digester construction
August 15, 2018

Taking Methane From Barn to Biogas

 |  By: Jim Dickrell

Methane from cow manure is the very definition of “natural gas.” But getting that methane into a form of energy that can be readily used has been a long, frustrating and arduous journey—until, perhaps, now.


Land O’Lakes, Inc. (LOL) and California Bioenergy LLC (CalBio) launched a first of its kind collaboration this summer to finance, build, operate and manage methane digesters on California dairy farms. The project is designed to capture methane from cow manure using on-farm digesters and then compress it into a natural gas pipeline where it can readily be used by commercial forms of transportation like city buses or heavy trucks in metropolitan areas such as Los Angeles.


The project comes none too soon. By 2030, the state of California has mandated that dairy farms within its borders must reduce methane emissions from manure by 40%.  


“The big challenge was the operation of these electrical generators, and it was as much art as it was science,” says Matt Carstens, senior vice president of LOL’s SUSTAIN, a business unit of Land O’Lakes focused on elevating sustainability in food production. Electricity projects generated with methane  release a small amount of nitrogen oxides (NOx), and California regulators and grant programs have been discouraging electricity generation.


That’s where renewable compressed natural gas (R-CNG) comes in, which is somewhat easier to deal with. The methane from cow manure is about two-thirds methane, with the remainder comprised of hydrogen sulfide, carbon dioxide and water. These latter molecules must be scrubbed, resulting in nearly pure methane for injection into the utility’s pipeline. This bio-methane is then contracted for sale with a fleet which uses R-CNG as a vehicle fuel. In addition, the new commercially available natural gas trucks and buses emit 90% less NOx than diesel alternatives, and as a result help contribute to improving California air quality.


No single farm can do all of this alone because of infrastructure requirements, costs and the complexity of such a project. However, if a cluster of nearby dairy farms can capture its methane at digesters on each of the farms, a central processing site can scrub, pressurize and send the gas via pipeline to Los Angeles where it can be used. Such a joint venture becomes much more viable and creates a potential and significant revenue stream for each farm.


The partnership between LOL and CalBio is designed to facilitate just that. “LOL and CalBio are creating the end-to-end sustainability infrastructure that farmers need to make ‘barn-to-biogas’ a reality,” says Carstens.


CalBio says its dairy digesters are proven in California, where it has many already in operation. “Our expertise and ongoing operational support will help dairy farmers make the most of a significant new revenue stream through biogas generation,” says Neil Black, CalBio president. CalBio will also manage the sales and marketing of the renewable energy credits that are available.


“The biggest thing our collaboration does is unlock new income for farmers,” says Carstens. While neither he nor Black will say publicly what that potential revenue might be, they say it could be substantial. “Any revenue is better than the zero farmers are getting today [if they don’t operate a digester]. But we believe it will be a net positive,” says Carstens.


Black acknowledges that the sale of biogas alone would not be sufficient to cash flow the project. “It wouldn’t be viable without renewable energy credits; it’s very dependent on those credits,” he says. But both state and federal credits are available, and California has an on-going commitment to the program. 


The state credit is from California’s Low Carbon Fuel Standard (LCFS). Dairies receive a particularly high LCFS value based on destroying methane which is currently released into the atmosphere. The federal program is the Environmental Protection Agency’s Renewable Fuel Standard. Dairy digester projects are eligible to receive a D-3 RIN, which is currently significantly more valuable than an ethanol credit.


On the cost side, none of this comes cheap. Just the on-farm portion of the digesters and initial-phase gas scrubbing can range from $2 to $3 million per farm. And given economies of scale, the larger the dairy the better. They become most feasible at 2,000 cows on up, and a cluster of five to eight nearby dairies milking 10,000 to 15,000 cows make the final-phase scrubbing and gas pressurization the most viable. Once such a cluster is established, smaller dairies would be able to tap into it, says Black.


“As developers, we will build, manage and pay for the project for the farm and for their neighbors,” says Black. “We can take the financial risk off the farm if they wish.”


But if the farm puts in capital and takes on some of the risk, it will receive a greater share of the returns from the sale of gas and energy credits. That’s where the LOL financing comes in.


LOL is allowing its farmer members to tap the equity they own in the co-op via Land O’Lakes SUSTAIN Innovation Financing. LOL will allow each farm to borrow up to $3 million to finance their project. Terms of the loan, including length and interest rates, are market based and vary, with loans available up to 65% of the member’s equity. Members using Innovation Financing must complete a Conservation Dairy assessment, show how the project meets or avoids the need for additional regulation, and demonstrate the project’s benefits to air, land or water.


Carstens says the only eligibility requirements to explore use of a digester through the new LOL/CalBio collaboration are equity in the co-op, a good credit rating and a willingness to participate. The first targeted areas are Tulare and King Counties, which have a large number of LOL members dairies in relatively close proximity.


For more information on California Bioenergy LLC, click here.


For more on the Land O’Lakes SUSTAIN Environmental business unit, click here.