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On-site processing makes financial sense when genuinely avoidable costs and additional material value exceed the costs it adds. Begin with the current waste operation, not a supplier’s savings percentage. Twelve months of invoices, weights and handling records give the comparison a defensible baseline.
Establish the current cost by material stream
Keep cardboard, wood and different plastics separate. Record collected tonnes, collection frequency, seasonality and peak weeks. A container’s volume is not its weight: light film and dense production offcuts can have very different transport economics.
| Cost | Evidence | Common error |
|---|---|---|
| Collection and transport | Collections × charge, including surcharges. | Adding transport again when it is included in the collection price. |
| Container rental | Rental contract and services included. | Assuming a committed contract can immediately be cancelled. |
| Treatment or disposal | Tonnes × tariff, sorting and rejection charges. | Using one tariff for different waste streams. |
| Handling and internal movement | Tasks, minutes, frequency, labour basis and handling equipment. | Treating released time as an automatic payroll saving. |
| Storage | Occupied space, blocked bays and alternative uses. | Booking theoretical rent as cash saved without changing a real expense. |
| Production disruption | Documented interruptions and rejected batches. | Counting the same loss twice. |
| Existing material income | Credits or sales less associated costs. | Claiming all future sales as new revenue. |
The original purchase value of wasted material can help justify prevention at source. It is not automatically recovered by shredding. Include that value only where the project demonstrably replaces purchasing or prevents a loss. Compare better segregation, waste prevention and a revised collection contract as alternatives.
Cost the proposed installation and the waste operation that remains
Initial investment should cover delivery, unloading, refurbishment where needed, utilities, extraction, foundations, protection, installation, commissioning and training. Consider spare stock and working capital in the funding plan. A machine’s sale price is not its operational installed cost.
- Electricity under representative load and idle conditions, including auxiliaries.
- Feeding, tying, supervision, cleaning, sampling and output handling.
- Routine maintenance, wear parts, filters, service and critical spares.
- Consumables such as wire, straps, bags and process inputs.
- Downtime, repairs, emergency collections and any measurable production impact.
- Remaining transport, treatment, rejects, container rental and internal handling.
Use operating hours and the actual material, rather than motor nameplate power alone. Lower volume may reduce collections while leaving a per-tonne treatment fee unchanged. Specify exactly which contracts and work tasks change.
Validate the benefit before assigning a material price
Baling, shredding and granulation prepare material for a purpose; they do not guarantee a buyer. Contamination, quality, specification, volumes, local demand, logistics and offtake terms determine value. Establish accepted bale or particle specifications, minimum lots, price terms, freight and rejection conditions in writing.
Internal reuse needs technical approval of quality and permitted incorporation, plus evidence of purchasing actually replaced. Without a verified outlet, use zero additional income in the base case. A better-looking waste product is not a receivable.
- Collection savings: demonstrate fewer trips within payload, storage and service constraints.
- Treatment savings: confirm the new tariff and the cost of rejected fractions.
- Labour benefits: distinguish redeployed time, added production capacity and a genuinely removed expense.
- Material benefit: use incremental net value after quality and logistics, subtracting existing income.
Calculate annual benefit and simple payback on consistent boundaries
- Measure the current annual waste cost
- Avoided cost = baseline − comparable residual cost
- Add verified incremental net material value
- Subtract additional equipment operating costs
- Annual net benefit, before financing and tax
- Installed initial investment ÷ annual net benefit = simple payback
Place remaining handling either in residual waste costs or equipment costs, once. The benefit above is a cash operating benefit before financing and tax; depreciation is not subtracted from it.
Keep accounting cost and investment cash flow distinct
An accounting comparison may include annual depreciation and financing costs. Simple payback already includes the initial investment in its numerator, so deducting its depreciation again distorts the cash calculation. For a financed cash-flow model, set out equity, borrowing, interest and repayments consistently; do not count both the full purchase price and loan principal repayment as duplicate outflows.
Three worked examples
Cardboard: a baler with fewer collections
Assume a current annual cost of €16,000: 120 collections at €80 including transport (€9,600), rental €1,800, treatment €1,600 and handling €3,000. The collector confirms acceptance of the proposed bales and a 40-collection schedule. Residual annual cost is €6,000: transport €3,200, rental €1,200 and remaining movements €1,600.
Additional equipment costs are €4,000: energy €500, maintenance €1,100, ties €800 and added labour €1,600. A confirmed outlet is assumed to provide €1,000 incremental net income. Benefit = €16,000 − €6,000 + €1,000 − €4,000 = €7,000/year. At €30,000 installed, simple payback is 4.3 years. Without the income, it is 5 years.
The decision still depends on safe feeding, bale handling, available space and the collector’s actual schedule. Compaction does not remove contamination or permit overloaded transport.
Wood: a shredder, with briquetting evaluated separately
Assume current annual costs of €24,000, residual costs of €9,000 and new operating costs of €9,000, with no additional material income. Annual benefit is €6,000. A hypothetical €60,000 installed investment pays back in 10 years. An extra €3,000/year of wear or cleaning halves the benefit and extends payback to 20 years.
Briquetting is a separate equipment scenario requiring material trials, acceptable moisture, preparation, extraction, storage and an outlet. Distinguish untreated wood from coatings, treated timber and bonded boards. Fuel use depends on the product, combustion equipment and applicable rules. Neither shredding nor densification establishes permission to burn the material.
Plastic: offtake changes the investment case
Assume current annual costs of €32,000, residual costs of €15,000 and additional operating costs of €12,000. With no additional income, benefit is €5,000/year: an €80,000 installation takes 16 years to recover.
A second hypothetical case assumes a buyer accepts 40 tonnes/year with an incremental net contribution of €200/t after freight and quality checks, adding €8,000. The accepted tonnage is a modelling assumption, not a standard yield. With unchanged costs, benefit rises to €13,000/year and payback becomes about 6.2 years. Rejected output could remove the income and add disposal costs.
Film compacted for transport, rigid scrap shredded for a buyer and granulate prepared for reuse are different duties. Polymer identity, moisture, contamination and product specifications determine the process. Demonstrate the accepted output with representative trials before building the financial case around it.
Define the plastic product and processing route
Stress-test the assumptions that can change the decision
| Uncertainty | Test |
|---|---|
| Available tonnage | Reduce feedstock while retaining fixed costs; recalculate variable costs. |
| Offtake | Remove income, reduce accepted price and include a rejected batch. |
| Collection contract | Check which trips disappear and when terms can be changed. |
| Wear and energy | Use difficult material as well as a favourable sample. |
| Availability | Include repair delays, spares and emergency collection. |
| Start-up | Delay benefits and include training and stock accumulation. |
Simple payback ignores the timing of money, asset life, later benefits, residual value and annual variations. A material capital commitment should also consider discounted cash flows, net present value, financing and uncertainty on consistent tax assumptions. A short calculated payback does not resolve a technically unsuitable process or an insecure outlet.
US Department of Energy: financial evaluation methods
Prepare a comparison that can be checked
- Twelve months of invoices, contracts, weights and collections per stream.
- Recorded handling, cleaning, movement and interruption time.
- Material composition, moisture, contamination and production variation.
- Installed quotation, operating assumptions, staffing and remaining waste costs.
- Identifiable avoided costs and dates when they can be removed.
- Written buyer specification and terms, or validated internal reuse.
- Base and adverse cases, asset life, finance and residual value.
Specify the process and acceptance test before buying equipment
MSR can compare the current waste operation with a baler, shredder or material-preparation scenario using these inputs. The useful result is a transparent list of changing costs, technical conditions and assumptions still to verify, before committing capital.
MSR engineering and integration services
Assess the installed cost of used equipment, including inspection and commissioning
Compare current waste costs with an equipment scenario