Twenty years ago, Holsum Dairies installed the first anaerobic digester in Wisconsin. Part of a combined heat and power system, the digester mixed cow manure with heat and bacteria to produce biogas that fueled a generator.
It was a novel experiment at the time. The digester, and another the dairy installed a few years later, reduced the size of open lagoons of manure that release methane into the atmosphere. Wisconsin Public Service, the local utility, bought the electricity. But last year, Holsum Dairies changed course, upgraded the two digesters and began producing renewable natural gas for California’s burgeoning renewable fuels market.
“California’s market is the biggest driver, for sure,” said Holsum Dairies owner Dr. Robert Nagel. He estimates the northeastern Wisconsin dairy will receive three to five times more revenue from selling the renewable natural gas and its environmental benefits than it did from electricity sales to the local utility.
The California Air Resources Board adopted the Low Carbon Fuel Standard in 2009. The standard seeks to slash the carbon intensity of transportation fuel 20% by 2030, with annual benchmarks for gasoline, diesel, and greener replacement fuels.
Under the policy, renewable natural gas is used to reduce emissions from existing natural gas-fueled vehicle fleets such as transit buses, trucks, vans and other multi-passenger vehicles. California refineries, petroleum importers and wholesalers receive credits for buying renewable fuels that lower the overall carbon intensity of the fuels they sell. Through a complex reporting tool, the regulated parties track the deficits and credits from fuel purchases.
Fuels are valued based on a formula developed by Argonne National Laboratory. Renewable natural gas from landfills, wastewater sludge and food and green waste all have a lower carbon intensity than any form of fossil fuel gas. The lowest by far, and thus the highest value credits, is for renewable gas from dairy farms.
That’s spurred a biogas boom in the Midwest. The American Biogas Association lists three Midwest states in the top 10 for biogas production potential, primarily based on the strength of the dairy industry. Several states such as Wisconsin have been producing energy from manure for decades already.
“I think a lot of the development you’ve seen in this industry has been in the Midwest,” said Grant Zimmerman, CEO of the Chicago-based renewable natural gas developer Amp Americas. “The attractiveness of the Midwest as a farming and retail dairy industry center … make it attractive as a dairy RNG producing region as well.”
“There’s a gold rush, so to speak, of folks trying to build these [RNG] networks to capitalize that strong pricing,” said Peter Weisberg, the Portland, Oregon-based director of product development at sustainability consulting group 3Degrees.
U.S. Gain, a Wisconsin renewable gas developer, signed Holsum Dairies and three other farms last year to join its network of 26 projects that supply RNG for California and other markets. (Oregon and British Columbia have a similar low-carbon fuel standard and Washington state just passed a law creating one.)
“We’re seeing more projects this year than we saw in the first 30 years of our [organization’s] existence,” said Johannes Escudero, founder and CEO of the Coalition for Renewable Natural Gas, who called it the “fruit of decades of advocacy.”
Amp Americas last year opened the largest dairy operation in its fleet at the Riverview LLP dairy in Morris, a city on Minnesota’s western border. The company uses manure from 100,000 cows on 12 dairies at four locations to produce more than 10 million gallons of renewable natural gas annually. The company is eyeing projects in Wisconsin, Kansas, Indiana, Iowa and Michigan.
Gevo, Inc. recently announced a $68 million project in northwest Iowa that will collect waste from 20,000 cows for renewable natural gas production. The company expects to earn $9 million to $16 million annually from mainly the California fuel transportation market, it said in a press release.
And Smithfield Foods, the world’s largest hog farmer and pork producer, has teamed with Roeslein Alternative Energy and invested $45 million to capture hog waste from its northern Missouri farms. Other renewable gas producers, including Brightmark, have Midwest projects either completed or under construction.
Stephanie Lowney, U.S. Gain’s director of marketing and innovation, said the company has seen a “surge of projects looking for financing and development support” because of the growth of the California market. “We can’t keep up; the pricing now is so strong,” she said.
According to the California Air Resources Board, about 90% of natural gas sold for transportation in the state last year was offset with renewable natural gas, pushing the overall weighted carbon intensity value of natural gas vehicles below zero for the first time in history.
The Coalition For Renewable Natural Gas and Natural Gas Vehicles for America released data showing that last year more than half of on-road fuel used by natural gas-fueled vehicles nationally came from renewable gas. The two organizations said renewable gas consumption for transportation fuel jumped 267% over the past five years.
Farms using anaerobic digesters substantially reduce methane emissions, which is 86 times more potent than carbon dioxide. After digestion, the remaining material remains suitable for fertilizer and animal bedding. Amp Americas says its Morris digesters will annually remove 100,000 metric tons of greenhouse gases from the air, the equivalent of removing 120,000 cars from the road for a year.
Critics of anaerobic digesters and renewable natural gas argue the system bolsters the factory farm model and only marginally impacts methane since cow burps cause more emissions than manure. They say some dairy farms are now adding cows to create more waste for renewable gas production.
Investors think the fuel will be relevant to transportation for many years, though, because semis and other large vehicles weigh 40 times more than passenger cars, a barrier to their electrification. “We’re a long way from solving that problem,” said Zimmerman, of Amp Americas.
The burgeoning industry isn’t without risk, though. Anaerobic digesters cost millions of dollars and rely on custom designs for each farm that make them harder to replicate. Injecting gas into pipelines can be a hurdle, and California or other states could pull the plug at any time on their incentives.
Ben Gerber, president of M-RETs, a Minnesota company that developed a renewable energy certificate for RNG, said California’s lucrative credits threaten to shut out potential buyers in other markets. A carbon tax could spread demand more widely, although he does not advocate it.
California dairies have stepped up, too, and have dozens of digester projects underway. The state expects at least $1 billion in renewable natural gas projects by 2024.
This article was first published by the Energy News Network and was reprinted with permission.