Wisconsin is already a leading producer of energy from dairy waste, and sunny industry reports suggest the opportunity for the number of digesters in the U.S. to grow more than tenfold in the next decade to a mature market worth nearly $3 billion a year.
But today, the market for anaerobic digesters—covered lagoons or tanks designed for efficiently extracting usable biogas from manure and other agricultural waste—is still small. And a thicket of complications need to be resolved before the industry can make the most of this optimistic future.
Dairy farmers, technology companies, university researchers, policy makers, and other groups in Wisconsin and beyond are trying to solve a complex puzzle that could make more digester projects economically viable through maximizing the value of all of their products, including monetization of their environmental benefits.
Digesters turn agricultural and food-production waste—which carries potent greenhouse gasses and can threaten water quality, particularly around large confined animal feeding operations—into a source of new revenue, rather than a cost. The trick is to use this raw material to make heat, energy and other useful products. Digesters capture methane, which is 20 times as potent a heat-trapping gas as carbon dioxide, helping the dairy industry meet a goal of reducing greenhouse gas emissions 25 percent by 2020.
One of Wisconsin’s largest dairies was just outfitted with a new digester, bringing the number in the state to 38. That’s progress, but another 45 projects—some dating to the early 1980s—have ceased operating, according to an Environmental Protection Administration database, underscoring the challenges inherent in this business, and in the dairy business more broadly. The EPA counted about 220 operational anaerobic digesters at commercial livestock operations nationwide as of November.
Inaugurated in December, the Rosendale Dairy project southwest of Oshkosh, WI, illustrates how each project requires a bespoke set of partnerships, financing agreements, and long-term supply and purchase commitments to go forward.
“Those economics are very, very challenging for every project that is being built or proposed currently in Wisconsin,” says Nadeem Afghan, CEO of BIOFerm Energy Systems, the technology provider for the Rosendale project.
Rosendale is BIOFerm’s fifth U.S. digester project, but the company’s German parent, Viessmann Group, a nearly 100-year-old, family-owned heating systems manufacturer, has built some 350 biogas plants, mainly in Europe. Based in Madison, WI, BIOFerm began U.S. operations in 2007.
The digester is designed to handle 240 tons of manure coming from the 8,500 cows at Rosendale each day. MilkSource, which owns the dairy, planned the digester to help reduce its environmental impact. It will also have a significant educational component.
“But based on the commercial payback in Wisconsin, they were quite concerned in going alone and doing that,” Afghan says, adding, “In Rosendale’s case, it took really the championship of the University of Wisconsin-Oshkosh Foundation, and our company, where we were willing to underwrite the risk.”
The Rosendale project is designed to produce 1.4 megawatts of electricity, but there’s enough capacity at the dairy to generate 2.2 megawatts, Afghan says. Madison, WI-based Alliant Energy, the local utility, is paying 9.2 cents per kilowatt hour, but would not contract for the additional power, he says.
The power output of the digester would generate only about 50 percent of the revenue necessary to cover its $7 million cost over the five-year term of its loans, which were provided by Wells Fargo, Afghan says.
In Wisconsin, as in many other states, power contracts with utilities are difficult and costly to negotiate, and do not bring premium rates for electricity from dairy digesters. (An earlier program that allowed Wisconsin utilities to offer digesters a premium, essentially as an experiment, has expired.)
“It would be easy if they gave me a German subsidy and bought my power for 29 cents [per kilowatt hour],” Afghan says. “I could quadruple the company’s size.”
Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com.