The Environmental world turns finance upside down – the economics of Solid Recovered Fuels (SRF)

The Environmental world turns finance upside down – the economics of Solid Recovered Fuels (SRF)

Here’s an interesting one: you “buy” your inputs yet receive an income for doing so, process them and then pay to “sell” your outputs. Welcome to the world of waste and SRF where assets become liabilities and vice-versa. Let us talk you through it.

Background: SRF is the end product where municipal solid waste (MSW), also referred to as black bin waste or Commercial and Industrial waste (C&I) is, in the first instance, stripped of all remaining recyclables such as plastics, ferrous and non-ferrous metals, glass etc. to produce a lower quality fuel referred to as Refuse Derived Fuel (RDF). This RDF is typically used as a fuel for Energy from Waste (EfW) plants. However, there is an option to increase the calorific value (CV) of the RDF by drying it, to reach a SRF standard which can then be used as a co-fuel in the more sensitive kiln used for the production of cement or even in the steel industry. There are other characteristics required such as relating to chlorine content and size (see tables below). Note that by funnelling the precise feedstock, or in particular by omitting the far less homogenous MSW, it may be possible to obtain the higher quality SRF without drying.

Current Financial Situation: As a financial model this reflects a “back to front” situation. The “raw material” or feedstock is supplied with a gate fee and hence represents an income stream for the receiver. Conversely, the end product, the RDF or SRF is disposed of at a cost. Even though it represents a fuel to the off-takers, for instance the cement industry, the latter collects monies as the market views the alternative to be landfill costs. The financial model here is optimised by being able to charge the highest gate fees in combination with the lowest disposal costs as possible. Despite its counter-intuitive nature, maintaining the spread between input revenues and output costs ensures overall economic viability.
Future Financial Situation: The 2017 Energy from Waste conference in London brought many expert speakers together and many interesting current facts and future developments were discussed. Of particular interest was the perceived change in attitude from the cement industry, as it moves towards accepting SRF as a valuable fuel source rather than as a waste “to be disposed of”. Needless to say that this development is very welcomed by the SRF industry. A word of caution – it might well also need to start paying for its inputs as financial normality restores itself!

Alpha-Financials Team visits an SRF plant in Swindon / Removal of recyclates from the feedstock.

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