Waste Not, Want Not
HPower's waste-to-energy plant has burned enough trash to fill more than seven Aloha Stadiums and save us 12 million barrels of imported oil. It made some money, too.
Employees outfit every visitor to the trash collection room at the HPower plant in Kapolei with a hard hat and protective glasses. But truth be told, they should probably hand out nose plugs, too, because more than 4 million pounds of trash has a very noticeable odor.
Although few Honolulu residents can locate the plant or know what it does, two-thirds of what Oahu residents pack into their trash cans every year lands on that cement floor, where it is bulldozed onto conveyor belts and burned to make electricity. New Jersey-based Covanta Energy, the company that operates the HPower plant for the city, says on average of about 2,000 tons of Oahu’s garbage — equal to 4 million pounds —arrives each day. On average, HPower burns 609,000 tons of trash a year.
In July, in its 16th year, HPower will burn its 10 millionth ton. In more tangible terms, Covanta’s Web site says that’s enough trash to fill Aloha Stadium more than seven times.
“I think without HPower you would have needed two more landfills the size of Waimanalo Gulch,” says Rodney Smith, the facility business manager.
Hawaii Business magazine chose to focus on Covanta in our annual Top 250 company list package, not because it had a mammoth increase in revenue or drop compared to other companies on the list, but because it is a unique public-private partnership that both makes money and does good, as Oahu continues to struggle to decrease its waste stream, recycle and wean itself off fossil fuels. Covanta is the only alternative energy company on our list.
Quietly, for more than a decade and a half, HPower, short for HonoluluPower, not HydrogenPower, has been ridding Oahu of a very smelly problem. In the process, Covanta has also managed to take advantage of an incentive-laden contract to operate the city’s waste-to-energy plant and make a few bucks. Last year, Covanta’s local arm, HPower, raked in $28.4 million in revenue, up 6.7 percent from the prior year, a healthy increase for a company locked into a long-term operating contract with the city government. Covanta is listed at No. 220 on our Top 250 list, down from No. 213. For competitive reasons, Smith would not reveal the local venture’s profit margin.
|#220 Covanta HPowerr|
|‘05 Gross Sales $28.4 mil.
‘04 Gross Sales $26.7 mil.
With the power it produces, the plant can support up to 44,000 homes, or about 4.5 percent of the power used on Oahu. Covanta says that power generation has saved Oahu by reducing its need for oil by at least 12 million barrels. “It is much better to take a product that is in seemingly continuous abundance — to take it and make energy out of it, and save the landfill and the environment,” Smith says.
Unlike some waste-to-energy facilities in other parts of the country, HPower has enjoyed a controversy-free run. Local environmentalists have generally supported the facility, though they stress that incineration does not replace the need to reduce and recyle solid waste. In 2003, The Estate of Joseph Campbell gave HPower a Kapolei Outstanding Achievement Award for its environmental work.
From a business standpoint, one of the most interesting parts of the operation is the contract. Smith says the city government originally contracted Amfac and Combustion Engineering in the mid-’80s to design and build a waste-to-energy plant. The city funded the construction, but also contracted Amfac and Combustion Engineering to operate the facility for 20 years. It opened in 1990.
Covanta Energy bought the operating contract in 1993. Unlike Amfac or Combustion Engineering, Covanta specialized in operating waste-to-energy plants, which Smith believes makes it better tailored to successfully operate the plant. “Covanta Energy is the largest waste-to-energy firm in the United States and probably the world,” Smith says.
The contract it bought, Smith adds, was shrewdly written. It requires Covanta to burn at least 561,600 tons of garbage a year. For every ton over that amount, Covanta gets additional money. On the electricity side, Covanta shares in the revenues, raking in about 18.5 percent of the sales, which this past fiscal year was upwards of $7 million for. (Not to mention, the city made $32 million on energy sales from the plant.) Covanta also gets a share of the profits from the metal recycled.
|POWER-FULL: On average, 4 millon pounds of Oahu’s trash lands on this floor every day. photo: Cory Lum|
“It’s a very intelligent contract,” Smith says. “It pays for us to do all we can to keep the plant running because we are only successful when the plant is running. That is how we make our money.”
Colin James, energy recovery administrator for the city, also praised the contract. “People have come from all over the world to look at this contract,” James says. “It has worked out to be one of the best kinds of contracts: I have the same goal as the plant manager and he has the same goal as I have.”
As a business, nationally and internationally, the future looks bright for Covanta and the waste-to-energy sector. The separate trends of increasing cost of oil and of land are making waste-to-energy more and more attractive. Smith says the majority of their plants are on the East Coast, where land is at a premium, as it is in the Islands, and sending waste to landfills is getting less financially attractive. Smith says in the past year Covanta bought six waste-to-energy plants in the Northeast and has plans to expand several plants. Covanta has also increased its plant capacity by 50 percent.
“The cost of energy is driving this,” Smith says.
Here on Oahu, Covanta is eager to expand as well. Oahu produces 900,000 to 950,000 tons of trash every year, but the plant can’t burn it all without expanding. Covanta is open to adding another boiler to burn the trash and perhaps a turbine-generator, so it can also produce more energy. The price tag for the city would be more than $65 million for the broiler alone and $110 million with the addition of a turbine-generator.
The city was looking at the issue a few years back, and also researching other technologies to deal with Oahu’s trash, but it has largely fallen off its radar in recent years, particularly as the issue of sewage infrastructure has bubbled to the forefront. But Covanta is ready, says Smith.
With the added boiler, HPower could burn another 110,000 tons of trash. With both the boiler and generator, perhaps 900,000 tons, he says.
“We could pretty much take care of most of the municipal solid waste that is available,” Smith says.
And turn a profit.
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