Energy for dairy processors: New feasibility report and economic modeling and mapping tool

To paraphrase the Rolling Stones, the future of sustainable food production in the United States may be a biogas, gas, gas − thanks to tools available through Baker Tilly as part of a grant funded by the State of Wisconsin State Energy Office (SEO).

Background

Baker Tilly Virchow Krause ("Baker Tilly") received a grant from Wisconsin’s State Energy Office (SEO) to create a feedstock assessment mapping tool, conduct biogas technology evaluation, and create an economic toolkit. Additionally the grant called for outreach and education on the tools now available to dairy farmers, food producers, and communities trying to learn more about the energy content in any of their by-product streams for beneficial use.

The analysis began with the premise that not all areas can benefit from biogas to energy projects, but given the right set of drivers related to local energy costs, waste disposal fees, utility tariff rates, and land constraints for growth, there can be good projects that make sense. The key is to understand the business case that can support the project and garner project investment while being a positive alternative to the current economics for all parties involved.

Why are community oriented anaerobic facilities important for communities and industry to assess? Diminishing municipal financial resources coupled with aging waste disposal plants and equipment is rapidly combining to create an emerging issue for food processors. The 2009 U.S. Conference of Mayors Metropolitan Infrastructure Sustainability Study showed three in five cities, or roughly 60 percent, lack the funding to meet infrastructure needs as a serious challenge.

With many municipal waste water treatment plants at their limits for biological oxygen demand as well as nitrogen levels, food processors will be charged extra to dispose of their waste.

As was noted, this creates a demand from the manufacturer which − when coupled with a demand from the consumer for sustainable practices in food production − creates a market-driven public relations issue for cost-conscious food processors and manufacturers.

Stringent effluent and pollution standards at the state and local levels are stifling expansion of the U.S. food and beverage industry at a time when rapidly developing nations are creating more product demand, according to Firm Wide Manufacturing Partner Brad DeNoyer and Energy & Utilities Manager Cory Wendt.

Credits, incentives and the payback

A cost-effective solution, Wendt and DeNoyer note in their report "Capitalizing on your next investment by maximizing credits and incentives" is using New Markets Tax Credits, Investment Tax Credits as well as negotiated incentives and loan programs to construct feedstock to biogas facilities.

A two-company mythical food processing company scenario prepared by DeNoyer and Wendt shows a seven-year payback when Company B constructs an anaerobic digester. Company A focuses solely on reducing total waste effluents, but Company B uses a comprehensive analysis that allows Company B to reduce its capital outlay in addition to its waste stream.

Baker Tilly’s Food and Beverage Practice also detected an emerging demand for sustainable agricultural energy practices, which resulted in an analysis of biogas to energy. The study, completed in Oct 2012, indicates Wisconsin has "significant biomass and biogas potential," aligning with the SEO’s top priority goal: Creation of a strategic plan for energy production from waste streams.

The Wisconsin SEO’s strategic plan may be key to keeping the Badger State’s $26.5 billion dairy industry in its national leadership role as a major employer of more than 146,000 people, according to the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP).

The analysis shows an additional potential of roughly 15 to 20 megawatts (MW) of electrical generation capacity from biogas existing in Wisconsin, according to the study prepared for the Wisconsin SEO.

The plan was then taken a step further by creating a set of tools identifying waste-reducing energy applications in Wisconsin. The biogas economic model and toolkit allow biogas users to create a feasibility evaluation to tangibly examine use of feedstock from as many as 10 farms or different processing plants.

The second tool is a development map, created in cooperation with the University of Wisconsin using ArcGIS software. The map shows biogas stakeholders a wide range of users from Confined Animal Feeding Operations (CAFOs) to wastewater treatment plants − a usable tool designed to aid waste producers in making informed, waste-to-energy feasibility decisions.

Another tool: ERIC’s lab

Partnering with the University of Wisconsin-Oshkosh’s Environmental Research Innovation Center (ERIC), Baker Tilly provides another analytical tool to determine high level feedstock feasibility.

ERIC’s lab, which includes a commercial-scale dry fermentation digester, is able to analyze specific feedstocks. The analysis, when paired with the economic modeling and mapping tools, is able to determine high-level feasibility of potential biogas partnerships or projects.

The studies and feasibility tools have garnered notice among interested parties − both internally and externally.

"Converting waste from these facilities for renewable energy applications may provide a meaningful tool as part of the state’s future energy mix in the areas of heat and power generation," observed Tom Unke, Leader of Baker Tilly’s Energy and Utility Practice.

"The tools allow interested parties to identify where feedstock is located and determine the cost-effectiveness of the project," remarked Kevin Vesperman, Division of Energy Services Administrator for the Wisconsin Department of Administration.

Showing its willingness to demonstrate cost-effectiveness to the dairy industry, the tools were rolled out recently at the World Dairy Expo, which was held October 2-6 in Madison, Wisconsin.

While biogas projects can be a benefit for WI, and potentially other states, it is important in any new business development to accurately assess the economic benefit prior to taking action. With the tools created, mainly the feedstock map, biogas lab, report, and the economic model, the State should now have a better ability to further understand the potential of areas which can benefit from the development of community oriented anaerobic facilities.

Using the tools already created for Wisconsin, Baker Tilly’s Food and Beverage and Energy practices intend to replicate and customize them for other states and regions throughout the United States − leveraging tax credits, loans and partnerships to create more opportunities for food and beverage producers as well as ranchers, farmers, and cooperatives. This is being done in an effort to encourage sustainable, cost-effective food production practices. To learn more about this opportunity, please contact foodbev@bakertilly.com.