(705e) A Coordinated Multi-Product Market for Organic Waste Management

Authors: 
Hu, Y., University of Wisconsin-Madison
Sampat, A., University of Wisconsin-Madison
Ruiz-Mercado, G. J., U.S. Environmental Protection Agency
Zavala, V. M., University of Wisconsin-Madison
One of the major challenges associated with organic waste management is determining an economic value for products. For instance, in current organic waste management systems, gate/tipping fees are normally required for processing, indicating that the waste supplier is willing to pay someone else for the waste disposal [1]. On the other hand, organic waste is a potential source for deriving value-added products such as biofuels, electricity, and fertilizers [2,3,4]. Thus, this suggests that waste suppliers can, in fact, earn income by letting others use their waste. Unfortunately, systematic waste exchange frameworks that can determine prices for waste streams are currently lacking. This is currently introducing significant levels of uncertainty on the market potential for derived products, technologies, and hindering investment.

We propose a coordinated market framework to exchange waste streams, processing, transportation services, and derived products. The framework is motivated and designed after coordinated electricity markets that currently exist in operation and that have led to high economic efficiency and technology innovation [5]. Also, the suppliers and consumers of waste and derived products, as well as technology and transportation providers bid into the market to offer their services. Prices for waste and derived products are obtained by solving a market clearing problem that balances products across a supply chain network that connects all the market participants. The market clearing problem provides prices for all products and services across the network.

We prove that the market clearing problem provides prices under which the profits of all market players are non-negative and provides a Pareto optimal solution (thus representing a true trade-off between the profits of all players). We provide illustrative examples to show the capability and properties of this coordinated market framework and demonstrate that the framework is flexible and can accommodate more sophisticated market players such as environmental remediation costs, waste storage, and policymakers and local/state/federal governments (which provide incentives/penalties to drive the market). The market can be cleared on a regular basis to adjust waste flows and prices due to seasonal effects (e.g., nutrient run-off during spring or poor air quality in particular areas). Moreover, the market naturally captures geographical effects (by providing space-dependent prices). This property can be used to redistribute waste streams across geographical regions (e.g., push nutrients away from endangered areas).

We use the proposed framework in a real case study of the Rock River basin in the State of Wisconsin. We consider (i) multiple organic waste streams including cow manure, wastewater sludge, and household food waste; (ii) multiple waste processing technologies that include nutrient recovery, energy production, and natural environmental degradation; (iii) regulatory drivers, such as RECs (Renewable Energy Certificates) and RINs (Renewable Identification Numbers) [6,7]; as well as (iv) environmental and social constraints on key factors such as TMDL (Total Maximum Daily Loads) [8].

References:

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[5] V. Zavala, K. Kim, M. Anitescu, and J. Birge, “A stochastic electricity market clearing formulation with consistent pricing properties,” Operations Research, 2017, 65(3): 557-576.

[6] “Renewable Portfolio Standard,” Database of State Incentives for Renewables & Efficiency (DSIRE) available at http://programs.dsireusa.org/system/program/detail/564. [Online; accessed 06-December-2017]

[7] L. McPhail, P. Westcott, and H. Lutman, “The renewable identification number system and us biofuel mandates,” ERS Report BIO-03, USDA, November 2011.

[8] D. Columbia, F L. Dodge, G L. Green, “Total Maximum Daily Loads for Total Phosphorus and Total Suspended Solids in the Rock River Basin,” 2011.