By Claudia H. Deutsch, July 4, 2006
In a sense, it is the ultimate renewable source of fuel. Weather anomalies can kill off corn crops, calm the winds, obscure the sun ? but through rain or shine, gusts or stillness, cows and hogs and turkeys spew forth a steady stream of manure, one of nature's richest sources of methane, a principal component of natural gas.
And now, farmers and entrepreneurs are recognizing that this immutable fact can yield a steady stream of revenue and profit, too. Slowly, but steadily, they are replacing the malodorous lagoons used to treat the waste with machines that can wrest energy from excrement.
According to AgStar, a federal program that promotes the conversion of manure to energy, there are more than 100 anaerobic digesters - devices that create an oxygen-free atmosphere in which bacteria digest manure and release gas - operating in the United States today, with another 80 on the drawing boards.
"These are the only kinds of waste management systems that can actually put money in farmers' pockets," said Kurt Roos, program manager of AgStar.
There are a number of reasons for the new spotlight on what is called brown energy. Oil and gas prices have soared, even as environmentalists have sounded alarms about climate change. In the last two years, various state and federal agencies have subsidized purchases of digesters, since they capture methane - a potent greenhouse gas - before it escapes into the atmosphere. Many utilities operate in states that require them to include environmentally aware energy sources in their portfolios. They will often accept manure gas, since many farms have installed equipment to clean it.
In fact, more utilities are thinking of buying the gas outright. Pacific Gas and Electric has agreed to transport gas from a big digester that Microgy, a digester manufacturer, is building in California. Right now Microgy plans to sell the gas on the open market, but Robert Howard, vice president for gas transmission and distribution, said P.G.& E. may buy some gas itself. "This technology provides pipeline-quality gas and reduces carbon emissions, so of course we're in favor it," he said.
The environmental boons are many. According to Agstar, digesters are already keeping 66,000 tons of methane from escaping each year into the atmosphere, while generating enough energy to power more than 20,000 homes.
And technologies, some of which have been around for decades, have finally grown more reliable. "There's been a lot of time and energy spent on making these as effective and efficient as possible, so anaerobic digestion will be a growing business," said Daniel J. Mannes, vice president of Avondale Partners, a securities research firm that recently initiated coverage of the Environmental Power Corporation, the company in Portsmouth, N.H., that owns Microgy.
The potential market is huge. Agstar officials say that at least 70,000 dairy and swine farms are big enough to support a commercial digester and could collectively provide enough energy to power more than 560,000 homes, while keeping more than 1.4 million tons of methane out of the atmosphere.
"The business model of producing energy along with food will transform the economics of rural America," said Michael T. Eckhart, president of the American Council on Renewable Energy, based in Washington.
Indeed, anaerobic digestion yields not just methane, but leftover liquids that farmers can use or sell as fertilizer, waste heat that can heat their homes and barns, and fibrous solids that make excellent bedding for cows. Farmers also save the costs of controlling odors and treating waste. "Two years ago I couldn't even convince farmers that digesters work," said Melissa Dvorak, marketing manager for GHD, a company based in Chilton, Wis., that sells digesters. "Now, all they ask is what the payback will be."
The deals are struck in different ways. In most cases, farmers buy digesters and either use the gas themselves, sell it to a utility, or use it to power a generator that feeds electricity to the utility's grid. In another model, the manufacturer owns the digester and sells the gas. In those cases the farmers provide the manure and the land, and get the fertilizer, bedding and a cut of revenues from sales of gas. Last year, for example, Hunter Haven Farms in Pearl City, Ill., paid $960,000 - half of it subsidized by state and federal grants - for a GHD digester that processes waste from 600 dairy cows. Hunter Haven then pipes its methane into a generator, and sells the resulting electricity to Commonwealth Edison for 3.5 cents per kilowatt hour.
Douglas R. Block, Hunter Haven's president, said the farm was saving $60,000 annually by using fibrous solids from the digester as bedding, and sells $12,000 worth of bedding to other farmers. And he anticipates at least $16,000 in added revenue from carbon credits, the tradeable units for reducing methane emissions.
Five Star Dairy, a 900-cow dairy farm in Elk Mound, Wis., anticipates a similar profit stream from the $1.2 million Microgy digester it installed in 2004. Lee Jensen, Five Star's general manager, said the Dairyland Power Cooperative pays him about 5 cents per kilowatt hour for energy, and that he is saving money on bedding and fertilizer.
"We're not taking any risk, the reduction in odors is huge, and we're powering 600 homes with 900 cows," he said. "You've got to admit, that's pretty efficient."
The digester companies are betting their futures that more farmers will agree with him. Environmental Power is phasing out an older business in burning waste coal to focus on its Microgy subsidiary, which uses a technology that it licensed from Xergi, a Danish company. Microgy, whose digesters can accept used cooking grease as well as manure, has already sold three of its machines in Wisconsin, and is building one in Huckabay, Tex., that will process waste from 10,000 cows. It will own that one itself, and hopes to sell the resulting gas on the open market.
GHD is cutting back on its business of cleaning up pollution from underground gas tanks to concentrate on the anaerobic digestion patents it has held since the late 1990's. It has sold 15 small manure digesters and is building 6 more.
Intrepid Technology and Resources, based in Idaho Falls, Idaho, is discontinuing its engineering services business to concentrate on its digester processes. Dennis D. Keiser, Intrepid's chief executive, said that in five or six years, he expects Intrepid will be collecting manure from 100,000 cows on 50 farms, and generating enough gas to serve 40,000 homes. "We're not profitable yet, but in the next 12 months we will be," he predicted. That may yet depend on the utilities that accept the processed gas, particularly since Agstar and some states have cut back on subsidies.
"Digesters need to get at least 6 cents a kilowatt hour to break even, and too many utilities want to pay 2 cents," said George Sterzinger, executive director of the Renewable Energy Policy Project, a nonpartisan research group in Washington.
But utilities are coming around. Dairyland is taking enough manure-generated electricity from Microgy projects in Wisconsin to power 1,800 homes, and John M. McWilliams, the utility's resource planner, said he hoped to have 30 digesters linked to his grid soon. Mr. McWilliams called manure-to-energy systems one of the few environmental technologies that can offer guaranteed supply and stable prices.
"Wind blows intermittently, people don't want more rivers and streams dammed up, there aren't many new landfills to tap, and we're captive to railroads to transport coal," he said. "Manure digestion is probably the only way we can expand."
Central Vermont Public Service is letting its customers choose. In October 2004 it gave its 151,000 customers an option to pay a few cents more for "cow power," so that the utility could pay for the more expensive electricity generated from manure. More than 3,000 customers have agreed to do so, and David J. Dunn, a senior energy consultant at the utility, said more keep signing up.
The utility is buying gas from one farm now, but Mr. Dunn said two others are installing digesters, and two more plan to do so soon.
"We've already got more customers signed up than cow power to sell them," Mr. Dunn said. "Cow power is really a market-driven program."