As with any waste industry business, the combustion sector is consistently evolving. "Zero waste" goals are becoming more popular nationwide while the prospects for building new facilities outside of the U.S. are increasingly promising.
As outlined during a recent Q1 earnings call, Covanta sees potential for WTE growth in special "profile" waste streams and overseas markets. Its new Dublin facility is expected to be fully operational by the end of the year and the company is open to projects in a number of other countries. Covanta's U.S. municipal solid waste business remains steady, but some cities such as Washington, D.C. and Boston — which currently rely on the company to accept their refuse — have indicated an eventual move in a different direction.
On Monday, Waste Dive caught up with CEO Stephen Jones in New Orleans for the first time since October to discuss recovery progress after a recent facility fire in Fairfax, VA, the challenges of achieving "zero waste" and opportunities to use residual ash as construction aggregate.
The following transcript has been edited for brevity and clarity.
WASTE DIVE: What is the latest on recovering from the fire at your Fairfax facility? Has the process provided any fire safety lessons you can apply to other facilities?
STEPHEN JONES: We're in the process of replacing the cranes and the siding and the roof. They were the areas that were damaged by the fire back in early February. We're also working with the fire marshal to see what additional upgrades we need to put on the fire suppression equipment. We're still hopeful and anticipating that late in the second quarter we'll be back on stream. Particularly around upgrades to the fire suppression equipment, one of the lessons learned quite frankly is what new technology is out there that allows you to understand when you get a hot load coming in. What we think happened here — and it's always hard to tell — is we got some waste dropped off and it had some sort of flammable piece to it and then that starts the fire. And that's a risk if you look at landfills or transfer stations or energy-from-waste plants. So we're starting at look what new technology you can bring to bear in order to understand what's coming onto your tipping floor.
There's opportunities [with] infrared systems that look for hot spots and then they can deluge the hot spot automatically. Our Dublin facility for example has something like that. It's got infrared sensors and then also there's water cannons. Once the infrared system tells you what's on fire you can direct a water cannon to put it out.
Your Environmental Solutions has been a big focus for the company and you had a recent small acquisition in that area. In terms of infrastructure and strategy what does it take to grow that part of the business?
JONES: Our strategy around this was to find acquisitions where we could build out our profiled waste business and that's what we continue to do. Some of these acquisitions you've seen us do, most of them are smaller. So they're bolt-on acquisitions where they're in geographies that we don't have the coverage we'd like. There's also product line acquisitions. We do a lot of drug take-backs already, because a lot of pharmaceutical companies want assured destruction. They don't want their out-of-spec or out-of-date medications going into landfills or other places where they can get pulled out. You think about the opioid epidemic in the U.S. and so that's driving a lot of this.
These are small material processing facilities. They do more than a transfer station because they'll bring in various waste streams and figure out what needs to go where, so there's a processing component.
Are there any certain regions you've been targeting?
JONES: The acquisitions that we've done [are] around our energy-from-waste plants on the eastern third of the U.S. Now we're looking at where our plants are as you move across the U.S. toward the west coast. So it's more a focus in that direction from a geographic standpoint.
During your session at this morning's Investor Summit you mentioned looking at opportunities to use residual ash as an aggregate. Is that something where you'd invest in new infrastructure or do you plan to sell the material?
JONES: What happens in that process is basically ash comes in, you process it, you can reclaim high value metals. Gold, silver, those types of metals ... You can also then create an aggregate that can be used in the construction industry, so then we'd sell that aggregate. [Based on] the numbers that we ran we assumed we were just going to give it away, because the alternative is to landfill it and that costs us money. But quite frankly we think there's applications in the construction industry where you can sell it as a material that can be used in cement blocks or asphalt. Asphalt is the one area that we've been looking the most closely at recently.
Boston recently put out an RFP to begin a planning process that could eventually establish a "zero waste" goal. You currently have a contract until 2019 to handle a large portion of their residential refuse at two regional facilities. How do you engage with them, or any other city that is a current customer but starts talking about these goals. Aside from New York, a lot of cities with "zero waste" goals don't see combustion as part of their future plans.
JONES: We've thought about this a lot with New York. That's a tough goal to achieve, particularly in any reasonable timeframe. You want to reduce, you want to reuse, you want to recycle. But there's going to be some portion of the waste stream that's still left over and we think its better to recover the BTU content from that waste versus putting it in a landfill. So what most cities have done is they started with a "zero waste to landfill" goal, with the hopes to get to a "zero waste" goal. I think the jury's still out on how long it would take a city, or any company or country, to get to "zero waste." I think that's an aggressive goal, but you know from a societal standpoint that's a good goal to have.
"You want to reduce, you want to reuse, you want to recycle. But there's going to be some portion of the waste stream that's still left over and we think its better to recover the BTU content from that waste versus putting it in a landfill."
In regions like the Northeast there is already less landfill use. For example, all of Boston's residential refuse is currently going to facilities operated by you and Wheelabrator. When it comes time for contract renewal, is that the case you make to them?
JONES: Yeah. You look at, where are the benchmarks? So Northern Europe — let's pick Germany. Germany takes about 5% of their waste to a landfill. They take 65%, in that range, for recycling. But what's left over — and there's still [about] 30% that's left over — they take it to energy-from-waste plants. So there's still a need. I think it's going to be extremely difficult to get to zero waste. I think there's going to be a step for a number of years where you want to make sure that rather than using landfills you're taking this residual and recovering the BTU content.
What will you be watching for in the industry during the rest of this year?
JONES: For us, metals pricing will be interesting to see how it plays out. Iron ore pricing has recently gone down. There is some concern that China is going to slow down. That will have an impact on the recycled metals that we reclaim.
And then what's going to happen with Trump [on the] tax code? We still have a large NOL (net operating loss) that allows us to not have to worry too much about taxes for the foreseeable future, but lower corporate taxes will be good for the economy. If the economy continues to grow at a higher pace than it has in the past that'll be great for the waste industry. And then also a higher economy will help on the metals pricing. So seeing what President Trump does and what happens with his administration, it should make for an interesting year.
Stay tuned for more from Jones in an upcoming episode of Waste Dive's Talkin' Trash podcast and additional interviews with other industry CEOs from WasteExpo this week.