The Future of On-Farm Anaerobic Digestion

In this episode, Dan Andersen discusses the future of anaerobic digestion, including influential policies and programs, and whether or not it may have a place on Iowa swine farms in the future.

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Transcript

SUMMARY KEYWORDS

digester, anaerobic digestion, manure, corn stover, farms, systems, talk, gas, cost, swine, challenges, credits, high, process, energy, biogas, feasible, fertilizer, carbon, RINs

SPEAKERS

Dan Andersen

Dan Andersen  00:06

Hello, and welcome to talking crap, a podcast by Iowa State Extension and Outreach. This institution is an equal opportunity provider. For the full nondiscrimination statement or accommodation inquiries, go to www.extension.iastate.edu/diversity/ext. In this podcast, we discuss insights into the science, technology and best practices surrounding manure management. Our objectives are to build awareness about the challenges farmers and the broader agricultural industry faced around manure, and to demonstrate solutions in areas of innovation. 

Dan Andersen  00:43

Hello, and welcome to the talking crap podcast where we dive into the world of manure management. And in this episode, renewable energy. I'm your host, Dan Anderson and today we have a fascinating topic that promises to be environmentally beneficial, we'll talk about when it's economically viable and what it takes to maybe make it work on some swine farms here in Iowa. That's right, we're gonna be talking about anaerobic digestion of swine manure, and some work that a student and myself and Raj Raman worked out about what it takes to make these systems economically feasible. So why anaerobic digestion of swine manure. Anaerobic digestion involves breaking down organic matter in the absence of oxygen, producing biogas that can be used for energy, and then it also leaves us with a nutrient rich digestate that we can use like manure. So swine manure is a byproduct of raising pigs and it's relatively well suited to this process because it's high in organic matter, we're producing it on a daily basis, and it gives us some opportunities to add other stuff to it because of its relatively high liquid content. So anaerobic digestion occurs naturally on any time we're storing an organic material with water, essentially. It needs to be an oxygen free conditions, but generally manure has a high enough oxygen demand that even when we're storing it with an open air surface, it'll create those anaerobic conditions and break down using an anaerobic process. What we're really talking about here is systems where we're trying to optimize that process, and then capture the gas. So I think what makes anaerobic digestion pretty exciting is it gives us an opportunity to valorize more of the manure in this case, trying to valorize that carbon that's in it to be a benefit for us. Hopefully adding to value for the farm and still letting us use it as a fertilizer in a state like Iowa, where that manure has lots of value as a fertilizer source, we probably want to use systems that allow us to continue that continue to taking advantage of the fertilizer. And this, I think is can be collaborative, if done well, it probably helps conserve more of the nutrients for valuable use, and crop production. But certainly we do have to make the right decisions along the way.

Dan Andersen  02:53

 So in today's episode, we're going to cover just a couple of topics. What's the value proposition, why there are people exploring anaerobic digestion? Again, what's got the conversation really moving? To do that we'll talk about revenue generation, and what are really the processes that people thinking about anaerobic digesters are using to valorize what they're making in and part of that is the energy, either electricity, or most of the time, these days renewable natural gas, but also what carbon markets are out there, and why that's made this more viable. I want to at least talk a little bit about some production costs. So what's it take to get a digester on a farm? What can you be expecting to spend? What are some of the other things that we need to think about, like hooking up to a gas pipeline or gas cleaning system. And then a little bit about feasibility and the reason I want to talk about feasibility is, as we talk through this, you'll probably see that there are some scaling challenges for some of our swine, our farms in general, our swine farms, in particular, with how some of the policies has been set up. So hopefully, you can sit back and relax or do something productive while you're listening to this. And we're gonna get going, so it's time to start talking crap. 

Dan Andersen  03:58

Alright, so first up, the one of the big challenges with anaerobic digestion, especially when it comes to swine manure has always been economics. And we've seen sort of this rush a few times right in the 70s, with spikes in energy prices. And then in the 2000's, there was the first renewable energy rush, and now we're seeing it again today. And today, it's probably at least in part driven by carbon markets. And I like to call that whole idea of everything that's happening there the alchemy of manure, right, in the history of manure has always been, can we take this thing that many people view as a waste, and I think many farms are starting to view as a valuable byproduct, right of fertilizer that they can use to offset some other fertilizer costs, and get more value out of it. And really, that alchemy and the energy have created some enthusiasm and investment from outside players that we haven't seen before. So I think it is getting a lot more adoption, a lot more sustained interest, and that gives us at least some potential for a more lasting change than we've seen in the past. But certainly there are still some challenges and maybe hurdles on landscape to getting greater implementation of anaerobic digestion. So really to talk about what's happening there, I want to dive into the evolving landscape of the environmental policies and financial incentives that are helping back some of these. And really what I mean by that is the carbon credit program, specifically, there's two programs that I think have really driven investment in anaerobic digestion. And the first one is the Renewable Fuel Standard, and specifically RINs, or do renewable identification numbers, and then the second is low carbon fuel standards. And specifically, we've seen California be a big player, a big driver there, but other states like Washington and Oregon, are getting involved and changing the way we think about those things. And those programs are really game changers. And the reason I say that is because when you look at the market that's been out there, more recently, something like 10 to 15% of the actual income we're generating from anaerobic digestion comes from the energy product that we're making either the renewable natural gas that methane, or the electricity. And then if we're playing in that renewable natural gas game, the majority of the credits tend to be those carbon credits. So the first market I wanted to talk about was really that renewable identification number. So renewable identification numbers, or RINs, are credits used to track renewable fuel production and ensure its compliance with the renewable fuel standard. So each gallon of renewable fuel produced generates a RIN number, which can then be sold to refiners and importers who need to meet specific renewable volume obligations set by the EPA. For farmers and biogas producers, this means that every unit of biogas generated from swine manure can translate into that additional revenue stream. So when I'm putting my gas into the pipeline, they're taking measurements of how much gas I'm putting on, the quality of that gas, and every gallon of gasoline equivalent, I'm generating a RIN number, and I can sell those RINs later. Manures, were granted a D3 RIN in the process, so pathways do need to get approved, but manures in general, have been approved as a D3, which is the cellulosic ethanol, or cellulosic fuel, and that's the highest standard of renewable fuel there is. And those credits have been relatively high priced, at least, I think they're relatively high priced compared to maybe what we've seen for credits in the past. So to give you some perspective on the price of a RIN, it does vary, and it's varied quite a bit, historically, since they started this program, but generally, we've been hovering between $2 and $3, and over the last year, we've been closer to $3 per RIN or gallon of gasoline equivalent for renewable natural gas, that's 77,000 BTUs of natural gas heating value is equivalent to one RIN. And that that works out to a pretty high number relative to the value of natural gas. So it's been a relatively lucrative market and one that most companies that are looking to valorize natural gas products are trying to capitalize and capture on. 

Dan Andersen  08:13

The second program that people have tended to be using is the low carbon fuel standards, often from California. The LCFS program just provides another layer of financial incentives. Essentially, what it does is it assigns a carbon intensity score to the fuel based on the lifecycle greenhouse gas emissions. So you have to figure out what greenhouse gas emissions would have been from if we didn't have that process in place, and how does implementing this process change the greenhouse gas emissions. Essentially, fewer fuels with lower carbon intensity scores generate low carbon fuel standard credits, which can then be sold to offset the use of higher emission fuels. Anaerobic digestion of swine manure tends to be a pretty low or very low carbon intensity score. So if you had a lagoon system, and we're changing to capture gas from that you might expect somewhere in the neighborhood of carbon intensity score of negative 300 grams of CO2 equivalents per mega joules of energy supplied. If you're switching from a deep pit system to maybe a natural gas system, you might be more in the neighborhood of negative 100 to a negative 150 carbon intensity score. In this case, more negative is better, it means that we're offsetting more of those carbon dioxide equivalents, and you are getting paid for essentially every ton of CO2 that is no longer getting emitted to the atmosphere. And while the prices again fluctuate pretty significantly, I think the last time I looked, it was about $70 a ton of CO2 that didn't get emitted from your process, so if you know how much gas you made and what your CI score is, you can figure out what that is. But it is pretty lucrative for any projects that are able to tap into that market if you have some of those low to extremely low carbon intensity scores. But the other thing I wanted to mention is you can actually stack these two programs, so you're eligible for both RINs and low carbon fuel standards. And when you provide the combined the revenue from both of those, the financial outlook for anaerobic digestion gets a lot stronger, right, because you're getting paid from two separate programs plus that thing that you're making that energy product that you're making. Now, the majority of the value does come from those credits, which means you're sort of in a credit market, making it a little bit harder to anticipate what might happen in the future, how these programs might change, but for the most part, they've looked more stable over the last few years than they have for quite a while. But using two different programs does help a little bit, if there's variation in one program, the other program has tended to help offset and provide a little bit more stability. Oftentimes, they move in opposite directions for whatever reason, and that hopefully, gives an indication of a little bit more long term stability and opportunity for investment. But again, they are mandated markets and a little bit harder to predict. There can be other revenue streams beyond the credits, and I want to talk about them at least a little bit. Biogas in order to get these credits, it has to be potentially used as a transportation fuel. So far, that has meant putting renewable natural gas into a pipeline. There is hope one day that potentially it could be combusted and burned for electricity, and that would be called an E RIN program. And there's opportunities potentially for that to get approved one day, we haven't seen that as of yet, but it's something people in this area follow quite closely. And then there are opportunities for selling digestate or byproducts of anaerobic digestion, because it is a high quality fertilizer. With that said, I think many of the properties are similar to manure. So if I start with swine manure and add nothing to it, and I run it through a digester, what I'm getting out, it's digested, it has a little bit less odor potential, some of the nutrient availability has increased slightly with swine manure, not as much as maybe some of our other manures, but slightly, and that may or may not make it more marketable. I don't think that one's a game changer for most of us here in Iowa, but if we started doing some different things like solid separation and in conduction with anaerobic digestion, that might change the process a little bit, but we're probably relatively similar. So all that to say, I think, really, what I'm saying is the landscape is different now than maybe what we saw in the 2000s, or the 70s  because the financial incentives are both much stronger. And I think so far, there's been at least an indication that they will be more reliable. So those programs provide a huge economic benefit that wasn't there in the past, when we were really relying on energy prices to make these systems and work.

Dan Andersen  12:39

When you think about these projects, and making them work long term, that alchemy of manure has always had its challenges, we'll continue to have some of those challenges. And it really takes the right mix of policy support, financial incentives, and technological advancement, to make it work. And I think, while we sometimes lack the expertise or lack the experience to make the systems function well, on farms, we're seeing a lot of people try, we're seeing a lot better success rates than maybe we had in the past. And part of that is because the financial structure has changed to help support more of that investment long term, rather than set it up and hope it runs and forgetting about it. So I do think there's at least opportunities to navigate some of these challenges and trying to make some of these investments more feasible and profitable operations of the long term. Alright, since we're in Iowa, I wanted to talk a little bit more about system configurations, especially some of the challenges that we might see for deep pit systems and why maybe that's going to mean that we have to look a little different than the model of implementation we've often seen so far on swine farms, which has really been looked for farms that have anaerobic lagoons, put a cover on them and capture that gas. We talked about one of them briefly, and that's really the difference in carbon intensity scores, right. So if you had a swine manure system with a lagoon before, you might have been in that negative 300 CI score, if you're using a deep pit system, if we're optimistic, we're probably in that negative 150 CI score. So our income from that low carbon fuel standard program might be roughly half of what it would have been if we had a lagoon system. And that's certainly a hurdle in the economics that we have to figure out how to adjust. But it really goes beyond that. In the lagoon system, where you're putting a cover on it, the farm makes relatively few changes. They can still use that lagoon as their manure storage, all the manure is flowing to that lagoon already anyway, there's not a huge change they have to make. Whereas, if you're using a deep pit and putting an anaerobic digester in, well, we no longer get to use that deep pit as our manure storage. It's a manure collection system and we want to get the manure out relatively frequently to feed the deep pit or feed to the digester. So that's, that's a pretty big change to start with and how we're operating what our daily management might look like, and the economics of doing that are yet to be discovered. We're still looking for the best practices, potentially, of how to get that manure out. You have to invest in building a new digester, you don't just get to put a cover on it. The deep pits tend to be in more northern climates where we aren't quite as warm from the weather, so we do have to provide some supplemental heat to try and optimize the process and get a little more gas production, so that also plays a role. And then you still need long term storage of the manure since we're in land application systems where traditionally we've been pretty heavily fall manure application with some spring manure application. But we need a place to store and hold that manure for the longer term. 

Dan Andersen  15:22

So a few things that I think we want to think about and talk about when we talk about Iowa and the deep pit model and sort of what's happening. One is just the scales needed. And there is an economy of scale and there's no question about that. Some things like hooking up to the pipeline, that's probably a $1 to $3 million cost, depending on the size of the product project, the location of the pipeline, if you're further from a pipeline, that might not even be feasible. But that's a pretty high hurdle, right? When you have a capital investment cost of $1 to $3 million just to hook up to the pipeline, that's not to build the digester, a new manure, storage, all the other stuff that needs to happen, it's just access to that pipeline and getting hooked up. So it can take a little time to make that work. The other thing that we've tended to see is maybe in some of the states where lagoons are more prominent, they tend to have more pigs on a farm, use this lagoon manure management system. In the Midwest, where we've been deep pits systems, one of the drivers really has been manure value. So we're trying to site and size swine farms, so they're matched with the land base. And it was pretty cost effective to build a roughly 5000 head farm, move a mile down the road, build another 5,000 head farm and say, well, this manure is tied to this land base, this manure is tied to that land base, and they don't have to move manure as far to utilize it as a fertilizer. And that's a great thing. I think that was a great way for this system to develop, when we're talking about economies of scale and making that work. 5,000 pigs sounds like a lot and then for many anaerobic digestion systems, that would be very small project, if we're going to try and pay for that high pipeline expense, as well as everything else we're going to do. And that might mean that we have to lean in more towards centralized digester systems that can serve multiple farms, to get to an economy of scale. And well with swine disease potential and moving manure around more frequently, there are certainly challenges to that. Another part of it is trying to get these systems more modular in design and sizing. Certainly, we have opportunities for that. But we need to hopefully drive down some digester costs to make them more feasible to put on some of these smaller farms. And one way to do that is to reduce some of the engineering costs, right, so making them all look more similar, so that they can sort of be cookie cutter fit on the farms would help drive some of that cost down. 

Dan Andersen  17:37

And then the other thing that people are looking at, and we'll continue to look at is, are their  co-substrates, things that we can add to them in order to get more gas production per unit volume, to try and better utilize our asset of that digester in the gas cleaning system. I think one that we've seen a lot of interest here in Iowa is corn stover, we throw a lot of corn and therefore have a lot of corn stover. We don't use that corn stover maybe in ways where we think about it really be being heavily utilized and valued. Certainly by leaving on the soil, it helps protect the soil from erosion, it helps build some organic matter in the soil by returning some of that residue. And harvesting and using an anaerobic digestion system, undoubtedly would change those carbon flows and the nutrient flows associated with that. Now I think if we're thoughtful about it, and think about how much are we removing, how much actually gets converted in the digester? And how does it get returned to fields, we can manage some of those challenges, especially by implementing cover crops, but there will be challenges there. But it does give us an opportunity to hopefully add a carbon rich substrate to a manure that's relatively high nitrogen, and doing that would give us a better carbon to nitrogen ratio, and more gas production per unit volume of the digester. Another substrate that people have looked at for a long time, is adding food waste or bio-processing waste. Certainly those are valuable, they often come with tipping fees for accepting them or taking them. Food wastes are really digestible high and organic matter, and can significantly boost biogas and methane yields when mixed in with manures. One of the challenges that you have to think carefully about is how does it impact the RIN score? How does it impact the low carbon fuel standard score that you're going to receive? Those aren't generally cellulosic materials. For a while there was a pretty strict regulation on mixing some of these things in and what would be D3 versus D5 or available for some of those carbon markets. The EPA has been adjusting some of their protocol for how that's calculated and I think that opens up some more of these opportunities. But again, you have to be pretty thoughtful about when that is right for the process and when it works out, or if we have to use separate tanks. And then the last thing is looking at dedicated energy crops. A few that get mentioned often are switchgrass, and miscanthus, but it also could be things like what we've traditionally call the cover crop turning into a catch crop that we're harvesting and potentially adding to the digester, so cereal rye, silage or something similar. And those can be relatively high feedstocks can make a relatively large amount of gas and certainly they adjust that carbon to nitrogen ratio in ways we want. But we have to develop some infrastructure, figure out what the correct pricing would be for the crop so that both the digester and company can make money off the gas they're making, and whoever's growing that can make enough off of the crop that they're producing to want to grow it in addition to the other things that we're doing. That gets complicated, right, we have to start talking about configurations and logistics, and which of these co-products might need some pretreatment? Like if I'm taking corn stover draft and grind it beforehand? Do I have to add some enzymes to help break it down? Or is there ensiling it enough? And can ensile corn stover and what would that process look like? So I think there's a lot of question marks to do that and how we best to implement it. That's exciting to me as an engineer, but it also makes some of these projects challenging, or if you're a wind farm, and you have to buy these products from neighboring facilities, how much investment or buying can we get from local farmers to provide some of these substrates and take the digestate, or the solid material from the digestate that we're generating back to their farm and use it in the production system? And working out those details. This is really where these projects are made and broken, right? The devil is often in the details. I think as a manure person, one of the things that really it comes down to at the end of the day is what's the market for the digestate that we're going to make? Is there a value added market that we can capture? Is it all going to be used locally, what's sort of the pricing structure that makes everyone satisfied on this? 

Dan Andersen  21:35

Alright, I wanted to talk a little bit about costs and, and sort of what you can expect and, and there really are a couple types of costs. There's initial capital cost of setting up a project and then there's the operational cost of getting the substrates collecting, storing, pre-treating them, and then energy and disposal costs related to utilizing them as a fertilizer. And all those can add up. But I think when I look at these projects, really it's the capital investment costs that tend to be a driver in them. So with a couple people, Gabby Myers, Raj Raman, Bobby Martens and myself, we did a little cost assessment of what it would look like to centralize swine manure and corn stover, digester systems and we really looked at four different potential scenarios, thinking about pig farms here in Iowa. So we said, what happens if we have a 1400 head pig farm? We're gonna put a digester just on that farm. And then what can we do to make these systems work. And we said, well, the first thing we would do is potentially add some corn stover trying to get the solids content of that manure up to about 12% and see where we're sitting. A second scenario we did was sort of the same thing. 1400, head of pigs get the digester cells content up to 12% by adding corn stover, but we're going to run a solid separator on the back end recycle the liquid back through the digester so that we can add more corn stover to it to try and get a better economy of scale by essentially making more gas having a bigger digester, things like that. And then we said, well, that alone might not be enough, what happens if we look at some systems where we work together? Essentially, we said, what happens if we get five of these pig farms all working in collaboration, and they can either move all the gas they produce from a single farm where each farm has a digester to a centralized point, share the gas processing equipment, and the injection point or what happens if we have to move all that manure all the corn stover to a single processing facility and handle everything there with a centralized gas production point for four facilities. And then we said alright, let's start sizing these facilities and see what happens. 

Dan Andersen  23:41

So a couple of things that might be useful or helpful to think about when we were thinking about that corn stover and how much we're going to add. If we were in that first facility where we're just adding corn stover to get our manure solids content up to 12%, that was taking about 20% of the corn stover we're probably applying pig manure right now. When we started recycling that digestate back through the digester to take more corn stover, we got up to 70% of the corn stover from land that was taking manure 70% of the acres had to be harvested. And then for the modeling we did every acre where we were harvesting from we were only taking about half the corn stover that producer was producing. So when I say taking 70%, we're really only taking 35% of the corn stover we were producing on that farm. But that's probably about the maximum amount of corn stover we want to take per acre is about half to try and balance some of those environmental conditions, limiting erosion with what we're trying to optimize here, which is trying to make some more gas to make the project a little bit more size feasible. So as you might imagine, the digester cost really is a function of how big does that digester need to be for our case where he's just swimming or taking a little bit of corn stover, we're in that million dollars for a digester range by the time that we started saying let's build and that was the same for basically every farm we got up to about a million and a half of recycled and took more corn stover. Where we really started to see an economy of scale or some benefit was taking all that manure from five farms combining it, and that digester only cost about three and a half million dollars, right. So rather than being that $5 million price that you'd expect from just adding them all together, you do get a little size benefit from constructing several digesters right next to each other. Similar things we're seeing with like the upgrading system, right, so the upgrading system, it is the cost is somewhat proportional to how much gas it has to clean. But as you get bigger, the unit cost goes down, right. So there's some scaling effect by sharing gas production systems and things like that. So for example, we estimated that upgrading and injection on some of our smaller farms, where's the single farm doing the upgrading and injecting it might cost something like $30 per mega joule. By combining all that guessed together and doing the upgrading and cleaning, we got that price down below $10 per mega joule right, so substantially cheaper. You do have to add a new manure storage on these systems that we're looking at, so we started considering those costs. And then I think the real take home from this was that single farms, we had trouble getting to prices where we were competitive with natural gas, even with those carbon credits, when we started getting farms to work together to write off some of that infrastructure cost. Especially when we did that combined digester, we found that at least, we were competitive with natural gas prices. And there would be time periods where the facility would be in the black, there would also be time periods when it was in the red. We were fortunate enough that that project sized out over roughly a 20 year period. But it does give some hope that with better engineering, good forethought into what we're doing there at least some possibilities about making these systems work. There's probably definitely room for optimizing some of the design as well, to try and get either more gas production. cheaper gas cleaning systems are thinking about how to combine farms and strategic ways. So that the value proposition is all achieved. And I don't want to talk about all those details today. We'll try and get some guests on the future to dive into some of those issues and talk about them in more depth. But I think what was exciting to us is we did see that there was at least potential to try and get to some of these levels where we could be cost feasible on some swine farm projects. Certainly there's a fair number of hurdles to jump through but how to coordinate multiple farms working together, working with both crop and livestock side to make some of these things happen. But it was nice to see that there are at least opportunities to become cost feasible.

Dan Andersen  27:36

Thank you for joining this installment of Talkin' Crap. Be sure to take a look at the show notes on our website for links and materials mentioned in the episode. For more information or to get in touch, go to our www.extension.iastate.edu/immag/. If you found what you heard today useful or made you think we hope you subscribe to the show on your podcast app of choice. Signing off from a job that sometimes smells, but never stinks, keep on talkin' crap.