Partnering Up

February 23, 2010 09:59 AM
 


One trip to look at an anaerobic digester on a dairy in central Minnesota was all it took to convince Lee Jensen that the technology would be a good fit for his 900-cow Five Star Dairy near Elk Mound, Wis.

"We were impressed,” he says.

As Jensen began researching prospects for installing a digester at Five Star, though, a major doubt surfaced. Most of the on-farm digester projects up and running at the time involved dairy producers buying the digester, then directly selling the gas produced to a utility company or using the gas to power a generator that feeds electricity to the utility's power grid.

"When we put a pencil to it, it didn't look like that good of a deal,” Jensen says. "As we saw it, the rates utilities were paying didn't seem to justify the huge cost of the digester. It seemed like a pretty big risk.”

Enter Microgy, Inc., a Colorado-based digester manufacturer. The company offered to finance, build and operate the digester if Jensen would supply manure and land for the project. In addition, Microgy would handle the specifics for selling methane gas produced by the digester to Dairyland Power Cooperative, a regional utility that provides electricity to four Midwestern states.

For his part, Jensen would get fertilizer for his cropping operation, bedding for freestalls, a cut of the revenues from gas sales and more. "Most important to us, we weren't required to put up any collateral for the digester,” Jensen says. "It basically took the risk out of the picture.”

Putting the agreement together proved to be challenging. Jensen spent nearly four months working with a law firm to hammer out the terms. He was able to use part of the money from a $180,000 USDA energy grant to pay for the resulting legal bills.

"Something like this had never been tried before,” Jensen says of the three-way arrangement. "There was no existing contract that we could use as a model. It wasn't a matter of just signing on the bottom line and getting things going.”

Eventually, the details were worked out. Stargest Power LLC, a separate business entity Jensen created for the digester project, started producing methane gas in mid-2005. "It's basically been a win for everybody involved,” he says.

"We're able to utilize our manure in a more environmentally friendly way. Microgy gets a digester. Dairyland gets green-generated power, and the local community gets electricity and fewer odor problems.”

Manure from Five Star's two freestall barns is pumped to a 750,000-gal. digester located about 100 yards from the dairy's housing/parlor complex. The Microgy digester is a thermophilic unit, meaning digestion takes place at 120¢ªF to 130¢ªF. At that temperature, most of the weed seed and pathogens in the manure are killed off. Roughly 50% of the total solids are eliminated in the digester.

In Microgy's design, the manure is mixed with substrate material--food processing wastes like fats, oils and greases--at a ratio of 90:10 (manure:substrate). The substrates provide an energy source for enhancing methane gas production in the digester. At peak capacity, the digester produces 300,000 cu. ft. of gas per day. Without the substrate, methane production would shrink to somewhere around 70,000 cu. ft. to 90,000 cu. ft. per day.

Jensen hauls three to four 6,000-gal. loads of substrate a week from suppliers like restaurants and ethanol plants. Most are within 40 to 50 miles of Five Star, but a few are as far away as 200 miles away. "Most of the time, our only cost is for hauling,” he says.

The methane produced by the digestion process powers a generator connected to Dairyland Power's grid. The generator, owned by Dairyland, is capable of producing 775 kW of energy per hour, enough to power 600 homes. "One way to look it at is that it takes about 1.5 cows to power a home,” Jensen says.

The manure/substrate mixture remains in the digester for approximately three weeks. Every half-hour, 700 gal. of digested material is discharged from the bottom of the structure and another 700 gal. is added at the top.

Microgy makes use of a sophisticated computer/satellite uplink, housed in a trailer next to the digester, to monitor operations. One dairy employee spends about five hours a week on routine maintenance chores at the site.

The discharged material is directed to a building housing a screw press solids separator and a loading dock area. "The only construction cost we had in the project was for this building,” Jensen says. "We figured that if things didn't work out, we'd always be able to find another use for it.”

The separator enables Five Star to recapture about 50% of the solids in the discharge material. Jensen uses the solids for bedding in his freestalls and sells the surplus to neighboring dairy producers. Jensen notes that switching from sawdust to the dried solids has significantly reduced annual bedding cost.

"At the time we put in the digester, we were probably paying around $800 a week for sawdust,” he says. "And the cost has gone up considerably since then.”

Area landscapers and gardeners are another potential market for the dried solids. "In the spring, we can sell everything we have on hand,” Jensen says.

Solids that don't get separated out and the liquid portion of the discharge are pumped to the dairy's 9-million-gallon lagoon. "We're not putting as many solids into the lagoon as we were before,” Jensen says. "That means we don't need to agitate as much as we did before. When it's time to haul, we're not as rushed. We can go about things at a more leisurely pace. It takes a lot of stress off everyone here.”

Odors in the lagoon have also been significantly reduced compared to before the digester. "It's pretty hard to put a number on something like that,” Jensen says. "The neighbors are a lot happier when we're hauling now.”

Jensen expects to see other benefits develop. He currently uses his share of the carbon credits generated by the project to retire debt on the digester. He figures a ballpark payback of 10 years. Once the debt is paid off in full, those credits will become an additional income stream.

Another potential benefit: More than 2 million BTUs per hour of waste heat generated by the digester could help the dairy significantly trim LP gas use. Currently, Five Star doesn't use any of the waste heat.

"We're looking at building a new farm shop this year and using the waste heat in that building,” Jensen says. "In the future, we might be able to use it in a grain handling facility or in a milking facility. It opens up a lot of options.”

 



Who Does What

  • Five Star Dairy provides the land and the manure to Microgy's digester.
  • Microgy financed the deal (with no collateral required of Five Star Dairy) and operates the digester.
  • Dairyland Power Cooperative owns the generator, buys the electricity and gets credit for using green power.
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