Annex 5
Objective 5: Economic analysis of recycling food waste.
Contents
Executive Summary
1.
Economics - Comparison of Options
2.
Costs and Benefits of Options
2.1
Landfill
2.1.1 Costs and benefits of landfill
2.2
Feeding processed food waste
2.2.1 Producer cost savings associated with PFW
2.2.2 Producer feed opportunity costs
2.2.3 Other factors
2.2.4 Economic model
2.2.5 Key findings
2.3
Anaerobic digestion
2.3.1 Costs and benefits of AD
2.3.2 Economic model
2.3.3 Key findings
References
2
3
3
3
3
4
4
7
8
8
12
12
13
13
14
14
Figure 1. Relative willingness to pay for PFW feed products for pigs compared to
conventional feed (with a conversion rate of 3.5).
Figure 2. Relative willingness to pay for PFW feed products for poultry compared to
conventional feed (with a conversion rate of 1.8).
Figure 3. Probability of pig producers adopting PFW products versus conventional
feed at different prices and conversion rates.
Figure 4. Probability of poultry producers adopting PFW products versus
conventional feed at different prices and conversion rates.
Figure 5. Probability of producers adopting PFW products versus conventional feed
at different prices and opportunity costs.
Figure 6. Cost ratio of PFW versus landfill.
Figure 7. Weighted cost ratio of PFW versus landfill.
Figure 8. Distribution of savings (weighted) associated with PFW versus landfill.
Figure 9. Distribution of savings associated with AD.
4
1
5
6
6
8
10
11
12
14
Executive Summary
The environmental and financial costs of waste are rising, and the economic conditions and
circumstances for investigating more efficient management of food waste are growing.
Given this, diverting some of this waste to alternative uses could be beneficial on both
counts.
While landfill has been the most convenient method for managing food waste, the increasing
public awareness and concerns and pressures on landfill capacity mean that this
convenience needs to be traded-off against alternative methods of managing the waste.
Aside from the obvious gate fees related with landfill, it is important to consider that food
waste has implications not only for waste management, but also due to the large number of
negative environmental externalities (primarily the production of methane, a potent
greenhouse gas) that these activities generate. Therefore, every tonne of food waste
diverted from landfill will reduce the incidence of negative environmental externalities.
Traditionally many pig and poultry producers have used food waste as animal feed, and it is
likely that they may become increasingly attracted to seek to use food waste as feed as the
price of conventional arable based animal feeds increase. A relevant factor associated with
the use of food waste as feed is the feeding conversion rate (i.e., ratio between weight of
food waste and weight gain) of the food waste. Producers will be willing to pay a significantly
lower price for food waste that is of a low feeding value. Associated with this, the proportion
of producers who will switch to food waste products is related to the relative price and
feeding value. At very low feeding values, it is shown that very few producers will be better
off using food waste, unless it is subsidised. Therefore, the link between opportunity costs
(which can be considered as the loss associated with not using conventional feed or the
trade-off between lost revenues and other costs incurred by the change of feed and savings
in feed cost) and the use of food waste is explored. The results indicate that the use of food
waste as animal feed is only justified when the price of food waste products is relatively low.
In fact, even if the food waste feed is fully subsidised (i.e., available to producers at zero
cost) the use of these feed products are only profitable as long as the opportunity costs do
not increase the total cost substantially. If feed derived from food waste costs the same as
conventional feed, then the enterprise is shown to be less profitable, due to the opportunity
costs.
An economic model is developed through a series of simulation runs (based on a Monte
Carlo method which relied on repeated random sampling to compute the results). From
these runs the costs and benefits of using food waste for animal feed and landfill are
compared. The economic model establishes the costs and benefits to producers per tonne of
food waste and, subsequently, assesses the cost-benefit ratio of landfill versus using food
waste for animal feed. The cost-benefit ratio associated with landfill is predicted as having a
relatively large inter-quartile range and, importantly, with a ratio greater than 1 (i.e., the costs
outweigh the benefits). In complete contrast, it is evident that significant efficiencies are to
be gained when food waste is used for animal feed, as benefits are predicted to be
substantially larger than the estimates of cost. It is estimated that the most likely benefits of
food waste being utilised as animal feed compared to land fill are in the region of
£19-£29 per tonne of food waste.
One of the principal drivers or advantages of anaerobic digestion (AD) is its ability to turn
food waste into a usable energy form. With energy supply becoming a higher priority this
makes AD an important process for managing food waste. The principal economic driver for
AD is the production of this energy. A further by-product of AD is the production of digestate.
Compared to slurry, digestate offers a number of benefits (including reduced greenhouse
gas emissions and ease of handling). A further economic model is developed through a
series of simulation runs (again based on a Monte Carlo method).
2
From this procedure it is shown that, for the most part, the benefits associated with AD
outweigh the costs involved with landfill. This analysis shows that over half of the simulated
scenarios suggest improvements to society from diverting food waste from landfill to AD.
1.
Economics - Comparison of Options
As much as half of all food grown is lost or wasted (Lundqvist et al. 2008). Added to this, the
cost of waste management is rising (Langley et al, 2010), environmental concerns are
increasing (Garrod and Willis, 1998) and the economic conditions and circumstances for
investigating more efficient management of food waste are growing. Given this, diverting
some of this waste to alternative uses could be socially beneficial (Spinelli and Corso, 2000).
This section explores this aspect.
2.
Costs and Benefits of Options
2.1
Landfill
While landfill is a widespread approach for dealing with food waste, the increasing public
awareness and concerns and pressures on landfill capacity mean that this convenience
carries a cost. To decide the most efficient way to treat food waste landfill has to be
compared to its alternatives.
2.1.1 Costs and benefits of landfill
As already documented in Annex 1, Table 3.3, landfill entails a gate fee and landfill tax in the
region of £68–£111 per tonne. While this is the most obvious cost of landfill, it is important to
consider that food waste has implications not only for waste management, but also due to
the large number of negative environmental externalities that these activities generate
(Garrod and Willis, 1998). As documented in Garrod and Willis (1998), these environmental
externalities are likely to include the production of greenhouse gases (and explosive gas),
the toxicity and health problems associated with the discharge of leachate to surface or
ground water and the noise, visual and odour impacts during the operational phases. In
addition to this, as shown in Brereton et al. (2008) and Ferreira and Moro (2010), proximity to
landfills has a negative effect on subjective well-being.
Therefore, an important social
benefit of alternative food waste management is the implied value of the avoided
environmental and social costs of landfill resulting from redirecting food waste from landfills
to other alternatives (Spinelli and Corso, 2000). Diverting waste from landfill means that the
timeframe of landfill resources are extended (i.e., it will take landfill sites longer to reach full
capacity) will to the betterment of society-at-large (Spinelli and Corso, 2000). Valuing the
negative environmental externalities is not a straightforward task, because to a large extent
they have a non-market component and may even entail non-use values. A Hedonic study
estimating the disamenity costs of landfill in Great Britain by Defra (2003) found that the 95%
confidence interval estimate of the present value of fixed disamenity effects of landfill is
between £1.52 and £2.18 per tonne. So for every tonne of food waste diverted, this loss
would be avoided. Nevertheless, it is important to bear in mind that other options may also
produce negative environmental externalities. However, the reduction of landfill will, in all
likelihood, decreases the incidence of negative environmental externalities more so than the
creation of new negative environmental externalities under alternative methods for managing
food waste. In addition to the fixed disamenity effects, there are often significant greenhouse
gas emissions from landfill. Nevertheless, using food waste as animal feed will also entail
greenhouse gas emissions. Findings in WRAP (2010) suggest that for every tonne of food
waste diverted to animal feed avoids 0.66 tonnes of CO2 emissions. Using the lower existing
UK social cost of carbon benchmark of £35 per tonne (cf. Watkiss and Downing, 2008),
3
means that the social cost is reduced by £25.28 (including the disamenity cost of £2.18) per
tonne of food waste diverted to animal feed.
2.2
Feeding processed food waste
Using food waste as animal feed is not new. Many pig and poultry producers have used food
waste to supplement their livestock diets. Moreover, as the price of conventional arable
based animal feeds increase, producers will become increasingly inclined to seek alternative
feed. One such alternative is feed derived from processed food waste (PFW).
2.2.1 Producer cost savings associated with PFW
Relative willingness to pay for PFW
PFW-feeding programmes vary greatly due to wide differences in feed values of PFW
products. Spinelli and Corso (2000) discuss that for pigs instead of a conversion ratio of
around 3.5 kg of conventional animal feed to 1 kg of weight gain, the equivalent figure for
PFW products ranges up to 20 kg. This has obvious implications for the pricing of PFW
products for use in the pig industry. Conversion ratios ranging less than 3.5 implies that
lower levels of PFW (in terms of dietary intake measured in weight) than conventional feeds
are required. All else held constant, economically rational pig producers are more likely to
consider feeding PFW products under this superior conversion ratio scenario. In the same
vein, other things being equal, the more likely scenario that PFW products deliver conversion
rates beyond 3.5 will be deemed less preferable to producers compared to conventional
feed. This implies that producers would be willing to pay a lower price for higher conversion
ratio PFW products compared to conventional feed (Spinelli and Corso, 2000). Based on
these figures, the relative willingness to pay for PFW feed products compared to
conventional feed can be obtained. This is presented in Figure 1. It is based on the
conventional animal feed conversion ratio of around 3.5 to 1 kg of weight gain (therefore, the
relative willingness to pay is maintained at 3.5:1). The plotted line depicts the point of
indifference between PFW feed products and conventional feed. Therefore, if PFW products
are priced lower than the relative price (shaded green), the use of PFW products would be
economically justified. If the reverse is the case (shaded red), then it will not be economically
viable for pig producers to consider PFW products. For this reason, the achievable market
price of PFW products should be constrained to be within the area shaded green.
1.00
0.75
0.50
0.25
0.00
3
6
9
Conversion rate of PFW
12
15
Figure 1. Relative willingness to pay for PFW feed products for pigs compared to
conventional feed (with a conversion rate of 3.5).
4
Relative willingness to pay for PFW
Repeating this exercise for a feed conversion ratio of 1.8 for conventional poultry feed, a
similar pattern is obtained. Given the lower poultry conversion ratio poultry producers would
be willing to pay relatively lower price for the equivalent PFW products.
1.00
0.75
0.50
0.25
0.00
1.5
3
6
Conversion rate of PFW
12
Figure 2. Relative willingness to pay for PFW feed products for poultry compared to
conventional feed (with a conversion rate of 1.8).
Related with these, the proportion of producers who are likely to consider feeding PFW
products (all else held constant) can be calculated using a logit expression:
Pr(Choose PFW) =
exp⁡(−Cost PFW)
exp(−cost PFW) + exp(−Cost conventional)
where, the cost of conventional feed is approximately £200 per tonne and cost of PFW is
equal to the cost of conventional feed times the relative price divided by the relative
conversion ratio of PFW compared to conventional feed. The results of this expression for
pig producers are presented in Figure 3.1 As would be expected, pig producers are most
likely to use PFW products when they receive a payment from food-waste generators or
when they are relatively cheap. In fact, irrespective of the conversion rate of PFW products,
approximately 60 percent all pig producers are predicted to adopt PFW products when the
PFW feed has zero cost. There is also clear evidence to suggest that this increases to the
extent that practically all producers will adopt PFW products in situations where the PFW
products have superior conversion rates. However, and not surprising, as the conversion
rate increases to 16 kg of PFW feed to 1 kg of weight gain, few pig producers would be
willing to adopt PFW unless, of course, the price is relatively cheap compared to
conventional feed. This gives a good insight into the possible demand for PFW products
among pig producers at different price levels and conversion rates.
1
It is noted that the costs in the expression have been standardised, so that their mean and standard deviation is
equal to 0 and 1 respectively. This is to ensure against extreme predictions (i.e., either acceptance or rejection of
PFW products) and, thus, accommodate the more realistic scenario of a mixture of the two feeding regimes.
5
Proba
1.0
bilit y
0.8
W ad
of P F
0.6
0.4
0.2
opt ion
0.0
-1
15
Re 0
la
tiv
e
pr 1
ice
of
10
er
PF 2
W
5
n
sio
te
ra
P
of
FW
nv
Co
3
Figure 3. Probability of pig producers adopting PFW products versus conventional feed at
different prices and conversion rates.
Due to standardisation of the cost, a similar pattern emerges for poultry producers. In this
case, however, all else held constant, producers appear to be slightly less likely (compared
to pig producers) to switch to PFW products unless the relative price can be maintained to be
relatively cheaper.
Proba
1.0
bilit y
0.8
W ad
of P F
0.6
0.4
0.2
opt ion
0.0
-1.0
15
-0.5
Re
la 0.0
tiv
e
pr
ice 0.5
of
PF
W 1.0
10
er
5
n
sio
te
ra
P
of
FW
nv
Co
1.5
Figure 4. Probability of poultry producers adopting PFW products versus conventional feed
at different prices and conversion rates.
6
2.2.2 Producer feed opportunity costs
In spite of any producer cost savings and the fact that more efficient conversion rates may be
achievable as well as the fact that PFW products are likely to be relatively cheaper (or even
subsidised) (meaning that production costs could be reduced), PFW-feeding is more likely to
have worse conversion ratios (Spinelli and Corso, 2000). Consequently, PFW will almost
certainly require an additional feeding period (in fact, as suggested in Westeddorf (2000), up
to 40–50 percent additional feeding period may be necessary). Consequently, producers
who implement a PFW feeding regime are in all likelihood going to incur additional costs,
some of which are actually incurred (using of infrastructure, additional labour, etc.) as well as
significant opportunity costs (which can be considered as the cost of the sacrifice related to
conventional feed). The first opportunity cost relates to the physical opportunity cost, or
revenue foregone, associated with the inability to restock. This arises because there is an
effective constraint on production output (in terms of numbers of livestock). This has obvious
implications for enterprise gross margins (i.e., the gross income (before accounting for fixed
costs) from a single unit of head for livestock).. Alongside this, there will be financial
opportunity costs of resources used in production, that is, the financial charges on capital
tied up in buildings and equipment or implicitly incurred through the foregone interest on
capital tied up in currently owned buildings (i.e., with livestock taking longer to rear, the
buildings and other resources are tied up, preventing restocking, which represents an
opportunity cost).
As alluded to above, there is a direct link between margins and the level of the opportunity
costs. Other things being equal the higher the opportunity cost, the lower the resulting
margins. It is important to also bear in mind that the net margin depends on the relative price
of PFW products. The adoption of PFW is warranted especially when the price of PFW
products is relatively cheap. However, even if PFW feed is fully subsidised (i.e., available to
producers at zero cost) the use of these feed products are only desirable as long as the
opportunity costs do not excessively increase the total cost. If the costs of PFW products are
the same as conventional feed, then the enterprise will be less profitable compared to
conventional feed, due to the almost certainly increased (physical and capital) opportunity
costs - which stems from the inferior conversion ratios associated with PFW feed.
The adoption of PFW feed is, therefore, also dependent on the extent of the magnitude of
the costs. Results from a further logit expression, presented in Figure 5, based on a fixed
conversion rate of 7:1 and where PFW feed is subsided reveal that practically all producers
would utilise PFW products provided the increase in opportunity costs do not increase the
total costs by more than 5 percent and PFW is heavily subsided. However, even if the PFW
has zero cost, if the additional opportunity costs (which may include physical, labour, capital
etc) means that the total costs creep up by 25 percent, then the proportion of producers who
will use PFW feed will drop to around 30 percent. In order to ensure around half of the
producers adopt PFW feed, producers would need to receive compensation in the order of
40 percent of conventional feed.
7
Proba
1.0
bilit y
0.8
W ad
of P F
0.6
0.4
0.2
opt ion
0.0
-1.0
0
-0.8
Re
la -0.6
tiv
e
pr
ice -0.4
of
PF
W
5
10
15
-0.2
20
0.0
p
Op
tu
or
nit
o
yc
sts
(%
inc
as
re
e)
25
Figure 5. Probability of producers adopting PFW products versus conventional feed at
different prices and opportunity costs.
2.2.3 Other factors
The transportation costs (including the negative externalities such as unwanted noise and
vibration) of food waste is a further factor requiring consideration. However, irrespective of
whether the food waste is destined for land fill or PFW, as described in Spinelli and Corso
(2000), there is likely to be no net increase in transportation costs. This analysis, therefore,
makes the reasonable assumption that the transportation costs are the same under both
options, meaning that, from a cost-benefit analysis perspective, it is not a relevant cost (i.e.,
the net difference will be the same whether it is included or not).
2.2.4 Economic model
An economic model is developed through a series of simulation runs (based on a Monte
Carlo method which relied on repeated random sampling to compute the results). The
rationale behind the model is to simulate (under a range of scenarios the costs of landfill and
the adoption of PFW products by producers).
These costs are derived based on the following assumptions:
Relevant landfill (status-quo) costs
Landfill costs (£): N~(76,76), truncated to the range (29,82)
Conventional feed consumed by pig (tonne): N~(0.45,0.45), truncated to the range
(0.4,0.7)
Cost of pig feed per tonne (£): N~(215,215), truncated to the range (200,260)
8
Total relevant current costs (per tonne) = Landfill costs + (Conventional feed
consumed * Cost of feed)
Relevant costs under PFW (the underlying means of the distributions are established
using the figures in Spinelli and Corso (2000) and relatively large standard deviations are
used to accommodate uncertainties and to ensure a reasonable spread between the
lower and upper bounds)2:
Conversion ratio of conventional pig feed = 3.5
Conversion ratio of PFW: N~(7,72), truncated to the range (3.5,16)
Relative price of PFW (ratio): N~(1,12), truncated to the range (0,1.5)
Opportunity cost increase (%): N~(25,252), truncated to the range (0,50)
Social cost reductions per tonne (£):N~(25,252), truncated to the range (20,30)
Total relevant PFW costs (per tonne) = (Addition PFW feed * (price of PFW feed))
+ (Opportunity cost increase) – Social cost reductions3
From these runs the costs of landfill versus PFW are compared. Specifically, the objective of
this economic model was to establish the costs per tonne of food waste and then to assess
the relative ratio between the two options. The intent in developing this model is to provide a
tool for choosing between these options. The results are ascertained from 10,000 simulated
scenarios. This was to facilitate a sensitivity analysis of the estimates. Only the relevant
costs are included in the model (i.e., those that would be incurred under both options, in
which the net difference will be the same whether it is included or not).
From this procedure and the assumptions outlined above, the calculations, presented in
Figure 6 (which plots the cumulative distribution of the relative costs) reveal that at the
median redirecting food waste to PFW is about one-twentieth (i.e., the median denotes the
50th percentile and this is shown on the graph to be associated with a relative cost of around
5 percent of the cost compared to landfill. This clearly slows that the benefits are likely to be
in the order of 95 percent of the costs associated with the landfill option. Therefore,
significant efficiencies are to be gained when PFW products are used, as the predicted costs
are substantially smaller than the estimates of landfill cost. In fact, approximately 30 percent
of the simulated scenarios suggest negative relative costs of PFW vis-à-vis landfill. Under
these scenarios, the social benefit of the reduced land fill outweighs the other costs
connected with PFW.
2
Only relevant costs are included to avoid double counting. Therefore, costs of production/treating the PFW and
transport are not included, as these are incurred under conventional feed systems. The negative environmental
externalities are only left out of the calculation, since the landfill cost encompasses the landfill tax and, therefore,
internalises the externality.
3
Note that the social cost reductions is subtracted, as it represents a saving.
9
1.0
Cummulative distribution
0.8
0.6
0.4
0.2
0.0
-0.2
-0.1
0.0
0.1
0.2
0.3
Relative costs of PFW versus landfill (%)
Figure 6. Cost ratio of PFW versus landfill.
However, it should be noted (as illustrated earlier), when assessing the magnitude of this
gain in efficiency, it is important to bear in mind the proportion of producers (e.g. Figures 3-5)
who will adopt PFW products. Unless this gain is to be realised by the producers, due to the
relatively high opportunity costs associated with adopting a total PFW regime, it is unlikely
that producers will adopt PFW unless it is considerably lower priced and they can manage to
minimise the additional opportunity costs.
Using the same criteria for calculating the probabilities of producers adopting PFW used
above, probabilities are estimated for each of the 10,000 simulated scenarios. This allows
the cost ratio of PFW vis-à-vis landfill to be weighted in accordance with the likelihood of
producers adopting PFW. The results from these calculations are summarised in Figure 7.
Based on this, we can see that for every tonne of food waste diverted from landfill to animal
feed, the median is close to 0.4, meaning savings in the order of 60 percent may be
achievable for every tonne of food waste diverted from landfill to animal feed.
10
1.0
Cummulative distribution
0.8
0.6
0.4
0.2
0.0
-3
-2
-1
0
1
2
Relative (weighted) costs of PFW versus landfill (%)
Figure 7. Weighted cost ratio of PFW versus landfill.
The actual (weighted) savings calculated by: (Current cost – PFW costs)* Pr(adopt),
associated with every tonne of food waste diverted from landfill to animal feed is portrayed in
Figure 8. Based on the above analysis, savings (to society) are most likely to range between
£10 and £40 per tonne of food waste redirected to animal feed. Both the median and mean
of the 10,000 scenarios are close to £24 per tonne. The lower and upper quartile estimates
are approximately £19 and £29 per tonne respectively (as indicated by the dotted red lines).
This range represents a best guess of the most probable range in savings associated with
food waste being utilised as animal feed rather than going to landfill.
11
0.06
0.05
Probability
0.04
0.03
0.02
0.01
0.00
5
10
15
20
25
30
35
40
45
Savings (weighted) associated with diverting landfill to PFW (£ per tonne)
Figure 8. Distribution of savings (weighted) associated with PFW versus landfill.
2.2.5 Key findings
Compared to landfill, redirecting food waste to be used as animal feed is beneficial in
societal terms. However, the magnitude of this benefit depends critically on the extent to
which producers are willing to adopt food waste in their animal feeding regime. The analysis
uses a Monte Carlo simulation of 10,000 scenarios - which accounts for the uncertainty in
landfill costs, dietary intake, prices of conventional and PFW feed, conversion rates of
conventional and PFW feed, opportunity costs (physical and capital) of using PFW and social
cost of greenhouse gas emissions - shows that the willingness of farmers to utilise PFW is
determined by its relative price, dietary quality of PFW and the opportunity costs involved. As
a result, in order to encourage uptake of PFW among producers, regulatory options should
focus on these issues. Specifically, the food waste that should be selected for PFW is food
that has feed value most comparable to conventional feed, since this will also be associated
with lower opportunity costs. Although, it is acknowledged that converting food waste to
resemble conventional feed, is likely to be costly. Uptake of PFW among producers will be
further increased if the cost (or any expense incurred) is much lower than conventional feed.
Provided these regulatory options and conditions are met society will be better off. While
difficult to get a handle of the magnitude of this gain, results from the Monte Carlo simulation
suggest that society will be better off somewhere in the region of £19-£29 for every tonne of
food waste that is diverted from landfill to food waste.
2.3
Anaerobic digestion
One of the most environmentally preferable management options for food waste is anaerobic
digestion (AD). Among its main attractions are production of both renewable energy and
digestate.
12
2.3.1 Costs and benefits of AD
One of the principal drivers or advantages of anaerobic digestion is its ability to turn food
waste into a usable energy form. With energy supply becoming a higher priority this makes
AD an important process for managing food waste. The principal economic driver for AD is
the production of this energy. The electricity market is relatively easy to access, with a sale
price of about £0.05 per kWh. With each tonne of food waste generating approximately 300–
400 kWh, which equates to in the region of £15-20 per tonne.
A further by-product of AD is the production of digestate. As outlined in Banks et al. (2011),
compared to slurry, digestate offers a number of benefits: often it has much less smell and it
does not spread weeds and disease as slurry does. Digestate can act as a substitute to
artificial fertilisers, meaning that an additional benefit is the offsetting of fertiliser production.
According to findings in Butler et al. (2011) an AD plant is likely to produce £250,000 million
of CO2 savings (7,000 tonnes over the 20 years) for a cost of around £20,000 - meaning that
savings per tonne are about £35.71 and capital costs per tonne about £2.86. Dolan at al.
(2011) suggest that the additional cost of transporting and spreading of digestate to be in
region of £8.25 per tonne.
2.3.2 Economic model
An economic model is developed through a series of simulation runs (again based on a
Monte Carlo method). The rationale behind the model is to simulate (under a range of
scenarios the costs of landfill and AD.
These costs are derived based on the following assumptions:
Relevant landfill (status-quo) costs
Landfill costs (£): N~(76,76), truncated to the range (29,82)
Total relevant current costs (per tonne) = Landfill costs
Relevant AD benefits:
Sale price of electricity (£per kWh): N~(0.01,0.152), truncated to the range (0.05,0.15)
Electricity output (per tonne of food waste): N~(350,3502), truncated to the range
(300,400)
CO2 savings (£ per tonne): N~(35,352), truncated to the range (25,45)
Capital costs (£ per tonne): N~(2.86,2.862), truncated to the range (2,3.5)
Transporting and spreading of digestate (£ per tonne): N~(8.25,8.252), truncated to the
range (7.00,9.50)
Total relevant AD benefits (per tonne)4 = (Sale price of electricity * Electricity
output) + CO2 savings - Capital costs - Transporting and spreading of digestate
4
This is a conservative estimate, as the further benefits are the reduction in costs associated with building new
power plants and the associated reduction in GHG emissions from burning fossil fuels.
13
From these runs the costs landfill versus AD savings are compared. The intent in developing
this model is to provide a tool for choosing between these options. The results are
ascertained from 10,000 simulated scenarios. This was to facilitate a sensitivity analysis of
the estimates.
From this procedure and the assumptions outlined above, the societal savings (benefits costs), presented in Figure 9 highlight that, for the most part, the benefits associated with AD
outweigh the costs involved with landfill (for just over 45 percent of the simulated scenarios
the benefits of AD do not outweigh landfill). Both the median and mean savings of the 10,000
scenarios are close to £2.50 per tonne. The lower and upper quartile estimates are
approximately -£10 and £16 per tonne respectively (as indicated by the dotted red lines).
This range represents a best guess of the most probable range in savings associated with
food waste being utilised for AD rather than going to landfill.
0.020
Probability
0.015
0.010
0.005
0.000
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
Savings (weighted) associated with diverting landfill to PFW (£ per tonne)
Figure 9. Distribution of savings associated with AD.
2.3.3 Key findings
Compared to landfill, redirecting food waste to be used for AD is largely beneficial in societal
terms. The analysis accounts for the uncertainty in costs and benefits. In approximately 55
percent of the simulated scenarios, the decision to redirect food waste would seem to be
justified.
References.
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