Josh Alban
BioCycle November 2003, Vol. 44, No. 11, p. 57
HIGH up-front capital costs have long been a serious obstacle for farmers looking to develop new revenue streams. This is especially true for farmers looking to use waste products as a feedstock for renewable energy production, where moderate to substantial infrastructure additions or modifications are often par for the course.

To overcome this hurdle, the federal government has designed a grant and loan program to provide selected entrepreneurs with the seed money they need to leverage private financing for biomass projects such as anaerobic digester systems, biofuels facilities, gasification projects and wind and solar energy projects. The program, established under Sec. 9006 of the energy title of the 2002 Farm Bill, is named the “Renewable Energy and Energy Efficiency Improvements” program, and is authorized at $23 million/yr through 2007. For a Farm Bill with a price tag of $248.6 billion, this is but a drop in the bucket; but to the farmers who are set to receive the first round of grant awards (no loans were given out this first year of program implementation), this is the fiscal push needed to pursue nontraditional revenue streams while advancing renewable energy production and energy efficiency.
On August 25, 2003, USDA announced the selection of 113 applications for renewable energy systems and energy efficiency improvement grants in 24 states, totaling $21,207,233. Of that, $7 million will go to 30 anaerobic digester projects; 16 applications totaling $3.9 million will go to ethanol plants/anaerobic digesters, direct combustion, and fuel pellet projects; $7.4 million will go to 35 wind power projects; and $1.1 million will go to six solar projects. In terms of anaerobic digesters, New York applicants were awarded the most project money, accounting for $1,740,203 in seven projects. New York was followed by Wisconsin with $1,715,610 in 11 projects. The following examples — one waste to ethanol plant and two anaerobic digesters — offer a sampling of the scope of the projects being supported by USDA across the country.
LIQUID RESOURCES OF OHIO — $500,000
Liquid Resources was founded in 2002 with the goal of creating both a service and an end product: converting waste liquids from beverage producers and other manufacturers to create ethanol. Company founders applied for a Renewable Energy and Energy Efficiency grant from USDA. The $500,000 award will go directly toward the purchase of machinery and equipment and the hiring of engineers to turn the idea into a reality.
Liquid wastes are typically thought of as pesky by-products of processes from industries, ranging from soft drink manufacturers to pharmaceutical companies. At the facility to be built in Medina, Ohio, shipments of waste liquids will arrive as case goods (i.e., goods arriving in packaging) or in bulk from various industrial suppliers located within a maximum radius of 500 miles (depending on the amount of waste to be disposed). According to representatives of Liquid Resources, companies will find it more cost-effective to ship their waste fuels to the Medina plant than it would be for them to dispose of it themselves.
The waste conversion process will be similar to most ethanol production, except that instead of converting starch to sugars, the waste liquid will be converted to sugars by enzymes. From there, yeast will be used in order to ferment these sugars, thereby creating ethanol. And, to complete the environmentally friendly cycle, packaging that originally accompanied these waste liquids – like aluminum, glass, and plastic – will be recycled, thereby diverting waste from landfills.
According to Tim Curtiss, cofounder and CEO of Liquid Resources, federal dollars have been a crucial part in getting his project off the ground. “Every dollar of this grant is a dollar of equity that we don’t have to raise,” says Curtiss. “For an entrepreneur, that’s incredibly valuable.” And the benefits of that seed money have larger implications for Medina’s industrial sector – Liquid Resources estimates that the new facility will create 25 new jobs.
HARRIS FARM OF NORTH CAROLINA — $130,000
The Harris Farm in Northeastern North Carolina – an 11,520 head swine finishing farm (“finishing” is the last stage of swine farming, preceded by the farrowing and nursing stages) – is looking to replace its old waste storage lagoon with an anaerobic digester as a means of both treating swine waste and generating energy. To this end, the farm has hired AgriClean, a private company based in Nashville, Tennessee, that specializes in agricultural waste management. The bulk of the money for the project — approximately $600,000 — is to come from a grant from the Animal & Poultry Waste Management Center of North Carolina State University. That portion of the project relates mostly to setting up an infrastructure for manure handling. The money to come from USDA — $130,000 — will be used to build the systems that are specific to renewable energy production, i.e., a gas collection and management system as well as a generator to provide power for the farm.
As is the case with any anaerobic digestion process, there are four general stages: Put simply, a handful of microorganisms work to convert the manure into a substance that is eventually converted into organic acids by a second group of microorganisms. These acids are then used by methanogenic (methane-producing) anaerobic bacteria to complete the decomposition process. The methane that arises from this process is collected and pumped off to a generator that burns the methane and produces electricity. The electricity from the generator powers the digester along with any other energy needs on the farm. Officials at AgriClean point out that the excess energy produced by the digester — energy beyond what is necessary for on farm energy needs — could be plugged back into the public electricity grid, but electric utility rates are currently so low in North Carolina that they pose a significant disincentive to all forms of distributed generation.
It should be noted that the anticipated benefits of the project go beyond energy production. From a farming perspective, coproducts that the digester provides, like liquid nutrients and compost, are indispensable value adds. Environmentally, not only does the energy produced by
the digester displace electricity produced by fossil fuels, but capturing the methane and putting it to use prevents one of the most harmful of greenhouse gases from contributing to global warming (methane is 21 times more potent a greenhouse gas than carbon dioxide). And finally, digesters can virtually eliminate two major environmental hazards associated with animal feedlots — groundwater contamination and odor.
However, despite these benefits, private capital to fund these projects is hard to find. Often times, public sector funding is the only option for cutting edge projects like the one on Harris Farm. According to Scott Pogue of AgriClean, this is precisely why the USDA’s program funding is so crucial. “If USDA were not out there to supplement the development of these systems, they simply wouldn’t exist because it is simply too hard to gather the upfront capital… Traditional sources of funding for these type projects are just not there yet,” he says.
MARKS FARM OF NEW YORK — $500,000
Another innovative awardee is the Marks Dairy Farm in northwestern New York State (Lewis County), which has received $500,000 to pursue an anaerobic digester with a bit of a twist. The region is home to two large cheese production facilities, Kraft and Lewis County Cheese, which both have substantial waste disposal needs for cheese whey, the serum/watery part of milk that remains after the manufacture of cheese. One disposal method that cheese producers have relied on is turning cheese whey over to farmers, who, after combining it with manure, use it as a topical field fertilizer. However, because the cheese whey is ultimately an untreated waste product that can contaminate water streams, this is becoming less and less of an option due to environmental regulations.
The anaerobic digester to be built on the Marks Farm will be an alternative for cheese manufacturers seeking to dispose of waste. According to Dennis Burke, an engineer working on the Marks Farm project, the digester will be able to co-digest — along with traditional manure — roughly one million gallons of cheese whey per month. The methane then collected from the digester will translate to roughly 2-3 megawatts of generated electricity per hour. And, because this amount is well beyond the needs of the farm itself, the farm will be able to sell excess energy to local utilities. Discussions with utilities are underway. Another by-product of the process will be a soil product that is pathogen free and nutrient (nitrogen, phosphorous) laden, a product the farm then will market to the region and the Northeast.
Because the digester will prevent the emission of harmful greenhouse gases, the farm anticipates being able to sell greenhouse gas (GHG) emission credits to companies looking to comply with GHG emission limits. This seems an especially timely commodity given that New York Governor George Pataki has led the campaign to create a Northeast market-based emissions trading system to reduce CO2 emissions and its equivalents. According to Mark Handley of the Coalition of Northeastern Governors, “Everything you can do to add value to these projects and bring revenue to farmers is critical… Greenhouse gas credit trading will be an important part of a long-term strategy to mitigate climate change.”
FUTURE OF THE PROGRAM
It has been nearly a year-and-a-half since the passage of the 2002 Farm Bill, and from a federal government standpoint, implementation of the program is still very much a fluid process. For USDA’s part, they have worked to ensure distribution of all grant monies in 2003, and will work to improve the application process for 2004.
However, if the last year is any measure of things to come, the long term future of the program is uncertain. Despite the fact that the 2002 Farm Bill allocated $23 million per year in mandatory funding for the program through 2007, the President’s proposed budget and the House Appropriations Committee eliminated funding for the program for 2004. Funding was eventually restored in the House by the passage of an amendment offered by Rep. Marcy Kaptur (D-OH). The Senate Appropriations Committee approved full funding for the program, but it is clear that legislators will face a similar funding debate for fiscal year 2005.
USDA will release a Notice of Funding Availability (NOFA) for the FY 2004 Sec. 9006 program by mid-November 2003. More information on the program and the application process can be found at www.eesi.org.
Josh Alban is with the Agriculture & Energy Program of the Environmental & Energy Study Institute (EESI) based in Washington, D.C. His e-mail is jalban@eesi.org.