Large-scale digesters need more incentives, owners say

Wednesday, October 6, 2010

Ontario Power Authority's ability to strip away 80 per cent of the profits from new uses for biodigester byproducts isn't helping to meet the province's green energy targets

by PATRICIA GROTENHUIS

Large-scale biodigesters are the orphans of the renewable energy industry, says consultant Garry Fortune. The reason? Ontario Power Authority (OPA) is offering contracts with clauses that strip away the profits from the sale of byproducts not yet developed.

Fortune cites a biodigester being constructed by Birchlawn Farms, owned by the Terpstra family of Donegal in Perth County, as a case in point. According to the contract that OPA has offered the Terpstras, the OPA can take 80 per cent of income from new uses for byproducts of the biodigester. OPA can also take 50 per cent of all EcoEnergy incentive money from the federal government and 100 per cent of carbon credits produced.

"It's extortion. It goes against the green economy part of the Green Energy and Green Economy Act," says Fortune.

Current feed-in-tariff (FIT) contracts apply to on-farm biodigesters producing below 250 kilowatts. Darryl Terpstra, who wants to enroll in the program, says Birchlawn's biodigester is capable of producing 440 kWs of electricity. Farmers producing less than 100 kWs receive 19.5 cents per kilowatt, while farmers producing between 100 and 250 kWs receive 18.5 cents per kilowatt. Off-farm biodigesters receive less money than this, again based on output.

Ben Chin, vice-president of communications for OPA, notes that farmers are allowed to keep 100 per cent of profits from existing uses of biodigester byproducts. However, 80 per cent for new uses will be claimed by OPA to benefit ratepayers. "It's a fairness issue. We want to be fair to both farmers and ratepayers," says Chin.

Fortune says that there are currently five Ontario universities doing state of the art research on biodigester byproducts to find new uses for them, but the 80 per cent clause may put a stop to this research. He believes the research will halt because farmers can't afford the extra equipment, maintenance and other costs associated with separating byproducts and preparing them for other uses.

Biodigester owners take on additional costs to separate the byproducts for use. However, the 20 per cent of profits given to the farmers after OPA claims 80 per cent for ratepayers will not cover these costs.

Currently, Fortune knows of five universities conducting trials at Stanton Bros. dairy farm in Ilderton. He says the fibres left as byproducts from biodigesters are currently used as animal bedding. They might also be used to replace peat moss by landscapers, in greenhouses as a soil replacement or as a fibre in plastic manufacturing.

Currently the trials are not far enough along for Fortune to discuss exact projects or which researchers are working on them. But he does believe new uses for biogas byproducts could create new jobs. And, according to Kate Jordan, spokesperson for the Ontario Ministry of the Environment, creating new jobs in the sector is one of the goals of the Green Energy and Green Economy Act, along with shifting to cleaner energy sources.

The federal EcoEnergy incentive is available if a use can be found for both heat and energy produced by biodigesters. Since biodigesters convert methane gas, which is 21 times more potent as a greenhouse gas than carbon dioxide according to Fortune, they create a large number of carbon credits. The 50 per cent of EcoEnergy incentives and 100 per cent of carbon credits would again be claimed to benefit ratepayers.

"I know (carbon credits are) not worth a whole lot now, but the way things are going in the future, they'll be a commodity," says Nick Terpstra, Darryl's father.

Birchlawn Farms began biodigester construction in September 2009 and contract negotiations in March 2010, once feed-in-tariff contracts were available. They will not be producing on the grid until negotiations are completed.

"There's no real end in sight to the paperwork. It seems like stall tactics and hurdle creations," says Darryl Terpstra.

Ontario Federation of Agriculture (OFA) vice-president Don McCabe is familiar with renewable energy projects in which OFA members have taken part. He says that, although the Act is for all of Ontario, it does have to work well for farmers. "Farmers are the backbone because we are the resource providers, whether it's land, rooftops or manure that's needed," says McCabe.

Chin says OPA reached the maximum 250-kilowatt figure following consultations with the Ontario Ministry of Agriculture, Food and Rural Affairs, and from interest expressed in the former program, Renewable Energy Standard Offer Program (RESOP). "It's a fairly rare exception that someone would want more than that," he says. 

Chin also states that to his knowledge there are no farmers asking about producing more than 250 kilowatts of energy, though Darryl Terpstra was able to name three – Birchlawn Farms, Stanton in Ilderton and the Heinzle operation in eastern Ontario.

Questions submitted to the OPA about the Stanton and Heinzle operations remained unanswered at deadline. A promised list of existing uses for biodigester byproducts had not been released a week after the request.

Darryl Terpstra says that, under RESOP, farmers were paid a lower amount for biogas energy, but did not have to pay for the power used to create energy. A 440-kilowatt biodigester is expected to use 25 kilowatts of energy, which has to be paid for at market rates, including delivery costs. Nick Terpstra says that, at their location, electricity costs 17.25 cents per kilowatt hour.

Chin says the current pricing takes all expenses into account and will pay biodigester owners back in nine to 11 years at 11 per cent return on equity. That is based upon the biodigester owners contributing 30 per cent of the cost. Darryl Terpstra says Birchlawn is contributing a total of 88 per cent of the biodigester cost, even if they get the provincial funding that was recently announced. They are still waiting to hear back on whether or not they will receive federal funding.

Fortune says the current price of 18.5 to 19.5 cents per kilowatt does not properly reflect the cost of maintaining the biodigester over a 20-year period. Another 4-5 cents per kW is required.

When all contracts are filled, Chin says 2,500 megawatts of electricity will come from renewable sources, which is slightly less than one tenth of Ontario's needs. Ontario has pledged for 12 per cent of energy to be renewable (wind, solar and biogas) by 2025. Fortune says Germany has pledged to increase energy from biodigesters alone to 17 per cent of the total domestic supply by 2020.

McCabe believes that Ontario has a long way to go and many contract issues to deal with if it is to meet its pledge to be free of coal-fired power by 2014. In many cases, McCabe says the delay in approving contracts is due to the fact that each application is different and the grid in each area in Ontario can handle a different capacity of farm-generated electricity. BF