Fish heads and chicken fat are being turned into electricity by the UK’s largest retailers including Wal-Mart Stores Inc. (WMT) (WMT) that ship food waste to power plants to reduce garbage-removal fees.

Tesco Plc (TSCO), Britain’s biggest supermarket chain, along with Marks & Spencer Group Plc (MKS), John Lewis Partnership Plc’s Waitrose, William Morrison Supermarkets Plc (MRW) and J Sainsbury Plc are testing how meat and fish, cooking oils and leftover sandwiches can lower energy bills and landfill costs when they’re transported to plants for converting into power.

Companies around the world have invested about $18.2 billion in waste-to-energy assets in the past five years, according to Bloomberg New Energy Finance. Waste Management Inc., North America’s biggest trash hauler, purchased stakes in eight companies developing systems to convert rubbish into electricity, fuel and chemicals. In Brazil, cities are building incinerators that burn trash to produce electricity.

Bioenergy can provide at least 8% of the UK’s demand by 2020, valued at about $13 billion at today’s oil prices, the government forecasts. Supermarkets are motivated by a landfill tax that makes it increasingly costly to bury waste. The tax starting in April was 64 pounds ($98) a ton and is set to increase by 8 pounds a year.

“Diverting food waste from landfill to anaerobic digestion is a no-brainer for the supermarkets – landfill charges and energy costs are only getting more expensive,” said Niamh McSherry, a food retail analyst at Berenberg Bank.

Anaerobic digestion

Anaerobic digestion breaks down organic material in the absence of oxygen to make a biogas that can be burned to generate power. Electricity from this process currently costs about $142.80 a megawatt-hour, according to data from the London-based researcher Bloomberg New Energy Finance. This compares to coal-fired power that costs $78 a megawatt-hour.

Developers of bioenergy plants set to benefit from the emerging industry include Kedco Plc (KED), Enviroparks Ltd., GWE Biogas Ltd. and Biffa Group Ltd., which is processing Sainsbury’s waste for the next two years, and Biogen Ltd., which already processes food from Waitrose stores.

Waste-to-power projects in the UK benefit from state subsidies under the government’s Renewable Obligation Certificate programme that requires utilities to buy increasing amounts of electricity from clean energy sources.

State subsidies

One certificate is awarded to generators of renewable power for every megawatt-hour produced. Utilities are required to hold increasing amounts of ROCs or pay a penalty. Different technologies receive different numbers of ROCs. Anaerobic digestion is currently eligible for two. This means they receive about 84.74 pounds for every megawatt-hour of electricity produced at current ROC prices.

Refineries and airlines also are pioneering energy-from- garbage projects. Neste Oil Oyj (NES1V) is making diesel for cars and trucks using fat from gutting pangasius, an Asian catfish. Airlines including Air France-KLM (AF) Group and Deutsche Lufthansa AG (LHA) have started flying planes on used cooking oil.
Old Lamb Chops

Wal-Mart’s Asda unit sends old lamb chops to moldy bread to bioenergy sites. About 2,500 homes are powered by Sainsbury’s unsold meals and rotting vegetables. Waitrose chickens are kept warm in solar huts as Tesco examines how fat from rotisseries can produce electricity.

Waitrose sends all ‘unavoidable’ food waste, packaged or unpackaged, raw or cooked, to anaerobic digestion facilities to make biogas used to generate power for the National Grid.

Tesco is saving 200 million pounds on its energy bills every year through low carbon and energy-efficient technologies introduced since 2006. Marks & Spencer saved more than 70 million pounds last year. Asda expects to save about 800 million pounds by 2020 by implementing energy-saving measures.

Zero waste

Morrison’s, as part of its plan for zero waste to go to landfills by 2013, sends trash to bioenergy plants. Marks & Spencer sends 89 percent of its food waste, including salads and sandwiches, to similar facilities as it strives to become carbon-neutral in the U.K. and Ireland this year.

“Anaerobic digestion saves the food retailers money and allows them to demonstrate their ‘green credentials’ to the government and consumers,” McSherry said in London.

The DECC estimates that anaerobic digestion facilities and plants using wood chips, food waste and agricultural residues to produce heat and power could account for 8 to 11% of the UK’s primary energy demand within eight years.

Source: businessweek.com