Your newspapers and magazines are recycled, your light bulbs are low energy and your weekly bottle collection is embarrassingly better than your neighbour’s.

But there is still one environmental chore that makes even the most die-hard eco warrior wince. Kitchen waste recycling — to compost or not to compost — is messy, smelly and all too attractive to vermin.

Yet recycling food waste could provide an alternative source of low-carbon energy.

Shanks, formerly a landfill company, has begun building its first anaerobic digestion plant, capable of generating enough renewable electricity to power up to 3,000 homes.

The £8 million plant will be built in Scotland and take waste food from Scottish homes and hotels and from restaurants and retailers in Edinburgh and Glasgow.

It will harness the gases produced by the rotting food to fuel a power plant. The power generated will be sold back into the National Grid, while also earning the company double Renewable Obligation Certificates — a government subsidy for renewable energy producers.

In the UK about 20 million tonnes of leftover food is thrown away every year. Using anaerobic digestion Shanks can turn this waste into a high-quality fertiliser for use on agricultural land and generate up to three megawatts of renewable electricity.

For every 45,000 tonnes of food waste recycled this way, about two megawatts of renewable power is produced — enough to heat 2,000 homes.

Shanks sold its English landfill business to Guy Hands, the private equity tycoon, in 2004 and now works with the private and public sector to recycle and reprocess waste.

It already runs similar plants in the Netherlands and Belgium and has plans for facilities in Canada.

The company, which announced a 24 per cent slide in half-year profits yesterday, is pinning its commercial hopes on new environmental legislation and a sharp increase in landfill taxes to persuade many more businesses and councils to opt for new technology and avoid putting waste into landfill at all. Shanks wants to build a clutch of anaerobic digestion plants around the country. It has indicated that it will bid for waste contracts to be put out to tender in Wales in the next year and has recently been shortlisted for similar contracts for Milton Keynes and North Lincolnshire.

It already has a three-year contract to recycle Marks and Spencer’s packaged waste food, which will use the anaerobic digestion technology.

It closed a £720 million Private Finance Initiative deal with Cumbria this year, which will allow it to build two facilities to dispose of the county’s rubbish for the next 22 years.

Tom Drury, chief executive, said: “I’m no eco warrior but how we can be smart in dealing with our waste is a very interesting challenge and could make a huge difference to the renewable energy sector that the Government is struggling to get off the ground.”

While the economy struggles, Shanks’s business, closely related to GDP, has suffered. But Mr Drury expects this to come back strongly when a recovery starts.

“The October PMI figures would indicate an upturn, as would GDP projections for next year. But if I’m honest, we’re not seeing it,” he said.

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