Lower milk prices have many family dairies screaming, “Holy cow!” But the secret to prolonged success isn’t in the milk alone. If small dairies are going to survive, it’s time for cows to pass a lot of gas.
Here’s where we’re at now: Things are not looking good for the average American dairy farmer. Nearly 3,000 U.S. dairy farms folded in 2018, about a 6.5% decline, according to the U.S. Department of Agriculture. In 2007, there were roughly 700 dairy farms in Washington State. In 2019, the number of dairy farms in Washington dropped to 350.
Milk prices have been historically low over the last several years, and supply is so high that dairy farmers have to dump out good milk to manipulate supply and demand. And it’s not just milk that factors into the matter.
With schools and restaurants either closing or completely minimizing capacity, the need for butter and cheese has drastically declined. About half of all cheese produced is consumed in restaurants. With restaurants being closed to accommodate for public health during COVID-19, the losses are exponential for the Washington dairy farmer.
And while dairy farmers and their bankers have lived through countless boom-and-bust cycles over the decades, family-owned dairy farms are having a harder time competing with conglomerates who can produce milk for less because of the volume they output, and because they have the capital to site dairies in states with more lax environmental regulations (read: lower overhead) than a locally owned dairy farm that’s tied to our communities.Saving the small, family-owned dairy in Washington from extinction requires a new, steady income stream to help offset the wild swings in milk prices. But sometimes hope exists in the strangest of places.
What Is Biogas?
In the simplest terms, biogas is fuel produced from decaying organic matter; in this case, cow manure, although food and farm waste are other feedstocks commonly used. In the dairy industry, cow manure can be converted into clean-burning biogas through a process called anaerobic digestion, turning manure into moolah.
The American Biogas Council defines anaerobic digestion as “a series of biological processes in which microorganisms break down biodegradable material in the absence of oxygen. One of the end products is biogas, which is combusted to generate electricity and heat, or can be processed into renewable natural gas (RNG) and transportation fuels.”
Biogas from dairy farms can be used to produce on-site electricity and heat, cutting back on farmers’ expenses. It can also be sold at a profit to the local utility and added to the electric grid to make it cleaner, or it can be upgraded to pipeline standards and distributed as RNG to power trucks and fleets.
Biogas is also crucial for the development of hydrogen transportation fuels. Currently, the limited supply of hydrogen in the United States is produced through electrolysis, a process that is powered by mainly natural gas. By using RNG from cow waste instead, hydrogen would be classified as a carbon-free energy source.
No car manufacturer has devoted more resources to developing hydrogen than Toyota. They believe it’s as big a step forward in low carbon transportation as the Prius was in the 1990s. They’ve found with the right policies in place, over 486,000 metric tons of hydrogen can be captured from cows in the USA. That’s enough hydrogen to supply annual fuel needs for 730,000 drivers every year.
With a top ten dairy economy, Washington is primed to become a leader in creating carbon-negative biogas for hydrogen.
One place Washington can look for inspiration is to our friends in California, where emission reduction targets from the state’s early adoption of both a cap and trade system as well as a low carbon fuel standard have contributed to the development of a biogas financial credit market worth $27 million last year. Dairies are building digesters to take advantage of the state’s commitment to reducing carbon emissions.
According to Navigant, the global annual market value of biogas is expected to reach over $20 billion by 2028.
In Washington, we’ve taken initial steps forward. In March of 2018, Governor Inslee signed H.B. 2580 into law, requiring the Washington State University Extension Program, the State Department of Commerce, and the Utilities and Transportation Commission to work together to develop recommendations on how to promote the sustainable development of RNG.
“This bill will help in our fight against climate change by reducing highly-polluting methane emissions and displacing fossil fuels with low-carbon, renewable sources of biogas,” Inslee said.
More progress was made in May of 2020 when The Washington State Department of Commerce announced $970,000 in grants from the Clean Energy Fund (CEF) under the Dairy Digester Enhancement Program. “Four proposed projects (in Whatcom, Skagit, and Yakima Counties) will address improved energy efficiency in operations and the marketing of biogas, nutrients, fiber, and other co-products of the digesters,” said Commerce Director, Lisa Brown.
“These new anaerobic digester projects…have multiple potential benefits to the dairy industry, local residents, and the environment,” Brown added.
Combining California’s carbon market that incentivizes buying biogas and 300,000 dairy cows in Washington that yield almost seven million pounds of milk annually, and it all adds up to a true economic opportunity that exists for dairy farmers.
How Does Biogas Increase A Dairy Farmer’s Salary?
The EPA states that “While manure has always traditionally been a resource on the farm as a fertilizer, alternative products can be produced creating new income-generating opportunities.”
Investors see the power of producing biogas and have put their financial backing behind building a biogas industry. Dominion Energy, for instance, invested $200-million in 2019 toward a multi-state, long-term biogas initiative. Hundreds of millions of dollars are being poured into converting dairy waste to energy by private investors like Brightmark and Equilibrium Capital. Farmers no longer have to be solely responsible for the financial investment to build a digester, but they can yield money in the form of lease payments for years to come.
Another project of interest is The Augean Renewable Natural Gas (RNG) project in Yakima County, Washington. Through digesters and a well-placed pipeline, George DeRuyter & Sons Dairy will convert 150,000 gallons per day of dairy waste from up to 7,000 cows into 160,000 MMBTU of RNG each year. That’s the equivalent of producing 1.4 million gallons of gasoline. Currently, the price for RNG is about $70/MMBTU. At 160,000 MMBTU, that’s about $11.2 million worth of RNG every year.
There’s much more room for digester growth in Washington. Europe, for example, had 12,496 animal waste digesters in 2016 compared to the 281 in the entire U.S. as of April 2018. With only eight digesters and nearly 300,000 dairy cows, we’ve barely scratched the biogas surface for the nearly 350 dairy farms in our state.
Dairy farmers who have faced uncertainty selling cow milk can now sell cow waste at a fixed price, whether that’s through the credit market or through lease payments from developers/owners. This is the missing leg of the table the dairy industry has needed to protect family farms and prevent the kind of aggregation that has ruined small businesses across America.
By enacting a Low Carbon Fuel Standard in 2021 that prioritizes cleaner energy, the Washington legislature will create short term construction jobs in our rural communities to build more anaerobic digesters, and give a long-term leg up to small farmers who’ve long known the smell of manure is money.