Wednesday, December 07, 2011

Low US Energy Prices Likely to Kill Biogas Project

I was amazed to read this article, which is quoted below. "Low energy prices" - do these people live on the same planet as the rest of us? This would have been an exceeding forward thinking and imaginative scheme.

An eagerly anticipated feasibility study on Cayuga County’s biogas pipeline concept has not yet been published, but it appears that economic and political factors may lead some interested farmers in another direction.


The current proposal, for a county-built pipeline connecting several large farms with the county’s industrial park in Aurelius, is the latest iteration of an idea that’s been in the works for about a decade.

The thinking of the farmers and their public and private partners has evolved with the vagaries of energy markets, politics and public opinion, with the fluctuating price of natural gas being perhaps the biggest variable.


From the 1970s until the turn of the century, the cost of natural gas stayed near $2 for 1,000 cubic feet. But beginning in 2000, it started on a steady rise, hitting a high of $10.79 in July 2008.

For investors, the calculus was simple: as traditional energy prices continued to rise, it became more and more appealing to explore alternative energy sources, biomethane gas first among them.

In the last three years, however, those historic high gas prices have fallen back to Earth, trading at $3.82 this September.

The lower the natural gas prices, the less incentive to find an alternative-energy replacement, something Spruce Haven Farm owner Doug Young acknowledged in an interview last week.

“Low energy prices are the reason this (pipeline) is probably not going to happen,” he said. “A few years ago the energy prices were high and people were very concerned about climate change. Since they’ve found these huge reserves of natural gas and are tapping into them and it looks like the U.S. has a long-term supply of fossil fuel, it looks like it took the pressure off.”

That price swing complicated two previous efforts to get the pipeline built with public and private funding.

In 2006, Long Island energy development company Global Common received a $1 million grant from NYSERDA for a cooperative project with Spruce Haven and Oakwood farms, two of the county’s largest dairies.

In the grant application, Global Common CEO Robert Foxen described a $17 million project to develop a centralized anaerobic digester at Oakwood, converting manure from four farms into biogas liquid fertilizer , liquid fertilizer and solids usable for bedding.

Foxen predicted 125 new full-time jobs, $75 million in construction and an increase in milk sales from $22 million a year to $67 million a year, the result of tripling the cow population at the participating farms to 21,000.

The digester was to have generated about five megawatts of electricity at start-up and up to 15 megawatts over the next 20 years, to be sold back into the grid through a long-term purchase agreement.

Of the $1 million, Global Common collected $100,000 for meeting preliminary planning goals, but never moved forward with the project.

For one thing, the two other farms that were to join Spruce Haven and Oakwood never materialized, according to Thomas Siesinger, the project manager with NYSERDA.

“We’re not really pushing that because the farms aren’t pushing it and want to go another way,” Siesinger said. “That money is still on the table (but) I guess I’d be surprised if they went back to the two-farm proposal or even the pipeline one.”

Young, the project leader, said he believed the remaining $900,000 from NYSERDA is no longer available.

Global Common is no longer intimately involved in the pipeline planning but could still have an interest in marketing the gas if anything ever gets built.

“There has been discussion of what their role could be in the project,” said Kelly O’Hara of Oakwood. “Really, (Foxen) is just willing to do whatever makes sense and helps. ... It’s a whole different realm from dairy farming.”

Foxen declined to comment on the NYSERDA grant or Global Common’s involvement with the pipeline, saying he was no longer up to date on the project.

Two years after granting $1 million to Global Common, NYSERDA heard another pitch for funding related to the pipeline.

This time, the solicitor was NYSEG, which has held informal discussions with the farmers over the years concerning the distribution and sale of whatever power may be generated.

In a 2008 presentation -- just when natural gas prices were at a record high -- a NYSEG representative told NYSERDA that the company was negotiating a gas purchase agreement with the farmers, known collectively as Cayuga Renewable Energy.

He detailed a two-fold project: first, the farmers would design and build on-site digesters at a combined (private) cost of about $13.5 million.

Second, the biogas would be cleaned and delivered via a pipeline to a NYSEG metering station, from where it would go into Auburn’s distribution system.

NYSEG requested $500,000 in funding for the second part only, part of what it estimated would be a $1.65 million project.

That state funding never materialized, largely because NYSEG cooled on the idea.

“For a variety of reasons, including the economic downturn and a reduction in the market price of natural gas, the project did not move forward,” company spokesman Clayton Ellis wrote in an email.


In the short term, the decision on the project’s progress rests with the county Legislature, which is awaiting the results of a feasibility study.

County Planning Director Stephen Lynch originally forecast that the first part of the $125,000 study would be public by the end of October.

That release has been delayed by a recent ruling from the state Public Service Commission that could change how farmers use their energy output.

Until this summer, the amount of electricity farmers could sell back to a utility company was limited by their usage at the meter to which the generator is hooked up.

The problem is that large farms can have as many as 20 different meters. The new state ruling issued this summer, and a new law passed by the state Legislature, allow farmers to combine their usage on all meters, a concept known as remote net metering.

The bottom line is that farms will be able to sell back much more electricity, with the possible consequence that they will no longer need a pipeline to get rid of excess energy.

Lynch said the supply side of the equation -- how much gas the farms can generate -- is more significant than the question of demand or natural gas prices.

“If the supply isn’t there, the gas price is a moot point,” he said.

The Legislature voted in July to spend up to $49,000 on the study and associated legal fees, but the county has spent almost none of that money so far by using state funds first, Lynch said.

O’Hara said he believed the pipeline has been the victim of unfair negative publicity and encouraged the county “to get out and do some PR work and make people understand that this is collecting energy that would essentially be wasted.”

“We don’t need this -- we’ll continue operating our farms the same way,” he said. “It’s just an opportunity for the county to attract some new industry. ... I think overall the level of interest (among farmers) is the same, but the economics of it is that it will either make sense or it won’t.”

Has anyone thought about phoshpate reserves? If chemical fertilizers will continue to be used then someone should be conisdering for how long phosphate sources will continue to be available at current prices...

View the original article here

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