MOTIVATIONS AND CHALLENGES
Survey of farmers across the country who were implementing a digester project shows that they "overwhelmingly" favored using the technology - citing odor control as a top priority.
AS HERD SIZE has increased over the years, managing animal manure effectively has become a pressing challenge for the agricultural industry and a particular concern for dairy farmers. Anaerobic digesters (AD) can help farmers, especially those with sizeable operations, develop efficient manure management practices, and at the same time control odor, reduce the amount of manure in runoff entering streams, and prevent methane release into the atmosphere. The methane can be used to generate electricity and in some cases may add income from the sale of excess power.
Yet despite its promise as an aid to manure management and a source of renewable energy, AD technology has been relatively slow to catch on in the U.S. According to the U.S. Environmental Protection Agency, there are approximately 100 digesters that are operational or under construction on farms across the United States, representing approximately one percent of the farms that could use a digester cost-effectively. This leaves a substantial untapped resource for generating electricity and a potential business opportunity for increasing farm income.
Over time, numerous conjectures have been made about the role of several factors - AD system technology, financing, electric utility negotiation, local opposition, and permitting - in creating a positive outcome for AD implementation, but there has not been any supporting data. To provide an understanding of the motivations and challenges associated with planning and installing AD systems, the California Energy Commission sponsored a survey project under its Public Interest Energy Research (PIER) program, to collect first-hand information from farmers across the country who plan to install an on-farm digester.
SAMPLING SET
The sample set for this project consisted of the 64 U.S. farmers who were recipients of federal funding for AD systems in 2003 and 2004 under the Farm Security and Rural Investment Act of 2002, which was the first Farm Bill to provide grants and loans to assist farmers with purchasing renewable energy systems. This was a convenient, focused sample of farmers with a wide range of experiences, from those with operating digesters to those who decided to abandon their project. Including all grant recipients regardless of the status of their AD projects provided a clearer picture of the implementation issues farmers face when considering an AD system.
As would be expected, the AD projects funded by the Farm Bill were most commonly found in dairy-producing states. Eighty percent of the projects in this sample were located in the five leading dairy states: California, Wisconsin, New York, Pennsylvania and Minnesota.
Fifty-nine of the projects were proposed for single farms, two for cooperatives, and three for ethanol biorefmeries. Two projects were intended for hog farms, one for a poultry operation, and the remaining 61 for dairy farms. The number of animals per farm ranged from 400 to 4,000 cows, 8,000 to 10,000 hogs, and over 800,000 chickens.
A limited number of system designs were being offered in the U.S. at the time this group was making their selection, and there were not many AD designers to choose from. Three design choices accounted for 94 percent of the selections, with the plug flow system being the most popular (Table 1). In terms of AD systems, three vendors provided 77 percent of the digesters installed in this sample (Table 2).
The current status of each AD project was classified according to the description given by the farmer. The following categories were used: Developed - digester is in the construction, start-up, shakedown, or steady-state phase; Delayed - construction has not begun and plans are not moving forward at this time; Discontinued - the farmer has refused the grant and ended the AD project. In all, 40 percent of the projects are developed, 45 percent are delayed, and 15 percent have been discontinued.
Information was gathered through structured telephone interviews conducted from April through July, 2006. We talked to all 64 farmers, for a 100 percent response rate. They were asked a series of questions about their experiences planning, installing, and implementing an AD system. In addition to providing narrative information, the farmers completed a 4-item questionnaire that required ratings of factors related to their motivation to install an AD system and the challenges they encountered at each stage of the process.
MOTIVATION FOR MOVING FORWARD
The economics of AD systems are most attractive for farms with a large number of animals - approximately 500 dairy cows, for example - because unit capital costs decrease as a function of herd size. Consequently, the farms in this sample tended to be at least that size or larger, or they were intending to expand to that level. These highly efficient farms, many of which are family-owned and operated, have characteristics and concerns unique to larger farming operations, that formed the basis for their motivations to install an AD system: odor reduction, environmental protection, manure management and using digested solids as bedding.
Farmers were asked to assign a number from 1 (low) to 5 (high) indicating their priorities for seven preselected issues potentially influencing their motivation to install an AD system: Odor - meaning odor control and reduction; Land application being able to apply manure to farmland more easily (e.g., when the ground is frozen); Electricity - including both electricity sales and offsets of electrical bills; Bedding - using recovered digested solids for animal bedding or compost; Fertilizer - using the digester effluent as a replacement or substitute for commercial fertilizer; Environment - protecting air and water quality; and Manure management - managing the volume of manure.
Figure 1 summarizes the farmers' responses regarding their motivations to install an AD system. Ninety-seven percent of the sample cited odor control as a top priority. Farming operations have always been associated with odor but demographic changes are creating new objections from neighbors, and farmers value good neighbor relations. Most importantly, all of the farmers saw an AD system as a means to increasing herd size without increasing odor, thereby forestalling potential local opposition.
Protecting the environment, particularly air and water quality, also was identified by the farmers as a top motivator. Twenty-five percent expressed great concern about environmental protection and showed enthusiasm for the potential of an AD system to make a positive contribution. A common feeling among many was expressed by a long-time farmer: "One of the big priorities for implementing the digester is to preserve our natural resources."
Manure management - dealing with the huge volume of manure, and using recovered digested solids - was also rated as a high priority motivating farmers to install an AD system. All of the farmers interviewed stated that they want to maintain good manure management practices, or as one put it, "Trying to find a responsible way to manage what cows produce."
Although the farmers in this sample received Farm Bill grants to implement an AD system specifically to produce renewable energy, generating electricity to sell or to offset electrical bills was one of their lowest priorities. Unlike odor reduction, environmental protection, and manure management, the production of electricity, particularly to sell off-farm, does not contribute directly to best practices for a large farming operation. "Electricity is more of a side issue," one farmer admitted.
We also presented farmers with six possible obstacles to implementing an AD project and asked them to rate each one according to how challenging it has been: Getting grant approval; Arranging acceptable nongrant financing; Selecting a specific AD system design; Negotiating an acceptable agreement with the local utility; Obtaining the necessary state and local permits; and Facing local opposition. Analyzing the data across all groups, negotiating with the utility emerged as the most challenging issue.
CHALLENGES WITH ELECTRICITY
Producing electricity was a low priority for most of the farmers, but it was a requirement under the Farm Bill grant. However, negotiating an acceptable agreement with the local utility for meeting electrical interconnection requirements and obtaining an energy contract for selling their renewable energy was reported to be a major challenge for the farmers. Difficulties and delays in the negotiation process often resulted in cost overruns and increased payments on loan interest.
On the whole, the farmers also expressed dissatisfaction with the relatively low rate they were paid for the electricity they generated compared to the higher rate they paid to purchase electricity for farm use. Many were under the impression that sale of additional electricity would enable them to recover some of the high cost of implementing a digester, and were disappointed when this was not the case. They were also bothered by the long-term contracts the utilities offered that locked them into a fixed rate even if their purchase price of electricity increased.
Finally, they were dismayed by the high cost of electrical upgrades that were often required in order to interconnect with the electrical grid. In particular, they viewed as unfair the policy that required them to pay for installation of interconnection infrastructure - such as poles, transformers and switches - that was not located on their land and would become the property of the utility.
CHALLENGES BY STATUS OF AD PROJECT
Looking at challenges separately for discontinued, delayed and developed projects provided an interesting picture of the stumbling blocks at different stages in the process of implementing an AD system.
Discontinued Projects
This group of nine farmers identified their biggest obstacles as the first steps in the process of implementing a digester - selecting a suitable AD design, and financing the project. They often stressed in their interviews that an AD system is not a complete solution for manure management. For the most part, they were in favor of using new technologies to manage their manure but they found the limitations of AD systems too great: poor design, time-consuming operation and management, and inadequate serviceability. As one said, "It should be as easy to operate as a milking machine." And another noted, "The technology has to become more efficient, particularly for a cold climate."
Many in this group found obtaining financing to be a major hurdle. With the widespread distress over low milk prices, they expressed concerns about profitability of an AID system. This was the only group that was motivated by the prospect of electricity sales, but they viewed receiving a fair market value for selling the electricity as unlikely. All but one of the farmers who discontinued their projects said they would once again consider AD if the technology improved, and it became economically feasible for them.
Delayed Projects
Negotiating electricity sales and offsets was by far the greatest challenge for the 28 farmers whose AD projects were on hold. In many cases, these negotiations were the cause of the delay. Farmers in this group generally had passed the hurdle of selecting an AD system and a designer, although arranging for project financing was rated somewhat challenging, particularly where the local bank did not have experience financing digesters. Even in the top dairy states, farmers in this group were worried that lenders may be holding off while they evaluate the success of existing AD projects.
Other difficulties came to light only when farm location was taken into account. Of the 12 states represented in this group, obtaining the required permits was a challenge only in California. Changes in water quality regulations that went into effect since some of the California farmers applied for permits have complicated the process and delayed projects in that state.
Local opposition was a challenge only in Minnesota. A national activist group has associated AD systems with large farms, particularly concentrated animal feedlots, and mounted opposition to digester installations. This has been keeping at least one Minnesota farmer tied up in court and unable to move forward with his digester project.
Developed Projects
The 27 farmers with operational AD systems or AD projects under construction identified working with the utility as, far and away, their greatest challenge. On the other hand, it did not keep them from moving forward with their project. They often had the necessary electrical upgrades already installed on the farm and had a good working relationship with their local utility. Most of them were, however, unhappy with the price they were being paid for their electricity.
In general, these farmers were entrepreneurs who were creative in the ways they approached the business of farming, viewing AD technology as a potential profit center for the farm - from tipping fees for accepting food wastes from nearby commercial interests, to sales of digested solids as compost and animal bedding. All of the farmers in this group expressed a desire for more flexibility in available grants to allow them to use the methane they produced in alternative ways. Some were already exploring options such as absorption chilling, or burning it in a boiler.
CONCLUSIONS AND RECOMMENDATIONS
The farmers in this sample were motivated to install an AD system to help them manage manure primarily because of its capability to reduce odor and improve air and water quality. These factors do not result in a monetary pay back, but farmers seemed to accept them as best business practices for large farms and recognize their value in maintaining good neighbor relations.
Farmers viewed the production of electricity as a secondary benefit that could allow them to recoup some of the capital expenses or operating costs of a digester. But they found negotiating with the local utility to be such a challenge that many of them did not move forward if financing their digester project depended on selling electricity.
In some cases, a number of issues - negotiating with the utility, financing, selecting an AD technology - arose that when taken together, resulted in a delay in project development or even abandonment. In other cases, a single factor - a change in permitting regulations, for example, or the formation of an opposition group - was sufficient to impede implementation progress.
Although farmers are not interested in installing an AD system primarily to provide an income stream for the farm, the expense of AD technology means that cost recovery is an important issue. Initial financial support also is necessary for many farmers. The farmers in this sample expressed a desire for financial assistance that is not tied to a specific form of renewable energy. As experienced business people, they are accustomed to making their own decisions, and would prefer a program that offers them the flexibility to market their biogas or electricity as a commodity in a manner similar to how they manage the production and sale of milk. Regarding support that is tied to electrical generation, they would like a dedicated, transparent process for negotiations between the farmer and the utility and fair compensation for the electricity they produce.
Despite difficulties the farmers in this sample faced when trying to implement an AD project, they were overwhelmingly in favor of using this technology. The final item on the questionnaire asked whether they would still consider an AD system if they were just starting to research new methods of manure management - and 92 percent said yes.
[Sidebar]
The majority - 57 percent - of the farms installed plug flow digesters, such as the mesophilic modified plug flow anaerobic digester at a flush dairy operation (left). The installation includes a storage lagoon for liquid fertilizer from the digester (right).
[Sidebar]
Farmers were dismayed at the high cost of electrical upgrades that often were required in order to interconnect with the grid.
[Sidebar]
AD technology was viewed as a potential profit center for the farm - from tipping fees for accepting food wastes to sales of digested solids as compost and animal bedding.
[Author Affiliation]
Patricia Mullins and Susan Tikalsky are with Resource Strategies, Inc. in Madison, Wisconsin, www.rs-inc.com. This project was funded by the California Energy Commission PIER Renewables Program; Zhiqin Zhang is Project Manager.
