Biogas: The Price is Not Right

Posted: February 22, 2022

Last week we looked at blended ethanol to analyze if it made economic or energetic sense to produce. This week’s prime target is “biogas,” an umbrella term that looks to harness the wasted energy of food production and animal husbandry. The four primary categories of biogas generation stem from:

*Availability of wet wastes in the US and associated energy potentials from “Economic Perspectives of Biogas Production via Anaerobic Digestion (Bhatt and Tao 2020)”*

Animal Waste – Primarily dairy and swine manures

Food Waste – Includes inedible parts of plant production along with food one might throw away

Wastewater Residuals – Primary and seconday sludges of wastewater treatement

Fats Oils and Greases – animal fats, used cooking oils, and restaurant fats for grease collection

This article will be focusing on animal-associated biogas since that represents the largest portion of recoverable energy and garners the most interest in the United States. The Wall Street Journal recently published an article highlighting the “Gold Rush” for cow manure in California. It is no secret that cows are the largest emitters of methane out of all of our favorite farm animals. This is a fact that we have known for decades. Here is an excerpt from a report released in 1986 showing how a single cow releases 5 times more methane than a human, and over 35 times more methane than a pig.

“Methane Production by domestic animals, wild ruminants, other herbivorous fauna, and humans” (Crutzen, Adelman, & Seiler 1986)

While numbers have changed due to increased efficiencies since the 80s, cows still emit an incredible amount of methane from both ends. Biogas aims to harvest as much methane as possible in order to avoid unnecessary energy waste. A cow’s digestive system performs the process of “anaerobic digestion” which can be industrially mimicked.

The easiest way to harvest energy from this process is by collecting the manure of cows as soon as possible. Then, all the manure is collected in a central location so the gasses can be collected and sent to a processing facility to be cleaned. Once the biogas reaches this point, it can be utilized like natural gas that was geologically produced. While the idea is very romantic, there are a few flaws.

California has aggressive policies to guide itself towards environmental compliance through the energy transition. One of the largest subsidy programs right now is the “Low-Carbon Fuel Standard,” which requires companies that sell transportation fuels in the state to lower their carbon intensity through the purchasing of credits. If a company exceeds its maximum carbon intensity, it must purchase credits. If a company is under their maximum carbon intensity, they generate credits that they can sell. The program establishes a market between energy manufacturers, distributors, and consumers where high-carbon groups pay low-carbon groups to offset their environmental impact. California officials have commented that they love the program because it costs the state no money, but rather makes high-carbon producers pay the incentive. This means a gasoline refiner would likely have to pay a dairy farmer that utilizes a biogas collection system.

The biogas market in California is still relatively young. The old king of carbon intensity was food waste gas associated with landfills. As garbage decomposes, lots of hydrocarbon-based mass from food waste (spoiled leftovers, inedible vegetable pieces) breaks down and releases ethane and methane. Many programs sprang up to make use of this, but just as many programs were created to limit how much methane a landfill can release. Farms have no such restriction and end up emitting much more than landfills, so capturing methane from decomposing manure to make truck fuel cuts far more emissions and scores far lower in carbon intensity. This has caused dairy farmers to become rather popular with developers looking to pitch ideas for manure harvesting systems that could bring more money into the farm’s bottom line.

Even Chevron has committed half a billion dollars in developing renewable gas by focusing on dairy farms. This way, the company can produce its own low-carbon gas to offset the high-carbon side of the conventional energy business requiring them to purchase fewer credits. Even Amazon is looking to generate biogas for its massive trucking fleets. So far, it seems as if the Low Carbon Fuel Standard program is definitely working to fund the energy transition… but will the subsidy program ever be unnecessary?

The short answer is no. California is not the first territory to explore the efficacy and economics of biogas production. A 2018 article from Germany highlighted the fact that biogas projects are dying because they are just too expensive. There are more than 9,000 biogas plants in Germany, but recent support cuts have changed the rate of development. Only 120 plants were added in 2017 versus 1,500 in 2011 when support was first announced. In 2021, the first 1,000 plants dropped out of the 20 year support period and many shut down. Owners of the plants said that they could not cover the necessary investments as biogas was too expensive and not cost-competitive with conventionally produced natural gas. After 20 years of experimentation and government funding, German biogas was not able to find its own feet. So… what does this mean for the future?

Methane emissions associated with food waste and animal development represent an insane amount of wasted energy. If someone is able to develop a solution that both harvests this gas and makes money, they will certainly become very wealthy. Unfortunately, current biogas operations only exist because of fuel standard programs. A dairy farmer is only receiving payments from Chevron because a government program is forcing them to provide the incentive, not because it is energy efficient. In fact, the entire process sacrifices energy in order to lower emissions. That does not mean there is no opportunity across the rest of the nation. Should Colorado, Wisconsin, or any other state push a similar credit program, there is much money to be made for those who can take advantage of the programs.