Bossie, the Climate Warrior: new approaches may unlock dairy methane’s value

One of the newer arrivals in Florida’s small bio-based industry is Culture Biosystems, which produces attractive economics for its advanced algae  cultivation platform which enables large-scale production of algae to be used in producing biofuels, aviation fuels, feed, protein and nutraceuticals.

Culture BioSystems has developed a hybrid technology platforms that takes the best of both traditional cultivation methods – a low-cost, closed system that can float on an open pond (FloatAlgae) or be deployed on the ground (LandAlgae). This improved engineering design allows for the production of cost-competitive products using natural algae strains. The Culture Fuels cultivation system works with any algae strain and final product market.

You can learn a lot more about the company here.

Culture Biosystems’s FloatAlgae technology, illustrated

During a recent catch-up conversation on technology and finance with the company’s CEO, Lawrence Walmsley, he turned the tables on the Digest and asked our impression, based on success stories we’ve seen, what the most important factors appear to be in terms of making an algae company successful.

Making algae and advanced crop system companies successful with investors, partners

There are two must-haves that we have seen.

1. Payback in 3 years or less. It’s very tough for the purveyors of systems, but we see a real change in the types of companies that are interested in deploying algae-based technologies, when the payback periods are very short. Elongated, 5+ year returns are for venture investors and certainly for strategic investors and government R&D grants — but competition for these dollars is fierce and the field of investors is small.

2. Partnership with waste feedstock providers. Even if algae has low-cost, highly abundant inputs such as water, heat, sunlight and CO2, they still must be obtained, and the best partners are those with waste streams. Algae producers have sought partnerships with cement companies, ethanol plants and coal-fired power plants, for example — usually to obtain water and CO2.

The trouble with cement companies and ethanol plants? That they generally have air permits to vent CO2, and coal-fired power plants tend to have so much CO2 production. As a result, algae-based remediation is a nice-to-have. These companies are strategic suppliers, but they are looking for opportunity rather than to remediate real corporate pain.

The methane option

For that reason, we like the methane option and dairy operations. Not the kind obtained from mining natural gas, but the renewable kind obtained from dairy cow operators. Many of these companies have investigated, or have installed, anaerobic digesters onsite to produce renewable biogas from cattle or dairy sludge. Where this gas has been compressed, it can be used as a cellulosic fuels and even today, some 95% of the cellulosic fuel gallons in the US represent CNG from these types of operations.

As Peter Brown of FFA Fuels explained in a note this week:

The EPA has been on the warpath against the dumping of manure on open fields from Confined Animal Feeding Operation (CAFO) for several years now and this could be the year when solid wastes become a solid toxic substance. The technology to remedy these sites is expensive and out of reach of the normal dairy farms as a complete system including ponds, digester (methanizer), special collecting equipment, methane handling and conversion equipment, solid waste pelletizers, ammonia extraction, CNG and LNG compression units, generators and utility injection systems can run well above $12 million per site. Once you realize that your average cow can produce twenty tons a year of manure and that we are targeting dairies or dairy groups of 10,000 cows then you perceive both the problem and the opportunity this situation represents.

We have been working with an international engineering firm and have, we hope, assembled all the players required to offer any dairy farm or feedlot operator with 10,000 or more animals to take the manure and convert it to sellable commodities. We pay a nominal one cent a ton of manure to comply with the paper trail required to show that the farm has disposed of the stuff, after that the offtake is converted and sold into one of several optional money-making commodities.

The equipment itself is off the shelf and already installed in over a hundred digester operation in Europe and Canada since they imposed the standards several years ago, with Germany already having over 6000 facilities and Switzerland coming close behind. Because we produce biogas the resale price is considerably higher and carbon credits from the operations will also be sold on the CBOT

Our investors will sign twenty year contracts to ensure a sow but consistent ROI since they are presently in retirement funds, insurance companies and near banks. The first push will be made into Oregon and Washington dairies.

OK, so methane rocks, but why algae?

The numbers can be substantial. In this report, we saw that a 1500 cow dairy can be expected to produce 45,000 cubic feet of methane per day, and would produce roughly 65KW of power.

But such an operation would also generate something like 870 metric tons of CO2 per year, at a rate of 117 pounds of CO2 per 1000 cubic feet of methane.

How much algae can you grow with 870 tons of CO2? Theoretically, as much as 400 metric tons of it, at around 2.1 tons of CO2 per ton of algae. In a real world scenario, perhaps 365 metric tons, or a ton per day.

How much value is there in 365 metric tons of algae?  For example, Cellana proposes that there is as much as $6,928 of value in a metric ton of algae.  Here’s their value diagram.

That’s $6,928 per day, or $2.53 million per year. That’s a substantial value-add for a 1500-cow dairy. So, the challenge becomes, to bring the costs down so that a system is affordable

How FFA is making it affordable

Again, Peter Brown writes:

This is one of those rare situations where the investors, who wish to remain discrete, are looking at a 20 year payback based on a steady revenue. At the farmer’s choice, they can invest as much or as little as they want. As a matter of fact we ran the scenario with the operating principle that they would not have to contribute anything, but they have to be paid for the manure so that there is that clean purchase point in time. It would be nice if we could count on their contribution to pay for the pre studies with which we go to the lender/owner of the project and save about four months in the building schedule.

Financing for the $12 million state of the art digesters will be assumed by several financial institutions who would take control of the facility on completion. For the first six months, the facilities will be operated by FFA Fuel hired employees. They will be responsible for collecting the manure on site, trucking it to the digester, ensuring that the digester is operated within the parameters of each system, distributing the natural gas produced to the local utility, paying the farmers for the manure at a nominal one cent a ton, and converting the biogas credits into carbon credits on the CBOT market.

Payback is also flexible. The producer can take payment in reduced utility bills or LNG production for his operation or even from he people who buy from him, but it depends on what the producer puts in of course.

The refinery is bought by us with the consent and approval of the owner, which can be any one of a number of options, from banks, Insurance or retirement funds. We will manage the operation by every morning cleaning and collecting the manure and other wastes, trucking it to the biorefinery and dumping it into individual digesters. Then gas is collected, compressed or liquefied and sold to the utility, trucking firm or wherever it is needed. We are looking for 10,000 cows within a twenty-mile radius of each other, something that is fairly common. There is an additional revenue stream from the fact that it is a biogas, therefore more valuable for the carbon credit value or whatever credit it can get.

Why Climate Mikey likes it

Anything that takes waste sludge and produces a valuable product is a cool thing. Such a system doesn’t solve all the world’s pressing nutrition, water, sustainability, biodiversity and ecosystem challenges.

But let’s go one step more.

But third chance carbon looks a lot healthier than the one-and-done systems such as CO2—>grain—>fuel/feed—>CO2. That’s one chance carbon. But third chance carbon gives you CO2—>grain—>feed/fuel—>power—>fuel/feed/nutrients—>CO2. That’s two more cycles of value before we return the CO2 to the atmosphere to restart the cycle.

So, that was the challenge we presented to Culture Biosystems, and to other algae companies in the field. Provide 3-year payback for a dairy operation and you might well find that the challenge of finding finance and partners is substantially lessened. Looks like FFA Fuels is thinking along the same lines and has taken practical action to get it done and make it happen.

More on FFA Fuels.