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Originally published Friday, January 3, 2014 at 4:36 PM

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Green Giant town bets big on biogas

Critics are less than jolly about it, but the $45 million Hometown BioEnergy Project promises to deliver cheap, renewable power from biogas to 12 municipal utilities in Minnesota.

Minneapolis Star Tribune

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LE SUEUR, Minn. — One of Minnesota’s most ambitious green-energy projects is flipping the “on” switch.

The odd-looking power plant, completed in November, is a collection of tanks and fabric bubbles resembling mini-Metrodomes.

Inside, bacteria in giant heated tanks are digesting corn silage and manure to produce methane, a flammable gas that’s fed into the engines that generate electricity. This city, famous for the Green Giant brand, is now home to one of the largest biogas power stations in the world.

“This is the newest and best technology available,” said LeRoy Koppendrayer, board chairman of the plant’s operating company, which is a unit of the Minnesota Municipal Power Agency (MMPA), a power producer for 12 cities, including Le Sueur.

Yet not everybody is jolly about the plant. Critics have questioned whether the benefits have been oversold and the risks understated.

The plant’s output isn’t huge, equivalent to about four wind turbines. Yet the facility, called the Hometown BioEnergy Project, promises to deliver cheap, renewable power when customers need it — not just at the whim of nature as with wind power.

Three fabric domes store methane from the constantly running anaerobic digesters. They’re designed to feed the biogas to generators that run 12 to 16 hours a day when electrical demand peaks, typically daytime and evening.

“We see ourselves being more financially effective by storing the gas and making electricity when it has greater value,” said Derick Dahlen, CEO of Avant Energy, a Minneapolis-based company that developed the biogas project and has long managed the municipal power agency.

During the startup, he said, the plant is increasing its methane output as it generates power for several hours each day.

The project, which will help the 12 municipal utilities meet state renewable-energy requirements, is a big commitment to a still-developing technology.

About 2,000 U.S. sites produce biogas, mostly farms, wastewater treatment plants and landfills, though not all generate power. The nation’s total biogas electrical output is 158 megawatts, about the output of a single 1950s-era coal power plant, according to Bloomberg data.

In Europe, biogas technology is more common, thanks to generous price supports. Germany has the most, about 7,000 biogas plants, said Mackinnon Lawrence, a Navigant Research analyst who has studied the biogas industry. He said biogas has benefits and challenges.

“It is a fickle process,” Lawrence said, especially with manure, a common feedstock. “It has to be the right temperature, the right mix of organisms. You are constantly brewing this thing.”

One U.S. biogas company, New York-based Microgy, built digesters using technology similar to the Le Sueur plant’s, only to file for bankruptcy in 2010. An uncompleted biogas plant in Hull, Iowa, went bankrupt in 2011 after developer Bison Renewable Energy, a company with Minnesota roots, ran out of money.

Three biogas-powered generators in Wisconsin were shut down in 2012 by Dairyland Power Cooperative because they couldn’t compete in the power market. The La Crosse, Wis.-based co-op now pays three dairy farms to flare the gas. Dairyland hopes to restart the generators in 2015 after making repairs and improvements, co-op spokeswoman Deb Mirasola said in an email.

“It comes with its share of headaches,” added Steven Bach, a Dorchester, Wis., dairy farmer whose two biogas generators still sell power to Dairyland and supply heat to his home and farm buildings. “There’s more maintenance than what you think.’’

The key maintenance challenge is engines corroding from hydrogen sulfide, which also stinks. The Le Sueur plant has scrubbers to clean the gas, and hopes to avoid problems.

Even before construction, the Hometown BioEnergy plant’s price tag climbed 50 percent, to $45 million, from the original estimate.

“This is the challenge of doing a first-of-its-kind-type project,” said Avant’s CEO Dahlen. “We didn’t have a good benchmark price for a facility like this in the U.S.”

The project is funded mainly with municipal bonds and a nearly $9 million federal stimulus grant. The project’s nearly $11 million in soft costs — for development, engineering and project management — chewed up 24 percent of the budget. That’s higher than wind-energy projects, and most of the money went to Avant.

“One of the questions we kept raising over and over is whether there is any risk that falls back on Avant, but they make their money without any documented risk of any sort, ” said John Schultz, a Le Sueur City Council member.

MMPA, the plant owner, hasn’t released detailed financial data on the project, even to the council, he said. Although Schultz said he hopes the plant succeeds, “we will never know the bottom line” if it doesn’t.

Pollution is a separate worry. The Le Sueur County Board in September unanimously denied a permit for off-site storage of the plant’s silage, citing concern about runoff. That left the plant with no central storage for trucked-in corn silage. MMPA is appealing the decision.

Dahlen has faith in the technology, and said he stands by promises he made at a community meeting four years ago that the plant won’t stink. The plant is on a rural site next to the city airport and a quarry, 60 miles southwest of downtown Minneapolis.

“Even if the biogas scrubber did not work, the hydrogen sulfide would be burned in the engines, which would render it odorless,” Dahlen said. “However, that would likely increase maintenance cost.”

He’s supported by Jørgen Ballermann, CEO of Xergi A/S, the Danish company that supplied key technology to the Le Sueur plant. He said Xergi has built 56 biogas plants, mostly in Europe, and the technology has improved in the past decade.

“Today, odor is really not a problem,” Ballermann said.

Can the technology compete?

Dahlen said he expects the plant can generate power at 5 cents per kilowatt hour — less than MMPA’s wholesale price for conventional generation.

Biogas plants offer the potential to profit from fees to accept waste and from the sale of post-digestion liquids as fertilizer and a dried material as boiler fuel or animal bedding. Dahlen said the plant is pursuing such deals.

Applied-economics professor William Lazarus of the University of Minnesota has studied smaller, farm biogas projects. He said many would have a tough time producing power at 5 cents per kwh. “That might be close to break-even,” he said.

The question is whether the Hometown BioEnergy plant’s larger scale, innovative ­technology and storage will provide game-changing benefits.

Koppendrayer, the board chairman, said MMPA and Avant make a strong case that the technology will work. “They are doing their best to make it as economic as possible and as low-cost as possible,” he said.

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