On-Farm Anaerobic Digester Trends In The United States

BioCycle April 2011, Vol. 52, No. 4, p. 36

AgSTAR point person ruminates on the successes, challenges and future of livestock methane as viable renewable energy source.

Dan Sullivan

U.S. EPA’s AgSTAR is a voluntary outreach and educational program promoting the recovery and use of methane from livestock manure. EPA and USDA — whose Rural Energy for America Program (REAP) and other mechanisms has helped fund on-farm biogas projects — have been working together since AgSTAR’s inception in 1993 and in May 2010 signed an interagency agreement to promote digester systems nationwide. AgSTAR is also working closely with the Innovation Center for U.S. Dairy and its Dairy Power Program, which signed a Memorandum of Understanding with USDA in December 2009 with the intent of helping reduce the carbon footprint of the dairy industry by 25 percent by 2020.

BioCycle caught up with AgSTAR National Program Manager Chris Voell just as his office had finished crunching the latest numbers related to trends in on-farm anaerobic digestion (AD) systems in the United States (see sidebar, “AD Trends at a Glance”). Voell offered some perspective behind the statistics regarding what is driving the growth of AD in America. In a nutshell, he says, if we want to realize the environmental and economic benefits that digester systems can bring, business models must be developed to make the projects viable (e.g., revenue, financing), a more conducive environment to attract investors must be created and energy policy has to be altered to be more supportive of smaller, distributed generation projects like AD. While government incentives and private investment are helping to drive growth, a handful of states are demonstrating how visionary policy is perhaps what is needed most.

“You look at places like Vermont and a few other states with policies and financial incentives that allow for investment in farm-based projects, and that’s where you find the digester system growth,” he says. Voell points to volunteer programs such as “Cow Power,” a Central Vermont Public Service (CVPS) voluntary program that allows customers to purchase electricity generated from dairy digesters at a premium (the generating farms receive 4 cents per kilowatt hour if they participate in the program). He also touted the Vermont-based standard offer program, which guarantees 14 to 16 cents per kWh to participating projects. Vermont also has net metering rules that allow projects to flourish on smaller operations.

Programs such as these, Voell says, allow citizens the opportunity to encourage development of smaller renewable energy projects in their communities and realize the improved quality of life that they bring (odor control, enhanced revenue generation, air and water quality improvements). New York, Pennsylvania and Wisconsin are other states with equitable rate structures and utility and energy policies in place that have led to the growth of AD. “But for a small- or medium-sized farm to invest in an AD system in most places in the country is not feasible,” he elaborates. “That’s why farmers and project developers who are currently investing time and money are looking at larger farms and codigestion to realize economies of scale and a decent return on investment. Also, a major issue is that for investors and project developers, it’s certainly not cookie cutter across the county. Every state and every utility has different requirements. This makes it very difficult to plan for long term investments.”

Since the USDA first added an energy title to the federal Farm Bill in 2003, the agency has awarded more than $40 million in grants to more than 100 on-farm digester systems. About 20 AD projects have come online annually since 2003 (many of these received USDA funding assistance), accounting for more than 140 of the 167 currently in existence in the United States, according to AgSTAR data. “One of the biggest reasons we have a start on the digester industry is the USDA’s REAP,” Voell says, adding that this and other federal assistance such as USDA Natural Resources Conservation Service (NRCS) EQIP (Environmental Quality Incentive Program) funds have been bolstered by state programs. These include Focus on Energy in Wisconsin, Cow Power in Vermont and programs of the California Energy Commission and NYSERDA (New York State Energy Research and Development Authority). Still, he says, much work remains to be done.

UTILITY RATES, REQUIREMENTS
“Getting appropriate rates for the energy, while probably the single largest hurdle, is only one part of the challenge,” he says. “Interconnection standards and studies, and the fees charged for those by utilities, vary widely as well. These fees can often be enough to kill a project — there are many cases where they have been multiple hundreds of thousands of dollars.”

Net metering — basically the deduction of an energy outflow from metered energy inflows —is a frequently discussed issue with regard to energy offsets. “While you might hear that 35 or 38 states have net metering as part of their energy policy,” he says, “the actual details and application varies widely.” He offers that a “good” net metering policy is one that allows for aggregation of all meters across the farm and contiguous properties, letting the farmer offset a higher level of energy use than they can in a lot of places. A “bad” net metering policy, he says, is where the farmer is required to pick a single meter to offset. Many digester projects will generate more energy than would be used by a farmer through one electricity meter.

“There are typically multiple meters all across the farm, for example, at the barn, for the irrigation pumps, the farmer’s residence, etc.,” Voell explains. “Say you are generating 100 kW from your digester project and your highest use at a single meter is 50 kW. You often cannot get credit for the remainder, and it is forfeited.” Some states, such as Pennsylvania and Vermont, go one step better with “virtual” aggregate metering, he adds, meaning that the meters do not have to be physically connected to allow for more energy use to be offset.

As a not-so-good example of utility policy — and Voell was reluctant to name a specific state or utility — he referenced a farmer “down South” who abandoned the electricity generation portion of his AD system (the digester is working fine with the gas being flared) because the standby charges he had to pay when his system was down for regular operation and maintenance were so exorbitant that it basically obliterated any profit that might be realized in the project. Standby charges are a fee for the privilege of being hooked up to regular utility service when a self-generating system is shut down. “When negotiating with utilities, pay attention to every detail,” he adds. “Hire someone who is fluent in utility contract negotiations. When you get down into the weeds in terms of negotiating contracts, net metering, standby charges, interconnection fees — that’s where the rubber hits the road.” Voell predicts this type of situation will happen less frequently as farmers become more savvy, these projects become more commonplace and support organizations such as AgSTAR become more involved.

NEW ENERGY POLICIES
Status quo policies built around centralized output of nonrenewables put up another major roadblock. “The way we’ve set up energy policy in this country is not conducive to the growth of distributed energy projects,” he says. “It’s traditionally been built around fossil fuel generated electricity at a much larger scale. The policy paradigm needs to change if we want to see proliferation of these kinds of projects.” Voell adds that the current difficulty is that energy policy is all done state by state. “Sometimes the federal government steps in, but for the most part states and individual utilities set their own policies,” he says. “And policy change at any level comes slowly. It takes a champion to get it done.”

He suggests several energy policy fixes that could help digesters along and allow smaller operations to be more economically viable. These include rates paid for the energy that recognize the broad suite of benefits these projects bring, streamlined permitting process and appropriate fees for interconnection and standby charges. “If on the back end there’s no return on investment, these projects aren’t going to happen,” he explains. “That’s why we have 160 when there could be easily 10 or 20 times that many. Until we have a fundamental shift in business models, energy policy and public support, the transition to seeing hundreds or thousands of these projects grow in the near future will not occur. Energy policy is not set up, in most cases, to encourage these. I know of instances where it costs people 8 cents to generate energy through this process, and they receive 4 cents for it — that’s not going to get it done.”
Voell points to the 100 percent shift in production by the Big Three automakers at the behest of President Roosevelt to support the war effort during WWII and America winning the race to the moon as two examples of our country being able to make necessary innovations when circumstances require action. “I think the country is trying to go in that direction in terms of energy usage and policy, but right now we are relying on market forces and volunteer efforts, which is not quite as commanding as FDR making a decision in time of war,” Voell says.

ONE FARMER, MANY HATS
The reality today is that embarking on a digester project requires business acumen that includes an awareness of all the potential financial benefits, counsels Voell. These include energy production (gas production for direct use or to power a genset and produce electricity and heat), codigestion (bringing in organic waste materials to boost gas production and generate tipping fees) and use of the liquid digestate as fertilizer and the manure fibers as bedding material or for other beneficial purposes. “Basically you have to cobble together every benefit you can get for these to make a project viable in today’s environment,” he says, adding to that laundry list management of on-farm nutrients and odors. “The way [odor control] translates to money is that when a dairy wants to add cows and the neighbors are happy about the operation, things tend to go much more smoothly.”

There is no question that the digester route is more expensive than “business as usual” manure management, Voell says. “The reality is that without government assistance up to this point at the state and federal level, we would not even have a start on the digester industry. The ultimate goal is to have projects that can generate revenue to pay the debt service with a reasonable profit. But in reality we heavily subsidize all the traditional energy sources in this country. If we would like to move toward alternatives like anaerobic digesters and biogas, we would have to expect to prime the pump for those new energy sources to be able to compete. If we want to achieve energy independence and energy security, helping promote systems like manure digesters offers an excellent way to get there. There is also a growing desire to be more self-sufficient at the local level and not always having to rely on large central infrastructure.”

Benefits of these projects go well beyond energy generation, he says. “They provide more stable revenues to farmers in rural communities. There’s a direct greenhouse gas reduction benefit of less methane into the atmosphere. And they provide for a better quality of life for the people who live in these communities. As we talk about investment of state and federal dollars, we have to realize the comprehensive benefits that come out of these projects.”

Helping other regional businesses such as food processors manage their wastes more sustainably is another plus, he adds. “Everybody I talk to is looking for that potential if it can be done appropriately. Securing a year-round supply of organics is no small task, but I think it’s a trend that’s on the rise. And we’re definitely seeing growth of third party owner/operated projects — capital being brought in by a third party. This reduces the risk to the farmer, and it brings in technical expertise as well as expertise in contract negotiations.” Nutrient management — keeping nitrogen and phosphorus out of waterways — has been another big driver, he notes.

ENERGY INTERDEPENDENCE
Backdropped by rising petroleum prices and dire times for other energy sectors such as nuclear power, Voell sees biogas from organics recycling as a growth industry with great, if largely untapped, potential. “The recently formed American Biogas Council (ABC) is another leg of the stool in helping move the industry forward,” he says. “Without appropriate technology and service providers, this industry will not thrive. We’re also seeing a definite convergence of the agriculture, livestock, waste management and organics recycling sectors. Folks in all of these sectors see anaerobic digestion as an opportunity to help them meet their goals of greenhouse gas reduction, green energy production, improved waste management, building a supply chain that’s more sustainable and providing a home for the organics waste stream. It is definitely moving beyond just an idea at the farmer level.”

Sidebar p. 37 AD TRENDS AT A GLANCE

Following is a snapshot of current digester projects across the United States.
• 167 currently operating digesters in 33 states
• 137 dairy, 23 swine, 5 poultry, 2 beef
• Top 5 states (in terms of total number of operating digesters): Wisconsin – 26, New York – 23, Pennsylvania – 19, California – 14, Vermont – 10. (Pennsylvania has had the most new systems become operational in the past year)
• 156 farm-scale, 11 centralized/regional
• Energy generation in 2010 was 453,000 MWh equivalent (compared to 374,000 MWh in 2009)
• For 2010, direct emission reductions were estimated at 51,200 metric tons of methane per year, or 1,075,000 metric tons CO2 equivalent per year
• Currently there are 146 operating energy-generating projects (electricity or thermal as opposed to flare or unknown gas usage)
• Current operational energy projects estimated to generate: 427,000 MWh from electricity and 51,000 MWh equivalent from boiler/other projects (478,000 MWh equivalent, total)
• These numbers include digesters that operate with livestock manure owned by farmers or third-parties, on farms or at a centralized location
More information on currently operating systems is available at: http://www.epa.gov/agstar/projects/
index.html.

— Compiled by Allison Costa, AgSTAR Program Manager

Copyright 2011, The JG Press, Inc.