LA's Federal Reserve is burning money ... literally

What happens to money after it's gotten too old and worn out to be useable? One of the tasks of the Federal Reserve is to take old currency out of circulation and destroy it. 

The shredded remains used to go to landfills, but thanks to a relatively recent program, most of that money is being recycled. In Los Angeles, it's turned into electricity.

The Federal Reserve operates 28 cash processing facilities across the country. Los Angeles has one of the largest. In 2014, more than 3.1 billion notes came into the branch.  Each bill is inspected to verify that it is still in good enough condition to stay in circulation. Machines capable of scanning 100,000 notes an hour automatically sort out counterfeit bills, which get sent to the Secret Service, and damaged bills, which are shredded. The Federal Reserve removes and destroys about 5,000 tons of money each year.  Until recently, most of that shredded money was sent to landfills.

In 2011, the Federal Reserve formalized a recycling program for all of its branches. From 2010-2014, the amount of money that was recycled increased from 30 to 90 percent.

Some of the money is sent to be used as compost; a small proportion is used in manufacturing items such as tabletops and home insulation. A third of the money is sent to refuse-to-energy plants to be converted into electricity. 

Since 2010, the Los Angeles branch has been sending its roughly 535 tons of shredded bills to a refuse-to-energy facility in the City of Commerce. In 2014, it diverted more money to energy facilities than any other branch. 

At the facility, the money shreds are mixed in with other waste and fed into a furnace. The heat generates steam and spins turbines, which provide enough electricity to power about 20,000 homes. 

Hyperlapse of grapple at the refuse-to-energy facility in Commerce

The money shreds comprise only about half a percent of the waste the Commerce facility receives. The energy provided is enough to power 100 homes. 

Employees at the facility said that the shredded money is treated like any other waste.

"People don’t come out running when we see the currency. If it wasn’t shredded, maybe, but because it’s shredded, no,” said Matt Eaton, division engineer with the L.A. County Sanitation Districts.

An official at the Federal Reserve said that the benefits of sending shredded money to the Commerce plant are threefold. 

“We’re able to divert the shredded currency away from landfills, we have done so at lesser cost to the Fed, and the County of Los Angeles now has an additional source of fuel,” said Deborah Awai, group vice president at the Federal Reserve Bank of San Francisco.

An operator of the grapple at the Commerce energy facility said an additional benefit is that his job has made him an expert at the claw machines commonly found in arcades. Richard Quimbo, a power plant operator, said he is able to win an item half of the times he plays.

"Yeah, my son always says, 'Dad, how did you do it?'" Quimbo said.