Pioneering Food Waste Recycling (Transcript)

Liz: Hi everyone, welcome to Waste360's NothingWasted! Podcast on every episode we invite the most interesting people in waste recycling and organics to sit down with us and chat candidly about their thoughts their work this unique industry and so much more so thanks for listening and enjoy this episode.

[INTRO MUSIC]

Liz: Hi everyone This is Liz Bothwell from Waste360 with John Hanselman, CEO of Vanguard Renewables. Welcome Jon and thanks for being on the show. 

John: Thanks Liz. It's good to be here. 

Liz: Please tell us a little bit about your background and how you ended up in this fascinating industry.

John: I don't think there's any direct lineage that you can actually tie to food waste recycling but hey, I spent about a decade prior to starting Vanguard doing solar development and we kind of started in the early days of solar and tried to unwind how to get renewable energy systems working and tied into the grid. And after we'd we've kind of gotten solar and the entire solar community kind of moved into a stable and functional system.

I got a little bored and so I started looking for the next challenge and I didn't quite understand exactly how big a challenge it was going to be but saw food waste recycling and specifically using European technologies for anaerobic digestion.

And that was the pathway that we took. And we've been doing that for the last six years and I think we're finally getting into to a functional business.

Liz: That's great. So, it seems farming today needs to be all about innovation and those that do it well survive and thrive. And it sounds like obviously you're following Europe's lead. Is anyone else doing it well or better than we are at this point?

John: So, there is Europe and the U.K. I think have all done a wonderful job. Now they've got lots of things that we don't have like federal energy policies that incentivize renewables and federal policies that incentivize farms to do food waste recovery.

So, they've got they've got a big advantage on us. And certainly, the UK has done a remarkable job in the last 10 years. So the Germans and the Dutch and the Danes kind of started all of this 20 plus years ago and there are a lot of drivers, not the least of which is that most of those guys got the vast majority of their natural gas from the Russians which I think is a fairly precarious position. So, they wanted to create a local generator some natural gas which is what you end up with when you recycle food waste. So, they built a pretty, pretty neat system. And I think the government was helping out a lot. We don't get a lot of government subsidies hardly any even less than the solar and wind is industries. So, we had to kind of do it on our own, but it's been really neat to see how, as you said in your correct, Americans farmers especially America's dairy industry is under phenomenal stress and being able to help the farms be more independent and self-sufficient has been one of the real great joys of what we're doing.

Liz: And that's fantastic. And you and you have said that you started as an energy company and then you realized that supporting the American farm has become a real driving force for you guys.

John: Yeah it is. And it was you know we thought we were a renewable energy business that happened to recycle food waste as our fuel on farms. And what we've actually are 100 percent wrong. We're actually a food waste recycling business that is 100 percent farm based and we happen to make renewable energy as a byproduct. So, we were right idea wrong end of the chain.

Liz: Now in your experience, can any type of farm or size of farm do this? Or are there limitations?

John: There are some limitations. We need a kind of base level of manure to help continually repopulate the bug population, so the way that the system works is we have these neat little microbes called them Methanogens that eat the food waste and emit the methane which is the renewable natural gas and keep that population happy and stable. There's kind of a core amount of manure that we like to have in the digester.

Interestingly we're now down to I think our smallest farm is about two hundred and fifty milking head.

So, it's pretty small for American farm. So, we are starting in New England where the farmers are generally much smaller than Wisconsin or California or Idaho where they've got huge kind of massive farms. We kind of started on the tougher side and as it gets easier and easier as you get on bigger farms.

Liz: That’s great. Now do you think farm based anaerobic digestion is ready to scale right now?

John: Absolutely. Yeah as I would say five years ago we were hopeful and we certainly got a lot of black eyes and some good learning along the way but it's very I think we now understand what we have to do and it's a very integrated process much more so than we thought. You really have to partner with the whole community and partner with our farm hosts and partner with the utilities. So it requires a whole lot of logistics and integration and then an enormous amount of education to are the food waste generators and some real learning on our side and you know we kind of thought everybody would see the light and kind of come running with their food waste. That never happened. And we kind of figured everybody would be really great about removing the non-food waste components the contaminants from the stuff they'd send us and that didn't really happen either. So, we've had to make a whole lot of modifications on our side and build a much more kind of vertically integrated system to handle the contaminants and handle the variety of food waste that we get.

Liz: And you said that you've taken a really hard data driven approach to this [farm based anaerobic digestion] . And could you tell us a little bit more about that? And is that a competitive advantage and do you think that's why you're succeeding where others have failed in this area?

John: It is and I think you know we early on. You know I came from the solar world and the technology world before that and using data has always been kind of core to our businesses.

And the thing that we found out in running anaerobic digesters is there wasn't a lot of good data in the US about the production conversion rates how you know what food created what byproducts how volatile the systems might be. And then an awful lot of the mechanics of actually taking that renewable natural gas as it comes out of the digester which is very wet and with other byproducts in it and say OK, what's the best way to turn this into energy. And that's been really good. So I think early on we probably overdid it and we're collecting data at a level that that probably seemed a little goofy for you know a couple of little funky farm based digesters but that's actually turned out to be our salvation because I think we now know as much as anybody about what we can put in, when we put it in. We've changed our technologies pretty significantly from our first two digesters to the last three that we've built are almost not recognizable as the same machines. And we did that because we really started to understand that you really needed to know, and you had to have a much better control and segmentation on the whole chemical process. I know more about food chemistry than I ever thought I would like that. Some things I didn't want to know actually. But that's a different podcasts really. I wouldn't do that today.

Liz: You never know we could revisit that.

John: That's right.

Liz: Now do you see yourself as a perpetual landfill for organics at this point?

John: Yeah, I think we do. As a solution too especially in the Northeast where we're under such unbelievable pressure for closure of landfills. It's pretty exciting to have one that just keeps going and granted we're were much smaller in capacity than a real landfill. But we certainly know we can take if I guess the standard metric these days people say there's 40 percent of the weight in waste is organics. We imagine we can probably get half or two thirds of that out into our system. That's a significant impact.

Liz: Yes.

John: That matters. 

Liz: That does matter. So how successful have you been in helping haulers turn waste into high value renewable energy?

John: I think pretty successful. It's certainly the behavioral change is really hard. I think for everybody. And we're also such a small portion initially of any haulers business that I think you know to their credit it's retraining their staff. Then you've got to go retrain your customers. It's a small portion of the business. And is it really cost effective or important for them to do. And I think for the longest time a lot of it was our education and just sitting with our hauling partners and saying “hey guys, we think this is a very sexy part of your business because of the renewables it's something that more and more of your customers would like to see”. Certainly, within the food industry that transparency of where's the waste going is something that that works. We see as a demand over and over again. And it's something that I think a lot of folks in the hauling community have tried to kind of push back and not have to do for obvious reasons. It's expensive, it cost time and energy and it's not historically something they've done. But I think when you look at kind of the leaders the folks who are really out there leading the food industry whether it's on the manufacturers side or the retail side those folks are all looking for transparency. They want to know where their waste goes. They want to know, first they're looking real carefully at where it is you're inbound product come from you know we've all been into those restaurants where they've got the list on the wall of all the farms that have sent their products in that day and which you know where your lettuce is coming from and where your tomatoes are coming from. 

I think it's as important to those people to see where the food goes and to know that it's going to be beneficial reuse is really cool. And I think that's our hook which is to say “hey this is this is a neat product. It's a differentiator if you do this it's something that your competitors may or may not actually be doing.”

Liz: Right.

John: And we're very lucky when we have wonderful partners like Whole Foods or the [New England] Patriots who've actually taken a lot of effort to get the food waste out of their way streams and to us and kind of leading by example.

Liz: And speaking of that can you share any stories around the Patriots or Whole Foods. 

John: Sure sure 

Liz: MGM.

John: Yeah. A Whole Foods is wonderful and there were probably one of our earliest customers. They very much looked at their mission, looked at that whole concept of transparency and accountability, looked at the ways that they were generating and really looked how do we recycle everything that comes out of the back end with someone who spends a lot of money at Whole Foods I'm really, really clever actually walk the walk and not just talk the talk. But they came to us and said you know how we want to do this. We ended up they ended up actually installing a grinding system, the grind energy system that's actually in their stores. I think we now have to take the waste from about 40 Whole Foods in New England, and I think at least half of those already have converted over to this in the store grounding.

So, we actually show up with tanker pump out a tank that we've built for them on site and take that straight out to our digesters. And that's been really neat and that's something that's very successful for them. A lot less odor, a lot less vector issues and nuisance issues. And then something that's a very efficient system for us for collection.

We've got a little remote monitor that actually calls us when the tank gets full and we can send out the tanker and grab it.

So even as they have seasonal or daily or weekly changes, we can accommodate that. So, it's been it's been a lot of fun there. It's a really neat system and the Patriots are very, very similar. I think they put putting the same exact grinding system and have been progressively moving through the stadium. We started up in the luxury boxes and then we're now moving down into the concession stands. 

Liz: Oh wow. 

John: Yeah, it's been neat. And again, folks who've kind of taken them as they're as part of their mission statement and embraced farm powered is as part of their core values and that recycling of all their products. Those are great customers for us.

Liz: Oh, I bet. And then you know speaking of that with the world kind of changing and a lot of big companies focusing on purpose and profit as part of their mission are you getting more interest at this point?

John: We are. Yeah, we get more and more folks in the manufacturing sector who are trying to be accountable for their waste. And it's wonderful and exciting for us and we can actually give them back exactly as you said the purpose and profit. We can tell them exactly how much renewable energy they made from each ton of food waste they send us, and we can talk about the equivalencies. You know you it was the equivalent of taking a thousand cars off the highway this year or planting 50000 trees. And that's a wonderful thing for them to be able to then communicate to their customers.

Liz: Right. And I think that's part of what makes your model so interesting is that you have completely flipped it and it's yes you are doing good in the world, but also here's why it matters to you as a business. I think from what I've seen you're doing that with the farmers and now you're also doing it with the waste generators as well because at the end of the day, it is a business for these people as well. And you're proving black and white that this works for them which is fantastic.

John: It’s absolutely true. You know we can because we have the energy component. We can make it a cost-effective solution. So they can pay less then and again easier up here in the Northeast where we've got really high disposal rates but we can actually give them cost savings on the disposal and give them this really neat environmental credit that they can then talk to all of their customers and say “hey you know it's not just getting thrown into a landfill, it's not just getting chucked out on the side of the road. We're actually doing something that that's good for the planet.”

Liz: Right. So, what do you what are you seeing as some of the barriers to slow adoption of larger scale organics recycling?

John: I think there are two big challenges. The first one you know what they say in real estate its location location, location, in the food waste recycling its contaminants contaminants, contaminants that the packaging the forks and knives and plates and other things that show up and we get some pretty weird things in different loads.

But the stuff that's unintended and when we originally started our digesters were very finicky and we really couldn't take any contaminants and that limited our ability to service the industry. And we've had to make a lot of changes internally. We're building our very first packaging facility right now where we're going to take stuff spray like a yogurt cup, an ice cream container and extract the organics and then recycle all of the packaging materials. That's a huge project for us but it's something that we decided we really needed that level for a vertical integration because imagining that our customers are going to be able to remove all of the issues of packaging and contaminants probably really limits but absolutely limits the number of people that we can service. So that's kind of first and foremost. The second part that's really challenging is the behavioral change that has to happen at the customer side. And this is probably more directed at the smaller generators the restaurants, hospitals, hotels and there you have to train staff to separate the organics into a different bin. And that's always challenging. There's a lot of turnover you're training staff to do a lot of tasks and I think it's been the major impediment that we've seen is that people just don't want to take another. Training task into a new employee orientation. And the folks who are dealing with the waste are usually the entry level folks who have the highest turnover, who are going through a whole lot of other training simultaneously and this is one more thing.

I think we feel confident that it can happen. If you look at the way cardboard recycling was adopted, I think it's really analogous to where we are. You wouldn't have thought 30 or 40 years ago that you would ever have a separate bailer for cardboard and that somebody would come and pick that up. Now it's commonplace. 

First obviously there was legislative change and regulatory change that made at least in most of the states and New England. You know you've got to do the cardboard recycling, but it became also cost effective. And I think when those two kind of mesh you then have a great step forward you know we have the regulatory and the legal requirement for organic recycling. Now in Vermont, Massachusetts, Connecticut, New York is moving that way as is New Jersey and certainly California and other states as well, that is kind of your first push. If you can combine that with a cost savings, I think that's when you start to see real change across the entire market.

Liz: I think you're right. Well you've mentioned Europe and how they are helped a lot by government. And I'm sure the fact that federal tax credits for renewable energy projects dropped anaerobic digestion after 2016, I'm sure that's not helping the cause.

John: That was not a big help. Yeah, we were very surprised and really disappointed that the Congress decided that we were no longer a priority in 2016. That was I think something that we would love them to rethink in the future but it was we've been able to make do and we've been able to kind of reset our economics having a 30 percent tax credit that the wind and the solar guys get would be really great, certainly would help. But you know we've made it happen even in the absence of that.

Liz: Oh, that's great.

John: Certainly, if we if we were ever to get it if the Congress saw in their wisdom to return us to a tax credit status we would be delighted. But I guess we're plugging along without it. 

Liz: OK. Well that's impressive. 

John: Yeah that was not a great day. 

Liz: Now is there anything happening like the new farm bills incentives. Does any of that help or is it not quite?

John: Unfortunately, no. I think we're we are trying hard things that the real key drivers of the California low carbon fuel standard has been an amazing incentive.

And so, California has kind of jumped way ahead of the federal government as they often do with renewables is really big, they started out the whole solar world by doing that. They've made that low carbon fuel standard and that's that has driven a lot of folks into manure recycling because of the technical complexities. It doesn't really apply to food waste yet. It may. But at the moment you can't sell food waste derived renewable natural gas into the California market for any profit. So, it's kind of left us out in that one but certainly manure recovery is going gangbusters these days.

Liz: It sounds like it. So, Vanguard was named the 2018 Organics Recycle of the Year by NWRA. Congrats!

John: Thank you. It was a great joy and surprise to us. We were delighted to get it, it was a surprise but it was really felt amazing to get that level of recognition.

Liz: I like that. I mean you know they said that it recognized your contribution to farm powered organics recycling and renewable energy. And the way that you're protecting the environment and advancing waste in recycling altogether. What else do you think helped you win this because I know you guys are kind of keeping your nose to the grindstone and working away and expanding, but what do you think helped?

John: I think you know maybe a very high degree of masochism. I think we where we appreciate that we are willing to take you know many punches to the forehead. You know it's I think that what the award recognized was that we worked really hard and for a long time without a lot of success.

And I think that we were very fortunate to have long term institutional funding that has been patient and has allowed us to learn and experiment and kind of come up with a program that actually works. And I think that the award was recognizing that that sense that we didn't have to have immediate quarterly payout. And that's a huge competitive advantage that we had versus having some large corporate entity trying to do this. I think we'd have a real hard time because this isn't something that that happens overnight. It's taken six years and it takes a lot of learning and I think that that may be part of the award is going to stay good for you guys for hanging in there despite all of the hard work.

Liz: Right. Hey, persistence pays off obviously. 

John: I guess so yeah. Thank goodness. 

Liz: Well I mean it looks that way. But do you think your model proves that food waste recycling works?

John: I think it does. I think that's the thing that's most exciting about what we're able to put together is that that you know there's and certainly we get a lot of help being in the Northeast having high tipping fees as high as our comparison having a lot of folks who are really looking towards that that mission-based issue of recycling and food waste and that that all has come together. But it's really, I think it is something that is a national platform now you can take this virtually to any market. There are going to be lots and lots of specifics. You know every market is a snowflake because you've got the regulatory environment, you've got the food manufacturing environment, you've got the local consumer market and those all will well modify how we will do this and different in different places. But I think it is something that is now broadly applicable. It's a business model that you can take to prevent any major metro in the country and find a way to make it work.

Liz: That's amazing. So, what's next for you? Where are you expanding?

John: West and south. We do have a group that is spending time looking at manure recovery for the low carbon fuel standard. That's kind of a whole different side of the business but for the core food waste where we've expanded up, we're just starting construction in Vermont on a really exciting project where Vermont is going 100 percent organic recycling in 2020. So literally down to the household.

Liz: Wow. 

John: And so, we're very fortunate to have a great farm just outside of Middlebury, Vermont and we have worked with Vermont gas and Middlebury College where 100 percent of the energy that we're producing is going to replace 100 percent of the energy usage, the thermal energy usage at Middlebury is campus and other Vermont gas customers who are looking to become a hundred percent renewable natural gas customers. So, really neat. Very, very different approach. 

In Massachusetts we're making electricity from renewable natural gas. Up there we're doing straight pipeline injection. So, a little, little different. And then we're in permitting for the Hudson River Valley of New York and moving down into Pennsylvania and South.

Liz: Oh makes sense. Well and New York is right for this.

John: I would say Manhattan and the greater New York Metro is kind of the holy grail of food waste gas.

Liz: Well you have to keep us posted as you enter and see now will you approach the Eagles with their stadium.

John: Absolutely. Despite being a really devout Patriots fan, I am non-denominational. What it comes to other stadiums and their foodways square but we're an equal opportunity food recycler.

Liz: Ok very good. Because I'm a devout Eagles fan. Just for the record. If you want to talk about Super Bowl fifty-two, we can, But that's fine.

John: Yes, we've got, we've got some you know between the Red Sox and the Patriots we've got lots of things good years and bad years. 

Liz: Yes, well many good. 

John: So as an older fellow I wear my red sox fandom as a mark of courage. 

Liz: There you go. 

John: Pre-2004 was a really, really bad long stretch. 

Liz: You've seen it all. 

John: Maybe that's what you're willing to stick in there with the food waste for all the years. 

Liz: Oh, there you go. That's our next case study. We should probably talk to my example. There you go. 

John: The Red Sox could do it why not us.

Liz: right. It's good. Grit is good. 

John: It helps us here.

Liz: So, you have 30 years of experience under your belt so if you can share some of the biggest changes you've seen considering you've come from such an environmental background so whether it's technology or perceptions and behavior I'd love to hear your thoughts.

John: Yeah it is a great question. In the in the whole renewable’s world is that I think we started kind of as true believers as people who really wanted to see renewables and recycling purely for the planetary benefit. And I think what's been most exciting about solar and wind and now anaerobic digestion is that you see that this is a good business and it's a good business not just for us but for all of our customers where we're providing services that are rewarding for them but also are saving them money. And I think the biggest change I've seen over the last 30 years is the doing good while doing well is has been the most important changes that that you know subsidies and it was painful when we lost the investment tax credit in 2016.

But I'm pretty good learning on our part to say “hey, look you've got you know subsidies aren't going to be there forever.” They are fickle things and you should have a business that stands on its own two feet and doesn't require massive subsidies. And I think that that to me is that is the biggest change across the renewables market and across recycling which is if it isn't a viable business it's probably not going to survive. And it needs to be a viable business without the tax incentives and without the kind of public subsidies because eventually people get tired of that and don't want to see those incentives going to continuously propping up an industry. And so, it's been it's been very neat to see how we've changed globally as an industry and how as an and part of it is you needed some help in the early days to learn the technology to make it cheaper, to make it cost effective because it's a prototype level. It's never cost effective but as you move forward and say “okay now, we can kind of do this at scale”. We should be able to step away from those subsidies and continue to provide valuable service that has those rewarding planetary components built into it. And I think I think on the whole we're doing that.

Liz: Yeah that's great. What else do you think we should be paying attention to in the world of waste, recycling and organics?

John: Oh well waste to me and as a newcomer to waste. It is remarkable how many opportunities there are. I mean it is such a challenging marketplace these days and with China's exit. I think the thing that's most intriguing to me and probably will require some help from the government but building indigenous American capacity for cardboard and plastics and glass where we've kind of taking the easy way out and send it over to China and let them do it and make the profit. Building those industries back up in the US, I think is absolutely fundamental to what we do. I was at a symposium with the head of Calgary Saigon and he volunteered that up until China's imposition of their national sword program California was exporting, I think if I may get the number wrong, but it was ninety eight percent of their recyclables.

Liz: Wow. 

John: And that's not good. You know not having native capacity we're looking for jobs. We're looking for industries which people can jump into. Those you know the old manufacturing jobs, I think is things that people didn't want to do but new manufacturing can do some pretty neat stuff with how would you make an indigenous cardboard industry and indigenous plastic recycling industry in the United States and that's something where I think there's going to be a lot of capital applied to that.

I think there has to be the recycling model that we all have been living with, I think it's broken and is probably broken for a long time. I don't see China re-entering the market, I don't think this is a momentary thing where they just want to kind of give everybody a swift poke in the ribs, I think they're gone. And so, I think that the challenge now to us is okay, we also don't want to recycle what we got to do with it. 

Liz: Right. 

John: And I think that's something that I miss. I think the venture capital and private equity markets will start addressing that pretty quickly because as prices continue to just go up and up and up, I think there'll be a lot of really interesting opportunities to do that.

Liz: I think you're right. What advice would you give to professionals entering this industry?

John: The organic side, patient capital really, get some really good partners on the funding side and we're you know we’re really fortunate to have a wonderful group of investors that have hung in there with us. And I think that the corollary to that is do not assume that your customers are going to change their behavioral patterns to accommodate your technologies. You need to change your technologies to accommodate their patterns.

Liz: That's great advice. So, John what keeps you busy outside of work?

John: Well four kids. That helps. Well this is this is pretty all consuming. There is a lot a lot of time spent trying to deconstruct this all the different challenges of it but it's we've got we're lucky to have great skiing and we take advantage of that up here and try and try to at least keep fit in body so we can stay ready for the weekly onslaught of challenges.

Liz: That sounds good. And then I read that you have a sneaky science background and maybe some patents in your toolbox.

John:  Yeah, I do. And I never thought I never thought that was going to be something I would do out of life. But yeah, we've I've been involved in a couple of different startups. And I mean natural language software and up to acoustics for semiconductor again didn't really plan on that but ended up having a lot of fun doing that. And so, I do have a couple of packs that I think at least three at this point and work well. And again, we I think the application of technology is fundamental to getting over these challenges. And there is there's so many really wonderful brilliant people out there who are looking to apply their chest infinite brainpower. And we're fortunate to be near a lot of those kids and at MIT, at Harvard and be able to kind of bring them into the into the process has been really exciting too.

Liz: Definitely. And I think it makes it an exciting time to be in this industry.

John: It is, it is. There is I think in renewables in general there's so much energy. And it's a bad time but there's so much enthusiasm in the young people. Coming into our we have we have the greatest time hiring because we just have numerous candidates who are fired up and want to do something different and wonderful and I think that's really encouraging for the industry and making them understand that waste is an enormous issue for us and something that has immediate and long-term payback.

Liz: Definitely.  

John: From an employment standpoint it is great and it's that's been fun too.

Liz: And you're helping it to become the resource that it is, right? And that's huge. 

John: Yes.

Liz: That's fantastic. Well John thank you so much this has been so informative. I can't wait for our listeners to hear this. And thanks so much for sharing all of your insights with us.

John: I appreciate it. It's been great fun. 

Liz: Thanks John.

John: Thanks so much.

Liz: Bye.