Anaerobic Digesters: A Promising Source of Renewable Power, Carbon Offsets

Biomass, including anaerobic digesters, has long been recognized as a potential source of renewable energy. Historically, however, the wide-spread use of digesters has been hampered by the initial large capital costs associated with the design and construction of digester systems. That may be changing in the near future as Congress is currently debating legislation that would help farmers fund renewable energy projects based on biomass, including anaerobic digesters. In addition, emerging carbon markets such as the Chicago Climate Exchange and the Regional Greenhouse Gas Initiative may offer farmers additional opportunities to recoup the costs of constructing these digesters through the sale of carbon offsets. This article explores the promise and challenges of biomass energy, particularly the anaerobic digestion of agricultural wastes.

Cow Power

Digesters are covered lagoons and sealed concrete tanks that heat waste to speed decomposition. The raw materials in the digesters include cow manure, other animal wastes, and unsold or unsaleable farm products. The decomposition of these materials produces methane, a potent greenhouse gas (“GHG”). Instead of being released into the atmosphere, the methane in the digesters is delivered to a modified natural gas engine, which spins a generator to produce electricity. That electricity can be used on-site or transmitted to a power grid. The biogas produced in digesters can also be “scrubbed” to produce natural gas for sale to power companies.

A majority of the installed capacity of digesters are found in the top five dairy states – Wisconsin, Minnesota, California, New York and Pennsylvania. Wisconsin’s largest utility pays a certain amount to customers who generate electricity using digester technology.[1] EPA’s AgSTAR program reports that the 125 anaerobic digesters operating nationally generated about 275 million kilowatt hours of electricity.[2]

At the international level, AgCert, a European company focused on large scale GHG emission reductions, has implemented anaerobic digesters for the dairy and pig industries in Brazil. AD-NETT, an organization of European countries sharing information on anaerobic digestion, reports that animal wastes contribute to more than 90% of the total biomass resources in Europe, which is projected to contribute 628,000,000 megawatt hours of energy by 2010.[3] Danish legislation has facilitated and regulated anaerobic digesters since 1989. Germany, Austria and Sweden have been following Denmark’s lead since 2000, and other European countries with commitments to Kyoto protocols are pursuing this technology in their efforts to reduce GHG emissions and provide renewable energy.[4]

Dairy farmers report that their top priorities for installing digesters were odor control, manure management and environmental compliance.[5] Anaerobic digesters mitigate odors by reducing volatile organic acids to methane and carbon dioxide which are used as biogas, and destroying the hydrogen sulfide during combustion.[6] They also protect water quality by destroying more than 90% of the disease-causing bacteria that might otherwise enter surface waters, and decreasing the amount of organic wastes that would otherwise reduce levels of dissolved oxygen in aquatic ecosystems.[7] Finally, digesters produce dry fiber for bedding and nutrient-rich liquid fertilizer.[8]

However, anaerobic digesters bring their own set of regulatory and environmental challenges. Farmers must comply with local and national permits regarding inputs, waste conversion processes, and post-digestion products, nutrients and liquid. For example, the Washington Department of Ecology requires Dairy Nutrient Management plans as a base regulatory tool for dairy farms, and digesters must be accounted for in these plans.[9]

If a digester accepts wastes from off-site sources, special requirements regarding storage and nutrient application may apply. Further, individual and general wastewater discharge permits are required by state agencies. If the wastewater from the digester is discharged to a waterway (as opposed to another permitted facility), a National Pollutant Discharge Elimination System (NPDES) permit is required.

Farmers must also be aware of local and state air quality laws. While some states exempt digesters that are located on and operated by farms from air quality permitting requirements, others may not, requiring farms to obtain air quality permits for digesters that vent to the atmosphere through flares or other emission sources. In fact, large-scale digesters that exceed relevant regulatory thresholds[10] will be subject to new source review requirements that include reporting the facility design, air emissions sources, air toxics and pollutants, and emission control devices.

In addition, local health agencies that govern solid waste use may require nutrient analysis and a “beneficial-use determination” of post-digestion solid waste that is used on the farm or sold as fertilizer. Heavy metals and antibiotics from treated animals that may be present in these solids must be addressed.

Some public interest groups, primarily championing environmental agendas, have opposed anaerobic digesters, associating these systems with large concentrated animal feed operations (CAFOs). While recognizing evidence that digesters offer significant manure management benefits to smaller farms and CAFOs, these groups are concerned about enforcement of air and water quality standards and the potential that anaerobic digester technology will promote construction of more large-scale CAFOs. A farm in Minnesota is currently tied up in litigation with a national environmental group over the installation of a digester. On the other hand, digesters can also help protect against environmental lawsuits because they facilitate proper manure management and reduce air emissions, thereby reducing the risk of violating Clean Water Act and Clean Air Act regulations, as well as CAFO permitting requirements.

GHG Regulations Provide New Incentives

Despite these permitting requirements and environmental challenges, growing concerns about climate change and legislative responses to this environmental threat are providing new incentives to dairy farmers and increasing the interest in digester systems. GHG reduction targets and financial incentives could make anaerobic digestion more economically viable.

Several recent state initiatives aimed at reducing GHG emissions illustrate this point. Washington State generates most of its electricity from hydropower and has one of the lowest rates of carbon output per capita in the country. Nevertheless, the State has committed to aggressive GHG reduction targets and with 7% of the state’s GHG emissions coming from agriculture,[11] methane emissions from dairy farms are a prime target for achieving the required reductions. Washington State University’s Climate Friendly Farming program has already begun monitoring dairy farms in Whatcom County to generate baseline data on GHG emissions as part of its research on the potential of anaerobic digesters to reduce methane emissions.[12]

Similarly, under its recent Climate Change Integration Act, Oregon is has adopted the goal of a 75% reduction below 1990 levels by 2050,[13] and has also adopted a renewable portfolio standard that requires the state’s largest utilities to generate 25% of their electricity from renewable sources by 2025.[14] California has nearly 2000 dairy farms and over two million cows. Assembly Bill 32 (AB 32), the California Global Warming Solutions Act of 2006, requires a reduction of GHG emissions to 1990 levels by 2020.[15] Like Washington and Oregon, California has a renewable portfolio standard which will require utilities to produce 20% of their energy from renewable sources by 2010. As demonstrated by states in the Northeast and Midwest, partnering with Northwest farmers will not only help utilities to provide “green power,” but will also contribute to states’ goals for reducing GHG emissions.

Financing the Fuel: Funds for Farmers

State and federal programs provide financial incentives to dairy farmers willing to invest in GHG-reducing technologies. Examples include Washington’s Energy Freedom Loan Account, which provided startup funding for two anaerobic digesters,[16] the Energy Trust of Oregon’s Open Solicitation Program which aims to help meet Oregon’s renewable energy goals by distributing grants to renewable energy projects that are “clever, creative approaches that have not been enacted due to lack of funding,” and California’s Dairy Power Production Program, through which the California Energy Commission distributed $9.64 million to ten California farms to build digester systems. Nationally, the AgSTAR Program, an EPA/DOE partnership that focuses on biogas capture as a source of renewable energy, provides a comprehensive guide to federal funding available for biogas projects. [17]

Cash Cows: Economic Incentives to Invest in Biogas

Even with initial start-up funding, farmers willing to invest in digesters must be sure they are economically viable in the long-term. Recognizing the negative impact of low electricity rates on start-up renewable energy sources, the Washington State Legislature passed and the Governor signed House Bill 2247 into law in May 2001. This is similar to the legislation in Wisconsin and Vermont, which requires utility companies to offer customers the option to pay increased rates for “green tag” energy.[18] In turn, utilities can take this extra income and offer better purchase prices to generators of renewable energy. Biogas energy, produced by anaerobic digesters, qualifies for this “green tag,” which boosts the prices paid to the farmer by about $0.15 per kilowatt hour. Further, this bill also allows utilities to buy “renewable energy credits” or “RECs” to fulfill their requirements to increase the purchase of power from renewable resources. RECs represent all of the “nonpower attributes associated” with one megawatt hour of renewable energy. That is, by replacing fossil fuel use with electricity generated by anaerobic digestion, farmers receive credit above and beyond the carbon credits related to methane removal. Utilities can purchase these RECs from farmers and combine those purchases with actual use of renewable resources to meet their annual renewable energy targets.

A 2006 evaluation of the ten anaerobic digester projects funded in California through its Dairy Power Production Program revealed that while many farmers saw large savings on their own electricity costs from operating digesters, they had little incentive to run the digesters at full capacity because they could not profit from any excess electricity that they produced.[19] This spring, however, the California Public Utilities Commission approved a power-purchase agreement program between a waste-to-energy company representing dairy farms and Pacific Gas & Electric. The company, BioEnergy Solutions, will deliver up to three billion cubic feet of biogas to PG & E every year, enough to meet the electrical needs of 50,000 California homes. One farm involved in the BioEnergy contract expects that its 3000 cows will generate over $400,000 in electricity revenue and obtain 18,000 carbon credits per year.[20] The project will also control waste runoff and odors, and reduce methane emissions by a projected 70%.

However, generating profits from on-farm power continues to face formidable obstacles. Utility interconnection and purchasing policies are still in their infancy, requiring utility companies to rework their billing structures and challenging dairy farmers to negotiate the complexity of generating electricity in parallel with the grid. Electrical upgrades required to connect to the grid are expensive, and some farmers have been required to pay for the installation of interconnection infrastructure – poles, transformers, and switches – that was not located on their land and later became the property of the utility. Transporting biogas, which has a lower energy density than other fuels, is inefficient over long distances. Overall state policies have yet to create markets to make investment in the technology worthwhile.

Moving Forward

Even with the implementation and regulatory challenges, anaerobic digestion is receiving increased attention as a source of alternative energy and a way to reduce GHG emissions. Farmers and agribusinesses are taking a hard look at their current operations, local and state permitting requirements, funding sources and market opportunities to determine whether an anaerobic digester is a viable option.

For more information, please contact Alyssa Moir.