Turning cow waste into biogas is a hot investment. Is it also a climate solution?

CASA GRANDE — Thousands of gallons of liquid manure sit in the open on 25-foot deep settling ponds at Casa Grande Dairy Co. Farm owner Jim Boyle says he could earn some extra revenue by taking biogas, water and nutrients from the slurry that is flushed twice a day from the dairy’s feedlines.

It is already a growing practice among dairy farms. Instead of letting cow manure decompose in open lagoons or settling ponds, farms send the nutrient-rich waste into an anaerobic digester, an enclosed system that decomposes manure and produces methane, which is later cleaned and sent into a pipeline to produce electricity, heat homes or fuel vehicles.

Methane, a greenhouse gas, is produced by the decomposition of organic matter and can retain 25 times more heat than carbon dioxide. Trapping it and cleaning it can be expensive, but the time for financial incentives is ripe, increasingly rewarded by some climate-smart policies. 

About $20 billion from the Inflation Reduction Act will support climate-smart agricultural practices. Federal and state policies, like the Renewable Fuel Standard and the Low Carbon Fuel Standard program in California, give incentives to biogas-producing farms, and both the Department of Agriculture’s Rural Energy Program, and the Natural Resources Conservation Service offer loans and grants for these systems.

But analysis has shown the credit system significantly favors mega farms and big contractors over smaller-scale operations. More importantly, critics say, the incentives miss the mark on sustainability goals and methane-avoidance solutions.

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How do digesters work and can any farmer have one?

Anaerobic digestion, the process that generates biogas, has been well-known for millennia. Digester systems as a commercial technology have been around for 170 years at least.

The goal is to transform and extract value from waste. It is broadly used to treat municipal wastewater, produce energy from landfills and improve farming operations.

For animal-farm digesters, the process starts with a cow’s ingestion and excretion of feed. The manure that falls in the lanes where cows are feeding is flushed with water into covered lagoons. Microbes then decompose the organic material, and methane gas is released and trapped in the air-tight sealed space. The gas is sent into a filtration system where it can generate electricity or be cleaned and compressed to be used as biofuel or natural gas.

The digestion system also traps odors coming from the manure, and the nutrient-rich material leaving the digester is often used in agricultural fields as a fertilizer. 

With state and federal renewable energy policies, digesters also "produce" carbon credits. Because they trap methane and transform it into renewable natural gas, biomethane projects can place their climate-smart action in the market. Companies buy these credits to make up for their own emissions.

In Arizona, there are already four big anaerobic digester systems fed by about 80,000 cows from five large dairy farms. Two of them started operating this year, and a fifth one is still expected. They are all part of the new “dairy methane” market. Farms partner with companies and corporations to ease investment costs, connect their systems to the pipeline to sell energy, and also enter the carbon credit market. It can create a generous extra revenue.

Examples of small-scale anaerobic digesters for farm operations can be found worldwide. They can improve waste management, and produce cooking gas for the house or business. But for the scale and demands of very large operations that also seek to process the gas to pipeline quality, costs can rise quickly. 

The upfront expenses to build a digester range from $400,000 to $5 million, plus several thousands of dollars in operational costs, according to the EPA. 

In the U.S., there are about 355 dairy farms with anaerobic digesters, and only 17% were operations with more than 5,000 cows. Only a quarter of the total got some sort of USDA funding, and only about half send the gas to a utility provider, according to EPA data.

Small-scale digesters are feasible but face additional challenges due to economies of scale, said Rebecca Larson, a professor and extension specialist at the University of Wisconsin-Madison. 

In her perspective, it would be beneficial to create policy incentives for smaller systems. She is optimistic about smaller dairies benefiting from the technology, despite the high initial costs.

“As the easiest projects are completed —" larger farms, farms close to pipelines "— we are now seeing the projects that maybe are a little less profitable but still possible being installed,” she said. 

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A costly upgrade that could be a game changer

In Arizona, there is ongoing research that could make the systems smaller, more cost-effective and bring additional environmental benefits.

"You need to be generating enough methane to economically justify making investments. That's been a hold-up,” said Bruce Rittmann, director of Arizona State University’s Biodesign Swette Center for Environmental Biotechnology. 

"We want to get over that threshold in two ways: generate more methane out of the same input material, and the second is just make the cost of the system smaller." 

Rittmann’s team is working on a big research program to improve digester systems across industries. The ultimate goal is that more people could install the technology and benefit from it.

Currently, anaerobic digesters take out 50% of the waste energy potential in the form of methane. ASU researchers would like to get more energy out of the same waste, while also separating nutrients and potable water from it.

Dairy operations also generate a lot of wastewater. But the material sitting on the settling ponds is so nutrient-rich that it can contaminate groundwater and affect crops if used directly.

Boyle, farming in Pinal County, says that while he can irrigate with it, he has to blend it with groundwater in a one-to-three ratio to avoid killing the crops. A better option would allow the farmer to take what sits in the ponds, use it to produce energy, clean it to irrigate fields, and, finally, separate the nutrients to sell as fertilizer or manage strategically at the farm.

“The ultimate goal is we do all the parts,” said Rittmann, who has been studying waste pre-treatment options at Boyle’s farm. However, the system is still "pretty far from being at the commercial scale."

Producing clean water from the system would be a game changer. In the wake of the Colorado River water cuts, many operations face an uncertain future. Currently, digester systems offer no solution to this problem. The material sitting in the ponds or lagoons, is the same as what exits the digester.

"All we do is borrow the manure and capture the methane breaking down,” said Hudson Davis, national sales manager at Maas Energy Works, the company operating the digesters at Triple G Dairy and Stotz Dairy farms.

Credit system doesn’t solve core issues and can shadow alternatives

Renewable natural gas is a useful but limited resource for transportation, said Jeremy Martin, an energy expert and director of Fuels Policy at the Union of Concerned Scientists.

Biomethane, he and his colleagues found, could only meet 3% of California’s natural gas demands, even if it were captured from all potential sources. They encouraged policymakers to be “realistic” about its potential and its role in meeting climate goals.

A few years back, Martin started hearing from people in agriculture that incentives for biomethane were so generous they were creating a “gold rush.” 

In 2018, California established policies to speed a renewable energy transition and created generous financial assistance for it. Renewable natural gas coming from the dairies is one of the winners of these subsidies. Today there are about 137 digesters across the Golden State. 

The wave of poop power certainly has benefits in capturing methane that could otherwise dissipate into the atmosphere. But the subsidies are inflated and distortionary, even to the point of greenwashing, critics say. An analysis from the University of California-Davis suggests the credit system exaggerates the value of methane capturing and offers a significant advantage to large-scale operations over smaller ones.

The incentive system is rewarding the biggest polluters, others add.

Boyle believes one of the reasons financing a digester system has been hard is because of the type of farm he operates. 

Free-stall dairy barns, common in the eastern U.S., make it easier to establish digester systems because all of the manure is collected in the lanes and flushed into the pits. They are common throughout the country, but rare in Arizona and the Southwest. 

“In this design, a combination of open-lot and flush design, you have 25% of manure falling in the lanes and the other 75% falling out on the pens. This style does not collect anywhere near as much manure,” Boyle said. The digester system would only receive a fourth of the waste in the farm.

That also means that the system does not produce as much methane. 

Cow waste piles that sit in the open air, under the baking sun, hardly emit the greenhouse gas. But no one is getting carbon credits for composting. 

“Providing a huge subsidy for only one mitigation strategy that only makes sense at mega dairies (is) not  a thoughtful way to address the agricultural methane problem,” said Martin.

It makes sense to capture biomethane and use it, Martin said, but because this is rewarded so richly there are other practices that are not being pursued. Revenue for the credit system could be distributed across all these strategies, he suggests. 

The experience of California could be used in federal policies and by other states to design mechanisms that give reasonable rewards for methane capturing, don’t exacerbate existing issues from mega dairies and also give incentives to farms that have better manure management and avoid methane production altogether.

A historic funding opportunity 

The Inflation Reduction Act funds are giving a boost to agencies funding climate-smart and renewable energy projects.

Jessie Huff, Arizona’s state rural development energy coordinator for USDA rural development, says she would like to see the additional funding benefiting a diversity of applicants and energy projects. 

So far, the bulk of the grants and loans go to solar panel projects, but there are provisions in the inflation bill that aim to create some balance. Within the $2 billion that goes to the Rural Energy for America programs, $303 million is set aside for “underutilized technologies.”

Through the Department of Agriculture Rural Energy for America Program, applicants can get up to $1 million in awards for energy projects such as anaerobic digesters, and receive up to 80% guarantee on loans that finance up to 75% of the digester’s total cost. They can also apply for matching funds through the Natural Resources Conservation Service, and, for tribal members, the Office of Indian Energy.

All grants are delivered as reimbursements. That means farmers, and their business partners, must cover up-front costs. Applicants must also provide a feasibility study of the project, something that shows the digester will be a financially sound investment.

Boyle says the terms of contracts with operators are a main hurdle. Although in other states some contracts can run for as short as seven years, he has only heard about 30-year contracts in Arizona, a risk that Pinal County farmers would not be willing to take with the current water crisis.

The program has existed since 2002, and two Arizona dairy farms have applied and been awarded loan guarantees in the past five years. The program received no applications from other dairy producers in 2022 or yet this year.

Huff believes it is a necessary step to have a community of knowledge and expertise to push the projects forward. In Arizona, there is an abundance of technical expertise and assistance for solar projects, but less of it for biogas production, something that can limit applicants.

Clara Migoya covers environmental issues for The Arizona Republic and azcentral. Send tips or questions to clara.migoya@arizonarepublic.com.

Environmental coverage on azcentral.com and in The Arizona Republic is supported by a grant from the Nina Mason Pulliam Charitable Trust. Follow The Republic environmental reporting team at environment.azcentral.com and @azcenvironment on Facebook, Twitter and Instagram.

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