The Utility of the Future at Work: Biomethane as New Sources of Energy & Income

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Clean water agencies seek more sustainable energy management and options for management of residuals produced in the process of cleaning dirty water.  The American Biogas Council (ABC) reports that “[t]he U.S. has over 2,000 sites producing biogas: 239 anaerobic digesters on farms, 1,241 wastewater treatment plants using an anaerobic digester . . . and 636 landfill gas projects.”     According to the ABC, Europe far outstrips U.S. utilization of biogas and boasts over 10,000 operating digesters.  The ABC also estimates about 2,440 wastewater treatment plants are available for biogas production which could support a digester.  Given those numbers, it is easy to see the potential for growth.

Looking Beyond Combined Heat and Power – Biomethane

Biogas is a byproduct of anaerobic digestion; as organic material breaks down in the absence of oxygen, methane and carbon dioxide are produced.  Biogas can be burned to produce heat or electricity, commonly known as combined heat and power (CHP) or it can be cleaned and converted to an upgraded form of biogas (about 95% methane) known as “biomethane.”  Biomethane is renewable and can be used in the same way natural gas is used, including transportation fuel and pipeline injection.  Organic biosolids, the raw material for biomethane, are produced in abundance as part of the wastewater treatment process and, according to the ABC, are estimated to be capable of producing “. . . enough energy to power 3.5 million American homes and reduce emissions equivalent to removing 800,000 to 11 million passenger vehicles from the road.”

New Money is Available

Permitting concerns, municipal land use restrictions, site location, and the relative cost of purchased power may all be considerations for a utility of the future when considering the feasibility of the biogas or upgraded biomethane project.  However, as some economic feasibility reports have suggested, high upfront capital cost and a long return on investment may ultimately be the deciding factors and while providing biomethane for use and resale may provide a reliable flow income, it may be cost-prohibitive for all but the largest or wealthiest facilities. 

Traditional market incentives like Renewable Energy Certificates (RECs), Renewable Energy Numbers (RINs), carbon offsets, and other traditional financing mechanisms may be useful to the utility with the desire, but not the capital, to leverage onsite energy production.  State revolving loan fund programs, tax credits, federally tax advantaged bonds, and Department of Energy (DOE) programs may also provide funding streams for biomethane generation projects.  New money is also available.  At the end of 2014, the USDA announced that new financial incentives would be available through the Rural Energy for America Program (REAP).  REAP is funded by the Farm Bill and provides grants and guaranteed loans for several categories of renewable energy production, including anaerobic digestion, hydro, geothermal, solar, and wind.  The REAP program makes funding available for grants, loan guarantees and other forms of assistance.  More information on REAP opportunities is available here and here

Conclusion

As clean water agencies and utilities of the future move toward more sustainable energy management, it will be important for the leadership of those agencies to continually assess and refine plans for onsite energy development.  The more traditional biogas CHP and the augmented process of producing biomethane are certain to be considerations in a comprehensive plan of energy development.

 

Dale Mullen and Doug Lamb are attorneys at McGuireWoods LLP who is a NACWA Legal Affiliate. 

Doug will be speaking on the topic, "Obtaining Investment for the Development, Expansion or Conversion of LFGTE to Pipeline Injection, Direct Use and CNG," at an event hosted by the Landfill Methane Outreach Program (LMOP) in conjunction with SWANA's Landfill Gas & Biogas Symposium 2015. The LMOP workshop will highlight recent successes in landfill gas (LFG) energy projects and include recognition of the 2014 LMOP Project and Partner of the Year awardees. Check the LMOP website for registration and additional details.

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