Organic Waste Consultancy Report

Environment Protection Authority
Consultancy report:
Organic waste economic values analysis

Summary report
This report has been prepared by consultants for

the Environment Protection Authority (EPA) and the views expressed
do not necessarily reflect those of the EPA.
The EPA cannot guarantee the accuracy of the report, and does not accept liability for any loss or
damage incurred as a result of relying on its accuracy.
Department of Industry and Trade
Environment Protection Agency
ORGANIC WASTE
ECONOMIC VALUES ANALYSIS
SUMMARY REPORT
January, 2002
Prepared in association with
Access Economics
Ref: 3091-01
NOLAN-ITU Pty Ltd ACN 067 785 853 ABN 23 359 240 890
P.O. Box 393 Level 1, 625 High St, East Kew Victoria 3102
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NOLAN-ITU PTY LTD

ACN 067 785 853
ABN 23 359 240 890
Melbourne
PO Box 393
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East Kew VIC 3102
Tel: (03) 9859 3344 Fax: (03) 9859 3411
Copyright © Nolan-ITU Pty Ltd 2002
This document is and shall remain the property of Nolan-ITU Pty Ltd.
The document may only be used for the purpose for which it was
commissioned and in accordance with the terms of engagement for
the commission. Unauthorised use of this document in any form
whatsoever is prohibited.©
Printed on Recycled Paper
REF: 3091-01
Document Issue and Status

Rev. Status Date Project Manager Reviewer
1-0 Preliminary Draft 18 July 2001 John Nolan Bruno Schacher
1-1 Internal Draft 19 July 2001 John Nolan Sam Bateman
1-2 Draft 10 August 2001 John Nolan Sam Bateman
1-4 Final Draft 13 November 2001 John Nolan Sam Bateman
1-5 Final Draft No. 2 16 January 2002 John Nolan Sam Bateman
1-6 Final 31 January 2002

CONTENTS
1 STUDY OBJECTIVES .........................................................................................1
2 SUMMARY OF KEY OUTCOMES ......................................................................2
3 TERMS OF REFERENCE ...................................................................................2
4 TERMINOLOGY ..................................................................................................3
5 CURRENT ORGANIC PROCESSING INDUSTRY OVERVIEW .........................3
6 AVAILABILITY OF FEEDSTOCK .......................................................................4
7 EXISTING AND POTENTIAL PRODUCT MARKETS.........................................4
Compost Products 4
Renewable Energy 5
8 ALTERNATIVE ORGANIC PROCESSING SCENARIOS...................................6
Scenario 1 – Base Case 7

Scenario 2 - Expansion of Current Organic Processing Industry 8
Scenario 3 - Inclusion of Other Organics in Current Industry 8
Scenario 4 – Residual Treatment - Pyrolysis 8
Scenario 5 – Residual Treatment – Anaerobic Digestion 8
Scenario 6 - Residual Treatment – Pyrolysis & No Recyclable Organics Collections 9
9 ASSESSMENT TOOLS.......................................................................................9
10 KEY FINANCIAL ASSUMPTIONS ....................................................................10
Evaluation Period 10
Ownership 10
Number of Facilities 10
Gate Fees 10
Transport Costs 11
Labour Costs 11
Land Value 11
Value of Compost to Agricultural Industries 12
11 ANALYSIS OF THE EXISTING INDUSTRY......................................................12
12 FINANCIAL EVALUATION OF FUTURE SCENARIOS....................................13
3091-01/DIT EPA - rpt1-6(sum).doc Department of Industry and Trade & Environment Protection Agency
CONTENTS
13 COST BENEFIT ANALYSIS ON ECONOMIC VARIABLES.............................14
Processor Operating Profit 16
Agricultural Users Benefit 16
Job Creation 16
Sensitivity Analysis 16
14 ENVIRONMENTAL ANALYSIS ........................................................................17
15 KEY STUDY OUTCOMES.................................................................................18
1. Economic Benefits of the Existing Industry 18
2. Environmental Comparison with Landfilling 19
3. Economic Benefits to the State 19
4. Role of Residual Waste Treatment Technologies 19
5. Treatment of the Combined Waste Stream in Preference to Source Separation 19
16 ACKNOWLEDGEMENTS .................................................................................20
1 STUDY OBJECTIVES
The objective of this economic value analysis study is to quantify and evaluate, as far as possible,
the broad economic, environmental and social costs and benefits of existing and potential organic
waste collection, processing, and product development industries to the welfare of South
Australia; so that government, industry and the community can make informed decisions on
organic waste management options.
Industries to be considered include those based upon source separation of organics to produce
high value compost products, and those based upon treatment of the residual waste fraction to
produce renewable energy, and in some treatment processes - lower value compost products.
The renewable energy organic processing industry is complimentary to the “source separation”
processing industry, when it utilises the residual waste stream only. However, it is competing
when organic feedstock is augmented by the inclusion of organic wastes which are currently, or
could be, source separated for processing and the production of compost based products.
It is intended that the study will:
� provide the South Australian Government and other stakeholders with sound
information on the range of potentially viable organic processing industries;
� advance understanding of the sustainablity parameters which form part of the
decision making process; and
� contribute to the national body of knowledge which is being developed to assist
waste managers to undertake assessments of alternative organic processing
technologies.
The study is restricted to organic processing industries that are or may be established within
100 km of the Adelaide CBD and their product markets which extend beyond the region.
The study has been undertaken on behalf of the Department of Industry and Trade and the
Environment Protection Agency by Nolan-ITU. Access Economics has contributed to the study
by conducting the financial analysis and economic cost benefit analysis. This summary report is
supported by a comprehensive and confidential report provided to the Department of Industry and
Trade and the Environment Protection Agency.
1
2 SUMMARY OF KEY OUTCOMES
The key study outcomes are summarised below:
i) Economic benefits to the State derived from the existing “source separated” organic
processing industry are indicated by the analysis. These are due to downstream
agricultural flow-on benefits and high labour requirements.
ii) All of the organic processing options considered, including the existing and
expanded source separated composting industry as well as residual waste treatment
using pyrolysis and anaerobic digestion technologies, result in improved
environmental outcomes compared with landfilling only.
iii) The “source separation” composting scenarios result in the greatest benefit to the
State due to downstream agricultural flow-on benefits and high labour requirements,
and that augmentation of the current “source separation” organic processing capacity
will result in additional benefits.
iv) There is also a role for new thermal treatments, enclosed composting and anaerobic
digestion in the treatment and resource recovery from residual wastes. They can co
exist with composting of source separated organics, provided that environmental
performance is clearly established and the technology has been fully tested and is
recognised as being both technically and commercially viable.
v) Adoption of domestic residual waste technologies to the exclusion of ‘source
separation’ alternatives is not considered desirable unless it is demonstrated that the
performance of the specific technology under consideration would result in improved
environmental and economic outcomes.
3 TERMS OF REFERENCE
The terms of reference for the study are as follows:
� Gather information from relevant sources to establish the overall operation and sector
impacts.
� Interview a selection of clients to cover the key market segments and to gain
qualitative data on the effects of the products.
� Analyse and assess these effects against statistical data on industry size to form
economic contribution values.
� Provide consolidated summary tables of environmental benefits and costs including
greenhouse gases and energy efficiencies and of overall findings of the economic and
employment analysis.
2
4 TERMINOLOGY
The potential sources of organic waste material considered include recyclable organics (RO),
commercial wet organics (CWO), domestic food waste (DFW) and domestic residual waste
(DRW).
Recyclable organics refers to ‘green’ organic wastes such as leaves, tree prunings, and shrubs
from household yards, parks and gardens, and road reserves. Commercial wet organics includes
organic wastes from the agriculture, and food processing industries such as manures, wool
scouring wastes, grape marc, animal carcases, and biosolids. Domestic food waste is the food
fraction of the waste stream generated by households.
Domestic residual waste refers to the residual waste placed by householders in the garbage bin
after source separation has occurred. For all organic processing industry scenarios considered, it
is assumed that domestic residual waste does not include paper, cardboard, and plastics which are
source separated by householders for kerbside recycling.
References to ‘compost based’ products includes both composted organic material (‘compost’)
and secondary products derived from compost such as pellets.
5 CURRENT ORGANIC PROCESSING INDUSTRY OVERVIEW

The current organic processing industry within the study area is well established. Approximately
111 000 tonne/yr of recyclable organics and over 75 000 tonne/yr of commercial wet organics is
currently processed; an increase of about 20% since 1999. Of the processed recyclable organics,
38% is sourced from kerbside collections, 41% from parks and gardens and drop off depots, with
the remaining 11% sourced from the commercial sector.
There are over 10 licensed organic processors within 100 km of the Adelaide CBD, and six
known unlicensed facilities which mainly produce mulch and are not actively involved in large
scale composting. Of the licensed organic processors, Jeffries Garden Soils and Peats Soil and
Garden Supplies receive over 50 % of the total organic feedstock used in the production of
compost based products. All of the licensed processors compost “source separated” organics
using traditional open windrow processing.
A range of compost based product are manufactured by varying the mix of organic wastes in the
compost, adding soil and/or sawdust, and introducing nutrients. The processed material is sold
to the viticulture, horticulture, landscaping, and site remediation industries. A small quantity is
also exported. The larger existing facilities are at production capacity, hence will need to re
establish at new locations within the next few years to meet projected industry growth rates.
There are substantial opportunities to expand the industry through an increase in the number of
councils offering collection services, the potential collection of domestic food waste, and
increased source separation of commercial wet organics.
3
6 AVAILABILITY OF FEEDSTOCK
As part of this study, the availability of feedstocks for organic processing has been estimated.
For ‘source separated’ processing systems about 206 000 tonne/yr of recyclable organics could be
obtained through improved kerbside collection systems, and enhanced commercial recovery
systems. By introducing domestic food waste collections, an additional 60 000 tonne/yr would
become available. Approximately 30 000 tonne/yr of commercial food and kitchen waste is also
potentially available. The potential availability of commercial wet organics is estimated to be
greater than 188 000 tonne/yr. In total, over 484 000 tonne/yr of source separated material is
potentially available for processing.
It is estimated that approximately 260 000 tonne/yr of domestic residual waste is landfilled each
year of which about 240 000 tonne/yr is available for residual waste treatment. The remaining
20 000 tonne/yr is potentially recoverable non-organics (i.e. metals and glass). The organic
available organic fraction is based upon the current level of kerbside collection for recyclable
organics.
7 EXISTING AND POTENTIAL PRODUCT MARKETS
Compost Products
Land degradation, caused by a loss of organic matter through soil erosion, salinisation, nutrient
depletion is one of the one of the most serious environmental threats facing Australia.
Approximately 75% of all agricultural land in Australia contains 1% or less of organic carbon
material, which is considered extremely marginal. It is widely recognised that if steps are not
taken to reverse the degradation of these finite soil reserves, the long-term viability of many
primary production industries will be severely threatened. Further impacts include loss of habitat
with associated effects on biodiversity and amenity.
Compost based products can make a beneficial contribution to address a range of land
degradation problems. The application of compost based products to agricultural soils can help to
reverse the rapid rate of soil decline across the state by providing organic carbon to the soil.
Compost use also improves water use efficiency and hence reduces the risk of soil salinisation
through excessive leaching.
Viable intensive agricultural markets for compost based products include the viticulture and
horticulture (vegetables and fruit) industries, as well as the cut flower and nursery sectors. Other
compost based product markets include landscape (amenity); rehabilitation and bioremediation.
Extensive agriculture was excluded as a large scale market sector due to the high transport and
application costs compared with the relatively low value of the crops. Export markets were also
excluded because of uncertainty regarding sustained market growth opportunities.
The potential demand and market values of the sectors are presented in Table 1.
4
Table 1: Potential Demand and Market Values for Compost Based Products
Market Sector Potential Market Value
Demand ($/tonne)
(tonne/yr)
Cut flowers, nurseries, and vegetables 48 000 60
Fruit and Vineyards 126 000 70
Landscape 85 000 45
Rehabilitation & Bio-remediation 57 000 8
Total 316 000
Renewable Energy
Converting organic waste to renewable energy has been seen as a significant way of contributing
to meet the Australian Government’s commitment to greenhouse gas abatement as part of the
Kyoto Protocol. This has become increasingly important due to the recently legislated target of
2% electricity generation from the renewable sources under the Renewable Energy (Electricity)
Act, 2000. Combined solar, wind, tide and small scale hydro electricity schemes have limited
chances to make up the mandated renewable energy source changes by the Kyoto commitment
period of 2008 to 2012.
As well as power generators meeting mandated targets, the introduction of tradeable Renewable
Energy Certificates has resulted in the introduction of novel fiscal measures, stimulating energy
from biomass ventures. Recyclable organics, commercial wet organics, domestic food wastes,
and domestic residual wastes have been classified as streams which are suitable biomass
feedstocks and a high level of financial assistance has been provided by the Commonwealth
Government to encourage uptake of alternative technology waste to energy ventures based on
these greenhouse gas reduction objectives. These alternative technologies include thermal
technologies such as pyrolysis and gasification, and other energy generating processes such
anaerobic digestion. In addition to generating a heat and fuel, anaerobic digestion produces a
solid residue which may be used to produce a compost based product.
It is assumed that the energy sells for $40/MWh, and that Renewable Energy Certificates will be
sold at $30/MWh in 2005 rising to $40/hr in 2010 to meet the 9 500 GWh renewable energy
target.
5
8 ALTERNATIVE ORGANIC PROCESSING SCENARIOS
A range of potentially viable organic processing scenarios have been assessed for their broad
economic, environmental and social costs and benefits. In addition to the existing organic
processing industry (Scenario 1), five other generic organic processing industry configurations
which cover the broad spectrum of available options have been evaluated. These are:
Scenario 2: Expansion of the existing source separated organic processing industry with
minor improvements to technology and incremental growth in processing
capacity to 275 000 tonne/yr.
Scenario 3: Significant expansion of the existing source separated organic processing to
350 000 tonne/yr, in part through the inclusion of domestic food waste. For
this scenario two enclosed composting facilities would be established. (This
scenario is reliant upon an expansion on the potential market size of 316 000
tonne/yr).
Scenario 4: Pyrolysis of domestic residual waste with continuation of existing industry.
The domestic food waste processing capacity is assumed to be 260 000
tonne/yr at a centralised facility.
Scenario 5: Anaerobic digestion of domestic residual waste with continuation of existing
industry. The domestic residual waste processing capacity is assumed to be
260 000 tonne/yr at a centralised facility.
Scenario 6: Pyrolysis of domestic residual waste with downsizing of existing source
separated industry through the discontinuation of recyclable organics
kerbside collections. The domestic residual waste processing capacity is
assumed to be 295 000 tonne/yr through a centralised facility, with a
reduction in feedstock of about 35 000 tonne/yr to the existing source
separated processing industry.
All of the above generic primary organic processing systems involve pre and post processing
elements which are specific to technology provider specifications. The main elements of the
primary systems are summarised below.
Composting is an aerobic process and hence it is essential to have sufficient bulking agents to
allow for air flow. For feedstooks with a high fraction of wet organics composting is typically
undertaken in an enclosed facility where the odoriferous off-gas is collected and cleaned in a
biofilter. Whilst domestic residual waste can be composted in enclosed composting facilities,
only source separated composting has been considered in this study.
Pyrolysis is a new thermal treatment technology process which produces syngas comprised
primarily of hydrogen, methane, carbon dioxide, and carbon monoxide. No air is used in this
process. The gas is cooled, cleaned, and transferred to power generation units. The process also
produces other by-products including a carbon rich char and an oily tar-based substance.
6
The anaerobic digestion process produces biogas which is transferred to power generation units.
The residual solid organic material from the process can be composted. The process typically
consumes a substantial amount of water in order to ensure that appropriate feedstock properties
are maintained. Off-gas is collected and cleaned usually by both an ammonia scrubber and a
biofilter.
Scenarios 2 and 3 are based upon “source separated” organic waste processing, with the
production of high value compost based product. Scenarios 4 to 6 involve treatment of the
residual waste stream. Whilst Scenarios 4 and 5 allow for the maintenance of the existing
organic processing industry at it’s current capacity, Scenario 6 also includes the processing of
recyclable organics which is currently collected at the kerbside, thus resulting in a reduction in
the inputs to the existing processing facilities.
Whereas Scenarios 2 and 3 differ from the base case in expanding the processing of source
separated organic material, Scenarios 4 to 6 differ from it by processing all the domestic residual
waste in a way that generates electricity and greatly reduces the amount of domestic residual
waste currently landfilled.
An overview of the scenarios analysed is presented below. For each analysis, total organic inputs
and material movements of 546 000 tonne/yr are considered with the respective amounts
recovered and landfilled depending upon the individual scenario specifications. The existing
kerbside domestic recovery programs for recyclables have been included in all scenarios as a
prerequisite, as they achieve waste hierarchy objectives as outlined in the Draft Environment
(Waste to Resources) Protection Policy (EPP) and are strongly supported by the community.
The quantity of waste landfilled in each scenario differs, and as such the financial and
environmental assessment relates to the entire scenario, not the technology. This is particularly
relevant for the environmental assessment, as the avoided landfill savings are highly influential
on the final assessment results.
Scenario 1 – Base Case
The current organic processing industry is assumed to include only the operations and activities
of the organic processing facilities within 100 km of the Adelaide CBD, and incorporates their
markets which extend outside of this area. There is a range of associated upstream and
downstream activities upon which the composting industry is dependent. Council recyclable
organics shredding operations with public sale or reuse on parks and gardens are considered
separately as indirect benefits and costs. Only two large-scale facilities have been assumed to
exist. While there are, and will continue to be, a number of smaller facilities, this simplified
assumption has little impact on the overall values analysis.
This scenario involves the continued collection and processing of organic materials at current
rates (188 000 tonne/yr), but with changed gate fees and new composting sites outside of
metropolitan Adelaide. The 260 000 tonne/yr of domestic residual waste is assumed to be
landfilled at new sites located outside of metropolitan Adelaide.
7
Scenario 2 - Expansion of Current Organic Processing Industry
In Scenario 2 it is assumed that 190 000 tonne/yr of recyclable organics, including an additional
35 000 tonne/yr of kerbside recyclable organics, is bulk hauled from transfer stations to open
windrow composting facilities located outside of metropolitan Adelaide. This is mixed with
85 000 tonne/yr of commercial wet organics, and 33 000 tonne/yr of blending materials for the
production of 198 000 tonne/yr of final product.
Scenario 3 - Inclusion of Other Organics in Current Industry
This final ‘source separated’ processing scenario involves the establishment of two enclosed
composting plants as well as the two open windrow facilities as described in Scenarios 1 and 2.
About 40% of the composting is assumed to occur at enclosed composting facilities located
within metropolitan Adelaide.
The combined organics processing is assumed to be 350 000 tonne/yr. This includes
70 000 tonne of kerbside recyclable organics, 35 000 tonne of domestic food waste, and 245 000
tonne of other organic wastes such as recyclable organics from parks and gardens, and
commercial wet organics.
Scenario 4 – Residual Treatment - Pyrolysis
In this scenario it is assumed that the domestic residual waste undergoes residual treatment via
the pyrolysis process. Collection and processing of source separated organics is assumed to be
identical to Scenario 1.
Approximately 260 000 tonne/yr of domestic residual waste will be pre-sorted to remove about
20 000 tonne/yr of metals and glass. Electricity will be produced from syngas at onsite
generators. The residual material requiring landfill is expected to reduce to 65 000 tonne/yr.
Scenario 5 – Residual Treatment – Anaerobic Digestion
In this scenario it is assumed that the domestic residual waste undergoes residual treatment via
anaerobic digestion. Collection and processing of source separated organics is assumed to be
identical to Scenario 1.
Approximately 260 000 tonne/yr of domestic residual waste will be pre-sorted to remove about
65 000 tonne/yr of bulky materials. The remaining material is shredded prior to anaerobic
digestion. Electricity is produced from the recovered methane via onsite generators.
Of the total residuals generated, 50 000 tonne/yr is assumed to be disposed to landfill with
45 000 tonne/yr used as daily cover. The remaining residuals will be mixed with 2 500 tonne/yr
of recyclable organics and composted to produce landscaping products and rehabilitation
material.
8
Scenario 6 - Residual Treatment – Pyrolysis & No Recyclable Organics Collections
In this scenario it is assumed that the domestic residual waste, including the recyclable organics
currently collected at the kerbside, undergoes residual treatment via the pyrolysis process. The
current arrangements for processing of other municipal and commercial recyclable organics will
continue.
Approximately 295 000 tonne/yr of collected material will be pre-sorted to remove over
20 000 tonne/yr of metals and glass. The remaining material will be pre-treated before
undergoing pyrolysis. Electricity will then be produced from syngas at onsite generators.
Approximately 73 750 tonne/yr of by-product will be produced. Whilst markets are developing
for this material, it is assumed that it will be landfilled.
9 ASSESSMENT TOOLS
In this study, assessment of organics processing options which were previously made using the
traditional criterion of engineering and economics, have been assessed on an ecologically
sustainable development (ESD) basis, with an emphasis on economic, social and environmental
dimensions. This allows for government, industry and the community to make ESD based, ‘triple
bottom line’ considered decisions on these options.
The financial viability of the various agents have been examined for each scenario for the given
tonnages, gate fees, wages, transport costs and other prices.
The indirect effects flowing from increased inputs from upstream industries, increased activity in
downstream industries, with consequent increased sales and increased disposable income have
been assessed using multiplier analysis. This allows for the examination of the effects on
employment and value added of increased crop yields from the application of compost, the
associated increase in wine production, and increased use of transport generally.
The net economic impacts have been assessed based on a cost-benefit methodology. This has
been restricted to “economic” variables. The cost-benefit analysis is conducted from the point of
view of the State of South Australia, rather than the national economy.
Existing Life Cycle Assessment data on generic organic processing scenarios to inform a
subjective environmental assessment process.
9
10 KEY FINANCIAL ASSUMPTIONS
Evaluation Period
All scenarios relate to a 20 year period commencing in 2005. They address the collection and
disposal of 546 000 tonne/yr of domestic residual waste and organic materials, both of which are
assumed to be generated at current rates throughout the 20 years. All scenarios assume the
construction in 2004 of new processing facilities at new sites, even where there is a continuation
of existing methods for processing organics.
Ownership
It is assumed that all facilities are under private ownership.
Number of Facilities
For simplicity it has been assumed that there will be two large open windrow composting plants
for all scenarios. In practice it is expected that there will be up to ten commercial operations of
which two to three are likely to dominate the market. There will also be several independent
facilities which process single organic waste streams. An example is marc composting within the
viticulture industry.
For Scenarios 4 to 6, which involve pyrolysis and anaerobic digestion, it is assumed that there
will be one metropolitan processing facility.
Gate Fees
The assumed gate fees applying to receival at all facilities, from 2005, are presented in Table 2.
Table 2: Assumed Gate Fees

Material Facility Gate Fee
($/tonne)
DRW Transfer station for landfill disposal 40
RO, DFW, and CWO Enclosed composting facility 55
RO, CWO Open windrow composting facility and transfer station 35
RO Resident self haul to transfer station 80
All materials Anaerobic digester and pyrolysis plants 60
RO Shredding at transfer stations 24
Transfer station holding fee 3.50
10
The Wingfield landfill site will close at the end of 2004 and there will be higher gate fees at new
sites well outside Adelaide, with landfill gate fees estimated to increase linearly in real terms
from $40/tonne by 50% over 20 years.
The value of recyclables recovered from residual waste at facility pre-sorting operations is
assumed to be $20/tonne.
Whilst in normal circumstances increases in production result in a reduced unit value, it is

assumed that the unit price is inelastic for processed product. The justification is that the quality
of the processed product will increase due to improved quality control and improved customer
perceptions and satisfaction.
Sand, soil, and pinebark are typically used as blending materials. The average cost of supply,
including delivery, is assumed to be $20/tonne.
For the landscape (amenity) and rehabilitation and bioremediation markets it is assumed that the
purchase and application costs are balanced by the value of the product. The mean cost of
managing commercial wet organics which are not recycled is assumed to be $60/tonne.
Transport Costs
Transport costs have been estimated for individual vehicle types based upon industry standards
for $/tonne/km and the assumed travel distances. Transport costs have been estimated for
kerbside collection, bulk haul to facilities, resident self haul, and transfer from facilities to
markets.
Labour Costs
The labour costs provided in the financial evaluation cover gross salary, workcover, payroll tax,
superannuation, and overhead costs including the provision of amenities of 20%.
These average annual labour costs per employee are assumed to be $40 000 for the open windrow
composting industry, $45 000 for the enclosed composting facilities, thermal treatments, and
anaerobic digestion plants, and $35 000 for the waste collection industry.
Land Value
The estimated land area requirements and land value for each of the facilities considered in the
six scenarios is presented in Table 3 below.
11
Table 3: Land Area Requirements and Capital Value
Facility(1) Area ha Value
$M
Open windrow No 1 (85 km from CBD) 200 1.0
Open windrow No. 2 (25 km from CBD) 120 5.4
Encl. Composting Facility No 1 4 0.6
Encl. Composting Facility No 2 4 0.6
Pyrolysis plant 3 to 4 0.5 to 0.6
Anaerobic digestion plant 5 0.8
Pyrolysis plant 4 0.6
(1)
All facilities 15 km from CBD unless otherwise stated.
Value of Compost to Agricultural Industries
Use of compost in the viticulture, horticulture, cut flower, and nursery industries has been
estimated to increase typical yields by about 12%. This is primarily due to water efficiency
savings. Other benefits of compost use are improved micro-organic activity and worms
improving nutrient availability to the plant which cannot be achieved simply by adding fertiliser,
reduced use of herbicides, and increases in organic soil content.
It is estimated that the combined gross crop productivity benefit for use of compost within the
viticulture, horticulture, cut flower and nursery industries is about $102/tonne of organic product
applied.
The main report also describes assumptions on several other less critical parameters including:
� impact of activities on buffer zone valuations;

� external infrastructure requirements;
� application of products to agricultural land; and
� cost of council kerbside collection and disposal services.
11 ANALYSIS OF THE EXISTING INDUSTRY

The current “source separated” organic processing industry generates employment and
contributes to the State’s economy in the following areas:
� collection of source separated material;
� facility design and construction;
� processing and compost production;
� product transport to markets and application; and
� downstream flow on effects.
12
The financial viability of the existing organic processing industry is based on: (i) the level of
landfill prices and collection costs; (ii) the cost of processing – i.e. technology and capital
employed; (iii) and the market for end product, including distribution and marketing costs.
The current organic recycling industry generates a direct income of about $12.2 million/yr, and
provides full time equivalent (FTE) direct employment for 152; with 85 in processing and
transport and 67 in kerbside collection and transfer station shedding operations. The industry is
expected to have a net present value (NPV) of $32 million over the period 2004 to 2019.
The compost produced is estimated to increase crop productivity for the viticulture, horticulture,
cut flower and nursery industry by $6.2 million/yr at a supply and application cost of
$5.6 million/yr. This represents a NPV of $9 million.
It is estimated that at the current usage rates compost results in an increase in wine production of
$13.8 million, and in wine value adding by $13.1 million/yr, with employment of an additional
174 personnel.
From an environmental perspective, the existing organic processing industry results in significant
reductions in water and air pollution compared to that which would have occurred if all of the
organic material currently source separated and composted was disposed of in landfills. It also
results in a reduction in greenhouse warming potential as well as transport energy use and
emissions.
It is therefore concluded that the existing organic processing industry benefits the State through
the creation of direct and indirect employment, an increase in agricultural production particularly
in the wine industry, and superior environmental performance compared with landfilling.
12 FINANCIAL EVALUATION OF FUTURE SCENARIOS

Table 4 summarises the results of the financial analysis which allows for the costs and sales of the
organic processors, and the costs to households, councils and businesses. Offsetting the NPV of
the cost to the community by the NPV of the net cash flows of the processors gives a total
financial impact of waste management. Each scenario is ranked in order of highest preference on
financial terms with ‘A’ being the highest preference rating to ‘E’ being lowest preference rating.
Costs to the community of waste are defined to be the sum of costs to councils and to households
and business.
In terms of financial impacts, Scenario 6 (pyrolysis of domestic residual waste including current
kerbside collected recyclable organics) is the preferred scenario. It also has the second lowest
cost to the community, despite having the highest cost to self-haul waste. This is primarily due to
the removal of the cost of providing a separate recyclable organics kerbside collection system.
This scenario also appears to be the most profitable option.
13
Table 4: Financial Impacts of Scenarios ($m in 2001 Prices)
Financial Impacts in NPV Terms ($ million) for Each Scenario
Organics in Current Industry
Pyrolsis with no Recyclable

2. Expansion of Current
4. Residual Treatment –
6 Residual Treatment –
Organics Collections
3. Inclusion of Other
Anaerobic Digestion
1. Base Case
Industry
Pyrolsis
Cost to Community -$471.5 -$482.4 -$488.7 -$505.2 -$505.2 -$481.7
Processor Net Cash Flow
Open Windrows $31.8 $53.5 $37.6 $31.8 $31.8 $16.6
Enclosed Composting $62.1
Pyrolysis $107.8 $130.0
Anaerobic $44.9
Total -$439.7 -$428.9 -$389.0 -$365.6 -$428.6 -$335.1
Ranking F E C B D A
NB: Gate prices for all organic processing options is as quoted by technology proprietors and industry representatives.
13 COST BENEFIT ANALYSIS ON ECONOMIC VARIABLES

The cost-benefit analysis goes beyond the financial analysis, which allows only for commercial
results, by allowing for upstream and downstream benefits in other industries in terms of
increased economic activity and employment in South Australia. Because it is conducted from
the point of view of the State of South Australia rather than the national economy, processor
profits are adjusted to reflect South Australia’s assumed share of profits.
The results of the cost benefit analysis are summarised in Table 5.
The Base Case (Scenario 1) was found to be the cheapest in terms of waste collection and
disposal, as gate fees were $35/tonne to $40/tonne rather than $55 or $60/tonne as in Scenarios 4
to 6, and because the relatively expensive separate recycled organic collections are kept to a
minimum.
Scenarios 2 and 3 expand kerbside collections of recyclable organics, which are relatively costly
as a lower volume of domestic residual waste is collected and the collection method is more
labour-intensive. In addition, some waste in Scenario 3 is disposed of for $55/tonne, rather than
the $35-$40/tonne as in the first two scenarios.
14
Table 5: Summary of Cost Benefit Analysis ($m in 2001 Prices)
Cost Benefit Analysis of Scenarios: NPV terms ($ million)
for Each Scenario
4. Residual Treatment –Pyrolsis
6 Residual Treatment –Pyrolsis

3. Inclusion of Other Organics
with no Recyclable Organics

Anaerobic Digestion
in Current Industry
1. Base Case
Collections
Industry
Cost to Community of Waste Management -$471.5 -$482.4 -$488.7 -$505.2 -$505.2 -$481.7
Benefit to SA from Processor Profits
Open Windrows $1.6 $2.6 $1.8 $1.6 $1.6 $0.8
Enclosed Composting $3.0
Pyrolysis $5.3 $6.4
Anaerobic $2.2
Downstream Net Benefits $8.6 $19.8 $26.8 $8.6 $8.6 $5.1
Labour Adjustment $52.7 $75.0 $92.4 $71.8 $64.5 $59.1
Net Benefit 2005 -$408.6 -$384.9 -$364.6 -$417.9 -$428.3 -$410.3
NPV 2005-2011 C B A E F D
Kerbside domestic residual waste collection in Scenarios 4 and 5 is the same as in Scenario 1, but
RO is now disposed of at $60/tonne rather than $35/tonne. Scenario 6 is the cheapest in terms of
kerbside collection as the council runs only one type of collection for all waste, which outweighs
the effect of a higher disposal fee ($60/tonne).
In the financial impacts analysis differences in the cost to the community resulting from varying
gate fees net out against the higher gate fee income received by processors. Hence there is no net
impact on overall net cash flows. In the cost benefit analysis, bigger processor cash flows from
high gate fees do not offset the cost to the community, as it is assumed only 5% of these net cash
flows accrue to South Australians. Thus the cost-benefit rankings are likely to be sensitive to
gate fee assumptions – that is, higher processor gate fees in Scenarios 3, 4, 5 and 6 bias the cost-
benefit analysis against them.
15
Processor Operating Profit
Counting only 5% of processor operating profit as a benefit to South Australia clearly has an
impact on the ranking of the various scenarios. As discussed above, 5% is an appropriate
conservative assumption, given that South Australians typically own only a small fraction of
Australian business capital. However, even if it were assumed that the processing operations
were wholly South Australian owned, there would still be leakages from the State through
company tax and fees for technology and management licenses.
Agricultural Users Benefit
In every scenario, the net benefit to downstream (agricultural) users reflects the quantity of
compost used, since they pay the same per tonne costs and receive the same per tonne benefits
regardless of the amount bought. Scenario 3 provides agricultural users with the greatest amount
of compost, and therefore, the greatest net benefit.
Job Creation
Scenario 3 also makes the greatest direct and indirect contribution to job creation. This is
partly a reflection of the greater benefits to farmers – as horticulture and viticulture are labour-
intensive industries, increasing production boosts employment by a proportionally large amount.
Scenario 3 also generates the largest amount of indirect labour in transport. A conservative
approach has been adopted in assessing the net benefit to South Australia from additional job
creation.
According to the analysis, despite being relatively costly in terms of collection and disposal of
waste, the scenario that manages waste at the least overall net cost to South Australia is
Scenario 3. This comes about due to high net benefits in terms of downstream compost usage
and job creation. Scenario 2 ranks second for similar reasons – though it is cheaper for councils
and self-haul waste disposers, the reduced benefits from using less compost in agriculture and
less employment generation outweigh these effects.
Sensitivity Analysis
To assess the robustness of the conclusions, sensitivity analysis for cost benefit outcomes has
been performed by:
� decreasing electricity generation from the pyrolysis plants by 37.5%;

� increasing all kerbside collection costs by 20%;
� increasing the infrastructure costs for enclosed composting facilities, anaerobic
digestion and pyrolysis plants by 20%;
� maintaining the base level landfill gate fee at $40/tonne over the 20 year period;
� 10% of the additional employment benefit continues indefinitely;
16
� increasing the percentage profits accruing to South Australians to 70% of open
windrow operations and 30% for all other organic processing facilities; and
� increasing all facility gate fees by 20%.
The results are reasonably robust to different assumptions. In particular, changes that affect the
cash flows of processors tend to have minor effects on the cost benefit analysis outcomes,
because only 5% of the gross operating surplus is assumed to flow to South Australia.
The rankings remain the same as in the base case, except in two of the sensitivities. The first
occurs when the costs of collection are 20% higher – Scenario 6 moves from rank D to C due to
its lower collection costs. The second arises when South Australians keep more of the processor
profits – Scenario 1 drops from rank C to E, as profits are so much lower in this scenario.
Sensitivity to the discount rate assumption of 7% was examined by repeating the analysis with
discount rates of 5% and 10%. The rankings of the scenarios remained the same.
14 ENVIRONMENTAL ANALYSIS
This study applied life cycle assessment (LCA) inventory data to assess the environmental
performance of waste technology options against a ‘landfill only’ benchmark. Existing data on
generic processing technologies was used due to the lack of LCA data in Australia.
All of the organic processing scenarios assessed are expected to result in better environmental
outcomes than for the ‘landfill only’ benchmark as there will be less water pollution and global
warming impacts.
The results of the environmental assessment across impact categories are presented in Table 6. In
each impact category each scenario is ranked in order of performance with ‘A’ being the highest
performing in that category to ‘E’ being lowest performing. The score relates to the management
of waste for the scenario and is not a direct comparison of technologies.
Table 6: Environmental Assessment– Relative Category Rankings

Scenario
Impact Category
6 Residual Treatment –
4. Residual Treatment -
3. Inclusion of Other
Anaerobic Digestion
Recyclable Organics
Organics in Current
Pyrolsis with no
1. Base Case
Collections
Industry
Industry
Pyrolsis
Water pollutants F E D B C A
Air pollution C B A D F E
Global warming potential F E D C A B
Transport D F E B C A
17
The environmental valuation scores represent the relative performance within each impact
category only. It is not possible to provide an overall environmental valuation ranking of the
scenarios as the category results are not additive. The scores do not constitute a cost benefit
assessment nor have they been weighted according to social values regarding the impact
categories.
The dominant influence on results, for all scenarios, in all impact categories, is from avoided
landfill. Each of the scenarios considered performs better than landfill in regard to net pollutants
to water and global warming potential. Landfill performs better than pyrolysis in regard to air
emissions (this assessment includes the avoided air emissions associated with energy
cogeneration from the pyrolysis facility).
In regard to water pollution, Scenario’s 4 and 6 result in the best environmental outcome,
followed by Scenario 5 and then Scenario’s 3 and 2. Much of this saving may be attributed to
avoided landfill.
Scenarios 2 and 3 result in the best air pollution environmental outcome. Emission reduction in
thermal processing and energy recovery scenarios can only be met through a trade-off with
financial costs and energy consumption. Based on the relatively low financial cost and the
energy generation capacity of plants assumed for this study, it is expected that air emissions
would be higher than best practice performance levels.
The electricity credit derived from energy generation from pyrolysis and digestion enables these
technologies to outperform composting from a global warming potential perspective. The
anaerobic digestion scenario appears to result in the best outcome due to the lower greenhouse
gas emissions compared with pyrolysis.
Whilst transport is particularly significant from a cost perspective, it is less significant

environmentally in regard to net pollutants to air and water, global warming potential and energy.
Scenarios 4, 5 and 6 provide greater environmental gains in terms of transport efficiencies.
15 KEY STUDY OUTCOMES
1. Economic Benefits of the Existing Industry
The analyses conducted did not include a scenario with no organic processing (i.e. all organic
waste is landfilled). However, the results from Scenarios 1, 2 and 3 show that economic benefits
increase as the proportion of organic processing increases. This suggests that economic benefits
would be less if there were no organic processing. The major difference from Scenario 1, if there
were no organic processing, would be smaller collection costs, partially (but probably not fully)
offsetting reduced benefits from smaller employment creation and downstream in agriculture.
These two approaches indicate the economic benefits of organic processing.
18
2. Environmental Comparison with Landfilling
The study clearly demonstrates that all of the scenarios considered result in an improvement in
environmental outcomes compared with landfilling only. This endorses the State’s current policy
to encourage recycling and resource recovery.
3. Economic Benefits to the State
It is apparent from the cost benefit analysis, based upon economic aspects only, that the “source
separation” composting scenarios result in the greatest benefit to the State due to downstream
agricultural flow-on benefits and high labour requirements, and that augmentation of the current
“source separation” organic processing capacity will result in additional benefits. Therefore,
source separation of organics with processing into compost products should be encouraged.
4. Role of Residual Waste Treatment Technologies
There is also a role for new thermal treatments, enclosed composting and anaerobic digestion in
the treatment and resource recovery from residual wastes - as these result in environmental
improvements compared to landfilling and from a financial perspective appear to compete
favourably with composting of source separated organics. It is, however, clear that the
environmental performance of these technologies is heavily dependent upon the pollution control
equipment and operational performance which in turn influences the financial performance.
It is concluded that new thermal treatments, enclosed composting and anaerobic digestion of
domestic residual waste can co-exist with composting of source separated organics, provided that
environmental performance is clearly established and the technology has been fully tested and is
recognised as being both technically and commercially viable.
5. Treatment of the Combined Waste Stream in Preference to Source Separation
Adoption of domestic residual waste technologies to the exclusion of ‘source separation’

alternatives would not be considered desirable unless it is demonstrated that the performance of
the specific technology under consideration would result in improved environmental and
economic outcomes.
It is therefore recommended that the current waste management hierarchy of reduce, reuse,
recycle, treat, and dispose continue to be applied to organic wastes, unless improved
environmental and economic outcomes can be demonstrated on a case by case basis.
19
16 ACKNOWLEDGEMENTS
The authors are indebted to the many stakeholders who have contributed to the study. These
include: Compost SA, the government agencies – Industry and Trade, Environment Protection
Authority, Primary Industries and Resources SA, and SA Water, industry - Jeffries Garden
Soils, Peat Soils and Garden Supplies, Michell Wool and Leather, Brightstar, and Global
Renewables Limited. Advice on the agricultural benefits of compost has also been obtained from
John Buckerfield of EcoResearch.
20

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Organic waste economic values analysis

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NOLAN-ITU PTY LTD

Copyright © Nolan-ITU Pty Ltd 2002

Printed on Recycled Paper

Document Issue and Status

1-0 Preliminary Draft 18 July 2001 John Nolan Bruno Schacher

1-1 Internal Draft 19 July 2001 John Nolan Sam Bateman

1-2 Draft 10 August 2001 John Nolan Sam Bateman

1-4 Final Draft 13 November 2001 John Nolan Sam Bateman

1-6 Final 31 January 2002

1 STUDY OBJECTIVES .........................................................................................1

2 SUMMARY OF KEY OUTCOMES ......................................................................2

3 TERMS OF REFERENCE ...................................................................................2

5 CURRENT ORGANIC PROCESSING INDUSTRY OVERVIEW .........................3

6 AVAILABILITY OF FEEDSTOCK .......................................................................4

7 EXISTING AND POTENTIAL PRODUCT MARKETS.........................................4

Scenario 1 – Base Case 7

10 KEY FINANCIAL ASSUMPTIONS ....................................................................10

12 FINANCIAL EVALUATION OF FUTURE SCENARIOS....................................13

13 COST BENEFIT ANALYSIS ON ECONOMIC VARIABLES.............................14

Processor Operating Profit 16

Agricultural Users Benefit 16

14 ENVIRONMENTAL ANALYSIS ........................................................................17

15 KEY STUDY OUTCOMES.................................................................................18

1. Economic Benefits of the Existing Industry 18

2. Environmental Comparison with Landfilling 19

3. Economic Benefits to the State 19

4. Role of Residual Waste Treatment Technologies 19

5. Treatment of the Combined Waste Stream in Preference to Source Separation 19

It is intended that the study will:

5 CURRENT ORGANIC PROCESSING INDUSTRY OVERVIEW

7 EXISTING AND POTENTIAL PRODUCT MARKETS

Scenario 1 – Base Case

Scenario 3 - Inclusion of Other Organics in Current Industry

Scenario 4 – Residual Treatment - Pyrolysis

Scenario 5 – Residual Treatment – Anaerobic Digestion

It is assumed that all facilities are under private ownership.

Table 2: Assumed Gate Fees

Whilst in normal circumstances increases in production result in a reduced unit value, it is

Value of Compost to Agricultural Industries

� impact of activities on buffer zone valuations;

11 ANALYSIS OF THE EXISTING INDUSTRY

12 FINANCIAL EVALUATION OF FUTURE SCENARIOS

Organics in Current Industry

Pyrolsis with no Recyclable

13 COST BENEFIT ANALYSIS ON ECONOMIC VARIABLES

The results of the cost benefit analysis are summarised in Table 5.

4. Residual Treatment –Pyrolsis

6 Residual Treatment –Pyrolsis

with no Recyclable Organics

Agricultural Users Benefit

� decreasing electricity generation from the pyrolysis plants by 37.5%;

Table 6: Environmental Assessment– Relative Category Rankings

Whilst transport is particularly significant from a cost perspective, it is less significant

15 KEY STUDY OUTCOMES

1. Economic Benefits of the Existing Industry

3. Economic Benefits to the State

4. Role of Residual Waste Treatment Technologies

5. Treatment of the Combined Waste Stream in Preference to Source Separation

Adoption of domestic residual waste technologies to the exclusion of ‘source separation’