Wisconsin's largest utility company has received approval to replace some of its natural gas supply with renewable methane from local farms, which could present new opportunities for the burgeoning alternative fuel industry.
The Public Service Commission voted unanimously Thursday to approve WEC Energy Group's $75 million pilot program intended to help its utilities meet their gas supply needs while reducing greenhouse gas emissions, providing farmers with a new revenue stream and reducing the risk of groundwater contamination.
This new approach will allow digesters to hook up directly to the gas distribution network rather than having to haul pressurized gas to an interstate pipeline portal.
WEC says the pilot program was developed in response to interest from the agriculture industry and it has already reached an agreement with an Outagamie County digester operated by U.S. Gain that is expected to deliver enough gas to supply more than 4,300 typical households.
"It is an evolving market," said Commissioner Tyler Huebner. "It's good to see the utilities getting into it and looking at ways they can support their customers."
Created during the anaerobic digestion of organic material, renewable methane is interchangeable with the fossil fuel extracted from the ground and can be blended into pipeline supplies used for home heating, transportation and electricity generation.
Common sources include landfills and wastewater treatment plants as well as digesters that break down manure from animal feedlots.
Digesters capture methane - a far more potent heat-trapping gas than carbon dioxide - that would otherwise be released into the atmosphere, which can be used to replace fossil fuels. Meanwhile the treated waste makes for better quality fertilizer with less odor and fewer pathogens that could get into water supplies.
"It ends up being a win-win," said Tim Baye, a professor of business development at UW-Madison who studies carbon markets. "The farm has a different revenue stream. The quality of the nutrients are better."
Same fuel, new market
In the early 2000s, Wisconsin biodigesters could turn a profit by generating electricity with the gas and selling it to utilities trying to meet renewable energy mandates. But increasingly cheap wind and solar energy have forced digesters to rethink that business model.
Now Wisconsin digesters who can put their gas into pipelines can receive carbon credits, which they can sell to California fossil fuel producers to offset the carbon emissions from their products.
"There are biogas developers on the street knocking on farmers' doors - constantly," Baye said. "It's one of the hottest segments."
The only challenge: getting the gas into a pipeline.
In 2020, Dane County completed a $28 million injection portal that allows the landfill and local digesters to inject their gas into an interstate pipeline. Solid waste director John Welch said the county currently has four digesters who he expects will deliver enough gas to displace up to 2.5 million gallons of gasoline this year.
But that system requires digesters to compress the methane, put it on trucks and haul it to the landfill, all of which cuts into the bottom line and increases the energy intensity.
The WEC pilot seeks to bring the pipeline to the farm.
Under the program approved by the PSC, the utility will pay for construction, operation and maintenance of facilities to connect digesters to its local distribution system and participating customers - either a farm or third-party digester - would contract to sell the gas at a discounted price for 10 years.
The digesters will retain the renewable fuel credits, which they can sell. At the end of the contract, digesters could continue selling the gas to the utility at market prices.
The pilot program is limited to 15 participants. Each interconnection is expected to cost between $2 million and $5 million, which the utility says will be offset by reduced fuel costs.
While the program will increase company profits, WEC estimates it will have minimal impact on consumers, in most cases lowering the average monthly bill by less than 10 cents.
Hardy Sawall, director of business development for U.S. Gain, said the WEC program is attractive because it relieves digesters of the capital costs, and hooking into the gas distribution network is less expensive than pressuring gas and hauling it to an interstate pipeline portal.
Earlier this spring the commission approved a smaller biogas pilot for Alliant Energy, which plans to hook up a Darlington dairy farm to an expansion of its natural gas network in Grant and Lafayette counties. In that case the gas supplier will pay to build the hookup.
WEC says the project will make Wisconsin a national leader in facilitating renewable gas development and offset about half of the company's methane emissions.
"This innovative pilot project is part of our commitment to affordable, reliable and clean energy," said company spokesperson Brendan Conway. "We are partnering with Wisconsin dairy farms to supply high quality, renewable natural gas to our distribution system."
Not a panacea
But experts caution biogas is not a replacement for other climate solutions like using clean electricity to heat buildings and power vehicles.
"There is a risk that RNG could be used as a justification for continued investment in natural gas infrastructure," said Morgan Edwards, an assistant professor of public policy at UW-Madison who studies the impacts of energy use.
At best, biogas could replace only about 5% of current fossil gas demand, making it a good choice for certain niche uses like heavy trucks.
"Dairy consumption, at least in the United States, is declining slightly," Baye said. "There's not going to be a lot more cow poop."
California's low-carbon fuel standard
In 2011, California launched a market-based program designed to progressively lower the carbon intensity of transportation fuels, creating a potential windfall for Wisconsin dairy farmers and digester operators who can capture the methane from animal waste.
Regulated entities such as refiners generate credits and debits based on the lifecycle carbon emissions per unit of energy.
Gasoline and diesel have a carbon intensity of about 100, while corn-based ethanol ranges from 34 to 75. Biogas from dairy cattle has the lowest score, between -276 and -330.
Those who don't generate enough of their own credits can buy them on the market from digesters that deliver methane to a pipeline.