The Van Trump Report

What’s in it for Farmers as Big Energy Firms Rush Into Renewable Natural Gas

A combination of the global energy crisis and the world’s rush to lower greenhouse gas (GHG) emissions is supercharging the addition of renewable power capacity. One area that is witnessing a huge amount of expansion right now is renewable natural gas (RNG), a drop-in replacement for conventional natural gas that is produced from various biomass sources, including waste from livestock operations. And as companies look to capitalize on the world’s energy transition, the scramble to secure biomass supplies is transforming animal manure into a lucrative revenue stream for some farmers.  

For those not familiar, RNG is produced through a process called anaerobic digestion, in which microorganisms break down organic waste materials in the absence of oxygen. This process generates biogas, which is then cleaned and treated to remove impurities such as moisture, carbon dioxide, and sulfur compounds. The resulting RNG is essentially the same as conventional natural gas, and can be used in a variety of ways, including for heating, cooking, and generating electricity. The difference between RNG and the fossil fuel version is that the carbon in the gas from a digester was created biologically, and not by fossil extraction, and therefore considered “carbon negative”.

Biogas is not a new concept – systems to collect methane and convert it to gas have been around since at least the 1990s. However, the vast majority of the biogases generated by current systems has been only partially treated and is typically consumed onsite. Only a relatively small share of these gases has been fully treated and upgraded to RNG, which is on par with pipeline-quality natural gas. Nationwide, RNG could be used to displace 13% of total U.S. gas demand by 2040, according to a study commissioned by the American Gas Foundation last year, along with EIA data.

As the push for greener energy sources ramps up – along with a slew of state and federal financial incentives to make it happen – a new wave of large-scale RNG projects are now cropping up across the country. According to Johannes Escudero, founder and CEO of RNG Coalition,  North America’s RNG industry has grown from 31 operating facilities to 268 in just the past decade, with 235 others currently in development.  

Many of the newer systems to collect and convert methane on the farm are installed by third-parties that are placing strategic bets on a lucrative future for RNG. One company doing this is Vanguard Renewables, which makes lease arrangements with the dairies for the land where it builds digester facilities. The dairy farmer has no upfront capital cost, which is a big deal when you consider that a biodigester can run anywhere from $400,000 to $5 million.

Vanguard’s partner farmers also have no responsibilities in operating the digester other than delivering the manure. Some municipal waste haulers also arrange to bring their excess organic waste to the farm sites. In areas with smaller dairy farms where it doesn’t justify building a dedicated digester, Vanguard has set up arrangements where the manure from several farms can be pooled at a single location. Currently they have 150 dairy farms under contract ranging from those with only 400-1000 cows to one that has more than 10,000.    

Many companies are also taking advantage of state and federal incentives. Companies like Maas Energy Works and California Bioenergy, for instance, are have responded to California’s Low Carbon Fuel Standard (LCFS) – which provides incentives for fuel producers to increase the amount of low-carbon or renewable fuels they supply and sell – by installing digesters at California’s dairy farms at a rapid clip.

It’s not only small, local companies jumping on the bandwagon, either. Chevron’s Brightmark RNG joint venture recently delivered its first RNG from their so-called “Athena” project in South Dakota. The project is comprised of three dairy farms located in Minnehaha County. The company also recently expanded a dairy biomethane joint venture in California to produce RNG.    

Escudero says many of North America’s agricultural and livestock operations have sufficient volumes of waste to successfully support RNG facilities, and it can create a new revenue stream for farmers. UC-Davis professor Aaron Smith estimates that each cow on a California dairy farm with a digester can generate $2,827 a year in air pollution and biofuel credits for methane alone.
While dairy farms are a natural fit for digesters, other livestock operations can also take advantage of the opportunities they present. Meat giant Smithfield has a joint venture with Dominion Energy to invest $250 million in covering lagoons and installing anaerobic digesters at nearly all of its hog-finishing farms in North Carolina, Utah, and Missouri over the next 10 years. Construction is already underway on at least four projects. 

If you are interested in learning more, the RNG Coalition is a good place to start. They have a section dedicated to agriculture HERE. (Sources: Yale360, FuelsFix, Bloomberg, Fortune)

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