Biogas Working Group Case Studies Economic Conditions and Investment Opportunities

1. Biogas Working Group Case Studies • Economic Conditions and Investment Opportunities • On-site Generation • Ziqhing Zhang & Ricardo Amon CEC • Bio-methane injection to NG pipeline • Kenneth Brennan, PGE; Ty Korenwinder , Sempra Utilities • Policy Recommendations and Next Steps

2. On-site Generation • California Dairy Power Production Program • Partnership with the California Energy Commission & Western United Dairyman • $10 million Grant Funding Program

3. Background • California Dairy Power Production Program (DPPP) • 18 dairies received awards with a total $5.8 million of SB5X fund by 2007 • 10 dairies installed and operated biogas systems • 9 dairies collected cost and performance data on the biogas systems

4. California Biomass Facilities Reporting System (BFRS)   Resource Assessments • Technical Resource 2010 BDT/y - Total Animal Manure STATE Total 3,890,000 • Existing Facilities 2.8 MW • Technical Electrical Capacity • 2010 Tech STATE Total 303 MW • Technical Electrical Energy • 2010 Tech – STATE Total 2,300,000 MWH

5. 10 Digesters Installed under DPPP Blakes Landing

6. Ten Digester Locations by Utility Service Areas 3 1 5 1

7. Performance of Biogas to Electricity Systems for Actual Cases

8. Existing Critical Issues • Air Quality Regulations • NOX 9ppm standard for stationary engines • Feed-in Tariff with Power Purchase Agreement • Utilities offer flat price that holds for 10-, 15-, or 20-year for plants under 1.5 MW. • For Market Price Referent, for plants starting up in 2008, it is 9.271 cents/kWh for 10-year contract and 9.572 c/kWh for 20-year contract. • SCE offers as-delivered capacity for plants under 1 MW, so there is no penalty as with a firm capacity contract if the farmer’s plant goes down briefly. • PG&E offers time of day rates on top of MPR with their Standard Contract. • SDG&E is smaller but welcomes farmers to meet with them to negotiate mutually beneficial contract terms.

9. Existing Critical Issues (cont’d) • High Capital and O&M Costs • Net-Energy Metering • Utility 12 month contract with no excess power purchase agreement • Demand payments and standby demand charge • Commodity market for co-products (liquid or solid fertilizer) • Production Tax Credit • The section 45 10-yr PTC for dairy waste is 0.01 cents/kWh under the open loop biomass classification. This is half the closed loop price. Credits escalate with inflation.

10. Research Needed for Potential Biogas System Development in California • Policies • Collaboration among utility, permit, and funding agencies to resolve existing issues on net metering, feed-in tariffs with long term contract, permitting, engine emission and sustainability standards. • Lower capital cost • Standardized digester design • Invest in low capital cost systems meeting air and water emission standard • Gas cleanup and upgrading • Engine emission reduction • Alternative power system design • Efficiency improvement • Feed and feedstock optimization • Digester optimization • Engine design and application • Heat utilization • Peaking power production • Utilization of economy of scales by allowing centralized, co- or multi-feedstock biogas systems, which might allow non-recourse project finance with debt. • Hybrid systems • Better performance data

11. Conclusions • Some biogas power system proved to be economically feasible without grant • Hilarides dairy biogas digester – no subsidy power • Grants are still needed for most systems to encourage future development • high capital and O&M costs • customized system for each digester • a few developers to choose • requirement to meet different environmental standards from different funding resources • Most plants are all equity financed, so there is some room for an aggregator or other developer, but it is likely many farmers will continue to use all equity. • Research needs to be continued to ensure innovation in biogas system design to reduce capital cost and operating expenses, and to improve efficiency. • Air emission standards (9 ppm. NOX) for stationary engines difficult to permit in SJV • Need to explore other business opportunities: • Fuels cell biogas generation under feed-in-tariff contract • CNG for transportation fuels on municipal flets

12. Thank you for your time and attention! For questions, please contact: Zhiqin Zhang California Energy Commission Phone: 916-654-4063 Email: Zzhang@energy.state.ca.us Ricardo Amon California Energy Commission Phone: 916-654-4019 Email: ramon@energy.state.ca.us