From Permit to Product: Why Execution, Not Technology, Decides Pyrolysis IRR

Sep 7
3 min read

"Illustration showing a pyrolysis project journey from permitting and planning, through construction and execution, to final product output, highlighting how operational excellence drives IRR more than technology — In pyrolysis projects, execution determines IRR — from permit approval to commercial production.

Pyrolysis has long been pitched as a technology story. Decks showcase proprietary reactor designs, catalyst tweaks, or thermal efficiency curves. But investors who have tracked projects through to commercial operation know the hard truth: technology rarely decides project IRR — execution does.

Permitting, feedstock logistics, EPC delivery, and offtake structures are the actual determinants of whether pyrolysis plants deliver double-digit returns or collapse into stranded pilots. In an OBBBA world where capital is scrutinized harder, execution risk is the dividing line between hype and bankability.

The Investor Blind Spot — Tech vs Execution

Most pitch materials overweight the “tech moat”:

Reactor geometry
Catalyst formulation
Energy integration claims

But when projects miss schedules by two years or fail to secure feedstock at the assumed gate fee, the IRR model doesn’t just compress — it implodes. A one-year delay alone can wipe 200–300 basis points off project IRR.

Investor takeaway: technology is necessary to enter the game, but it’s execution certainty that sustains returns.

The Permitting Bottleneck

Permitting is the first wall every pyrolysis project hits, and the most underestimated in models.

Timeline drag: Environmental impact assessments, zoning, and local community consultations typically extend 18–36 months in the US and EU.
Regional fragmentation: Some US states treat pyrolysis as “recycling,” others as “incineration” — a classification gap that changes permitting regimes entirely.
IRR erosion: Every 12 months of delay pushes revenue start back and increases IDC (interest during construction).

Illustration:

A project modeled at 12% IRR assumes COD in Year 3.
If permitting drags into Year 4, IRR drops closer to 9–9.5%, even with unchanged Capex.

Execution lesson: permits, not patents, drive timelines.

Feedstock Logistics — The Hidden IRR Driver

Feedstock is the single biggest variable in pyrolysis economics, yet often the least detailed in investor decks.

Feedstock Type	Cost / Gate Fee Dynamics	Logistics Radius	IRR Sensitivity
Municipal Solid Waste (MSW)	Sometimes gate fee positive (+$20–50/ton); quality highly variable	Short (<50 km) to keep trucking cost manageable	High — contamination raises O&M and yield loss
Post-consumer Plastics (sorted)	$0–50/ton depending on region	Moderate radius (50–100 km)	Moderate — pricing linked to recycling demand
Industrial Waste Plastics	Can be secured at low cost, often more uniform	Longer hauls acceptable	Lower — but offtake volumes smaller
Biomass residues	Low or negative cost in some regions	Distributed, high moisture content	Very high — drying costs erode margins

Investor takeaway: Logistics radius is the silent killer. Every extra 10 km of trucking can shave $10–20/ton off netback, compressing IRR materially.

EPC and Scale-Up Risk

“Proven at pilot” does not equal “bankable at 100 ktpa.”

EPC credibility: Lenders demand EPC contractors with a balance sheet capable of standing behind performance guarantees.
Warranties: Stack replacement cycles and uptime guarantees must align with debt tenor — a misalignment forces higher equity share.
O&M learnings: Even with sound technology, unproven O&M regimes often lead to yield losses, downtime, and inflated costs.

Execution lens: Bankability flows not from lab data but from EPC guarantees.

Offtake Realities — What Actually Clears Credit Committee

Offtake is where many pyrolysis projects over-promise. Letters of Intent (LOIs) look impressive, but credit committees treat them as paper until converted into binding, creditworthy contracts.

Counterparty quality: An LOI with a start-up polymer buyer ≠ a 10-year take-or-pay with a global chemical major.
Price benchmarks: Offtake contracts typically link to naphtha, oil, or polymer prices — meaning IRR resilience depends on commodity parity, not just “green” branding.
IRR uplift: Binding multi-year offtakes with investment-grade counterparties can improve financing terms and add 100–150bps to IRR by reducing equity burden.

Execution lesson: offtake quality, not offtake volume, drives bankability.

Capital Deployment Lens — What Investors Should Track

When evaluating pyrolysis projects, investors should shift from “does the tech work?” to “can this project execute?”

IC-Level Questions

How realistic is the permitting timeline vs model assumptions?
What is the feedstock contract structure (gate fee vs purchased waste)?
Is the EPC contractor credible, with performance guarantees aligned to debt tenor?
Are offtakes contracted with creditworthy buyers at fixed or indexed terms?
What happens to IRR if COD slips 12–18 months?

Proprietary Lens: Execution-to-Bankability Ratio (EBR)

Measures the degree to which IRR resilience depends on execution certainty (permits, feedstock, EPC, offtakes) vs technology upside.
A project with high EBR (>70%) is more investable than one where technology accounts for most of the modeled economics.

Outlook — Pyrolysis as an Execution Play

For investors, the conclusion is clear: pyrolysis is an execution play, not a technology play.

Near-term: Projects that secure permits, gate-fee feedstock, and creditworthy offtakes will deliver double-digit IRRs.
Medium-term: Scale-up will consolidate around developers with proven EPC partners and operational uptime.
Long-term: As carbon markets deepen and consumer demand for circular polymers rises, execution excellence will determine which projects survive industry shakeouts.