Biogas industry seeks to clear the regulatory air

Fresno, Calif. and the rest of the San Joaquin Valley share some of the worst air in the United States.

A bootstrap industry, still trying to gain a toehold in the state, can remove tons of those pollutants and produce renewable energy at the same time. The concept would appear to meet the goal of the state's Global Warming Solutions Act of 2006, which seeks to reduce emissions to 1990 levels by 2020.

So what's the holdup?

Part economics, part regulatory. Five of the top people in the state's biogas industry met recently in Fresno with members of the California Public Utility Commission to explain the difficulties in getting bio-digesters up and running. The meetings were in Fresno City Hall. Each commissioner and his or her staff listened and gave feedback to various groups.

Making the case for biogas

The small but friendly renewables group spelled out all the potential a viable biogas industry could bring. But the group, who represented five companies, also explained the turmoil their operations face breaking into the market in a substantial way. And by and large, the commissioners, who met them one by one, appeared to see the merits of their cause.

The biogas representatives' plan is simple. The Valley is also home to 1,700 dairies, the most productive and largest milk production region in the country. These dairies also produce a huge amount of methane, mostly through cow poop.

Their companies, with the exception of one that uses agricultural waste, take what the cows discard and convert it to energy. However, to do this they need a little help. Because the industry is so new, development and operation costs somewhat exceed current return. The biodigestion process removes pollutants, which could improve the health of millions of people, but that benefit -- at this time -- isn't worth anything to banks. The fact that the industry could divert a huge amount of the state's greenhouse gas and create a renewable resource can't be monetized. And that means the projects don't look good to traditional financiers.

"We need a stable program to launch the industry," says Neil Black, president of California Bioenergy.

Industry could use a hand

There are a lot of details involved with getting a biodigester up and running. Suffice to say that most of them boil down to price per kilowatt hour. Utilities pay something like 8.9 cents, while the standard biodigester coupled to a energy-creating turbine needs something more, like 15 to 17 cents, at least at this early stage.

It's not uncommon for a developing energy source to get regulatory assistance. In the energy business, it's understood that every new resource needs some sort of subsidy to get started and eventually become profitable. Even oil.

Black says there only 11 biodigesters operating in California. He says about that many went out of business, unable to make the economics work.

"We're operating in five different states now, and all are easier than California," says Bob Joblin, who represents AgPower Group. He says he's had a project fully permitted for a year and a half, just waiting on assistance to unravel regulatory red tape.

Nettie Drake of Ag Power Development says she's working on her second digester, but it hasn't been easy. She says her business finds nothing but hurdles.

The cost of clean air

The difficult part is that of air quality. Because there is no viable methodology for trading carbon credits, where one company pays another to offset its pollution, there is no method for companies like Black's or Drake's or Joblin's to leverage those credits.

Congress has failed to pass cap-and-trade, meaning no sales of credits for biodigesters. However, California does show some promise -- but not until next year, when it's due to launch what Peter Weisberg of BioCycle.net says is "the nation’s most comprehensive cap-and-trade program."

Weisberg says digester and composting project developers interested in generating carbon credit revenue "must now turn their attention to the intricacies of the emerging California carbon market."

Timing is key. The group at the CPUC meetings in Fresno says the opportunity for getting their current projects established and successful is limited. Expired permits, missed financing or mounting debt could sour farmers on the concept.

And it's farmers who take the risk.

Renewable energy

These projects could make a big difference. Black says the potential in California for all digesters, including waste water and ag waste is 3 gigawatts of power.

That's a pretty big deal. For example the twin reactors at the Diablo Canyon Power Plant near San Luis Obispo produce about 2.2 gigawatts.

And it would remove greenhouse gases from the worst air in the nation. Fresno and other cities in the Valley are good at getting on lists no city wants any part of. For instance, Fresno has the distinction of having the nation's highest concentrated poverty and a number of Valley cities found their way onto the Top 10 residential foreclosure list over the past few years.

Bye bye brown haze?

The American Lung Association's 2012 State of the Air Report lists primarily Valley cities in its top 10 most polluted. One of the reasons for this airborne nastiness has to do with the region's geographic configuration (basin surrounded by two mountain ranges) its lack of wind and rain and the fact that everything from Los Angeles and the Bay Area migrates east and hangs out.

The biodigester industry is poised to do its part. And there's this: Biogas doesn't operate at the whim of mother nature like wind and solar. Hook it up to the grid and it could even out the highs and lows of other renewable power sources.