Baiting Biogas

Changes to policies could push biogas project development and industry growth.
By Lisa Gibson | November 23, 2010

A recent study by the Great Plains Institute illuminates the enormous potential of biogas projects in the U.S., but also illustrates the lack of incentives or support to develop them. On both the federal and state levels, existing and proposed policies could use changes or a push to jump-start a robust biogas industry and new proposals could use a champion.

One of the main problems with current policy is the fact that the focus for biogas projects lies almost solely in electricity generation, but the resource can be used for combined heat and power, natural gas replacement, transportation fuel and chemical production, according to Amanda Bilek, GPI energy policy specialist and author of “Spotlight on Biogas: Policies for Utilization and Deployment in the Midwest.” Specifically, the Business Energy Investment Tax Credit (ITC) gears its 30 percent credit only toward electricity-generating facilities. “What stakeholders would like to see is a way to open up this tax credit so that projects such as natural gas can also qualify,” Bilek says.

The grants in lieu of the ITC program, U.S. Department of Treasury’s Section 1603, could also use some revision, according to both Bilek and the newly formed American Biogas Council. As of September, only 0.1 percent of a total $5.2 million allocated to renewable energy under the program was awarded to anaerobic digestion biogas projects, according to the council. Those grants are only available, if not re-authorized, until Dec. 31.

Industry stakeholders would also like to see changes in USDA’s Business and Industrial Guaranteed Loans program that would allow flexibility in the means of demonstrating business viability. The program does cover some biogas projects, but the main obstacle is the fact that it requires a traditional lender and businesses must provide balance sheets in order to obtain one. “Some new businesses don’t necessarily have access to balance sheets from previous years to help secure that traditional lender,” Bilek explains.

As money always seems to be a development hang up, stakeholders say changes to state net metering rate policies allowing more payments for renewable electricity at retail rates would also lend a helping hand to biogas development. “It does help improve the economics for biogas projects,” she says of the retail rate. In addition, state renewable portfolio standards that include a resource carve-out for biogas projects would help significantly.

Changes to such policies will allow biogas to step into the spotlight and become part of our energy future, Bilek says, but she does not expect advancements until the new Congress convenes in January. “I doubt action on any of these policies is going to happen in the lame duck session,” she says.