Friday, July 28, 2017

Cutting Out the Middleman in Waste-to-Energy

The recent articles, “Advanced Disposal Services:  Hauling a Heavy Load” and “Solid Play in Solid Waste” looked at waste management services.  The group has exploited increased demand and market fragmentation to deliver strong profits and growth.  Investors have flocked to the sector, inspired by one acquisition announcement after another. There may be more afoot in the sector than consolidation. 
There are some newcomers to the solid waste management sector that have passed up the usual business model of garbage trucks, transfer stations and landfills. These innovators are rethinking solid waste and bringing new technologies to the sector, potentially disrupting the business model that has been so effective for the garbage haulers.
In the last article we looked Recology with its alternative view on waste as valuable resource.  HomeBiogas Ltd. is yet another innovator with an entirely different approach to solid waste.

Home Biogas has developed a closed-loop waste management system for the residential market that cuts out the middleman in kitchen scraps recycling.  The system converts household food scraps, including meat and dairy leftovers, and animal manure into cooking gas and liquid fertilizer for use in the home.  About 200 liters of gas is produced from each liter of food waste.  The system has a 500 liter capacity to store gas, which is enough to run a barbecue grill for about 45 minutes or fire a gas burner on a stove for two hours.  As long as the householder continues to feed the system with food waste, it will produce gas.  Fertilizer is a handy by-product.

The experience level of the average person with anaerobic digesters is low at best.  Most have no experience at all with such systems.  Home Biogas has tried to set up a user-friendly set-up and operating sequence.  The system arrives in a small box with do-it-yourself instructions.  After the system is put together it is activated with starter material.  Time to first biogas is expected to be about one to three weeks.
It sounds quite compelling especially considering the $995 retail price.  It is also versatile enough to be used for water heating or lighting if biogas-compatible equipment is hooked up to the gas output.  However, the Home Biogas system is practical in only a few settings.  First, it only operates in warm climates where the scraps in the system will not freeze.  Some modifications are necessary in colder climates such as electric heaters for the digester tank or placing the digester inside a larger greenhouse.  Second, it appears practical only for single family homes, condominiums or garden level apartments where the householder has access to secure outdoor space.
While the company started out targeting the residential market, others have found interesting applications for the HomeBiogas system.  The European Union provided funding for 40 systems for a Palestinian village in the West Bank and the system has been used at an orphanage in Uganda.
It would be interesting to watch HomeBiogas as it continues perfecting its technology.  Achieving the ability to processing meat and dairy waste is a significant improvement over other biogesters that accept plant matter only.  The company claims customers in 56 countries around the world, which provides some indication that this feature has particular appeal.  It would also be interesting to see if the system can be scaled for larger scale applications such as apartment buildings or commercial applications.
HomeBiogas is a privately held company based in Israel.  The company keeps its financial matters close to its vest.  Reportedly the company has used product crowd funding to take in a small amount of money for working capital.  It has also taken in an estimated $3.0 million in early rounds from an angel investor. It would not be surprising to see another overture from HomeBiogas looking for additional capital in a Series A round.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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