Dan DeRuyter doubts he would do it again if he knew what he knows today.
The 42-year-old dairy producer east of Zillah operates the only manure digester in Eastern Washington, one of four currently operating in the state.
His 1.2-megawatt capacity digester may ultimately be the only one in a county where facilities like his that turn manure into electricity and usable products would appear to be a natural.
With 61 dairies and about 139,000 cows, Yakima County has the highest concentration of milk producers in the state, which carries with it the dubious distinction of being a large producer of manure.
A single dairy cow produces nearly 150 pounds of wet manure a day.
As a result, dairies are considered one of the culprits contributing to a groundwater contamination problem in the Lower Yakima Valley, where one out of every five wells has nitrate levels above what the federal government considers safe.
While the federal Environmental Protection Agency is trying to pinpoint the source of the contamination, some dairies are trying to find their own solutions, which led DeRuyter to explore what kind of a difference a digester could make on his manure output.
He was encouraged by local and state policymakers, but things aren’t turning out quite the way the models envisioned when he built the $3.8 million facility and began producing power more than three years ago.
DeRuyter, whose dairy has 3,000 cows, has run into a problem with Pacific Power, which has a contract to market his power at a rate of about 6.1 cents per kilowatt hour this year, or more than $1,700 per day. It is a six-month contract that began in November.
The utility argues that a tariff it proposed – ultimately approved by the state Utilities and Transportation Commission – prohibits it from paying him for more than 1 megawatt of electricity at that set rate.
The rate is designed to assure small start-up generators a firm rate to support their operations.
As it stands now, an interim renewal agreement allows DeRuyter to be paid for no more than 1 megawatt, enough power to light about 500 homes.
But DeRuyter needs to be able to market electricity at his capacity of 1.2 megawatts to make the project pencil out and provide a return on his investment.
His operation averaged under 1 megawatt during its first three years. Efficiencies have boosted his ability to generate more power.
Now he finds paying for and operating the digester is a draw on the equity in his farming operation. And it is occurring at the worst time, as dairy producers try to slog through a downturn in milk prices. Prices to dairy producers dropped nearly in half to $12 for 100 pounds early last year. Prices have since rebounded some.
“It’s a situation where they have me over a barrel and just don’t care,” argued DeRuyter, who has taken his case to state lawmakers.
Pacific Power spokesman Tom Gauntt in Portland responded the utility is operating under rules established for it that can’t be ignored.
“Those are the rules we operate by. They can be changed and there are processes involved. We have been talking to the Legislature and talking about the administrative rules to make alterations,” he said. “I don’t think we are opposed to making changes. Until they happen, we have to work with the rules we have.”
“It’s not in our power to make an exception and pretend 1.2 megawatts is 1 megawatt,” he added.
State law and regulations that set out what utilities must do raise public policy questions about the role the state should play in encouraging renewable energy sources, especially in light of Initiative 937.
The initiative, approved by voters in 2007, required utilities such as Pacific Power to meet targets for the use of renewable energy resources in their portfolios.
The ultimate target is 15 percent renewables in the portfolio by 2020.
The commission, which regulates electricity, could modify the tariff rate by rule, but has not done so. Commissioners have to make sure that utility customers receive the best rates possible for power service.
Efforts to modify the system in the Legislature have failed because the various parties – producers and utilities – can’t agree, according to a state lawmaker who is working on the issue.
State Rep. John McCoy, a Tulalip Democratic lawmaker and chair of the Technology, Energy and Communication Committee, said he sympathizes with DeRuyter’s predicament. But right now there’s not consensus to move forward.
“I want to fix that. We have to keep plugging away,” McCoy said in a telephone interview. “I don’t want the DeRuyters to go away. I have talked about anaerobic digesters for years. Now, legislators are starting to get it. I still can’t get the utilities to come around.”
Dairy operators in Yakima County and elsewhere are watching.
Jay Gordon, executive director of the Washington State Dairy Federation, said DeRuyter’s experience is sending the wrong message to others about building a digester to expand uses for the huge amount of manure created every day in Yakima County.
“It needs to be where we can show this will give you a return on investment and not lose your shirt,” Gordon said. “This sends a loud message to farmers and energy companies there is some risk.”
The digester on DeRuyter’s dairy is composed of a huge concrete-lined digester, a 3.3 million-gallon tank that mostly sits below ground level and an engine room with two 900-horsepower motors.
About 150,000 gallons of manure are flushed into the system every day.
Heat is applied to activate microbes that feed on the manure, creating methane. The methane is used to power the motors that turn a generator and create electricity.
Byproducts include a bedding material he uses for his cattle and fertilizer. The bedding material also could replace peat moss for nursery companies. Other uses for the byproduct also are being looked at, such as wood pellets and plywood.
DeRuyter also said the digester has reduced odors from the dairy, something about which his neighbors have commented to him.
Other digester operators in the state are faring better, primarily because they are in the Puget Sound Energy service area.
Kevin Maas, president of Farm Power Northwest LLC, a company that is operating a digester for two farmers in Mount Vernon in Skagit County, said Puget Sound is paying for power up to two megawatts – Puget’s tariff limit – at a rate that started last year at 7.5 cents per kilowatt hour and rises over the next nine years to 12 cents per kilowatt hour. The other two digesters are located in Snohomish and Whatcom counties.
The cap of two megawatts represents what is known as Puget Sound Energy’s avoided cost, what the investor-owned utility would have to pay to generate the energy itself or purchase the energy from someone else.
In Pacific Power’s case, its avoided cost is 1 megawatt.
Pacific Power officials say any production above the 1 megawatt must be submitted under a request for proposals process by which rates are set on a competitive basis and generally are lower.
But Maas argues Pacific Power is doing only the minimum it is required to do.
“The regulations don’t require them to do anything more than the minimum and that is what they are doing with Dan,” Maas said.
DeRuyter said Pacific Power could approach the commission to modify its existing tariff or seek an exception to allow it to go beyond the 1-megawatt limit.
But the utility would have to do that for all producers, said Tom Schooley, accounting manager in the commission’s energy section.
Maas points to Oregon, where utilities are required to offer longer-term contracts and accept power from generators up to 10 megawatts.
“The state government could change all of this by doing the same thing as Oregon,” he said. “It is something the Legislature could solve if it weren’t distracted by a $2.6 billion shortfall.”
The issue is getting a renewed look by the state Utilities and Transportation Commission.
The last chance for a legislative fix died last week when a McCoy bill that sought to modify Initiative 937 died.
The dairy federation’s Gordon said should nothing change in the current, short legislative session, he may try to start a between-session dialogue on the issue.
“My plan is to put together a letter to the UTC and send it out to the utilities asking why we have such a low tariff rate on renewables and can we change that to what we have in Western Washington?”
DAVID LESTER, Yakima Herald-Republic – http://www.bellinghamherald.com/northwest/story/1278356.html