By Siobhan Fathel and Stephanie Herbstritt
Biogas is a valuable byproduct of anaerobically (without oxygen) digesting (decomposing) agricultural wastes. Anaerobic digestion is an old technology during which bacteria break down the carbohydrates, proteins, and lipids in organic material, producing a mixture of methane and carbon dioxide (biogas) and a nutrient-rich liquid and solid byproduct (digestate). Today, many farms across the United States and within the Commonwealth of Pennsylvania have made biogas an integral and successful part of their current systems converting biomass resources like manure and food waste into energy, fertilizer, and revenue using anaerobic digesters.
There are several ways producers can produce revenue in the current energy marketplace in Pennsylvania with anaerobic digestion. This article discusses those potential revenue streams; however, substantial financial investments are required to build and operate a digester. Farmers must consider those substantial costs to understand the system’s profitability in addition to many other considerations. These include the significant technical skills and time needed to operate an anaerobic digester, the feasibility of connecting to existing energy infrastructure (pipelines and power lines), the availability of federal and state financing, manure and nutrient management mandates, and fluctuating energy markets.
Electricity
Most producers with farm digesters in Pennsylvania participate in the electricity marketplace. These producers have engine generators that convert their biogas into heat and electricity, most often sold to electric distribution companies and electric generation suppliers. Waste heat from the engine-generator set can be captured in co-generation power systems and used on-farm for heating the digester to aid in the anaerobic digestion process and for either water or space heating. This captured heat adds additional benefit by offsetting the cost of external energy supplies, while the generated electricity provides an opportunity to offset their farm electricity use and for an additional source of revenue.
Pennsylvania is also one of many states where electricity from renewable sources like biogas is required under state law. In Pennsylvania, under the Alternative Energy Portfolio Standards Act (AEPS), electric distribution companies and electric generation suppliers must include a percentage of the electricity they sell to Pennsylvania consumers from Tier I alternative energy resources, which includes electricity produced from biogas. In 2021, the Alternative Energy Portfolio Standards Act required 8% of electricity generation to come from Tier I renewable energy sources, with the expectation that this will gradually increase in the future. Other states have much higher target goals, such as California, Colorado, Nevada, Maine, Virginia, New Mexico, which expect to achieve 100% of electricity generated from renewable energy sources by no later than 2050.
Pennsylvania farmers who produce biogas can enter this renewable energy market by selling their renewable energy credits (RECs), referred to as alternative energy credits (AECs) in Pennsylvania. AECs can be sold to distributors and suppliers directly through the Generation Attribute Tracking System (GATS) or via a trader/aggregator that combines smaller producers and sells their aggregated energy credits to interest parties. In 2019, Tier I AECs ranged from $0.20 - $115.00. A list of aggregators is available on the Generation Attribute Tracking System webpage.
Pennsylvania is also a deregulated retail electricity market served by a Regional Transmission Organization (RTO) known as PJM. The deregulated retail market allows residential electricity consumers to choose their energy supplier. Customers can choose who generates their electricity and how their electricity is generated. Consumers can preferentially choose providers that specialize in generating electricity from renewable energy sources. This type of market allows electricity generated from renewable sources, like biogas, to compete directly with electricity generated from fossil fuels. If you live in Pennsylvania, you can visit PAPowerSwitch.com to learn more about how to choose your electricity supplier. Because of AEPS requirements, some electricity from renewable sources is provided along with electricity from fossil fuels, which can help increase demand for renewable energy from biogas.
Renewable Natural Gas
In addition to the electricity marketplace, biogas can also generate revenue as a transportation fuel. Biogas is a mixture of methane (50-70%), carbon dioxide (30-40%), and trace amounts of other gases, which can be upgraded to renewable natural gas (RNG) or biomethane. Biogas upgrading removes contaminants, separates the carbon dioxide and methane streams, and compresses (compressed natural gas) or liquefies (liquefied natural gas) the methane for easy use. When renewable natural gas is produced from a cellulosic feedstock, such as municipal solid waste (from landfills), agricultural wastes such as animal manure and crop residues, municipal wastewater, there are opportunities to generate credits called Renewable Identification Numbers or RINs under the United States Renewable Fuel Standard (RFS).
In the RFS program, renewable fuels generate RINs, which can then be traded or sold to interested parties. The Renewable Fuel Standard was developed by the U.S. Environmental Protection Agency (EPA) to increase the volume of renewable fuels used in the United States. One RIN represents an equivalent of a gallon of fuel ethanol. In the case of RNG from cellulosic feedstocks, like those you would find on-farm (for example, manure), the generated RINs are classified as “D3 RINs”. The value of D3 RINs ranged from $22 MMBtu-1 to $36 MMBtu-1 last year, approximately ten times the price of fossil natural gas at around $3 MMBtu-1.
Pennsylvania producers could also receive low carbon fuel standard (LCFS) credits if they sell RNG to companies that inject natural gas into pipelines that supply the California transportation market. LCFS credit market values for dairy manure projects are currently around $50 MMBtu-1 or 15 times the current price of fossil natural gas. However, substantial costs are associated with upgrading biogas to renewable natural gas and assessing and injecting it into pipelines.
Other revenue streams
In addition to the energy marketplace, revenue from byproducts, tipping fees, and emerging carbon markets are other potential streams for Pennsylvania producers to consider.
The liquid and solid digestate byproducts created during anaerobic digestion can be used on-farm or sold as a nutrient-rich soil amendment (liquid-fraction) and livestock bedding (solid-fraction). Liquid digestate has reportedly sold at >10 cents per gallon.
Farm digesters fed by food waste can generate revenue from municipal waste disposal fees or tipping fees. Pennsylvania requires waste haulers to pay these fees per ton of waste managed, and in 2020 these tipping fees averaged $73.45 ± 15.23 in Pennsylvania.
Producers that feed their digesters perennial crops that can sequester carbon in the soil can contract with companies that participate in voluntary carbon markets to offset their greenhouse gas emissions. Under these markets, companies pay producers a price per ton of carbon sequestered by their agricultural practice.
Facilities that capture the pure carbon stream after upgrading to renewable natural gas and sequester the carbon underground can receive up to $50 ton-1 of carbon dioxide under 26 U.S. Code § 45Q.
Conclusion
Biogas systems offer a revenue opportunity for Pennsylvania farms. There are several ways to generate revenue using an on-farm anaerobic digester, including electricity generation sold to the grid, upgrading biogas to RNG that can participate in the Renewable Fuel Standard program, and from co-products like liquid fertilizer or food waste tipping fees. While most Pennsylvania farmers with anaerobic digesters participate in the energy market via electricity generation, there may be future pathways for producers to earn revenue from biogas in the renewable natural gas and carbon markets. However, producers should consider the substantial financial investments required to build and operate a digester in addition to the technical skills and time needed to operate an anaerobic digester, the feasibility of connecting to existing energy infrastructure, and fluctuating energy markets.
Source : psu.edu