by MAURA KELLER
Just about everyone in the recycling and waste management business is burdened with some kind of fiscal challenge from soaring diesel prices to increased labor costs. In addition, the industry is saddled with pressures from environmentalists, government regulators and customers to change their products and processes to better accommodate these earth-sensitive times.
As fuel prices continue to impact waste haulers’ bottom line, a fresh focus on such things as alternative fueled vehicles, is a sign that environmental considerations are more than just ‘green’ business. They’re good business.
As Graham Rihn, chief executive officer and founder of RoadRunner Recycling explained, gas and diesel prices are affecting the waste industry in a major way. Standard garbage trucks only get approximately three to four miles per gallon which means they are especially costly to run right now.
“Because of this, we’re seeing a lot of related costs jumping, from landfill tipping fees to fuel and environmental fees to the annual price increase rates,” Rihn said. The effects land squarely on the shoulders of the customers who rely on the recycling and waste services.
“They’re seeing the costs of services they rely on ballooning by anywhere from 5 to 20 percent in APIs on their service contracts,” Rihn said.
RoadRunner has been building around this problem for a few years now. They are fortunate enough to have an enormous amount of data in waste and recycling by nature of what they do.
“We wanted to make sure we were arming our teams with tools, built from our data, to ultimately help customers cure increasing waste and recycling costs. In addition, our teams work directly with customers to make sure they are getting services when they need them, as often as they need them, and that the containers they are filling are the correct size for their business,” Rihn said.
Directly relating to gas and diesel prices, RoadRunner also utilizes local trucking companies for clean stream recycling hauling. As Rihn explained, their network operates trucking assets that are far more efficient than the standard solid waste and recycling trucks.
“We use our proprietary technologies to create the most efficient routes for our haulers, saving even more on fuel efficiency. This, in tandem with our data and negotiations on the waste management end for our customers, can mitigate a lot of the cost and save them money over the long term,” Rihn said.
Benjamin Dierker, director of public policy at the Alliance for Innovation and Infrastructure, an organization that studies public policy, infrastructure and innovation matters, said they study and observe the waste and recycling industries by waste or recycling – it is something they observe inside the context of broader transportation, infrastructure, energy and innovation policy. As such, Dierker said that in the same way that gasoline and diesel prices are affecting all industries, the high price at the pump is a strain on waste and recycling haulers and managers. Practically, the cost to operate the business is higher. Revenue is not necessarily increasing, so that strains the sustainability of the business model. That said, revenues may increase, as commodity prices rising tends to increase the value of recycling and revenue for waste management.
“Routes tend to be as optimized as they can be already to save time and money, but to the extent they’re not yet, managers may tighten these up,” Dierker said. “Anecdotally, I’ve heard of skipping or rearranging pick up days, and even directly observed a truck skip a street altogether (but costs and fuel may not have been part of the calculus).”
Alternative Options
Ann Colvin, brand analyst with ConsumerGravity, which provides an in-depth analysis of the most popular brands, said that many companies are working to reduce their fuel consumption through a variety of means. One of the most common is to invest in more fuel-efficient vehicles. This can be expensive upfront, but it can lead to significant savings over time.
“Some companies are investing in alternative fuel sources, such as biofuels. Still, others are working on operational changes that can lead to reduced fuel consumption, such as changing routes or consolidating facilities,” Colvin said. “Biofuels, such as biodiesel, is one option that is being explored by many companies. These fuels can often be produced from recycled materials, such as used cooking oil.”
There has been a big push and many major solid waste companies have large goals of converting their fleets to CNG fuel in the future. Rihn believes this is a really positive step forward for the industry, but one they see as an incremental innovation as opposed to transformative. Compressed natural gas (CNG) is a readily available alternative to gasoline that’s made by compressing natural gas to less than one percent of its volume at standard atmospheric pressure. Consisting mostly of methane, CNG is odorless, colorless and tasteless. It’s drawn from domestically drilled natural gas wells or in conjunction with crude oil production.
Not surprisingly, as gasoline prices continue to rise, U.S. companies are showing an increased interest in CNG. As CNG costs about 50 percent less than gasoline or diesel, emits up to 90 percent fewer emissions than gasoline, and is plentiful right here in America. These facts, and others, are causing recycling and waste haulers to sit up and take notice of a potential new revenue stream that may make a significant mark on the industry.
In addition, Rihn pointed to the introduction of electric trucking assets –one RoadRunner Recycling is following very closely.
“We believe these assets are already market-ready and we’ve actually even started a pilot with an electric trucking asset,” Rihn said. “Industry companies are pursuing alternative fuel and electric options because any step towards producing less carbon emissions in 2022 is a step to take and build upon. All major industries are under carbon transformation which is primarily causing all of the interest around more efficient fleets. With every new technology and solution that enters an industry, it will take some navigation to take things to scale.”
Dierker added that while it still fluctuates, the price of electricity is relatively stable. That means that companies can insulate themselves from fuel price surges that may impact their bottom line.
“If they have the capital or credit to invest in new electric vehicles, this can be a good trade off. For the most part, waste and recycling trucks can be parked overnight to recharge fully and only operate during the day,” Dierker said. “However, if a day’s route requires more charge, then the company would need additional vehicles – an obvious downside from simply refilling a tank quickly and heading back out.”
Long-term Implications
The rising gas and diesel prices will undoubtedly have long term implications in the waste industry and fluctuating fuel prices will be a significant factor in the waste and recycling industry until the reliance on diesel fuel lessens.
In the long term, Dierker anticipates that more municipal waste and recycling operations will move to electric vehicles as public will shifts to favoring lower emission vehicles. Private operations will follow when it is more economical to do so.
“Research indicates that some medium and heavy duty vehicles are becoming more economically efficient, with total cost of ownership even being more favorable for electric relative to gasoline or diesel,” Dierker said.
The short term impact is largely unavoidable as virtually all waste management fleets are still powered by diesel with support vehicles generally running on gasoline. These are subject to the same price at the pump as everyone.
“Electric fleets are on the horizon, but remain years away, represent a significant investment, and will still rely on long charge times, questionable sections of the electricity grid, and energy costs from the electric utility,” Dierker said. In the short term, mitigating fuel costs by optimizing routes is the best cost-saving option.
Rihn predicts that the industry’s future will consist of solid waste companies implementing incremental innovations through the conversion to CNG fleets and ultimately building towards electric fleets.
“This will take place over the next several decades as companies realize this saves money, meets sustainability goals and positively impacts customers,” he said. “How quickly this happens will be predicated on how important companies feel it is for them to reduce emissions throughout the industry. The industry is certainly in flux with a lot of eyes on not only the price of fuels but the potential overuse of them. We’re seeing a lot of the industry turning toward potential alternatives, which might be the push needed to get the waste industry into the next phase of sustainability. However, large problems still exist – landfills overflowing, prices skyrocketing and recycling services dwindling. We’re working toward a greener future one clean-stream customer at a time.”
Published in the August 2022 Edition
