Energy Prices Steer Farmers Away From Manure Power

Despite U.S. encouragement, development of farm waste-to-energy systems wanes

ENLARGE

Anaerobic digesters convert cow manure into gas, which can then be used to fuel electricity generation. Above, a digester at the New Hope Dairy in Galt, Calif., in 2013. Photo: Manny Crisostomo/Sacramento Bee/Zuma Press

David Kesmodel

Feb. 18, 2016 12:02 p.m. ET

19 COMMENTS

Wisconsin dairy farmer Art Thelen was full of optimism a decade ago when he joined a growing group of U.S. farmers investing in technology that turns livestock manure into electricity.

The systems promised to curb air pollution from agriculture, generate extra revenue and—in no small feat—curtail odors that waft for miles in much of farm country.

“It was a great idea, and when it worked well, it was wonderful,” Mr. Thelen said.

Now the 61-year-old is among a group of farmers who recently have shut down their manure-to-energy systems—known as anaerobic digesters—or scrapped plans to build them because of the prolonged slump in natural-gas prices and higher-than-expected maintenance costs that made the systems less economical.

ENLARGE

Construction of new U.S. farm digesters has slowed sharply over the past two years, marking a challenge for the Obama administration, which is pushing the technology as a way to curb greenhouse-gas emissions. Agriculture accounts for 36% of human-related emissions of methane—a potent heat-trapping gas—in the U.S., making it the biggest source, according to the White House.

Some big meatpackers that have supported development of digesters have become more cautious, too. Perdue Farms Inc., among the largest U.S. chicken processors, has pledged to contribute poultry waste to a planned Maryland biogas project, but the company has rejected several other manure-to-energy proposals.

“With today’s fossil-fuel prices,” many such projects “can’t stand on their own,” said Mike Phillips, director of special projects for Perdue AgriBusiness.

Digesters are oxygen-free tanks in which microorganisms break down waste and capture methane that otherwise would be released into the atmosphere. The biogas from digesters, mostly composed of methane, can be burned to produce electricity or cleaned and pressurized for transport in natural-gas pipelines. The digestion process also yields products like fertilizer that farmers can use or sell. And by diverting waste from open-air lagoons, digesters limit the potential for spills that can pollute waterways.

About 260 digester projects were active or under construction on U.S. farms as of May 2015, according to data compiled by the Environmental Protection Agency from voluntary sources. Only six new projects became operational or were under construction in 2014, down from an average of about 30 a year from 2008 to 2013.

The Obama administration’s plan to reduce methane emissions relies on farmers voluntarily using digesters, though some federal grants and loans help pay for the systems. A “biogas opportunities road map” issued in 2014 by the Agriculture and Energy departments and the EPA projected that broad adoption of the systems could produce energy to power 1 million U.S. homes, up from about 70,000 at the time. Last year, the USDA announced a goal to support the installation of 500 new farm digesters by 2025.

ENLARGE

The gas produced from anaerobic digesters is used to fuel power generators. Above, a generator at Homestead Dairy in Plymouth, In. Photo: MIRA OBERMAN/Agence France-Presse/Getty Image

But installing and operating digesters has become tougher for farmers. Buying the systems can cost millions of dollars, which farmers typically fund through long-term sales agreements with utilities. Manure from a typical 1,000-cow dairy farm can produce enough electricity to power about 250 homes, said Melissa VanOrnum, vice president of marketing at DVO Inc., a digester provider.

Some utilities, including in Wisconsin, are paying less for manure-generated electricity amid a national slump in power prices driven by cheap natural gas. Wind and solar power also have gotten less pricey, making them more attractive than manure biogas for utilities seeking to meet state renewable-fuel standards.

Nevertheless, installations are expected to pick up in New York, California and a few other states thanks to state government financial incentives, Ms. VanOrnum said.

Smithfield Foods Inc., a subsidiary of China’s WH Group Ltd. and the world’s largest pork processor, has pursued biogas projects since the 1990s and remains optimistic about their potential, despite having to shut several operations because they weren’t as efficient as expected, Smithfield officials said. The company has a handful of existing projects and two pending.

“We want to do everything we can to promote the use of swine manure as an energy source, but there are hurdles to it and we’re trying to work through them,” said Kraig Westerbeek, Smithfield’s vice president for environment and support services.

For biogas-system designers like DVO, markets overseas help make up for the slowdown in the U.S. Germany has more than 8,000 digesters, thanks to a law guaranteeing renewable-energy producers above-market rates for their power for years. China, France and Denmark also encourage the use of farm digesters.

Wisconsin, the second-biggest dairy producer after California, long has led the U.S. in farm digesters. But farmers’ interest has waned, in part because some contracts with utilities reached last decade to promote digester installation are nearing expiration and new terms aren’t as good.

Wisconsin utilities including Alliant Energy Corp. LNT 1.24 % have received state approval to pay around 3 cents per kilowatt-hour of electricity produced from manure, down from 8 to 9 cents guaranteed to some farmers last decade.

Alliant is exploring further digester partnerships and “we view them as playing an important role environmentally,” a spokesman said. But “digesters are more complicated and expensive to maintain” than wind and solar programs.

Mr. Thelen, who runs Wild Rose Dairy near La Farge, Wis., said he and partner Dairyland Power Cooperative decided to halt their digester project about a year ago. One big challenge: maintenance costs for the generator, due in part to corrosion by a chemical common in biogas, he said.

“It got to the point where the electricity was way too high-priced coming out of the digester to be sold on the main line [and compete] with cheaper stuff like solar and windmill towers,” Mr. Thelen said.

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19 comments

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Andrew Eppink subscriber

That's too bad. Cat's marketing dual fueled (diesel pilot fuel, natural gas power fuel) cogenerating generator sets to California greenhouse producers, with the exhaust vented directly into their greenhouses giving rise to a CO2 enriched atmosphere and phenomenally increased growth rates. You'd think farmers, especially in cold areas, could profitably do much the same thing with adjoining greenhouses. Corrosion around wet digester gas is a problem but it's not insurmountable.

Kerry Doyle subscriber

The key to continued success in farm driven AD is the development of value added off takes from the digestate. Our work at Trident Processes does just that by increasing the value chain and ensuring sustainability. AD is just one piece of the puzzle. The big picture requires more pieces including partnerships with producers, technology providers, government and the consumers.

STEVEN ESTES subscriber

First, the facts; Wisconsin hasn't had any major renewable projects built since the last gubernatorial election. The article references that the price for the electricity paid to the facilities went from 8 or 9 cents down to 3 cents; where is the value for these projects in the community? The ability of AD facilities to take out the harmful items that cause Algae blooms - Grand Lake St. Mary's in Ohio, or the Chesapeake watershed that goes across 6 state? What is the prevention of Algae blooms value? what about the neighbors that no longer have to deal with odor?

Secondly, the author doesn't reference the value of the environmental benefits that an AD facility gets from selling the Renewable Biogas into the pipeline infrastructure? The value of these on Friday were more than $15 per MMBtu.

Finally, those 8,.000 AD's in Germany - how much economic value did they create? Jobs, environmental benefit? There is actually approximately 13,000 in Europe, with several thousand more planned.

where's the commentary on this? http://www.wsj.com/articles/exxon-fails-to-replace-oil-gas-production-for-first-time-in-22-years-1455926914

The oil companies are facing the most challenging times of their entire existence; unfortunately for those fossil fuel companies that don't grasp and invest into the Renewable Energy/Sustainability boom that is about to take place won't be around in 20 years.

One simple question for those that want to decry regulations or the "war on coal" when it comes to the status of coal, oil and gas; where were the folks that defended land lines and other companies that were made obsolete when the technology boom started?

The same thing is happening now, unfortunately our world has become so politicized that we can't all work together to embrace and grow this opportunity society has with the Renewable and sustainability industries.

For the sake of our economy and future generations of Americans, we MUST embrace these opportunities and lead the world (again)

ROBERT MATZ subscriber

Sounds like bull s in Washington has more power.

Bill Wald subscriber

Story is important because it shows the intent of the Co2 fanatics. In WA, power supplied by BPA and in WI the retail price of electricity is around ten cents/KWH. In WA, people that generate solar or wind and are on the grid are paid retail price (10 cents) for excess power generated.

If the Co2 crazies in WI were serious about Co2 pollution, they would pay ten cents/hour to farmers who are on the grid and also generate manure power. A farmer who milks 100 cows should do better than break even over the amortized cost of a small digester and appropriated sized generator.

See http://www.ers.usda.gov/media/430528/err47b_1_.pdf for dairy herd sizes in the US.

NUGGEHALLI VASUKI subscriber

It is a very good idea to use the manure for generating methane. It is a clean burning fuel. There should be no overt subsidies for all fuels - oil, coal, wood, nuclear, solar and wind.

If we do not pay sufficient attention to clean air quality, we will pay the medical service business more and more. It is always a toss up.

As a consumer, I would any day pay more for cleaner energy as compared to paying more for medical services. We have created a problems ourselves by electing politicians who tell us that we should have a risk free and zero cost world. Let us face it - there is no free lunch

Milton Eaton subscriber

Why the surprise? All you need is subsidy to build, price support and quantity mandate guarantees. Then the farmer can receive the income with minimum capital cost and guaranteed income.

A couple years ago a wind energy utility CEO said to me "All we need is a another year of $5,000 million in subsidies to have another great year."

The science and engineering may be ready. Obviously, the economics give us a completely different result.

Oh, and how about the comparison to the costs of coal, natural gas or oil powered energy.

Patrick McNally subscriber

Just dry the stuff out and burn it. Roll it into logs that people can use in their wood stoves.

Thomas Yasin subscriber

Do they call this "clean energy"?

Jacob Maczuga subscriber

If there was a market for manure power, this Obysmal administration would pay off the National Debt in about a week and a half.

William Fehr subscriber

The government needs to get out of the energy business. Look at the disaster that ethanol brought us. The EPA is full of ignorant idiots who hand out billions in grants and incentives, that when their projects fail, they just come up with another bad idea.

Ted Gianoutsos subscriber

If PC BS could be harnessed, it would power the whole wide world!

Dard Hunter subscriber

From where I sit watching the Presidential campaign, it appears that manure power is alive and well. I'm going long manure.

Joseph Breton subscriber

Why do the Climate Scientologists think that burning methane, which produces CO2, will reduce 'greenhouse' gasses? Seems like a wash to me. I think this was just a big nonsensical PR project to appease the climate gods...with the farmers getting screwed.

Brian Terborg subscriber

@Joseph Breton Because burning the methane is far less polluting to air quality than having unburned methane escape into the atmosphere. And you can't even begin to compare how harmful unburned methane is compared to CO2. Another example is the flares you see burning at landfills. Landfills are required to burn the methane created in landfill garbage piles because it greatly reduces air emissions compared to it simply seeping out of the ground.