Today, I want to tell you about a true game changer in the energy industry.
Up until a few years ago, this initiative would have seemed almost impossible. It would have been the subject of sci-fi movies.
I'm talking about turning trash into energy.
Here's the story...
According to Waste Management (NYSE: WM), the average person generates roughly four pounds of trash a day. That adds up to 227.5 million tons of "municipal solid waste" every year, enough to fill a line of trash trucks nearly 100,000 miles long, which would circle the Earth four times.
All of that trash has a pretty predictable profile. As the chart below shows, a good portion of it is recyclable: The glass, plastic and metal can all be reused.
But the majority of trash is organic material: Wood, food, yard waste and paper account for 62.5% of the trash Americans toss out. This adds up to 142.2 million tons of rotting material every year, just in the United States.
As much of that organic waste decomposes in the landfill, it emits gas... quite a lot of it too. Made up of about 60% methane, landfill gas is combustible. Enough so to create high-pressure steam that spins turbines to generate electric power in exactly the same way utilities burn natural gas.
Right now, there are more than 540 landfill gas-to-energy projects in the United States. Those projects are delivering 1,684 megawatts of electricity to corporate and government users, which is enough energy to power 1.7 million homes.
The national average utility bill is $96.55 a month, according to the White Fence Index, which tracks utility costs in the United States. Based on this average bill, powering 1.7 million homes has a sticker price of $165 million a month, or $1.98 billion a year.
This means solid waste companies in the United States are already bringing in nearly $2 billion from energy created using the garbage that they get paid to collect.
And that's just the beginning...
With only one landfill-gas site for every 5.7 active landfills, there is room for serious growth. Those untapped landfills are like having open wells bleeding gas into the air, where it vanishes, instead of into a pipeline, where it can be sold.
There are many companies out there that see that waste, yearn to harness that energy and might well make a fortune in the process. That's one reason market intelligence firm Pike Research expects this industry to at least double worldwide in the next decade.
The American Biogas Council estimates there are 12,000 undeveloped biogas sites in the wastewater (3,300), agriculture (8,200) and landfill (500) sectors.
Using the energy created from these sites, biogas could replace up to 10% of the United States' electricity needs. We are, after all, already "making" all this gas. The opportunity lies in capturing and harnessing its power.
Right now, one of my favorite plays in this space is Tetra Technologies (Nasdaq: TTEK), a massive engineering firm that is always on the cusp of "the next big thing." That's one reason it has, in its history, delivered fully four times the Nasdaq's return.
As a member of the America Biogas Council, Tetra Tech is one of the few companies with the expertise and ability to build a commercial-scale turnkey biogas facility.
The company is also solidly profitable and well-run, as evidenced by its strong historical growth in equity. And, with a $1.73 billion market cap, it still has plenty of space to grow -- or the potential to be acquired at a substantial premium.
Risks to Consider: Let me warn you though, if you're thinking about investing here, then the technology is pretty new, and -- much like solar -- it still relies on government subsidies. The industry also competes with natural gas... which is already near historic lows. So this sector of the garbage waste industry may need time to grow before it takes off.
Action to Take -- > But in any case, please stay tuned. There is much to come in this emerging industry. The technology is good and so are the economics -- the trick is finding a seat at the table.