May 27, 2009 | General

Economies Of Scale In Renewable Natural Gas

Vintage Dairy's covered lagoon processes waste from the farm's 5,000 cows, producing about 250,000 cubic feet of biogas per day. BioCycle May 2009, Vol. 50, No. 5, p. 39
Clustering dairies to pipe raw biogas to a centralized upgrading facility achieves economic production of pipeline quality RNG.
Diane Greer

BY 2010, California’s renewable portfolio standard (RPS) will require 20 percent of the power procured by the State’s utilities to come from renewable sources. To help meet its goal,Pacific Gas & Electric (PG&E) signed contracts with Bioenergy Solutions, in Bakersfield California, and Microgy, a subsidiary of Environmental Power Corporation, to deliver renewable natural gas (RNG).
Microgy and Bioenergy will generate RNG by installing anaerobic digesters at dairies in California’s Central Valley. Biogas produced by the digesters will be upgraded to pipeline quality RNG, compressed and injected into PG&E’s natural gas pipelines.
California is the nation’s largest dairy producer, with 1.8 million dairy cows producing 3.6 million bone-dry tons of manure each year. San Francisco-based Sustainable Conservation estimates that these dairies could generate nearly 14.6 bcf of biomethane (RNG) a year, or 140 MW of electricity.
For dairy owners, producing RNG provides an economic means of reducing the environmental impacts of animal waste, and creates an alternative income source. From an environmental standpoint, the renewable fuel displaces fossil fuel usage and reduces greenhouse gas emissions.
Microgy implemented the first large-scale RNG gas injection project in the U.S. at Huckabay Ridge in Stephensville, Texas. The facility employs eight 916,000-gallon digester tanks with the capacity to process manure from up to 10,000 cows at nearby dairies. Gas conditioning equipment processes the biogas to produce 635,000 MMBtus of RNG per year, or the equivalent of 9 MW of electricity per year.
Gas generated at Huckabay is piped to PG&E in California under a 10-year purchase agreement signed in October 2006 for up to 8,000 MMBtus of pipeline quality RNG a day (2.9 million MMBtus/ year). The remainder of the gas to fulfill the agreement will come from Microgy projects under development in California.

In March 2008, Bioenergy Solutions turned the valve on California’s first RNG pipeline injection project at Vintage Dairy, located in Riverdale. The dairy is owned by Bioenergy’s President, David Albers, a third generation California dairy farmer and an environmental lawyer.
Albers gained a deep understanding of anaerobic digestion while representing dairy farmers trying to obtain permits for new or expanded operations – a process that requires an environmental review, including public hearings and comments. “Every time I represented someone on a project, there would be opposition,” he says. “And every time I heard, ‘Why not build an anaerobic digester – they are the answer to life.'”
The question, in turn, led to a requirement for an economic feasibility analysis of a digester. “I learned that far more energy could be generated than the dairy needed,” says Albers. “But we really did not have any good economic options for that excess energy.”
In early 2006, the economic options changed. During a meeting to discuss the sale of excess electricity to PG&E from a proposed digester project, the utility instead asked to buy the gas. Eight months later, in April 2007, Bioenergy signed a 10-year agreement to deliver up to three bcf of pipeline quality RNG a year (three million MMBtus/year) to PG&E.
The Vintage Dairy installation was done as a demonstration project under PG&E’s “Cow Power” program. The California Public Utility Commission approved a block of money to fund gas testing and monitoring equipment for the project, explains Ken Brennan, senior project manager for PG&E’s gas transmission and distribution group. Brennan facilitated the project, shepherding the gas injection process through PG&E’s gas quality team and the construction group that installed the gas monitoring/metering equipment and physically connected the site to the transmission pipeline.
At Vintage Dairy, manure from the farm’s 5,000 cows is flushed to an open pit, where it is mixed to reduce particle size. A separator removes the larger particles and the resulting mixture is pumped into a large covered lagoon, which produces about 250,000 cf of biogas a day (91,250 MMBtus/year).
The biogas is upgraded to RNG to meet PG&E’s quality specifications under Gas Rule 21, section C. The specifications call for removing moisture, carbon dioxide (CO2), hydrogen sulfide (H2S), oxygen and other impurities from the gas. Vintage is using a Natco bioreactor to remove H2S from the gas. A pressure swing adsorption unit (PSA) reduces the gases’ CO2 and moisture content. The upgraded biogas, or RNG, is then pressurized to match the pressure in PG&E’s receiving pipeline. A main or backbone transmission pipeline may require 750 psi, while a local transmission line in the valley has 250 psi, Brennan explains.
Prior to injection into the pipeline, the gas goes through two sets of monitoring equipment to insure it meets specifications. Equipment at Vintage Dairy samples the gas every four minutes. Just 1,500 ft away, across the farm’s fence, PG&E maintains identical monitoring equipment at the metering station where the gas is injected into the pipeline. “We sample and then they sample,” Albers explains. “If there are any discrepancies we can cross check.” Gas that is out of spec shuts down the injection process until the problem is corrected.
Bioenergy Solutions uses a bioreactor to remove hydrogen sulfide from the biogas (top, under construction), and then pressure swing adsorption units (bottom) to reduce moisture and carbon dioxide levels.
Bioenergy’s business plan calls for clustering dairies geographically to achieve economies of scale. Each dairy in the cluster will produce biogas in on-site digesters. Raw biogas will be piped to a centralized upgrading facility to produce pipeline quality RNG and compress it for injection into a PG&E pipeline.
Clustering makes gas injection economical for smaller dairies. “We would not make money at Vintage with just Vintage,” Albers explains. “The investment is just too great. We need thousands and thousands of cows to run through the system.” At each dairy, Bioenergy will design, build, operate and finance the digesters producing the biogas and handle all the permitting. “We are technology neutral,” he continues. “Our approach is to figure out the best type of digester for the dairy.”
Dairy owners in the cluster enter into long-term contracts with Bioenergy for the feedstock and share revenues from the sale of gas and the emission reduction credits. “We guarantee a certain amount per cow per year and we pay that monthly,” Albers says. A percentage of the revenue from carbon credits is shared when the credits are sold.
Piping raw biogas between dairies presents some challenge due to the corrosive nature of the gas. Albers is working with pipeline experts to design the transport system. “We will have a blower and chiller at each dairy pushing the gas to a manifold at our upgrade plant,” he explains. The pipeline will be maintained with routine “pigging” of the lines. (A pig is a device that cleans the pipeline, propelled by the pressure of the gas in the line.)
In March 2008, Albers contracted with Pier van der Hoek dairy, located about five-miles away, to join the Vintage cluster. Bioenergy will install a lagoon digester at the facility to process manure from the dairy’s 6,400 milk-producing cows and replacement stock. The facility is expected to produce about 275,000 cf of biogas a day (100,375 MMBtus/year), which will be piped to Vintage dairy’s upgrade system.
The raw biogas is about 70 percent methane. After upgrading, the two dairies will produce about 525,000 cf of RNG a day (191,625 MMBtus/year). Albers has contracts with a number of other dairies in the region and expects to have completed up to four projects this year, with another eight projects slated for 2010.
Microgy's Huckabay Ridge project in Texas aggregates manure, digesters and gas processing equipment at a central location, with eight 916,000-gallon digester tanks.
Microgy is also clustering dairies in California to produce RNG. The company’s “hub and spoke” design distributes digesters over multiple farms. The raw biogas is transported from the farms composing the spokes in the network to the hub, located closest to the interconnection point. The hub houses its own digesters along with the gas processing and compression systems.
While Microgy prefers the approach it used at Huckabay, which aggregates the manure, digesters and gas processing equipment in a central location, the approach is not really viable in California. “You are always better off if you can aggregate because your construction costs are a lot less,” explains Michael Hvisdos, Executive Vice President at Microgy. “But in California, the dairies already have individual permits. If you commingle the manure, then you fall into a different permitting classification.”
Very small dairies adjacent to the central gas processing centers can potentially take part in the cluster. “They have the opportunity to put in a covered lagoon system and tie that into the network,” Hvisdos explains. “The key is to create the critical mass for the hub. When you have enough critical mass in one location then you can hub and spoke out to the smaller locations because your sunk costs of operations is already taken care of at the central location.”
As with its previous projects, Microgy will install, own and operate the digesters and gas processing equipment. But the company will not utilize a single digester technology. “We will put in the right technology to support dairies and other farms so we enable more of these projects,” Hvisdos says.
Microgy looked at two strategies to transport the biogas to the hub. The pipeline could be constructed to withstand the corrosive nature of the biogas or the corrosive materials could be removed before the gas is pushed down the line. Microgy is opting for the latter approach. Each “spoke” location will include equipment to remove H2S from the gas prior to shipping it to the hub, as H2S can cause corrosion in the pipelines. At the centralized gas processing station, the California projects are permitted to use either an amine treatment system or PSA units to remove CO2 and moisture from the raw biogas. “Either system should give a positive, reliable result,” Hvisdos says. A decision has not been made as to which type of unit will be employed.
Microgy plans to start construction in the third quarter of 2009 on two “hub and spoke” projects at Riverdale and Hanford. Riverdale will produce 621,000 MMBtus/year and includes three dairies. Hanford is also composed of three dairies and will generate 732,000 MMBtus/year. Commercial operation is expected to start in the fourth quarter of 2010. A separate standalone project is planned for Bar 20 in Karman, California, producing 631,000 MMBtus/year.
In aggregate, the three projects are expected to produce almost 2 million MMBtus/day of RNG. These California projects will employ Microgy’s third generation design for gas collection and upgrade/ treatment equipment, along with the system of piping and valves that connects all the various components, including the digesters. The design modifications are a result of lessons learned at the Huckabay project. For example, Microgy ran into problems with fibrous materials carried in the biogas stream accumulating at “pinch points” in the system causing plugging in the gas collection system, Hvisdos explains. “Unfortunately we had a partner that misdesigned the system. The intent at Huckabay when it was originally built was to outsource the gas conditioning piece. That just did not work out for us.” Microgy is now designing, installing and managing the gas conditioning piece.
All of the Microgy projects will be codigestion systems, supplementing the manure stream with food wastes to boost biogas production. “We have located supply sources and are continuing to locate even more as the projects develop,” Hvisdos says. He declined to name the specific types or sources of the waste.
Farms within the clusters have amended their water permits, and Microgy is copermitted with them for codigestion. The company is working closely with the farms and the state agencies to get them familiar with the codigestion process, its benefits and by-products from the process.
Bioenergy is not employing codigestion, which accounts for the difference in biogas production between the two companies’ projects. Albers is not opposed to codigestion, but has met resistance from some dairy owners. “For one thing, it is a lot more management intensive for us and it would definitely create issues for their operations, putting them in a whole other level of permitting, reporting and oversight,” he explains. “Where it makes sense we will do it, but I do not have any current projects.”


Microgy is taking advantage of California’s tax-exempt financing for waste to energy projects. The company has obtained $62.4 million in tax-exempt bonds issued through the California Statewide Communities Development Authority to finance the Riverdale and Hanford projects. The Bar 20 project received $26.1 million in tax-exempt bond allocations from the California Debt Limit Allocation Committee. In a statement released in March announcing year end 2008 results, Environmental Power Corporation said it would pursue financing of the Bar 20 project once “the tax-exempt bond market improves and pending other financial initiatives.”
Albers, on the other hand, is financing Bioenergy’s projects himself. “Right now we are out in the market raising capital,” he says.
Brennan of PG&E believes a federal biogas incentive package is the key to advancing the technology. Two bills in Congress, Senate Bill S306 and House Bill HR1158, call for tax credits of $4.27 per MMBtu for renewable gas, manure-based projects. “These projects can do a lot for the environment, but they need capital funding,” he says. “Everyone is capital constrained right now and needs help. If we do something on the federal side, I think we will be able to sign up a significant number of these projects.”
Diane Greer is a Contributing Editor to BioCycle.

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