Energy investors have noses for rotten food, cattle dung
U.S. investors are beginning to smell an opportunity in the waste-to-energy market, where livestock dung and food garbage is traded. Interest is being fueled by new state laws and by demand from companies such as UPS Inc.
After a lull in investor interest stretching back a decade, attention to waste-toenergy “anaerobic digestion” is surging in the United States, developers in the sector have said.
Renewable fuel options are drawing increasing investor demand amid concerns about climate change and environmental, social and governance issues, especially in Europe.
Meanwhile, California is encouraging fuel producers to cut their carbon emissions and big transportation businesses are converting their trucking fleets to renewable natural gas. In May, the logistics and delivery company UPS said it would buy 170 million gallons of renewable natural gas by 2026 — the largest purchasing commitment for renewable to date by any U.S. company, it said.
“2019 is probably the biggest year in the history of digestion as far as I can remember,” said Dana Kirk, who manages the Anaerobic Digester Research and Education Center at Michigan State University. He estimated that there are 50 to 100 new projects starting this year.
The last time investor interest in anaerobic digestion jumped was in 2007 and 2008 during a surge in oil prices, but “the economic performance of those systems did not end up very well,” Kirk said.
“This is the second big rush of investments, but this is a whole different scale now,” in part because of the low carbon intensity of the fuel from anaerobic digestion, Kirk said. “It is in really high demand, so you see values of the commodity being at astronomical levels,” he said, pointing to the recordhigh price of California carbon credits in the last 12 months.
Newlight Partners, a private equity fund founded last year by a group of former Soros Fund Management financiers, last week announced a $106-million investment in Bioenergy DevCo, a Maryland anaerobic digestion developer. Bioenergy DevCo was created this year with additional funding from Sagewind Capital, a New York private equity fund, and individual investors.
This year Bioenergy DevCo bought BTS Biogas, an Italian company that has built more than 200 plants in Europe. The acquisition will help Bioenergy DevCo bring developed anaerobic digestion technology to the United States to expand operations, the investors said.
More widespread as an energy source in Europe than in the United States, anaerobic digestion converts methane gas, which is released as organic matter decomposes, into natural gas. In the United States, there are only about 248 anaerobic digester projects operating on livestock farms, according to government estimates.
But with California’s lowcarbon fuel standard of 2009, which encourages low-carbon fuel use — and with other states passing similar laws — “there is a financial motivation now for folks to invest in anaerobic digester to renewable natural gas systems,” said Curt Gooch at Cornell University, who works with New York state and dairies to develop waste-to-energy projects.
Current high prices for California’s low-carbon fuel standard credits “should help spur biogas production,” analysts at Bank of America said in a research report Friday.
Bioenergy DevCo will initially develop facilities in Maryland, New Jersey and New York, all of which this year passed laws mandating certain food waste recycling. In March, New York Gov. Andrew Cuomo announced that the first big anaerobic digester in the New York City metropolitan area will be operational in 2020.
The state efforts are prompting the need for foodwaste disposal options such as anaerobic digestion, said Shawn Kreloff, founder and chief executive of Bioenergy DevCo.
“That mixture of events has made it much more interesting here now to bring the technology to the U.S.,” he said. “One of the biggest issues here in the U.S. is a lot of the plants the small actors have built have not worked very well. The technology is needed and wanted.”