by James A. Bacon
Dominion Energy and Smithfield Foods are investing a half billion dollars to capture methane from hog farms and convert it to “renewable natural gas.” The partnership aims to become the “largest renewable natural gas supplier in the U.S.,” according to a press release issued Wednesday.
A few days ago, I noted how Dominion had sold a $2 billion stake in its Cove Point liquefied natural gas project as part of a larger restructuring of the company away from businesses exposed to market forces in favor of regulated businesses like electric utilities and gas distribution companies. I wondered if Dominion now sees its competitive advantage as its ability to manipulate the regulatory and legislative process.
This new venture, Align Renewable Natural Gas, suggests that Dominion hasn’t abandoned risk-taking ventures entirely. Dominion is making a $250 million bet that a “waste-to-energy” model, demonstrated only in pilot projects, can be implemented nationally. I don’t recall the company having taken a risk of this magnitude to create an entirely new business model before.
Dominion and Virginia-based Smithfield, the nation’s largest hog processor, collaborated to develop the process in several pilot projects. Waste from hog farmers’ manure lagoons undergoes a bacterial process called anaerobic digestion that produces a mix of methane and CO2. The gases are piped to a central processing facility serving clusters of 15 to 20 hog farms. The processing facility reduces the moisture in the gas so it meets gas pipeline standards and can be distributed to users. The methane, a potent greenhouse gas, otherwise would be emitted into the atmosphere.
“After researching ways to transform manure into renewable energy for nearly two decades, Smithfield, together with our partners, has developed a proven business model that can be expanded at scale across the country,” said Kenneth M. Sullivan, CEO of Smithfield Foods in the press release. In 2016, Smithfield was the first protein company to adopt a far-reaching GHG reduction goal across its supply chain. In 2017 the company launched Smithfield Renewables. Then in 2018, Smithfield partnered 50/50 with Dominion to create Align RNG and, in Sullivan’s words, “transform the future of sustainable energy and agriculture.”
Smithfield expects the “manure to energy” model will reduce greenhouse gas emissions by 25% across the company’s supply chain while creating an additional revenue source for farmers and bolstering the nation’s supply of natural gas. When fully scaled, the greenhouse gas reductions will equate to taking 500,000 cars off the road or planting 40 million new trees. (Not mentioned in the press release: Smithfield is owned by the China-based Shuanghui Group. China, the world’s largest producer of pigs, could be a massive market for the technology.)
“Our partnership is revolutionizing the future of sustainable energy and agriculture in this country, and we are thrilled to partner with Smithfield to grow this exciting new industry,” said Diane Leopold, CEO of Dominion Energy’s Gas Infrastructure Group. “We’re capturing 25 times more greenhouse gas emissions from the farm than are ever released when the gas is used to heat homes or power businesses.”
“It’s incredible how much environmental progress we can make through the power of innovation and partnerships,” said Sullivan. “There are many synergies between our two companies that allow us to advance this technology on a wide scale. We share a strong commitment to innovation and sustainability, and together we have the technology and market expertise to make this work.”
Bacon’s bottom line: From what I can glean from the press release, Smithfield and Dominion are shouldering the entire financial risk from this venture. I’m presuming that the venture will sell its natural gas into the marketplace in competition with other natural gas suppliers. Fortunately, Align LNG came along before environmentalists and politicians concocted some scheme for regulating hog-waste emissions and foreclosing a creative market-based solution.There are currently no comments highlighted.