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Overview:

  • Despite increasing interest and supportive legislation surrounding composting, the growth of composting facilities in the United States has only seen an 8% increase from 2018 to 2023, as revealed by a report by the Composting Consortium. This organization, overseen by Closed Loop Partners’ Center for the Circular Economy, indicates that more investment is crucial to fulfill the growing demand.
  • The report highlights significant investment opportunities within the industry, noting that less than 4% of the 66 million tons of food waste generated in the U.S. annually is currently composted.
  • Tailwinds acknowledged by researchers include increasing landfill fees, state mandates for organic waste diversion, and expanding collection access. Conversely, challenges include product demand and pricing issues, difficulties obtaining permits, and securing financial backing.

Insights:

This recent research is part of a series of studies sponsored by the Composting Consortium, designed to shed light on the challenges and prospects in the composting sector. These findings emerge as federal authorities and significant stakeholders are increasingly viewing organics recycling as a pivotal solution to combat climate change and food insecurity.

Data collected over the past year reveals a substantial discrepancy between current composting facility capacities and anticipated needs. For instance, the Composting Consortium’s survey with BioCycle found that over 50% of full-scale composting facilities in the U.S. process under 5,000 tons of food waste annually. However, a town with 50,000 residents would generate approximately 7,000 tons of food waste yearly, exceeding the capacity of such facilities.

“From the start of the Composting Consortium, we recognized the imperative to enhance composting infrastructure in the U.S., particularly in solutions that accommodate larger and more complicated organic streams, including post-consumer food scraps and compostable packaging,” stated Kate Daly, managing director at Closed Loop Partners’ Center for the Circular Economy. “Investment is essential, alongside policy support and collaboration across multiple stakeholders.”

However, growth comes with financial implications. According to CalRecycle’s estimates, the implementation of SB 1383, which mandates organic waste diversion, could require $20.9 billion by 2030 but potentially yield about $17 billion in economic advantages.

Even in states with strong organic waste diversion regulations, such as California, significant hurdles remain in scaling infrastructure. Notably, around 2,700 facilities focused solely on yard waste are present nationwide, many of which could also handle food waste. However, the transition is often impeded by permitting challenges, as highlighted in BioCycle’s research.

Facilities that have succeeded in accepting food waste have predominantly relied on limited federal grant opportunities through the USDA or EPA, state-level funding, or low engagement from private companies like Atlas Organics, Republic Services, and WM.

The initial expenses associated with launching a composting operation can be substantial, especially for advanced systems like aerated static piles or in-vessel setups.

According to the report, initiating a larger-scale project can cost between $125,000 and $250,000 in preliminary engineering and permitting alone, with the approval and permitting process taking anywhere from 18 months to three years.

Improving the situation may require a standardization of the permitting process, as suggested by the report. Researchers also emphasize the importance of blended financing approaches to overcome these obstacles, potentially involving “patient capital” from sources such as Closed Loop Partners’ Infrastructure Group, community development financial entities, and government initiatives. Private equity can be effectively utilized where backers aim to consolidate facilities, pre-fund site selection, or create cost-effective capital structures.

Notwithstanding these challenges, the report indicates that changes in policy and broader economic trends are enhancing the appeal of composting. It referred to data from EREF showing an 11% increase in landfill tipping fees between 2021 and 2022. Additionally, a growing number of cities and states are mandating the diversion of organic waste from municipal solid waste, creating a ready supply of materials for new facilities.

“The composting industry is experiencing a critical juncture in its evolution, and to effectively tackle food waste, it is imperative for the industry to promote investment and collective action,” the report concluded.

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