The dairy farm industry can't stop talking about the potential of cow power. But high costs and low incentives are slowing biogas development in America, which trails Europe in developing energy from bovine waste.

Digesters capture methane from cow manure and turn it into biogas, which can be used to generate electricity or converted into natural gas. Turning manure into an energy source can reduce emissions of methane and the environmental impact , by up to 70 percent. Methane is a greenhouse gas with a global warming potential 23 times higher than carbon dioxide.,

But digester equipment ranges from $300,000 to $2 million, making it a cost prohibitive investment for many farmers. Many digesters are built using steel and concrete – two products with rising costs due to transportation and fuel, so digesters probably won't get any cheaper.

Experimental Farmers

Some smaller dairy farms have gathered to build community digesters, like in the Port of Tillamook Bay in Oregon, which collects manure from seven farms totaling close to 4,000 cows. Meanwhile, larger farms have chosen to team up with big utility companies.

"We're trying to make a community digester work," said George Devore, who operates the Port of Tillamook Bay's digester and heads research and development for the community facility. It's been a learning experience for the Tillamook farmers. Some of the digesters only lasted one year. He thinks the government should provide assistance to keep equipment in running order in addition to helping farmers with the initial startup costs.

"We're losing money like mad here. Our government won't help the existing (digesters) to make them perfect. They help start them and that's the last you see of them," said Devore.

Amanda Bilek, energy program associate for the Minnesota Project, said most digesters in Minnesota last for up to 15 years. The non-profit promotes rural economic development, and tries to help small farms benefit from digesters because 75 percent of Minnesota's farms have less than 200 cows. Some of the small farms use digesters to heat their facilities, but it is more cost effective to sell the biogas to utility companies for electricity or natural gas. However, because small farms don't have enough cows to produce enough biogas to sell, that is usually only an option for large farms.

Selling the power to utilities is only profitable if the companies pay farmers enough to compensate for the costs of the digesters. The local power company told the Tillamook farmers they would get 7 cents per kilowatt hour. "But when we put it online, it was 4 cents," Devore said. "At 7 cents we could break even, but at 4 cents you lose. The government doesn't do anything to make green power give better money."

Widespread adoption of biogas digesters could change the sustainability of the dairy business in the United States, particularly in California. The state houses about 1,800 dairies with more than 1.7 million dairy cows. The methane from just California's cows could equate to about 140 megawatts of electricity, according to a University of San Diego survey on biogas production and use on California's dairy farms. Biogas has been captured and used for many years by landfills and wastewater treatment plants in California, but use on dairy farms is just catching on with only 22 biogas-producing digesters located on dairy farms.

Europe Leads the Field

America's testing of cow power is nothing compared to European countries such as Germany, which have thousands of digesters. Germany is the largest producer of biogas in the European Union, and has expanded its small agricultural digester projects from 850 in 1999 to 2,700 in 2005 due to policies promoting biogas production.

A policy adopted in 2004 requires German utilities to purchase renewable energy at a fixed cost and duration, so many farms use biogas to generate electricity that feeds directly into the electric grid. Then in 2005, German utilities were required to purchase biogas-produced electricity for between 11 and 15. cents per kilowatt-hour – nearly twice as much as the United States – while providing bonus payments for projects that use animal manure, combined heat and power, and advanced technologies such as fuel cells. The country also offers financial incentives of up to $20,190 for small biogas projects with electric capacities less than 70 kW, in addition to low-interest loans.

"The utility companies (in Europe) are paying producers of biogas a much higher price for electricity because it's valued so much more," said Bilek, "and biogas production is generally cheaper than other forms of electricity that Europe is producing."

Other European biogas leaders include the United Kingdom and Denmark, which rank first and third, respectively, in terms of per capita production. Denmark uses some co-digestion projects, which uses other organic materials – like crop residue and food processing waste – in addition to manure. This can produce more gas per unit of feedstock than using only manure and can reduce the amount of solid byproducts by diverting organic materials from landfills, but is more complex and requires additional regulations.

Sweden, which ranked fifth for biogas production per capita, uses biogas not only for electricity and heat, but also for transportation fuel. Sweden ran about 800 buses and more than 4,500 cars on a biogas/gasoline mixture in 2006.

America Tries to Catch Up

California's Renewable Portfolio Standard mandates that 20 percent of electricity sold by investor-owned utilities must come from renewable energy sources by 2010. This makes cow poop begin to look very appealing to utility companies.

That's just one state, but Senators Larry Craig of Idaho and Ben Nelson of Nebraska introduced the Biogas Production Incentives Act of 2007 in the Senate in April. It would encourage renewable energy production from animal and agricultural waste by giving the biogas industry access to incentives, such as tax credits, loans and grants to facilitate capital investment, as well as a floor price for biogas producers to protect them from volatility in the energy market.

"Government tax breaks, government grant programs, and low interest loan programs are one piece of the puzzle," said Bilek. "The other piece is what the sale is of that natural biogas... The price paying for that end use of biogas also needs to be high enough to give a decent rate of return for that farmer."

Utilities NW Natural in Oregon and PG&E in California have made some progress. NW Natural customers can pay $6 a month or a variable fee based on their gas usage to buy carbon offsets from The Climate Trust, a Portland nonprofit working to establish biogas production facilities throughout the state. NW Natural expects to raise more than $3 million over the next five years, which could pay for the setup of one to three digesters if they find farms capable of handling the production.

PG&E recently signed deals with biogas manufacturers BioEnergy Solutions and Microgy, Inc., a subsidiary of Environmental Power Corporation. BioEnergy Solutions is already installing equipment at its first site, Vintage Dairy in Fresno, owned by BioEnergy president David Albers. Biogas will be produced and transported to a PG&E plant through pipelines. BioEnergy's business model consists of paying for the upfront costs, marketing the gas to a utility and measuring and selling carbon credits, and sharing profit with the farms.

"We expect other farmers across the state who have shown a lot of interest in this to participate. They have to do something because of regulations in California; they have to take some steps to reduce emissions on their farms," said Steve Duchesne, spokesman for BioEnergy. "In our view, this is a risk-free option for them because they're not risking capital on the front end, and yet they'll be compensated."