Scientists around the world have been sounding the alarm on the catastrophic impact of climate change and rising global temperatures if efforts to decarbonize remain inadequate. Reaching Net Zero targets by 2050, however, involves a seismic shift in energy production and consumption towards less emission-intensive processes and renewable sources.
The United Nations’ Intergovernmental Panel on Climate Change estimates that nearly a quarter of total global emissions are related to agriculture, from how goods are produced to deforestation for agricultural land use. In Canada, the amount of energy used in agriculture has grown by 30 percent between 2008 and 2018, largely from diesel use in heavy machinery. While processes have become more efficient over time, energy consumption has increased due to greater agricultural production, necessitated by the demands of a growing population. The largest source of methane and nitrogen dioxide emissions come from sources including cattle manure, enteric fermentation, and fertilizers. About 10 percent of the greenhouse gases (GHGs) generated in Canada – about 73 megatonnes – come from the agriculture sector.
Yet higher profile sectors tend to take the spotlight when it comes to Net Zero targets and the energy transition. As stewards of the land, Canadian farmers are just as committed to sustainable practices and want to do their part in adopting energy transition practices.
At the same time, Canada recognizes its indispensable role in feeding a growing, global population. Already, countries around the world consume wheat, barley, and other food products produced by Canadian farmers. Collectively, they are searching for ways to both increase food production while also reducing their carbon footprint. A 2021 federal government census on agriculture land use and farming practices documents a clear trend toward adopting sustainable practices.
Gaps and challenges remain, however, and effective sustainability initiatives need to be supported by sound financial economics. Implementation of new technology can be both risky and expensive, for example, but as costs come down and technology improves, enormous environmental and economic opportunities await, with businesses exploring new ways to reduce greenhouse gas (GHG) emissions while also generating electricity.
From cover crops and solar panels to no-till seeding, autosteer, and precision agriculture, many Canadian farmers are already engaged in sustainable farming systems and processes. But as part of their environmental commitment, they remain on alert for further opportunities that are not only good for climate change, but that are also revenue opportunities.
Greater use of cover crops, for example, helps to reduce nutrient losses, pests, soil erosion and improve soil fertility, while precision agriculture works by gathering and analyzing data that can help farmers run their operations with optimal efficiency and productivity. In precision agriculture, for example, fertilizer in soil can be assessed to minimize over-fertilization. These strategies and processes also help reduce the need for synthetic fertilizers, which in turn, also reduces the associated energy required to produce, transport, and apply them.
Biodigesters: a cost-effective, proven technology
One of the most impactful technologies being adopted by farmers that can also carry a strong business case are biodigesters. These systems are proof that some tools and technologies for reducing agriculture GHG emissions are no longer theoretical, but are being invested in and installed on actual farms.
These anaerobic digesters use organic waste, in particular from animals, to produce fertilizer and biogas. Organic waste products from the food processing sector are also used, all of which provides the additional benefit of reducing the amount of garbage that goes into landfills. The energy generated in the form of biogas, especially, creates an entirely new revenue stream for farmers.
The biodigesters work by breaking down organic material using bacteria in an oxygen-free system. The biogas produced is made up of methane and carbon dioxide, which can be used instead of natural gas. And because it comes from a renewable source, it is carbon neutral – potentially carbon negative even, if more CO2 is removed from the atmosphere than is emitted.
Farmers can produce their own heat using biogas instead of natural gas, and can also use it to power electricity on the farm as well. What remains in the system is organic fertilizer – rich in nitrogen, phosphorus, potassium, and free of pathogens – which can be used on the farm or sold. Soil enriched with organic fertilizers are less vulnerable to pests, erosion and drought, according to the U.N. Climate Technology Centre and Network. Meanwhile, the methane that would normally enter the atmosphere is instead captured and used for electricity or renewable natural gas.
By recycling organic waste and turning it into energy and valuable nutrients, biogas presents a unique closed loop opportunity, while also contributing to global decarbonization targets.
An environmental and revenue opportunity
Whether installing a biodigester system is a financially sound option for a farmer will depend on a variety of factors. These may include farm size and distance relative to gas pipelines, whether the location is suitable for a digester, the available labour, what government incentives are being offered to farmers for the electricity, and how much natural gas is substituted.
Farmers in Canada began showing more interest in these systems during the last round of FIT contracts in Ontario in late 2016 according to John van Logtenstein, with DLS Biogas, an Ontario-based maker of anaerobic digester systems. Government FIT contracts were designed to promote and encourage the use of renewable energy sources for electricity generating projects.
“When the FIT program was cancelled, it definitely took some of the wind out of the sails,” says van Logtenstein.
While interest from farms to build a biodigester never went away, the farms’ opportunity to monetize that interest did, he explains. More recently, new opportunities have revived significant interest in carbon neutral and carbon negative renewable gas (RNG) projects with companies like DLS Biogas regularly fielding queries. Biogas can be upgraded to RNG, which is interchangeable with traditional natural gas.
“Not all of them will develop into projects but it goes to show how significant the interest is in the industry. Overall, my outlook is very positive,” he says.
“Between RNG procurement programs, new demands for distributed energy production, and a push to more ESG style reporting/investing, we are finally getting the pieces in place to support a sustainable industry.”
Before committing to a project, however, companies like DLS Biogas need to first assess whether a biogas plant is even feasible in that location. While systems differ, farms with sufficient space that can generate enough daily organic waste are potential candidates. These systems have long been cost effective in Europe, already the world’s largest producer of biogas and biomethane. In Canada, Ontario and Quebec are home to a growing number of farms that use biodigesters in a cost-effective manner, but there is room for significant growth.
In DLS Biogas’ case, once a location is considered feasible, farmers are taught about RNG, the nuances of the industry, the operations, the contracts, and how to earn money from the plant.
“It is a very complicated and long development process and because of that, you need the farmer to be 100 percent onside with the idea of RNG,” says van Logtenstein. Under the right opportunities, DLS Biogas has invested into some of these new facilities themselves.
“Often that joint investment approach is quite interesting to the client as it de-risks the project for them and potentially makes the investment more palatable for them.”
A commitment to sustainability: walker farms
Located in Aylmer, Ontario, Walker Farms is one example of a farm that is currently installing two biodigesters, an investment financed with the help of RBC and made in partnership with DLS Biogas. In operation for four generations, Walker Farms is one of the largest dairy operations in the province. Committed to environmentally green practices, Walker Farms has already implemented a number of sustainability measures to reduce their carbon footprint, including building a milk processing and packaging facility on site, supporting local food systems, and employing precision farming techniques.
The biodigesters at Walker Farms will be able to produce over 1,000 Nm3/h of carbon neutral biogas using the animal waste produced on the farm. They use AB Energy’s BIOCH4NGE Upgrading system to turn the biogas produced into renewable natural gas, which is fed into the local gas grid. The system essentially helps remove 47,000 tonnes of CO2 from the atmosphere, and will create a new source of revenue for the business. Local businesses and residents also benefit from the farm’s biomethane and lower carbon footprint. Walker Farms is proof that these technologies benefit not only the environment, but also offer a clear financial opportunity.
As global efforts to decarbonize and reach Net Zero by mid-century accelerate, opportunities abound for businesses with the vision to adopt technologies that will help drive these necessary changes. The energy transition within agriculture will play a fundamental role in this revolution. The technology coming online right now is no longer theoretical or small scale and Canadian farmers are adopting them at greater scale. As custodians of the land, they understand the dual responsibilities they hold in working towards an environmentally sustainable and secure future, while also fulfilling a critical role in feeding the world’s population.
RBC is committed to helping our clients thrive and prosper. As one of the world’s largest banks in energy and infrastructure finance, RBC has deep knowledge of the energy sector. We are working with the government and other partners to adopt and finance the technologies needed to reduce carbon emissions.Our leadership and expertise in the energy transition is an invaluable asset for Canadian farmers looking for support as they grow their operations while transitioning toward a sustainable future.
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