Profits From Poop?

22 May

So you want to talk sustainability?  I work in an industry that’s the shits.  Literally!  I own a cloth diaper service.  Which got me thinking how to turn waste into profits.  Central Vermont has developed a community-wide cooperative program which captures methane gas from cow manure and produces energy from it!  I know of some farms close to Indiana, PA which use Cow Power to provide electricity to the farm buildings, however the CVPS Cow Power Program actually creates enough energy to contribute to the energy grid.

Pretty neat stuff and I think it work well in Western Pennsylvania.  (PS – you can make fertilizer from human waste, called humanure, but we’ll save that for a different day!)

So, here’s my spiel..

Developing a strategy at the state-level to incentivize renewable energies is one political planning strategy which benefits individuals, the environment, and the greater public.  Using a case study on the Central Vermont Public Service Corporation’s Cow Power program, renewable energy production at the local level will be evaluated.  First, the organization of the CVPS Cow Power program are explained, followed by a discussion regarding the benefits of the program.  The results of a five-scenario analysis are examined and applied to public policy.  As the five-scenario analysis shows, there is potential for successful implementation of renewable energy at the state-level; it needs only to be invested in through federal incentives and grants.  Several lessons can be learned from the Cow Power case study, including the need for further research.  More importantly, it is clear that with properly focused funding, renewable energies can be produced at the micro-level scale; this type of investment strengthens local economies and has significant environmental benefits.  More specifically, the Cow Power program is a strategic way that state-funded programs can lower greenhouse gas emissions on a macro-level scale.

                How Cow Power Works

The Central Vermont Public Service Corporation developed an idea for renewable energy generation from cow manure.  The manure is collected at Vermont dairy farms by participating farmers and loaded into a methane digester; this digester holds the manure for twenty-one days at a constant 100° Fahrenheit1.  As the methane gas builds inside the digester, it creates pressure which pushes the gas into a combustion engine, where electricity is created and sold to the CVPS electrical grid system.

There are currently six dairy farms participating in the Cow Power Program, all of which have over 500 cows3.  Five hundred cows can produce up to 15,000 gallons of manure a day.  This manure is eventually translated into physical electricity, but eventually breaks down into a solid and liquid product.  The solid product is similar to sawdust and can be used for animal bedding, while the liquid product is used as an odorless, pathogen-free fertilizer that can be used to spray fields.  Energy that would normally be wasted during the generation process is captured, and used locally on the farm (perhaps heating water for the barns, or for electricity).  The monetary profits along with savings in the form of self-sufficiency are two primary benefits of this program.

A family farm that participates in the Cow Power program.
You can see the methane digester behind them.

The Cow Power Program is mutually beneficial for local dairy farmers and for the community in which the farm is located.  Cow Power systems have prevented 45,000 tons of farm methane3, which is a greenhouse gas twenty times more powerful than carbon dioxide,  from being released into the atmosphere.  The neighbors of each dairy farm are also rewarded by the decline of odors associated with farming and improvements of water quality in the region.  Methane-generated electricity is produced locally, creating a cycle where local energy is paid for by local residents, who consume the electricity locally.  This cycle strengthens and boosts the local economy, maintains diversity in the regional landscape, and prevents the creation of eyesores like wind turbines or solar farms.  The community, in turn, supports the Cow Power program by volunteering to pay for their electricity at a premium price (in Vermont, customers can opt into the program at 35%, 50% or 100%).  Consumers pay the market value for electricity in addition to a $0.04 surcharge per kilowatt-hour3.

The program has been so successful that in 3009, over 4,000 consumers demanded more Cow Power  than what the six functioning farms were able to produce (which was between 750,000-800,000)3.  In times where demand exceeds supply, the CVPS provides customers with renewable energy by using the excess money collected from the electricity premiums.

The Potential of Micro-Level Renewable Energy Programs

                The potential of micro-level energy programs is extremely valuable and as authors like Thomas Friedman propose, a catalyst.2  The Environmental Protection Agency estimated that programs like Cow Power could generate 1 quad (equivalent to 8 billion gallons of gasoline) of renewable energy every year3.  Another benefit is that farms can cut down on spending by capturing wasted energy from electricity producing and using it onsite; by creating animal bedding through the methane digester; by producing an odorless liquid fertilizer; by creating regional partnerships where other dairy farms can dispose of waste like whey.

For each year that the CVPS Cow Power Program remains successful and profitable, lenders become more likely to invest in farms.  In the CVPS example, the longevity of the program allows participants to better understand the life-cycle of the equipment and also to improve on the efficiency of the equipment.  Based on the cost-return analysis performed in the Cow Power case study, it would also appear that each year the demand for renewable energy increases.  Even if there are not even Cow Power participants to meet the renewable energy demand, the increased desire for renewable energy causes municipalities to rely more heavily on REC credits.

 Challenges of Renewable Energy Production

There are two challenges that the Cow Power program (and other programs that produce renewable energy) will have to overcome are the high capital-requirements and the dependence on government funding.  First, a common obstacle of programs like CVPS Cow Power is that they require high amounts of capital; many are literally dependent on state grants and other types of funding in order to survive.  While it is true that the Cow Power program is foremost a contract through the CVPS and local farmers, which benefits the local economy, but it is also true that the CVPS alone could not fund the Cow Power Program.  Government agencies are responsible for providing extensive funding in the form of grants.  Participants in the Cow Power program receive, on average, approximately $700,000 worth of grants3.  The program would not be economically feasible without those grants.

Another challenge for the Cow Power program has been fluctuation in market prices.  Electricity, just like any other commodity, is based on market pricing and thus in times where electricity is less expensive, farmers are unable to earn profits collected from the energy market.  In 2009, Vermont passed the Vermont Energy Act, which has guaranteed farmers a stable locational marginal price (or wholesale price) on energy that does not fluctuate with the market3.  The Vermont Public Service board later approved a feed-in tariff in 3010, which raises that locational marginal price further, so that farmers generating renewable energy are able to collect profits based on a price of $0.141/kWh in addition to the $0.04/kWh3.

Another challenge that the Cow Power program faces is that for investors or farmers seeking to join the program, there are no turn-key farms.  Each farm in operation went through a two to three year planning process, in which their existing dairy farms were formatted with methane digesters and generators.  To put this into perspective, the average cost it takes to retro-fit a farm to produce electricity in this manner is approximately $3,038,468.  For example, just to connect the farm to the electrical grid is on average $183,143.  The farmers in the program receive, on average, approximately $703,313 and use almost $1.5 million of their own capital.  The bulk of this capital is provided by private bank loans3.  The funding challenges that many of the Cow Power farms face are exacerbated further by the fact that until the program survives over an extended period of time, many lenders are hesitant to invest in a business venture with unknown risks.  If renewable energy programs like Cow Power are not provided with opportunities to overcome challenges like these, then producing renewable energy at the micro-level may never be achieved.

Lessons Learned from the Cow Power Program

It is clear that the Central Vermont Public Service Corporation needs to conduct more research regarding the Cow Power Program.  In instances where the case study researchers were unable to determine the life-cycle of specific equipment, it was estimated at approximately seven years.  However, a seven year life cycle for a generator is not very realistic.  The methane digester and the generators will probably far exceed the life-cycle estimate of seven years, which will also affect the cost-return analysis results.  The cost-return should be conducted with more appropriate data, if available.

Another lesson learned from the CVPS Cow Power Program is that stronger government subsidies are required to jump-start municipal renewable energy programs.  Funding provided through government agencies provides domestically-created energy at a reasonable price.  Where this funding is successful, municipalities will eventually be less dependence on centralized assistance programs.  By creating energy self-sufficiency, the United States will depend less on foreign energy sources like oil.

In areas where Cow Power is feasible based on industry, geography, and climate, state governments should provide funding.  By not investing in domestic, local energy sources, the United States government breeds negligence.  For every Cow Power program that fails or is never developed because there is no grant money available, millions of gallons of foreign-supplied oil must be supplemented.  A key perspective in Thomas Friedman’s, Hot, Flat & Crowded,is that the cycle of dependence that countries engage in where energy is provided by foreign source, this type of economic pattern requires federal investment into non-domestic markets, like China.  A redirection of investment will continue to develop foreign economies that are in direct competition with the United States; this cycle hurts the American economy.  The United States government along with specific states in which Cow Power is feasible are obligated to the citizens to create opportunities for local energy production.  This local energy strategy is an example of how governments can take measures to strengthen local economies, creating a mutually beneficial situation at the local, state, and federal levels instead of investing money abroad.

My final thoughts…

This report examined the structure, organization, and financing of energy produced using farm methane.  The CVPS Cow Power program illustrates that renewable energy production at the micro-scale can meet the triple bottom line, wean American states from dependence on foreign-produced energy, create stronger local economies, and develop regional partnerships.  Two analysis were conducted within the case study, both of which show that renewable energy programs rely heavily on grant money.  Despite that fact, the benefits of the Cow Power program vastly outweigh the challenges, which can be overcome with strong government subsidies and produce a spectrum of benefits ranging from the farmer to the federal government.

Sources

1.  Cvps cow power. (2009). Retrieved from http://www.cvps.com/cowpower/

2.  Friedman, Thomas.  Hot, flat, and crowded: Why we need a green revolution – and how it can renew america.  New York: Farrar, Straus and Giroux, 2008.

3.  Wang, Q., Thompson, E., Parsons, R., Rogers, G., & Dunn, D. (2011). Economic feasibility of    converting cow manure to electricity: A case study of the cvps cow power program in vermont.  American Dairy Science Association, 94(10), 4937-4949.

**Some of my methodology has been omitted from this post, because well…its really boring. If you’re interested in reading/learning about the full case study I examined, please send me an email.**

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6 Responses to “Profits From Poop?”

  1. Dave May 23, 2012 at 8:25 am #

    Michelle; Thank you very much for a great summary of the Cow Power program. Your research is excellent. We would love to see the program copied across America. Check out the America Revealed series on PBS which came to Blue Spruce Farm. http://www.pbs.org/america-revealed/story/energy/cow-power/
    I’ll be in Harrisburg in June to share what we’ve learned with dairy industry and state leaders!!

    • SOLEfortheSoul May 23, 2012 at 11:53 am #

      Dave, that is great! The research was part of my graduate studies, which focused on strenghtening regional sustainability (obviously this project focused on micro-level energy production). Will you be speaking at a conference in Harrisburg? I’d love some more details!

  2. Jayne Sebright May 24, 2012 at 9:11 am #

    Michele, Pennsylvania is also beginning to focus on “Cow Power.” A group called the “Dairy Power Stakeholders” representatives from the power companies, PA Utilities Commission, DEP and farmers has met twice to discuss how to overcome the obstacles that exist in getting farms to invest in Methane Digestion. Dave is actually coming to the next meeting. If you’re interested in learning more about what is being done, email info@centerfordairyexcellence.org. Jayne Sebright

    • SOLEfortheSoul May 24, 2012 at 12:50 pm #

      Thanks Jayne, it looks like the meetings are in Harrisburg. Is there a chapter closer to Pittsburgh?

      • Jayne Sebright May 24, 2012 at 2:40 pm #

        Unfortunately it’s a state-wide initiative and it’s in Harrisburg because that is where the state leaders are. We are planning to do a write-up after the meeting for farm press, and I’d be happy to share that release with you. Please let me know.

      • SOLEfortheSoul May 27, 2012 at 9:31 pm #

        Yes, please do! My email is michelle dot caparoula at gmail dot com

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