at least two disadvantages:
Mustafa Oluwa is an energy consultant with Energy Ltd., Houston. More information on energy auctions can be found on his blog at www.BusinessExpenseTips.com and at Energy Ltd.’s website, www.energy-limited.com.
The author is editor of Recycling Today magazine and can be contacted via email at email@example.com.
- Two dozen types of scrap imports banned by China in 2018
- Dow Packaging and Specialty Plastics collaborates to make trash bags from recycled plastic scrap
- China’s pullback leading to fiber price plunges
- RMA reports scrap tire piles have declined by 93 percent
- China asks to ban mixed paper and many plastic scrap grades