Interview by Gary Thomas
Ian Smale, Hydrodec CEO, talks to Gary Thomas about the innovative Hydrodec system that recycles PCB contaminated oil for reuse.
GT: Could you please provide a brief introduction to the industry that Hydrodec works within and outline the key drivers?
IS: Put simply, we produce new oil from old. The technology itself was developed just over a decade ago in Australia. At this time, this was developed to solve a contamination issue in transformer oil with a now banned chemical called PCB (polychlorinated biphenyl), which is a global issue.
The technology when linked with a hydrogenation process creates an incredibly sustainable recycling proposition and creates oil which is at least as good, if not better, than new oil with 99.9% recovery rates, so it is extremely sustainable.
GT: What is PCB? Where is it found and what can be done with it?
IS: PCB stands for polychlorinated biphenyl. The chemical is toxic and can cause cancer, as well as a variety of other adverse health effects on the immune system, reproductive system and nervous system. There is a lot of information available online outlining terrible stories of its use over 3 or 4 decades, and production was finally banned by the Stockholm Convention on Persistent Organic Pollutants in 2001.
It was used in transformer oil, which is insulating oil in the electricity industry which sits in every form of circuit breaker and transformer. It was used primarily as a flame retardant which allowed transformers to be situated very close to tall buildings and originally it was focussed on that, but it became very widely distributed.
Rather like many other persistent organic pollutants, such as dioxins, PCB effectively contaminates whatever it is in - in transformers it gets absorbed into the paper, the rubbers and into the metals themselves. This leaves a contamination issue that has to be resolved.
GT: Could you explain how your refining process works?
IS: We have a patented process that is fundamentally what I would call some clever chemistry with some smart processing engineering. The solution was derived out of the CSIRO labs in Australia on behalf of the Australian government and was bought by the precursor to Hydrodec.
It is a relatively straightforward chemical scavenger which converts PCB into sodium chloride (rock salt), which is completely benign. The alternative is a sodium dechlorination process which leaves a residue which has to be disposed of separately.
The other alternative is incineration, but this has to be very carefully controlled, particularly through the flue gases, otherwise you get the creation of dioxins in the exhaust system and you just solve one organic pollutant problem and create another one.
We’re extremely efficient and have patented technologies for the handling of PCBs. This is allied with a relatively standard hydrogenation process to reinvigorate the oil molecule.
GT: How are your oil products unique and how do they compare to ‘new’ oil from primary sources?
IS: There is a very interesting open debate currently going on within Hydrodec as to whether we are new oil or recycled oil. For example, the process of hydrogenation that we go through is particularly helpful in establishing the oxidation stability of the product. This is a key performance measure of the quality of the product because the higher the oxidation stability, the less likely the product is to succumb to early oxidation - the main form of deterioration in oil products generally. With a very good oxidation stability score, our oil competes extremely well with new oil.
The second thing is that the oil is derived from used or PCB contaminated oil, but effectively removes the PCB down to zero, which differentiates it from any of the other recycled oils that don’t completely eliminate PCB.
The third thing is that it does all of that and is competitive commercially with new oil without a government subsidy, which is quite unique in clean technology (although there is a subsidy in Australia which is beneficial).
Lastly, the process of taking a spent oil and revitalising it for use in the same activity is quite unique and that process has allowed us to submit a methodology to the UNFCCC (United Nations Framework Convention on Climate Change) . We’re awaiting their view on this, but we are quietly confident that this will allow us to market our oil as carbon neutral or oil that can come with a carbon credit, which I believe would make it the first oil product on the planet to come with a carbon credit.
GT: Where are your main plants located currently?
IS: We have two operational plants, one in Young, NSW and the other in Canton, Ohio.
The technology originated in Australia and we have one operating unit in Young, what we call a processing train, with a capacity of 6.5million litres per annum.
The same processing train technology is now deployed in Canton, where we have 4 processing trains operating in parallel with a capacity of 27million litres per annum.
The plants are well established, the one in Canton was built just over 3 years ago, and they are also commercial.
In fact for the first time, over this half year they are both cash generative at the operating level, which is an extremely important development for us.
GT: Have you got plans to expand operations in the near future?
IS: Our strategy is first and foremost to maximise the opportunity of the operation that we have and we believe there is more upside still to come from our existing facilities, with higher utilisation and possibly better margin structures as we improve our sales and marketing processes.
The next big stage for us will be to look at expand the operating platform. First and foremost in the United States, which is the most controllable and scalable market in which we operate.
Secondly, in Australasia, the likely expansion will be an expansion of product rather than an expansion of existing capacity. We’re actively working at the moment to reprove our ability to do this not just for transformer oils but with industrial oils generally. We’re working with a potential industrial partner to do that, which is going extremely well.
The third thing would be to expand in other geographical locations Japan is the one that we are probably most advanced due to our joint venture, but not the only one that we are considering.
GT: The EPA has just issued Hydrodec with a final permit for the storage and treatment used transformer oil in the US. – how important is this to the company and how will it allow you progress in the future?
IS: I think it is very significant – firstly the level of PCB contamination in oil is regulated differently in different countries in the world. So in the United States, oil has to greater than 50 ppm contaminated with PCB to be considered contaminated.
Most oil is less than 50ppm, so greater than 50 ppm is probably around 10% of the used oil stock in the US. This approval, which is to process greater than 50ppm oil, gives us access to another complement of the market, another 10% if you like.
The second part is that US EPA accreditation is an important endorsement of the process itself. So it enables us now to present our process to the bigger OEMs and the larger utilities and say that this is now an approved and endorsed regulated process, and therefore a viable alternative to incineration etc.
The third thing is that it is pretty internationally transportable – being approved by the US EPA means it is more easily regulated elsewhere, which is helpful. We are already approved and regulated in Australia and in Japan.
GT: What are the environmental benefits of using your mineral oil products?
IS: Hydrodec is a very small part of the global oil chain, but it refers to a globally ubiquitous business which is the electrical transmission industry. This oil is available globally at scale and, certainly in the large OECD countries, the legacy plants will have a higher PCB contamination issue than perhaps in the new markets. So perhaps counter intuitively, our growth opportunity is in the big OECD markets.
Most importantly for us is that if we can genuinely reuse oil, this is a closed loop that allows supply completely independent of new oil markets. I think is a very exciting proposition. Our methodology suggests that we would save quite a considerable amount of carbon in effectively being able to get into this closed loop.
To give some quantification, to date as a company we have probably recycled
about 70 000 tonnes of transformer oil. This equates to 250000 tonnes of CO2 saved and if you save that in the Australian carbon pricing market today, there is a notional value of around AUSD$3 million.
As a minimum aspiration, a doubling of our existing capacity would allow us to save 250000 tonnes of CO2 globally per annum which is small, but starts to be relevant.