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Generate Upcycle President Bill Caesar provides insight on the future of anaerobic digestion, drawing on his more than three decades of experience in the waste industry.

1. North America still has relatively few food-waste anaerobic digestion facilities compared with the size of the opportunity. What is preventing the market from building significantly more capacity, and which of those barriers do you think can realistically be overcome in the next five years?

Bill Caesar: There are a number of challenges that could be impacting the growth of the food waste AD market. One of those challenges is simply that there aren’t enough successful operating food-waste AD facilities in North America today to demonstrate that the model can be economically and operationally successful. We’ve seen a handful of facilities built, rebuilt or expanded recently, and there are additional projects in development, but the track record of successful facilities is limited.

Second, the economics of these facilities have to work. There are four core components of the economic equation for food waste ADs. We need long-term contracted and appropriately priced RNG revenue. We need landfill disposal costs in the waste sheds surrounding food waste ADs to continue moving in a direction that makes AD a competitive alternative for organic waste generators. We need operators who understand how to efficiently manage the operating cost side of food waste ADs. And finally, we need reasonably priced capital and efficiently designed facilities to minimize the CapEx requirements of new projects.

The AD or RNG upgrading technology aren’t the barriers. AD has been used successfully for decades, and RNG upgraders are established pieces of technology. The challenge is creating the operational and market conditions that allow these facilities to consistently succeed, thereby convincing investors and developers to grow the sector. 

2. Feedstock seems to be an interesting challenge in food-waste AD. There is an enormous amount of organic waste available, but securing a long-term supply can still be difficult. What needs to change in the waste and collection markets to close that gap?

Bill Caesar: Feedstock certainty is one of the most important—and difficult—parts of developing a food-waste AD project. There is absolutely no shortage of food waste, but that doesn’t necessarily translate into a predictable, consistent supply for a particular facility.

The waste industry hasn’t historically evolved in a way that established long-term disposal contracts that would give an AD developer feedstock certainty for many years. From an investment standpoint, you ideally want surety around three things: your feedstock supply, your RNG offtake and your capital costs. Feedstock can be particularly difficult to lock down as waste generators typically do not want to be tied up in long-term put-or-pay contracts. 

While a significant portion of feedstock entering a food waste AD comes from industrial or commercial generators, curbside collection practices matter as well. Canada provides some good examples of communities establishing residential curbside, source-separated organics programs. Keeping household food waste out of landfills reduces landfill dependence and extends landfill life, while also creating a feedstock that can be processed through anaerobic digestion.

Source separation is important. If food scraps are collected together with leaves, branches and grass clippings, that material becomes much harder to process through a food-waste digester. In many cases, you’ve essentially limited yourself to composting. If more communities adopted source-separated food-waste collection, you could create substantially more feedstock for AD facilities.

3. You’ve argued that RNG should be valued based on the cost of carbon abatement rather than simply the cost per unit of energy. What would a market built around that principle look like, and how would it change investment in different types of RNG projects?

Bill Caesar: Today, some buyers of renewable natural gas are indifferent to the carbon intensity of the specific molecule of methane. For some buyers, price per unit of energy is therefore the primary consideration. But if one of the reasons we’re producing and consuming renewable energy is to reduce greenhouse gas emissions, I think we should also be asking how much carbon we’re actually abating for the money we’re spending.

There can be significant differences among RNG produced from landfill gas, dairy manure and food waste. Dairy-based RNG, for example, can have very low carbon-intensity scores, but the cost of each unit of carbon abated can be higher than it is at a well-run food-waste AD facility. Landfill RNG can be less expensive, but it likely has a much higher (and in many cases positive) carbon intensity score.

A market that looked at the cost per unit of carbon abated, rather than simply the cost per MMBtu of RNG, would give buyers and policymakers a better way to compare those pathways. Ultimately, if reducing greenhouse gas emissions is the objective, we should be directing capital toward solutions that give us the greatest amount of carbon reduction for the dollars invested. 

4. How much of the future growth of food-waste AD will ultimately depend on policy? What separates policies that successfully create a durable organics market from policies that look good on paper but don’t lead to investment?

Bill Caesar: Policy can play a very important role, but I don’t think it is simply a question of having more incentives. What matters to developers, owners and investors is having a market framework they can rely on over the life of an investment.

We’ve seen different market mechanisms successfully unlock investment in this sector. The common elements tend to be long-term stability and predictability, transparency around the market and data, and greenhouse gas accounting that accurately captures the full lifecycle impact of the project. If those fundamentals are in place, investors can make rational decisions about where to deploy capital. 

You then still need the underlying project economics to work. That means confidence in long-term RNG offtake, confidence in feedstock supply and reasonable certainty around capital costs. That last piece has become more challenging since COVID because construction, equipment and labor costs have increased significantly. 

Food-waste diversion policy can also make a meaningful difference. Where governments create effective source-separated organics programs and actually enforce diversion requirements, they can create the feedstock base necessary to support more AD infrastructure. That is one reason we see significant potential for additional facilities across North America if food-waste diversion policies and enforcement mechanisms continue to strengthen.

5. Imagine we revisit this conversation in 2035 and food-waste AD has become a much larger part of North America’s waste and energy infrastructure. What would have needed to happen between now and then for the industry to reach that scale?

Bill Caesar: I think success would mean that we stopped treating food waste primarily as something that needs to be disposed of and increasingly viewed it as a feedstock that has value.

There is a tremendous amount of organic material that still goes to landfills today. We know how to take that material, process it through anaerobic digestion, capture the biogas and turn it into renewable natural gas or electricity. We can also return the nutrients that remain after digestion to agriculture rather than putting those nutrients into a landfill where they become a dead end. 

Becoming a much larger industry will require more source-separated organics collection, more predictable feedstock supply, stable markets for RNG and policies that appropriately recognize the carbon benefits of different renewable fuels. We’ll also need existing food-waste AD facilities to demonstrate strong, consistent operational and financial performance so investors become more comfortable financing the next generation of projects.

The important point is that we don’t need to invent a new technology to get there. Anaerobic digestion is mature and has been used for decades. Europe already has dramatically more AD infrastructure than North America. The opportunity here is to get better at collecting the material, operating these facilities and creating the economic and policy conditions that allow the industry to scale.