Guest Commentary
Mitigating Risk in the Development of Emerging Technologies
In order to develop profitable, sustainable projects it is helpful to gather as much information as possible as early as possible.
Susan Robinson
Over the decades, Waste Management (WM) has seen its business evolve. What started as a waste services company, grew when recycling was added to the portfolio. Now, the company is in the process of transforming itself into a materials management company. One of the first moves that the company made as part of this transformation effort was to create a dedicated department to evaluate and invest in technologies that make the best use of WM鈥檚 assets and expand sustainable materials management options.
We鈥檝e been at this for more than five years now鈥攁s an investor, joint venture partner and as a developer. We are also a feedstock provider, a processor and user of finished products such as biofuel. We now have experience with multiple projects鈥攅ither on our own or with partners. Through it all, we鈥檝e learned quite a bit from our multi-project, multi-level, multi-year involvement.
Great Technologies Don鈥檛 Guarantee Success
Many projects look great on paper but ultimately fail. Permitting issues, feedstock quality or preprocessing requirements, technology surprises and unexpected costs, funding shortfalls or a lack of an offtake contract for the finished product can all hinder success. WM has invested in more than two-dozen projects through its corporate venturing team. While many appear to be on their way to successful commercialization, over a period of five years it is not surprising that several have not played out as we had hoped. More often than not, the 鈥渂ones鈥� of the project are sound, but success remains elusive. While we work hard to minimize the risk of failure before making an investment, it is important to enter into these ventures understanding that there are many unknowns and that success is by no means a certainty. Hence, our decision to create a portfolio to spread our risk across multiple companies.
Waste Management鈥檚 Organic Growth Group maintains a pipeline of companies that come to us for funding, purchase or partnerships鈥攁ll of which we evaluate with the knowledge that we have gained as we continue to invest in this space. For example, when evaluating possible new investments, we have learned to look at a series of factors beyond the technology itself, the management team and financing. We also evaluate investments based on our knowledge of feedstock realities, processing limitations, logistical synergies and the political/regulatory environment. We are careful to understand the components of the waste streamas well as our ability to access it (i.e., flow control and regulations).
What can we say about reducing development costs and increasing the opportunity for success? Many of the following lessons may seem obvious in hindsight, but have been learned the hard way by many technology companies.
Location, Location, Location
Location plays an important role when siting conversion technologies. From permitting to community acceptance to pricing structures, selecting the best location for a facility plays a significant role in mitigating the risk of failure. Co-location at an existing solid waste facility often makes sense because of opportunities for efficiencies with existing permits, roads, water, scales, etc. Co-location can have drawbacks as well depending on the priorities of the onsite staff, the status and complexity of ongoing permitting processes, and the expectations of the surrounding community. While most of our projects have been co-located, in some cases, new challenges may outweigh potential cost savings.
Engage Experts During the Permitting Process and Use Industry-specific Experts to Address feedstock and Pre-processing Needs
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Permitting. Several companies have done an excellent job of choosing States and counties that are receptive to new technology opportunities. Other States are less receptive to innovation, or may be challenged to find the time and resources to be open to innovative projects. We鈥檝e learned that we need to understand this context before we endure an extended permitting process. To avoid this in the future, we pulled together our regulatory experts on air, water and environmental planning to review our projects and develop a consolidated checklist on what to know about each potential new location. This combined knowledge of operational logistics, federal, state and local laws is now used to help WM and our partners to reduce permitting time and costs.
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Materials Sourcing and Pre-processing. Many project developers have a lot of knowledge about their own technology, but often very little about solid waste regulations, handling and material processing equipment. This lack of broader industry knowledge can spell disaster for a project. Too often, engineers and developers fall into the trap of looking at national waste characterization charts and graphs and declaring it to be 鈥渏ust garbage.鈥� The waste stream may look homogenous at a large scale. In reality, feedstock varies by season, geography, local industry, local events and it varies according to the quality of local recycling programs. Problems arise when the developer: 1) Doesn鈥檛 understand the feedstock well enough know what pre-processing is required; 2) Does understand the feedstock, but not the pre-processing equipment requirements; 3) Simply underestimates equipment requirements and costs.
Technology providers rarely accurately assess and plan for adequate pre-processing of materials. As hard as it is to add this cost upfront, it is much more expensive to address this need after the fact. We recognized early the role that processing would play in managing waste in the future. More material would be processed in some way to create end-material of higher value. Unless the material collected is completely separated at the source (which it rarely is), all of the technologies that we have heard about require processing of some type. We anticipate separating recyclables first, then processing the residual into energy. Over time, we can ensure that material will flow to higher and better uses as technologies develop. Our processing must be flexible for this purpose. There are compelling reasons why garbage is heavily regulated across the U.S.. It is complex and can be hard to handle. The public expects new technologies to be at least as safe and environmentally protective as the waste handling options they replace. Public acceptance depends upon evaluating鈥攁nd avoiding鈥攑otential environmental concerns.
Engage Stakeholders Early
Local stakeholders, the community and NGOs (non-governmental organizations) can kill a project just as effectively as failed technology or funding issues. Know, respect and involve the community. Several of our partner technologies have commented on the important role that buy-in from their local communities has played in moving their projects forward. Gaining an early understanding of the local community and regulators, and responding thoughtfully to their views, can help avoid unnecessary costs later in the process. Even when an investment doesn鈥檛 turn out as we had hoped, we learn about the process, the technology, feedstock requirements and potential product end markets. And, we incorporate what we鈥檝e learned into our decision making process.
Gather As Much Information as Possible
In order to develop profitable, sustainable projects it is helpful to gather as much information as possible as early as possible. Asking tough questions early can be inconvenient, but it is the best way to ultimately ensure the success of a project. You鈥檝e heard it before, but the devil really is in the details. Over the past five years, we have experienced unexpected costs increases and have sometimes been surprised by details that were not envisioned in the initial 鈥減lan.鈥� The good news is, however, that we have gained enough experience with these projects to anticipate the hurdles, plan for them and work our way to success.
Susan Robinson is Director of Federal Public Affairs at Waste Management (Houston, TX) where she works directly with the company鈥檚 Organic Growth Group, working to develop innovative technologies. Susan has worked in the environmental industry for 30 years and has been responsible for implementing innovative new programs in the West. She can be reached at (425) 825-2011 or via e-mail at [email protected].听