Assessing the Commercial Feasibility of Manure to Energy Systems

1. Assessing the Commercial Feasibility of Manure to Energy Systems Assessing the Commercial Feasibility of Manure to Energy Systems Kraig Westerbeek Kraig Westerbeek AVP, EHS AVP, EHS Murphy-Brown LLC Murphy-Brown LLC

2. 1. 2. 3. Evaporation pond Sludge Land, Landfill

3. Manure to Energy? Manure to Energy? • Manure from animal operations does have energy value • Manure from animal operations does have energy value • Swine manure = app. 8000 BTU / pound • Swine manure = app. 8000 BTU / pound • Animals are not 100% efficient in converting feed energy into body mass • Animals are not 100% efficient in converting feed energy into body mass • Relative measure of efficiency is feed conversion (swine 3 : 1) • Relative measure of efficiency is feed conversion (swine 3 : 1)

4. Manure to Energy? Manure to Energy? • Energy not used by animal can be recycled to other forms of useful energy • Energy not used by animal can be recycled to other forms of useful energy • While gasification and or combustion are options for some dry manures, anaerobic digestion seems to have the most potential for deriving energy from animal manure • While gasification and or combustion are options for some dry manures, anaerobic digestion seems to have the most potential for deriving energy from animal manure

5. *tpy: tons per year Source: AMI, 2011 Chicken: 18,750,000 tpy* Cattle: 13,300,000 tpy* Swine: 11,650,000 tpy* Turkey: 3,100,000 tpy* Others (veal, lamb, mutton): 158,500 tpy* Manure energy: 10,000 – 20,000 MW power equivalence

6. “Anaerobic digesters, commonly in the form of covered lagoons or tanks, are designed to stabilize manure and optimize the production of methane.” “Anaerobic digesters, commonly in the form of covered lagoons or tanks, are designed to stabilize manure and optimize the production of methane.” EPA AgStar – AD101 EPA AgStar – AD101

7. Number of Operating Anaerobic Digester Projects (US, July 2010) Number of Operating Anaerobic Digester Projects (US, July 2010) Dairy Dairy 126 126 Swine Swine 24 24 Poultry Poultry 5 5 Beef Beef 2 2

8. Biogas Use for Operational Projects Biogas Use for Operational Projects Cogeneration Cogeneration 78 78 Electricity Electricity 48 48 Boiler / Furnace Fuel Boiler / Furnace Fuel 20 20 Flared Full Time Flared Full Time 15 15 Unknown Use Unknown Use 7 7 Pipeline Gas Pipeline Gas 4 4 Vehicle Fuel Vehicle Fuel 1 1 Methanol Methanol 1 1

9. Energy Production by Anaerobic Digester Systems: 2001-2010 (EPA AgStar) Energy Production by Anaerobic Digester Systems: 2001-2010 (EPA AgStar)

10. Swine barn Develop: Dewatering system to produce dry organic fertilizer Swine manure is scraped and collected in the surge tank. Develop: Solids are further dried with waste heat and processed into organic fertilizer or used as fuel for combustion at a biomass plant Wastewater is pumped to existing lagoon and irrigated with existing irrigation equipment Biogas Electricity distribution grid Biogas Digesters Buffer tank Generator Surge tank Combination of above- ground and in-ground fermentation leverages the cost and engineering advantages of both design.

11. Manure to Energy – Commercial Feasibility Manure to Energy – Commercial Feasibility • Fact: The technical feasibility of creating energy from manure has been proven • Fact: The technical feasibility of creating energy from manure has been proven • Question: Can energy be created at a cost that makes manure to energy commercially feasible on a large scale? • Question: Can energy be created at a cost that makes manure to energy commercially feasible on a large scale?

12. Commercial Feasibilty Commercial Feasibilty • To be attractive, manure to energy projects must create value for: • To be attractive, manure to energy projects must create value for: – Investor (long term, stable return) – Investor (long term, stable return) – Farmer (avoided costs / increased revenue, improved manure management system) – Farmer (avoided costs / increased revenue, improved manure management system) – Energy User (reasonably priced renewable energy) – Energy User (reasonably priced renewable energy)

13. Cost of Manure to Energy Systems Cost of Manure to Energy Systems • High capital investment typically required (example – swine manure $5-10M per MW electricity) • High capital investment typically required (example – swine manure $5-10M per MW electricity) • Various state and federal renewable energy credits help reduce initial investment • Various state and federal renewable energy credits help reduce initial investment • Operating costs vary depending upon system used, but are significant, particularly if transportation of manure is involved • Operating costs vary depending upon system used, but are significant, particularly if transportation of manure is involved

14. Revenue from Manure to Energy Systems Revenue from Manure to Energy Systems • Direct payment for energy based on current market value • Direct payment for energy based on current market value • Renewable energy credits – vary from state to state depending upon legislative requirements • Renewable energy credits – vary from state to state depending upon legislative requirements • Tax benefits (state, federal) • Tax benefits (state, federal) • Carbon credit value (destruction of methane) • Carbon credit value (destruction of methane)

15. Benefits to Manure Management Systems Benefits to Manure Management Systems • Significant destruction of volatile solids / reduced organic loading on existing system (increased treatment capacity) • Significant destruction of volatile solids / reduced organic loading on existing system (increased treatment capacity) • Reduction of total solids leaving a more nutrient dense solids stream • Reduction of total solids leaving a more nutrient dense solids stream • Potential reduction of odor and emissions • Potential reduction of odor and emissions • Reduction of pathogen loads • Reduction of pathogen loads

16. Commercial Feasibility Commercial Feasibility • Investments in manure to energy projects are risky due to the constant variability of manure characteristics • Investments in manure to energy projects are risky due to the constant variability of manure characteristics • Advances in technology (anaerobic digestion, etc.) have reduced the risks substantially • Advances in technology (anaerobic digestion, etc.) have reduced the risks substantially • State level renewable energy mandates have created a market for manure to energy projects by making returns more attractive • State level renewable energy mandates have created a market for manure to energy projects by making returns more attractive • Depressed carbon market has been a negative • Depressed carbon market has been a negative

17. Circle 4 Farms Project Circle 4 Farms Project • In the late 1990’s and early 2000’s, our company invested a significant amount of money in an anaerobic digester project at Circle 4 Farms in Utah • In the late 1990’s and early 2000’s, our company invested a significant amount of money in an anaerobic digester project at Circle 4 Farms in Utah • The goal of the project was to capture methane generated from the anaerobic digestion of swine manure and convert it into biodiesel • The goal of the project was to capture methane generated from the anaerobic digestion of swine manure and convert it into biodiesel

20. Circle 4 Project Circle 4 Project • The project failed due to problems associated with manure transport and lower than expected manure energy value • The project failed due to problems associated with manure transport and lower than expected manure energy value • While technically feasible, the economics of the project did not work • While technically feasible, the economics of the project did not work • The digesters built for this project are no longer in use • The digesters built for this project are no longer in use • This project may have worked with today’s renewable energy incentives • This project may have worked with today’s renewable energy incentives

21. Murphy-Brown Strategy • • Instead of investing internal capital in manure to energy projects, MB has sought out partnerships with project developers and investors • • Current projects – – Alpental Energy – Utah – – Pacolet/Millikan – North Carolina – – Ag Power – North Carolina – – Roeslein - Missouri

22. Summary Summary • The technology is available today to support manure to energy projects – continues to improve with experience • The technology is available today to support manure to energy projects – continues to improve with experience • Economic drivers have been added to provide the necessary revenue to support projects • Economic drivers have been added to provide the necessary revenue to support projects • The number of manure to energy projects continues to increase • The number of manure to energy projects continues to increase

23. Summary Summary • I believe manure can compete well in the renewable energy marketplace based on both its price relative to other renewable energy sources, and its reliability in delivering continuous energy • I believe manure can compete well in the renewable energy marketplace based on both its price relative to other renewable energy sources, and its reliability in delivering continuous energy • I expect a continued increase in the number of manure to energy projects • I expect a continued increase in the number of manure to energy projects