Anaerobic Digestion: An Economic & Environmental Benefit for Farm and Ranch Livestock Operations

By Bill Hagy, VP Federal Funding, Lee Enterprises Consulting

Special to The Digest

How can one determine if an anaerobic digester will provide a value-added economic opportunity as well as an environmental solution for my livestock operation?

There are several factors to consider:

• Size of the farm or ranch operation and manure type
• Location of the farm or ranch operation and the off-take sources
• Ownership of the digester to be constructed
• Financing Sources /Incentives

Size of Farm or Ranch Livestock Operation and Manure Type

There are 8,000 large dairy and hog operations where biogas recovery systems are technically feasible.  A large operation is defined as an operation with a minimum of 500 head of cattle, 2,000 hogs with anaerobic lagoons or liquid slurry manure management systems, or 5,000 hogs with deep pit manure management systems where a minimum of 90 percent of the manure is regularly collected.

Also, smaller operations can partner with other smaller operations by forming a cooperative or similar organization and construct a jointly owned biogas recovery system which may result in a technically feasible system.

In addition to the farm size is your manure management technique compatible with biogas recovery technology? Biogas production is best suited for farms that regularly collect liquid, slurry, or semi-solid manure with little or no bedding. This requires the farm to collect manure:

• As a liquid, slurry or semi-solid (see different types of manure definitions provided below)
• At a single point of entry into the digester
• Every day or every other day
• Free of large amounts of bedding or other materials (e.g., rocks, stones, straw, sand)

Types of Manure:

1. Manure Type: Liquid Manure

Definition:  Has been diluted to a solids content of less than 5%. This manure is typically “flushed” from where it is generated, using fresh, or recycled water. The manure and flush water can be pumped to treatment and storage tanks, ponds, lagoons, or other suitable structures.

Compatible with Anaerobic Digestion:    Maybe. Can be adapted for biogas production and energy recovery in warm climates. In colder climates, it may be limited to gas flaring for odor control unless other organic materials are codigested.

2. Manure Type: Slurry Manure

Definition: Has been diluted to a solids content of 5-10% and is usually collected by a mechanical “scraper” system.  It can be pumped and is often treated or stored in tanks, ponds or lagoons prior to land application.

Compatible with Anaerobic Digestion: Yes. For biogas recovery and energy production, depending on climate and dilution factors.

3. Manure Type: Semi-Solid Manure

Definition: Is handled as a semi-solid, with a solids content of 10-20%, and is typically scraped. Water is not added to the manure and the manure is typically stored until it is spread on local fields.

Compatible with Anaerobic Digestion:    Yes. Fresh scraped manure (less than one week old) can be used for biogas and energy production in all climates, because it can be heated to promote bacterial growth.

4. Manure Type: Solid Manure

Definition: Has a solids content of greater than 20% and is handled as a solid by a scoop loader.

Compatible with Anaerobic Digestion: Maybe. Aged solid manure or manure that is left “unmanaged” (i.e., is left in the pasture where it is deposited by the animals) or allowed to dry is not suitable for traditional digesters. However, regularly collected manure could be used in a digester.

Anaerobic digesters can use single or multiple feedstocks. Digesters that codigest manure with other feedstocks (e.g., fats, oils & grease, food wastes, cheese or wine wastes, manure) can increase biogas production. Additional pre-processing equipment and holding tanks may be required for codigesting.  The tipping fees for other feedstocks provided to the digester can also be another source of income to the owner of the digester.

Location of the farm or ranch operation and the off-take sources

The location of the farm or ranch operation in proximity to potential off-take sources can determine the type of digester to construct and the off take(s):  renewable nature gas (RNG), compressed nature gas (CNG), combined heat and power, electricity, compost, bedding etc.

The biogas generated for the anaerobic digester can be used to:

Generate electricity to:

• Fuel a reciprocating engine or gas turbine.
• Operate equipment on-farm. For example, dairies operate vacuum pumps, chillers, feed mixers and fans. Hog farms typically operate heat lamps and ventilation equipment.
• Sell to the local power grid.

Be used directly on-farm to fuel boilers or heaters, and in most processes requiring heat, steam, or refrigeration.

           Be processed into higher quality fuels, including:

• Pipeline quality renewable natural gas (RNG)
• Compressed natural gas (CNG) to fuel vehicles

Be flared to:

• Control odor
• Reduce greenhouse gas (methane) emissions[1]

Ownership of the digester to be constructed

There are several companies that will construct, operate, and own the digester placed on your livestock operation and share the income derived from sale of the off-take product(s) with the livestock operation owner.

In other situations, there are companies that will design and construct the digester owned by the livestock operation owner.   In these cases:

• The livestock operation owner would operate the digester or contract with a company to operate the digester on their behalf.
• All operating expenses including any financed debt repayment would be the responsibility of the livestock operation owner.
• The income derived from the operation of the digester and any tax credit or other benefits would be realized by the livestock operation owner.

In cases where smaller operations are considering partnering with other smaller operations by forming a cooperative or similar organization and constructing a jointly owned biogas recovery system, USDA Cooperative Services provides support and information for deciding whether and how to form a cooperative.[2]

Financing Sources /Incentives for Digesters

All projects require capital investment, which can be a direct cash contribution from the owner; financed with a loan, or both.  Most digesters are funded through a combination of cash contribution by the owner of the digester and a loan. In cases where a loan is needed, USDA has programs that can support the financing needed.

Cash contribution can be cash available or equity financing funds from third parties to provide up-front capital in return for partial ownership or other valuable consideration.

Debt financing involves securing capital from banks, credit unions, savings and loans, or other traditional financial institutions. USDA has programs that partner with these lending institutions by providing loan guarantees.  A USDA loan guarantee limits the exposure of the lender to any potential loss and allows the lender to provide better terms for repayment to the livestock operation owner.  In some cases, USDA programs can provide grants as well as loan guarantees for a portion of the digester costs.  USDA programs are available for only a portion of the capital investment.  Normally, a 20%-25% investment from cash/equity is required for participation by the USDA programs.

Depending on the off-takes from the digester, there may be tax incentives and/or other incentives available to offset some of the capital costs of the digester. These may include the EPA’s Renewable Identification Numbers (RINs) program, California’s Low Carbon Fuel Standard for transportation fuel offtakes, and power purchase agreements with local utilities.  The Database of State Incentives for Renewables & Efficiency (DSIRE) is the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States: https://www.dsireusa.org/.

Whether a financial institution provides the loan directly or partners with USDA for a loan guarantee,   there are several components of an application that will require independent third-party services.   These services include preparation of business plans, feasibility studies, technical engineering report on technology being utilized, and an environmental assessment.  These types of services are considered eligible project costs and can be made a part of the loan.

Lee Enterprises Consulting, Inc. has expertise and experience to support the implementation of anaerobic digesters. These services include digester project planning, design and oversight, including genset, CHP and offtake solutions, business planning, techno-economic analyses, insurance and upgrading for all varieties of manure and facility types.  For facility financing, LEC has numerous experts who can provide the following services for clients: identification of funding resources, both debt and equity; packaging of the funding application; environmental assessment; appraisal; technical engineering design and analysis; and feasibility studies.

About the author: Bill Hagy is member of Lee Enterprises Consulting.  He is retired from the USDA’s Rural Development, where he progressed from Assistant County Supervisor administrating loans, loan guarantees, and grant programs to serving as Acting Under Secretary for Rural Development. He spent his final three years as the Special Assistant for Renewable Energy to United States Secretary of Agriculture Tom Vilsack advising on policy matters relating to alternative/renewable energy development.  Bill has been recognized in the past as one of the Top 100 People in Bioenergy by Biofuels Digest. Lee Enterprises Consulting is the world’s premier bioeconomy consulting group, with more than 150 consultants and experts worldwide. The opinions expressed herein are those of the author and do not necessarily express the views of LEC.

[1] Much of the above information was sourced from the EPA’s AgStar website: https://www.epa.gov/agstar/anaerobic-digestion-right-your-farm

[2] https://www.rd.usda.gov/programs-services/all-programs/cooperative-services.