BioCycle December 2011, Vol. 52, No. 12, p. 48
Delegation of Midwestern energy policy analysts and University of Wisconsin graduate students visited Germany to examine on-farm biogas production as a source of renewable energy.
Amanda Bilek, Aleia McCord, Steve Plachinski, Gary Radloff and Jeffrey A. Starke
A delegation of midwestern energy policy analysts and University of Wisconsin-Madison graduate students visited Germany in Fall of 2010 to examine on-farm biogas production as a source of renewable energy. Germany is the world leader in biogas project deployment, with an estimated 6,000 operational biogas plants at the beginning of 2011 (Budzianowski 2011). In the Midwest United States, however, biogas remains a relatively untapped resource due to concerns regarding economic feasibility and a lack of agreement on deployment strategies or regulatory policies. The biogas industry in Germany has been operating for more than 15 years and offers examples of technology, policy, and development models that could benefit the U.S. as it continues to develop a robust biogas industry. The delegation explored Germany’s success with biogas projects to identify which opportunities or successful models could be replicated.
The major driver of the explosive growth in the German biogas industry can be attributed to the Renewable Energy Sources Act (RESA). A provision from this policy guarantees electric grid connection and a premium rate for the renewable electricity supplied (Table 1). Guaranteed rates, or feed in-tariffs, vary by energy technology and system capacity. For biogas, the policy includes a base rate and additional bonus rates for use of different materials, emission reductions, biomethane production, or combined heat and power usage. The basic tariff rate combined with bonus payments can result in a buyback rate ranging from €0.12/kWh to €0.30/kWh ($0.16-$0.40/kWh) for a < 150 kW system. All of the project developers, industry representatives, and government officials we met with in Germany credited RESA as the driving force behind biogas development. The German feed-in tariff model might not be a precise fit for U.S. development, but it speaks to the importance of public policy as a key industry driver.
Biogas Plant Tours
The delegation visited seven different biogas facilities that encompassed family-owned/operated systems to cooperative models. These biogas plants were selected to demonstrate the diversity of creative ownership models and economically feasible utilization of the outputs associated (i.e., gas, solids and heat).
Single Family Farm
The delegation visited two different families that own/operate their biogas system. Both maintain less than 100 head of dairy cows and operate with manure and plant feedstock, such as corn silage. Both farms combust the gas to generate electricity, producing five to ten times the amount needed for on-farm uses. The excess is sold to the local power companies. Both producers utilize the waste heat generated from electricity production for on-farm uses and report the digester investment had a five to six year payback. Interestingly, these farmers confirmed that energy production revenues were the primary motivation in their decision to install anaerobic digesters. One estimated that 80 percent of his annual revenue was derived from energy production.
One family also owns/operates a second digester that only processes plant material (primarily harvested grasses and corn silage with some crop residues); no animal manure is used. This digester, operational since 2006, has a “triple ring” design (one large tank with three internal tanks laid out as concentric circles) allowing for flexible use of the chambers depending on feedstock availability. The design reduces heat loss by sharing walls and enables better feedstock mixing compared to large tanks. The biogas plant is completely automated and powers a 500 kW engine generator set; waste heat is used to dry wood for residential fireplaces.
Biogas Cooperative Near Pfullendorf
The delegation visited a biogas facility jointly owned by three farmers, located on the outskirts of Pfullendorf. The plant produces 1.2 MW of electricity from purpose-grown plant feedstocks and five percent manure. All of the feedstocks (primarily corn) are transported to the plant from nearby farms as silage and are not pretreated prior to digestion. The resulting digestate is applied to farm fields as fertilizer. While some biogas is used on-site, approximately 80 percent is piped to the neighboring town (approximately 1 mile) and combusted for electricity generation. The waste heat associated with this combustion meets the heating and cooling requirements of a large supermarket.
Biogas Cooperative Near Freiburg
Biogas plants cooperatively owned by multiple farmers can offer other opportunities due to an increase in the economy of scale. A large project near Freiburg processes 135 tons/day of purpose-grown crops per day from fields within a 13-mile radius. Digested solids are spread on surrounding cropland as fertilizer. The biogas plant began operating in 2006 and is expecting a 5- to 10-year payback period.
This digester is only one of approximately 40 projects out of Germany’s 6,000 biogas plants where the biogas is used to produce renewable natural gas, or biomethane (Rutz et al., 2010). The project generates 1 MW of electricity, which is used to operate the facility. Additionally, 1,000 cubic meters/hour of raw biogas are sold to the local power utility every hour. The utility upgrades the biogas to biomethane (95 percent methane) and injects approximately 500 cubic meters into the conventional natural gas pipeline. The German feed-in tariff policy was amended to provide a bonus payment for upgrading raw biogas to biomethane. The utility receives the bonus since it owns and operates the upgrading equipment.
Opportunities For Wisconsin
The potential for agricultural biogas development in Wisconsin and the Midwestern U.S. is significant. Three general principles drawn from the success of Germany’s biogas industry — innovative business models, adaptable scales and designs, and innovative inputs and end uses — can help Wisconsin fully capitalize on the state’s biogas opportunity.
Innovative Business Models
The German biogas business environment showcases a variety of ownership models. Some producers retain single ownership of their projects, shouldering the entire capital investment and operational costs, but are the sole recipients of a stable source of income. Dairy farmers reported that the majority of their on-farm income, as much as 80 percent, was attributed to biogas production. Some producers noted that securing commercial financing to install or improve anaerobic digesters was easier than securing financing for more traditional farm investments, such as herd expansion. The 20-year guaranteed rate provided by Germany’s RESA makes biogas investments more secure than investments subject to commodity price fluctuations.
Farmers opting for co-ownership of biogas facilities cited the benefits of distributing the capital cost of the project, dispersing the investment risk, and sharing the management burden. Limited time and financial resources motivated these producers to enter into such agreements with business partners or family members.
We also met with producers who sought out partnerships with private businesses or nearby communities as end-users of their product. Incentives in RESA motivated producers to identify new uses for their combustion waste heat by exploring partnerships with private companies and public buildings, such as hospitals and government offices.
One producer entered into a split-ownership arrangement with a local energy utility. The farmer owns the anaerobic digester system and produces the biogas, while the utility owns the equipment to upgrade the biogas to meet natural gas injection requirements. Under the terms of their agreement, the local utility agrees to purchase a fixed amount of biogas at a fixed rate under a long-term contract, creating a secure market for the farmer’s biogas. The local utility, with more capital and more experience, is in a much better position to capitalize on the natural gas injection opportunities than a single farmer.
Lessons Learned: According to the Wisconsin Agricultural Biogas Casebook (Kramer 2009), three different business models exist among Wisconsin’s 31 operational on-farm digesters: 71 percent are owned by the farmer, 19 percent are split-ownership (farmer owns the digester, third-party company owns and operates everything else), and 10 percent third-party ownership (farmer owns nothing and typically sells manure to the operator and buys back electricity and bedding). While different farm-specific reasons have driven these business models, there is ample opportunity for creative ownership and operating models to spawn widespread investment in Wisconsin. One example is pairing biogas with existing ethanol plants to digest their organic waste stream, with the biogas providing the electricity and heat needed for the energy intensive process of producing ethanol from corn.
Adaptable Scales And System Designs
Anaerobic digester technology is remarkably flexible. Each system can be designed to meet the specific needs of a site. In Germany, we saw small-scale manure-based systems on farms with 70 head of milk cows, expansive 3 MW systems operating solely on field crop inputs, and everything in between. However, the majority of on-farm systems (over 3,000) in Germany exist on small dairies with less than 100 head of milk cows (Hambrick et al., 2010). These systems are made profitable by digesting plant feedstocks in addition to animal manure. Germans cited support for rural livelihoods as an important societal value, and some producers even suggested that without the steady income stream from biogas, small dairy farms in Germany might not exist today. To ensure that small farms stay competitive in the green energy marketplace, RESA provides a higher base rate for small-scale producers (currently €0.1167/kWh) than for larger producers (currently €0.0779/kWh for the largest). Despite the incentives for smaller systems, producers were quick to note that the high capital costs associated with biogas production —which can be attributed to cost increases in raw materials like cement and steel — have led the current industry to trend toward larger systems.
Anaerobic digester systems can also range from basic to sophisticated designs. Basic systems like standard plug-flow designs popular in the U.S. are still used in Germany, but newer, innovative designs are also being deployed. In response to the demand for technological innovation and support, a robust biogas technology industry has developed in Germany.
Lessons Learned: All of the 31 operational digesters analyzed in the Wisconsin Agricultural Biogas Casebook operate on farms with greater than 500 head of dairy cows. However, there are over 12,500 licensed milk herds in Wisconsin representing over 1.26 million dairy cows. Since 82 percent of these herds are located on farms with less than 100 head, the typical farm has not entered into the biogas market. As demonstrated in Germany, biogas systems can be viable, and critical, to sustaining small (less than 100 head) farms. This creates an opportunity for policies and incentives to engage widespread investment in the typical Wisconsin dairy farm.
Innovative Inputs And End Uses
Germany has been able to stimulate the use of specific inputs and promote specific end uses for the gas to best accommodate the country’s unique assets and needs. Though unexpected by our delegation, use of field crops for biogas production was very common in Germany. Producers reported an average yield four to five times higher for crop inputs compared to manure. As a result, most of the agricultural biogas systems in Germany use field crops as their primary feedstock. However, the German populace is sensitive to debates about food vs. fuel and has expressed serious concerns about the potential for land use change and increased commodity prices resulting from new demand for field crop inputs. In response, the German government introduced a new incentive program offering 0.04/kWh for biogas producers whose systems utilize at least 30 percent manure.
Germany has pioneered development of new end uses for waste heat and new technologies for safe direct injection of upgraded biogas into existing natural gas pipelines. Both have been driven by the feed-in-tariff, which provides an extra bonus per kilowatt-hour. Creative uses for waste heat abound in the country. One entrepreneur, for example, is paid a tipping fee from a local municipality to receive the town’s biosolids, which are dried using waste heat from biogas combustion and formed into pellets. The project receives an additional 0.03 per kWh for utilizing the waste heat. The pellets are burned, along with coal, to power a nearby cement factory.
Lessons Learned: Of the 31 operating digesters on 21 different farms analyzed in the 2010 Wisconsin Agricultural Biogas Casebook, 20 farms use the biogas to generate electricity/heat. One farm used the biogas for heat/flare operation. All 21 farms digest manure with six farms accepting substrates from off-farm entities (receiving revenues from tipping fees and increased electricity production). Thus, 71 percent of Wisconsin’s biogas system are reliant upon on-farm products and are not integrating additional waste streams to maximize biogas production.
The German biogas development model demonstrates that the possibilities for U.S. biogas deployment are vast. While the three general principles just described contributed to Germany’s biogas success and are applicable to Wisconsin, it is important to keep in mind the social and policy context that helped to create Germany’s thriving biogas industry. German energy policy, specifically the feed-in tariff system prescribed by the Renewable Energy Sources Act, has been instrumental in promoting and regulating the biogas industry in a way that reflects the social values of German citizens (although there is sensitivity to the “food vs. fuel” issue with purpose-grown energy crops, which could likely be similar in Wisconsin). To fully develop Wisconsin’s biogas opportunity, policymakers must consider the unique social values of Wisconsinites and institute policies that stimulate biogas development in a way that is consistent with Wisconsin’s specific assets and needs.
The authors’ affiliations are as follows: Amanda Bilek, Great Plains Institute in Minneapolis, MN; Aleia McCord, CHANGE-IGERT, Nelson Institute of Environmental Studies, University of Wisconsin, Madison; Steve Plachinski, CHANGE-IGERT and Short Elliot Hendrickson Inc., Sheboygan, WI; Gary Radloff, Wisconsin Bioenergy Institute (WBI), University of Wisconsin, Madison; and Jeffrey A. Starke, CHANGE-IGERT and Department of Geography and Environmental Engineering, United States Military Academy, West Point, NY (and corresponding author; Jeffrey.Starke@ usma.edu). This research was funded from National Science Foundation (CHANGE-IGERT, UW-Madison), The Nelson Institute for Environmental Studies, The Wisconsin Bioenergy Initiative, and the Great Plains Institute.
Budzianowski, W.M., Chasiak, I. (2011) The Expansion of biogas fuelled power plants in Germany during the 2001-2010 decade: Main sustainable conclusions for Poland. Journal of Power Technologies 91 (2) p. 102-113.
FRG:RESA (2010). German Renewable Energy Sources Act. Federal Republic of Germany.
Hambrick, W., Jungjohann, A., Chiu, A., Flynn, H. “Beyond Biofuels: Renewable Energy Opportunities for U.S. Farmers”. Heinrich Böll Stiftung, 2010.
Kramer, J. (2009). Wisconsin Agricultural Biogas Casebook, Focus on Energy; Public Service Commission of Wisconsin.
Rutz, D., Ferber, E., Janssen, R. “Biogas Market in Germany”. Presentation on October 20, 2010. http://www.biogasin.org/events2.html.
December 19, 2011 | General
German Biogas Experience And Lessons For Wisconsin
BioCycle December 2011, Vol. 52, No. 12, p. 48