Policies in North Carolina are propelling the development of hog waste-to-energy projects.
In terms of sustainable business practices, the reduction or reuse of waste to generate savings—or in some cases, generate new sources of funding or energy—is impacting more and more businesses. In fact, entire teams are tasked with the measurement of operations to find ways to reduce usage and recycle resources.
As a natural extension within the agriculture industry, the use of animal waste to capture and generate renewable energy addresses two issues at once: additional utilization of animal waste (most farmers already use manure as fertilizer), and secondly, creating new opportunities via a sustainable, renewable domestic energy supply.
A big opportunity
North Carolina ranks third in the nation in hog production—marketing over 18 million hogs in 2012 for a value of $2.9 billion. The vast majority of the state’s 2,100 permitted hog farms are family owned, and while the largest farm in the state is 50,000 head (hogs), the average farm size is 3,900 head.
The pork industry is an important part of North Carolina’s economy, providing approximately 46,000 full-time paychecks and contributing $11 billion annually to our state’s economy.
Simply put, the pig business is big business in North Carolina.
Currently, innovative technology is in use to capture methane gas released from hog waste to convert it into electricity or fuel. Referred to as “biogas,” this byproduct of the waste decomposition process can generate revenue for farmers, increase on-farm efficiencies, and provide renewable energy investment opportunities for utilities seeking to comply with North Carolina’s Renewable Energy & Energy Efficiency Portfolio Standard (REPS) law.
Ranked as the No. 3 state in hog production, the North Carolina swine industry works to use its available agriculture resources to create energy value through waste-to-energy projects. In fact, Duplin County is the No. 1 county in the United States for hog production.
Foundation of policies
In 2007, North Carolina’s REPS law was passed overwhelmingly as part of Senate Bill 3. The REPS established a clean energy market in the state, directing the state’s electric providers (or utilities) to generate a portion of the state’s electricity needs both from renewable energy resources and through energy efficiency. That amount—expressed in terms of a percentage of their overall total energy portfolio (coal, nuclear, natural gas, renewables, etc.)—gradually increases, eventually topping out at 12.5 percent by the year 2021.
In addition to requiring a certain percentage of total electricity sales to come from renewables and energy efficiency, the law also has carve-outs or “set-asides” for energy created from solar, swine waste and poultry waste. North Carolina is the only state to have a specific carve-out for electricity generated from animal waste as part of a clean energy law.
To meet the law’s requirements, electric utilities must secure Renewable Energy Certificates (RECs). One REC is equal to 1 megawatt hour (MWh) of electricity. Utilities may purchase swine RECs or develop their own, and to comply with the law, they must secure approximately 284,000 swine RECs by 2018.
With more than 2,100 swine farms in North Carolina, there is indeed a tremendous opportunity to create electricity from biogas produced at these farms. Progress towards meeting the compliance goals set forth by the REPS law has been slow but steady.
Methane digester technology is not new, but the application of that process on swine farms is still relatively new. Additionally, it was only when the REPS law went into effect that these projects could become a reality. Prior to the REPS requirement, a farmer or developer would have had a very difficult time selling that electricity at a price that allowed for cost recovery of their investment in the technology.
To date, there are six on-farm projects in the state that are selling electricity back to the grid generating an estimated 15,500 RECs annually. But there are many more projects in the works.
Those existing projects vary in size and specific technology application. They range from the use of an in-ground anaerobic digester capturing the methane generated from 7,000 hogs to on-site tank digesters creating electricity from tens of thousands of hogs.
In late 2013, the largest swine waste-to-energy effort to date in North Carolina began operations. The pair of projects, comprising 10 separate but adjacent finishing farms in Duplin County, was developed by Revolution Energy Solutions (RES), a Washington-based company that specializes in the development of agricultural-based renewable energy technology. With this effort, multiple on-site tank digesters utilize manure from nearly 74,000 hogs, enough methane to produce around 10,200 MWh of electricity annually and power upward of 738 North Carolina homes.
In comparison to previous endeavors, both the size of the RES project, as well as the financial model with which it was developed, sets it apart as a very different approach to creating electricity from hog waste. The owner of the farms incurred no cost in the construction of the project and RES is responsible for the daily operation and maintenance.
The capital for the project came largely from outside investors, and although the availability of state and federal tax credits were key to pulling it all together, no grant funding was used. Since RES owns the project, they profit off of the electricity sales and the RECs earned. The farms simply serve as host sites.
The most recent swine waste-to-electricity operation to come online is Storms Hog Power, a 600-kilowatt (kW) facility located in Bladenboro, North Carolina. The farm, owned by Billy Storms, has 28,000 hogs, making it one of the largest single hog farms in the state. The project has an on-farm anaerobic tank digester that is 16 feet deep and about half the length of a football field. About 50,000 gallons of waste are fed into the 1.2 million gallon digester each day.
In addition to the manure from the hogs, Storms is also using the digester to dispose of mortality from both his hog and chicken operations, making him the only farmer in the state to do so. Finally, to further increase the biological activity and maximize methane production inside of his anaerobic digester, Storms is adding dissolved air flotation (DAF) sludge from nearby hog and turkey processing plants.
To help pay for the project, Storms received a $1.5 million U.S. Treasury grant and was able to monetize about $1 million in state and federal tax credits. And while a significant portion of the $5 million project was financed by the farmer, Storms is not worried about the return on his investment. He says he will easily make his money back with the combination of selling the electricity and the accompanying RECs, selling carbon credits, money saved from previous mortality costs and with payments for taking the DAF sludge from the plants.
On-farm electricity generation may not be the only option the state’s electric utility providers will have for meeting the requirements of North Carolina’s REPS law. Novi Energy, an engineer of waste-to-energy models based in Novi, Michigan, is hoping to construct a 4.3 megawatt (MW) plant with a centralized digester in Duplin County. In this model, hog manure from nearby farms within about a 10-mile radius of the plant would be transported to a large, centralized digester.
Developers like Novi Energy see the value of investing in North Carolina projects due to its market potential with a large volume of hogs concentrated in a few counties.
“The value of a centralized biodigester plant is that we gain an ‘economy of scale’ by building a larger plant versus a smaller plant,” says Jim Zimmer, project development manager for Novi Energy. “We are also in the business of power plants, not farming, so our employees are hired and trained to run power plant machinery. That allows us to focus on what we do best—generating electricity, while allowing the farmers to focus on what they do best—farming,” Zimmer says.
Plans for the centralized digester in Duplin County are in preparatory stages with the North Carolina Department of Environmental and Natural Resources (NCDENR) to determine the required operating permits and identification of feedstock suppliers, according to Zimmer.
From waste to value
The use of methane digesters provides many benefits beyond the additional income from selling electricity, many of which are not directly monetized.
“We should be talking about it in terms of ‘waste-to-value’ instead of ‘waste-to-energy’ projects,” says Al Tank, CEO of RES.
Indeed, these ventures save farmers money formerly spent on other energy and fuel needs. Waste heat from the generation process can be used for heating barns, water and greenhouses or even used for drying grain.
Despite challenges some have encountered along the way, the future looks promising for swine waste-to-energy technologies. Even beyond the kinds of projects that are already in operation, opportunities continue to increase, including liquefying biogas for use as fuel in vehicles or for injection into existing natural gas pipelines.
In fact, last year, Murphy-Brown of Missouri, a subsidiary of Smithfield Foods whose headquarters is located in Warsaw, North Carolina, announced that construction is underway on an $80 million project in northern Missouri that will capture biogas from 88 existing hog lagoons and clean it up to produce a source of renewable natural gas (RNG) and establish a network of distribution centers to provide RNG to vehicle fleets.
According to Tank, “We are at the very beginning of ‘waste-to-value’ in the swine sector, and the North Carolina industry has the potential to be the undisputed leader in the U.S.”
Leaders in North Carolina’s agriculture industry recognize the importance of the state’s renewable energy law and the Renewable Energy Investment Tax Credit and are working hard to keep them in place. These policies are generating exciting new opportunities—new technologies, value chains and income streams—for an industry that has been the backbone of North Carolina’s economy for many generations.
Angie Maier is director of policy development and communications for the North Carolina Pork Council. More information is available at www.ncpork.org.