Mitigating climate impacts from the dairy industry through conversion of manure to clean fuels
When most people think of climate change, carbon dioxide (CO2) is the first greenhouse gas (GHG) that comes to mind. While CO2 is by far the most prevalent and best-known GHG gas, there is increasing focus on reducing methane emissions. This trend is reflected in the Biden Administration’s recently announced commitment to reduce U.S. methane emission by 50% by 2030 and reach net-zero emissions by 2050.
Second in prevalence only to CO2, methane’s greater efficiency in trapping radiation and shorter residence time in the atmosphere amplifies its short-term climate impact. According to the International Panel on Climate Change (IPCC)’s latest assessment, methane has about 27 to 30 times the global warming effect of CO2 over a 100-year period and about 80 to 83 times the effect over a 20-year horizon. The IPCC’s latest assessment includes a greater focus on short-lived climate pollutants such as methane, driving more recent awareness of the role methane reduction can play in limiting near-term global temperature rise.
Mitigating the effects of methane is best done at its source. As shown in the figure below, a large portion of anthropogenic methane emissions in the U.S is linked to the livestock industry. When accounting for both emissions from livestock digestive processes (enteric fermentation) and manure management, the industry contributes 36 percent of U.S. methane emissions.
A sound solution
The U.S. dairy industry is now taking an active role in addressing manure-related methane emissions through anaerobic digestion. Large-scale dairy farms have traditionally stored manure with water in lagoons or storage ponds, which releases methane to the atmosphere. As an alternative to these traditional manure management methods, anaerobic digestion units can be installed to concentrate and capture the methane in the form of biogas. Today over 200 dairy manure anaerobic digesters are in operation in the U.S. with many more in construction, a trend which Leidos has seen firsthand as independent engineer for anaerobic digestion facilities.
With further treatment, the biogas can be upgraded to renewable natural gas (RNG) of sufficient quality to be mixed with or substituted for natural gas that can be used to produce electricity. RNG can also be converted to renewable compressed natural gas (CNG), which has a potentially negative carbon intensity (CI). Renewable CNG can serve as a substitute transportation fuel for fossil-derived diesel, which has a high CI.
Growing interest and investment in anaerobic digestion stem not only from reduction in methane emissions, but from financial incentives linked to sales of a useful product from what would otherwise be useless waste and revenues in the form of credits. Current incentives for anaerobic digestion are most favorable in California, where projects can receive California Low Carbon Fuel Standard (LCFS) credits for RNG that is used as CNG for transportation fuel. Projects outside of California may also receive LCFS credits if the produced RNG is transported and used as CNG transportation fuel in California. Throughout the U.S., RNG used as CNG transportation fuel is eligible to receive renewable identification number credits, and RNG used to produce electricity may receive renewable energy credit. Additional federal tax credits may be on the horizon for anaerobic digestion projects.
Breaking down the process
The process of anaerobic digestion involves feeding organic material (in this case, manure) and water into a reactor where bacteria break down the organic feed in the absence of oxygen to produce biogas (nominally 55 to 60% methane and 40 to 45% CO2). Residual liquids and solids are typically land-applied on the farms, requiring little to no further treatment. Commercial anaerobic digestion technologies are well-established and range from simple lined and covered lagoons to plug flow reactors to continuously stirred tank reactors. The figure below is a simplified flow diagram of the process.
To produce RNG from the biogas, trace contaminants such as sulfur compounds, oxygen, and nitrogen as well as the bulk of the CO2 is removed from the biogas stream, leaving primarily methane (RNG). Multiple commercial technologies are available through the use of adsorbents, membranes, or solvents or a combination of these approaches to produce RNG from biogas that is equivalent in quality to fossil natural gas.
Understanding project risks
As independent engineer, Leidos conducts comprehensive due diligence to advise both developers and investors of the technical and market risks of energy projects. For each project, we evaluate the risks most material for the technology in play. Based on the more than 40 dairy manure anaerobic digesters we have reviewed, we have learned that a project using proven commercial technologies executed by an experienced construction contractor and using a single, homogeneous feedstock has a relatively low technology risk. Performance risks for anaerobic digestion projects are generally associated with the accuracy of the projections for manure capture efficiency, biogas production quantities, ramp up times, and seasonal variability. Leveraging our experience, we have developed a proprietary anaerobic digestion performance model for a broad range of feedstocks to assess and quantify performance risks. The key development hurdles for an anaerobic digestion project are securing contracts for the feedstock manure supply, obtaining permits, and finding a site with as many animals as possible and in reasonable proximity to a natural gas pipeline. If simple land application of the residual liquid and solids is not an option, further treatment and disposal of these streams may become a cost to a project rather than being cost neutral or a revenue source. As with any project that receives a large proportion of its revenues from incentives, there is significant risk of revenue loss should incentives be reduced or eliminated with changes in government or if the market becomes saturated to such a point that the value of credits decreases.
Potential for future growth
Meeting the ambitious U.S. goals for reductions in methane will require changes to business as usual for many industries, including how dairy farmers manage manure. The dairy industry is already answering the call for methane reductions by partnering with developers to advance projects that take advantage of current financial incentives and proven anaerobic digestion technologies. These projects use a manure waste that previously had no value to produce a marketable RNG product that can substitute for fossil fuels and contribute to reductions in carbon emissions from the oil and gas industry.
The same anaerobic digestion concept can be applied to produce RNG from other organic wastes, such as food waste or sewage sludge, including in combination with manure feedstock. Given a favorable regulatory and incentive landscape, the manure-to-fuels industry is poised for even greater growth.
Leidos’ understanding of the risks lenders and developers face when financing anaerobic digestion facilities is grounded in our due diligence experience across many types of conversion technologies.
