Renewable Energy from Landfill Gas. Corporate Overview Headquartered in Houston, Texas Operations in 47 states, District of Columbia, Canada and Puerto.

Renewable Energyfrom

Landfill Gas

Corporate Overview

• Headquartered in Houston, Texas• Operations in 47 states, District of Columbia, Canada and

Puerto Rico

• Nearly 20 million customers

• Collect and process around about 115 M tons of waste

• 273 active landfills

• Over 357 collection operations

• 104 recycling facilities

• More than 45,000 employees

1. Double our waste based energy production

• Power 2 million homes by 2020

2. Triple the tons of recyclable materials processed

• Process 20 million tons by 2020

3. Invest in cleaner technologies

• Direct capital expenditures to reduce emissions and increase fuel efficiency by 15%

4. Preserve and restore more wildlife habitats across North America

• Increase the number of WHC certified facilities to 100

WM Sustainability Goals

Environmental Protection

Regulations governing landfill gas:– Off-Site Underground Migration (RCRA Subtitle D)

– Groundwater Contamination (RCRA Subtitle D)

– Odor control

– Organic Carbon Emissions through cap (CAA - NSPS)

The first priority for a renewable energy project is to be compatible with landfill operations and comply with

all regulations and protect the public and environment

Source of Landfill Gas

Produced by the natural anaerobic decomposition of organic waste in the landfill

Typical Landfill Gas Percentages

• Methane (CH4) 45% to 55%

• Carbon dioxide (CO2) 35% to 45%

• Oxygen and nitrogen 5% to 15%

• Minor amounts of other organics and contaminants

Natural gas fossil fuel is methane, so landfill gas can be used for the same purposes as natural gas

Landfill Gas Well Head

Header Pipe and Flare

Types of Landfill Gas Projects

Electricity GenerationSmall on-site plants, off-site plants, or blended with fossil fuel at utility

plant

Heating Fuel (“Medium BTU”)Medium BTU gas used in steam boilers, kilns, dryers, greenhouses,

liquids disposal, etc.

Process to Natural Gas (“High BTU”)Remove carbon dioxide, nitrogen, oxygen, and other constituents, and

deliver methane to natural gas pipeline

Vehicle FuelProcess to natural gas, then compress or liquefy to produce CNG or

LNG for alternative fuel vehicles

Landfill Gas Value: $/mmbtuDisplaced Energy Coal Natural

GasNatural

GasWholesale Electricity

LFG Project Type Med BTU Med BTU High BTU Electricity

Fossil Fuel Value $2 - $4 $3 - $12 $3 - $12 $9 - $21

Discount for LFG 0 – 40% 40% - 70% 0% 0%

Conversion Efficiency 95% 95% 70% 28%

LFG Revenue $1 - $2 $1 - $5 $2 - $8 $3 - $6

Sec 45 Tax Credits 0 0 0 $1.60

Renewable Energy Credits 0 0 Maybe $0.10 - $4+

Power Generation Projects are the Most Common

Renewable energy incentives are directed to electricity Renewable Portfolio Standards and Renewable Energy Credits

Federal tax credits

State subsidies, grants, and tax credits

Technology for electricity production is low risk

Access to market is universal (power lines)

More amenable to landfill gas quality

Less product quality risk (electricity vs. gas quality)

Electricity prices are less volatile than natural gas prices

Inventory of Landfill Gas Projects

Type of Project U.S.* WM

Electricity Generation 310+ 85

Medium BTU 110+ 22

High BTU 20+ 9

Vehicle Fuel 2 1

Totals 440+ 117

Renewable Energy Plant

Waste Management Business Model Currently own 47 power plants Capital is provided internally for projects meeting minimum Internal

Rate of Return: add 8 – 12 projects per year Corporate Renewable Energy Group (WMRE) performs centralized

management for all projects: Design, construction, and commissioning Plant operations Accounting and finance Energy marketing

Landfill business unit supports the plant with backup operators, compliance management, community relations

WMRE business unit pays the landfill business unit for the landfill gas used at the plant

WMI has appetite for all of the tax credits

Feasibility of Landfill Gas to Energy Plant

Landfill Site Considerations Sufficient Landfill Gas flow Availability and Cost of the Utility Interconnect Constraints of Air Permit

Energy Value Electricity Price Renewable Energy Credits Federal Tax Credits State Incentives

Renewable Energy Revenue Sources Energy Pricing: varies with competitive vs.

regulated markets, dominant fossil fuel

Renewable Energy Credits: varies with state portfolio standards, $3 to >$30

Federal Tax Credits: $11/mwh for 10 years Federal MACRS accelerated depreciation State Incentives: investment tax credits, property

tax and sales tax exemptions, grants, loans Federal Grants - ARRA

Power Pools

Marginal FuelFuel used atnormal load

NG - Natural Gas

C - Coal

NG

NG

NG

NG

C & NG

C & NG

C

C & NG

C

H & C

H - Hydro

Renewable Energy Credits (RECs)Renewable Energy Portfolio Standards (RPS)

Value range = $3 - $55 per mwhState policy that requires electricity producers to obtain a minimum

percentage of their power from renewable energy resources. Producers purchase (RECs) from qualified resources in amount needed to

comply with standard. Sales may cross state lines.

Voluntary Utility Renewable Energy ProgramsValue range = $1 - $10 per mwh

Customers pay a premium for blocks of renewable energy, and the utility purchases RECs from renewable resources, resulting in premium

payment by utility to renewable resource.

Voluntary Corporate Renewable Energy ProgramsValue range = $0.50 - $5 per mwh

Corporations purchase RECs to support renewable energy development.

Renewable Portfolio Standards

Regulated Markets PURPA rules: utility must buy power, but at their avoided cost rate Avoided cost is approved by the state PUC Avoided cost is driven by the marginal fuel cost In many regulated markets, the marginal fuel is coal, so the avoided

cost is often less than $30/mwh Rates are recalculated periodically, so there is no certainty of future

pricing Usually sell to the distribution line owner, but may be able to wheel

power to a co-op or municipal utility With no competition and low avoided cost rates coinciding with no

RPS, renewable energy has been slow to develop in some regulated markets

Competitive Markets Texas, PJM, New York, New England, MISO Competitive bidding by Retail Energy Providers Short-term contracts: 1 to 3 years Price is based on forward curve of marginal fuel, which

in most competitive markets is natural gas $1/mmbtu change in natural gas can result in $3/mwh to

$6/mwh change in market price of power Need for Renewable Energy Credits often is the

incentive for buyers, so RECs are almost always bundled with power purchase

LFG is attractive because of its high capacity factor (high confidence in output)

Long-term, Fixed Price Contracts

Buyers may be utilities, municipal utilities, or co-ops. Buyer’s incentive is to lock in energy rates, obtain

renewable energy credits, or both Renewable Energy Credits are almost always bundled

with power purchase Utilities in states with no RPS are initiating RFPs for

renewable energy Negotiated rate must be approved by PUC, City council,

or power co-op board of directors, and deemed beneficial or protective of the electricity customers

Federal Production Tax Credits“Section 45” Federal tax credit of $11/mwh can be claimed

by the owner of a renewable energy generation facility which uses landfill gas as fuel.

Tax credit can be claimed for a period of 10 years after the placed in service date.

Facility must be placed in service prior to January 1, 2013 to qualify.

To be eligible, no entity could have claimed previous Section 29 (45k) tax credits at the landfill

Conceptual Project

Conceptual Project: 4.8 MW

Capital Cost: 4.8 MW x $1.5 million/MW = $7.2 million

Capacity Factor: 5% parasitic load, 95% run rate = 90% CF

Output: 38,000 mwh per year

Combined State & Federal tax rate = 39%

Section 45 tax credits: 38,000 x $11 = $418,000 / year

Landfill Gas in the Total Energy Portfolio

Drawbacks Total resource is finite Individual plant size is typically less than 10 MW

Advantages Distributed energy: typically located in population centers

and connected to distribution lines Base load resource: capacity factor is typically >90% Peak load generation

LFGTE compared to Wind & Solar

Type Wind Solar LFG

Total Resource High High Finite

Capacity Factor 25% - 45% 10% - 20% >90%

Base Load Resource No No Yes

Distributed Generation No Excellent Good

Peak Load Generation Poor-Mod Good Excellent

Transmission Cost Can Be None NegativeHigh

Type Wind Solar LFG

Total Resource High High Finite

Capacity Factor 25% - 45% 10% - 20% >90%

Base Load Resource No No Yes

Distributed Generation No Excellent Good

Peak Load Generation Poor-Mod Good Excellent

Transmission Cost Can Be None NegativeHigh

Solar can be a great opportunity

Solar can be a great opportunity

10 Megawatts = 60 Acres

Branding and Advertising Campaign

Educate our customers that we are proud to be a garbage company, but we are also

• An energy company• A technology company• An environmental company• A people company

• Double our waste based energy production by 2020

• Short-term initiative to build 60 new renewable energy facilities by 2013

Landfill Gas to Energy is a Key Point in the Sustainable Growth Goals

• 2006 National Focus Group Research:

Knowledge of landfills’ electric generation capability moves opinion in a positive direction, with 72% of respondents having a more positive opinion

• 2008 Individual Site Survey:

Knowledge of a planned electric generation plant made 87% of respondents more likely to favor a landfill expansion

Improves Perception of Landfills

Curbside to Power