Powering Up with Centralized Biodigesters for Dairy Farms

19 january 2013

About 1,900 dairy farms dot the landscape in California, with millions of cows producing both milk and manure. The California Energy Commission wants to help milk that manure for all the power it can provide! In fact biodigesters, which produce gas from manure, offer a number of potential benefits: They generate energy, decrease greenhouse gases, reduce odors, improve water and air quality, and provide additional financial security for dairy farmers.

It is technically feasible to produce about 150 megawatts of generation (enough to power about 70,000 homes) from manure through the use of biodigesters, according to a study from the California Biomass Collaborative. The California Air Resources Board further estimates that the potential for methane capture from dairies amounts to about 3.1 million metric tons of carbon dioxide.

Savings and Revenue Opportunities from Community Digester Systems

Community digester systems not only provide useful power but also yield renewable energy certificates (RECs), carbon credits, and waste heat that can be used for multiple purposes. In some cases, the plants produce digested fiber that can be sold as bedding for cows, for composting, or for use by wholesale organic products companies. A summary of potential opportunities for cost savings and/or revenue generation is provided in Table 1 below.

Table 1. Summary of potential savings and revenue generation from community digester systems

Centralized digesters are potentially the most economical approach to achieving all these benefits. When neighboring dairies collaborate with one another to develop and operate centralized facilities, capital, operating, and regulatory compliance costs all decrease. However, a number of challenges stand in the way of achieving the full potential of this approach, including the need to develop business agreements that will be acceptable to multiple dairy businesses and the need to arrange power purchase agreements with electric utilities.

The California Energy Commission’s Research and Development (R&D) program has provided funding for a project to address these issues. The Commission’s R&D program supports energy research and development aimed at bringing environmentally safe, affordable, and reliable energy services and products to the marketplace.

“This project will lead to guidelines that can help reduce barriers to the use of centralized biodigesters for electricity generation while helping us to meet the state’s renewable energy and greenhouse gas emission reduction goals,” says Energy Commission Chair Dr. Robert B. Weisenmiller.

Researchers are looking at potential business structures, permitting issues, interconnection barriers, and financial factors for both Sacramento County and the state at large. The project has already yielded some useful results on the feasibility of a community digester/power generation project under certain conditions. Further research is expected to cover a more general set of circumstances. The ultimate goal is to develop a roadmap for expediting utility interconnection and managing shared responsibility, risk, liability, and maintenance.

Looking at the conditions under which centralized generation might be feasible, researchers found that, under certain assumptions, about 1,000 cows would be needed to take advantage of economies of scale for centralized generation — assuming that energy can be sold for $0.06 per kilowatt-hour. The analysis also compared alternative system designs and found that pumping manure to a central digester with an accompanying electricity generating facility was the most cost-effective approach. It compared favorably to trucking manure to a central digester, or using individual digesters to pipe biogas to a common generator facility. However, these conclusions are site?specific and different options may prove to be preferable under different conditions.

Researchers also conducted technical and economic feasibility studies for a community facility for colocated dairies in the community of Elk Grove, California. They found that over a 10-year period the community digester project would provide approximately $1.3 million in financial advantages. Additional benefits from reductions in greenhouse gas emissions were not included in the estimate. The simple payback period, assuming a total project cost of $2.4 million and an initial grant of $500,000, was approximately 7.8 years.

Researchers also determined that, under the conditions examined, a limited liability company (LLC) was the preferred organizational structure for a collaborative effort. Under other conditions, other models may be preferred. In an LLC, similar to a limited partnership, one entity takes the lead as the “managing partner,” while the other participants remain passive members. The LLC approach offers several advantages — most importantly, it quantifies and limits each participant’s involvement and risks. During the formation of the LLC, the structure also enables all LLC members to have a say in the operation, much as they would in a cooperative. It also allows creation of a legal entity that avoids many of the tax and business liability issues that can arise in a corporate or partnership structure. The LLC format also provides a means for individuals to conduct their financial and business affairs without the restrictions associated with cooperatives, partnerships, and contractual relationships.

Ultimately, the economical and organizational models developed in this project will help increase the portion of manure that can be cost-effectively used, and the new guidelines could be used to produce similar benefits throughout the state and across the U.S.