ESG Focus: Plastic Recycling Disruption – Part 2

ESG Focus | Apr 29 2020

FNArena's dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future:

ESG Focus: Plastic Recycling Disruption – Part 1 was published on 24th April 2020.

-New technologies to hit the market
New repositories for recycled plastic
-Lock it in, Eddy

By Sarah Mills

Disruption is about to descend on the plastic recycling market. At least one technology – that of hydrothermal upgrading – has already arrived. 

Combined with the fourth industrial revolution and the shift to a circular economy, plus the global determination to be rid of the bane of single-use plastics, this technology and its descendants and rivals promise a revolution of existing models.

Assuming the technology lives up to its promise, the fact that existing technologies will be insufficient to drive the demands of regulators should open the door to these new entrants

As Bridget Croke, vice president of external affairs of Closed Loop, tells Greenbiz: “If you look at the amount of recycled content in the plastic industry that companies are committing to, they are not going to be able to reach that with the mechanical technologies that exist today. They’re going to need new ways to be able to get that plastic back so that the quality of material is high enough to get into packaging again.”

The tip of the innovation iceberg

The most disruptive technologies will be those that enable the recycling of all polymers (including mixed films and bioplastics) into plastics or fuel (to create new virgin plastic), via a single waste stream, thereby solving much of the costly sorting problem that has dogged the recycled plastic industry for decades. 

Low-level sorting will still need to take place to ensure waste streams are not contaminated by non-plastic material; and aggregation of plastic waste at the kerbside and malls will play a key role.

In doing so, these technologies will further governments’ aims of achieving a fully circular economy and support the United Nations’ Sustainable Development Goals (SDGs) on several fronts.

These technologies should loosen the grip of fossil fuel companies on the plastics industry, giving bioplastics a foothold; an industry that is expected to receive strong support from impact investors, not-for-profits and energy poor sovereign nations (it provides an energy source for countries with no energy).

Hydrothermal upgrading

Hydrothermal liquefaction has been around for some time – since its conception in the 1920s. It was the subject of some experimentation during the 1970s oil shock and has more recently been revived to address the plastic problem.

It converts chemical polymers, biomass and bioplastics into fuel, which can then be used to create virgin plastic or provide energy for the process. Biomass fuels obtained from the process can also be mixed with petroleum fuels in the one facility. 

It differs from chemical pyrolysis (which also turns plastic into fuel) in that it uses supercritical water to break down the polymers - pressure cooking.

Hydrothermal upgrading takes a big step towards achieving the goal of processing all polymers through a single waste stream, in that, depending on the technology, it can process most plastics including many bioplastics in the same stream.

The shortcoming of hydrothermal upgrading compared with mechanical recycling in particular, is that it is less "plastic circular", in that half of the oil retrieved from the polymer breakdown would need to be used to fire the crackers to create virgin plastic and would end up as carbon emissions. A certain amount of fuel is also needed to run mechanical recycling plants, but less.

On the upside, it offers a solution for end-of-life plastics (plastics that have been recycled so many times they have lost their integrity) and creates a simple cost-effective process that improves the economics of recycling. It also emits less carbon dioxide than many competitors, such as incineration, because it operates at lower temperatures. 

While not exactly plastic-to-plastic, like mechanical recycling, it does re-use all of the plastic components, closing the circularity loop. 

Australian company building a global presence

Licella, an Australian company, claims to be the global leader in hydrothermal upgrading technology. Its CatHTR process allows the recycling of 85% of plastics into fuel – another big leap – that in turn can be used to produce new plastics.

While ideally, Licella would create separate plants for bioplastic and petroleum plastic recycling, it can accept both as small amounts in the mix in the other's stream. The mix levels generally reflect the balance of plastics rejected from material recovery facilities.

Licella’s technology substantially reduces sorting costs given it can recycle most plastic, including films such as cling wrap, multi-layered plastics and potato-starch-based bioplastics. 

The company says that after $75m and extensive testing, it has perfected the process and is ready for commercialisation.

Sorting still has to occur but far less of it, cutting labour costs. For example, you don’t have to separate out PET or polystyrene. A notable exception to this is PVC, which generally is not found in recycling bins anyway. 

The company is not listed and is only taking investments of a minimum of $1m. The plastic industry is keeping a close eye on this technology, which the company website positions simply as “a bridge to a lower carbon future”.

It is understood the plastics and packaging industry is under pressure to opt for plastic-to-fuel options over mechanical recycling options, which would enhance the technology’s prospects.

One assumes its successors may be less expensive, smaller and less capital intensive. But innovation will need to occur swiftly to compete with low oil prices.

The rise of mini plastic-recycling plants

As technology advances, it is conceivable that within the decade, factories, and consumer goods and packaging companies will have their own such plants installed in-house to cut transport costs – a key cost input for plastic producers and recyclers.

Already do-it-yourself mechanical recycling machines, produced by a company called Precious Plastic, allow people to recycle plastic in their homes. 

Such technologies are nascent but taken to their logical conclusion would allow manufacturers to recycle their plastic in-house, particularly if incentivised by governments to achieve circularity and reduce emissions.  It is more energy efficient than pyrolysis and monomer recycling, and inhousing would cut transport costs.

It may also explain the pressure on packaging companies to favour plastic-to-fuel options as these will be more capital intensive in the near term.

It also suits big plastic’s agenda, because by converting half the oil in plastic to emissions, it potentially opens the market for more virgin plastic (and oil), in which the petrochemical industry has invested heavily in the past decade.

However, MSCI expects the trend towards smaller less-capital intensive technology across all recycling modes increases the likelihood of stranded assets in the plastic industry and possibly even the plastic recycling industry. 

Companies like Licella will need to paddle hard to remain on the crest of the wave.

Big plastic is observing the company’s progress and Prime Minister Scott Morrison has endorsed the company domestically and internationally. 

The Saudi-Russian oil war and the resulting low oil price may have a negative impact on the rollout of hydrothermal upgrading technology, particularly to energy poor countries that can now access oil at a quarter of the price it was just two years ago. Plastic as a source of energy is now less attractive.

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