How one company’s plan to turn pollution into a commodity could change an entire industry
- Smithfield Foods will invest hundreds of millions to turn manure methane emissions into biogas.
- Financial incentives to contract hog farmers are a key part of the company's strategy.
- New venture may have an industry-wide impact.
When the world's largest pork producer set out to reduce greenhouse gas emissions from its full supply chain, it sent a powerful signal to the industry at large: By cutting emissions it's also creating new business opportunities.
With a 26-percent market share in pork processing, Smithfield Foods' initiative to turn methane pollution into a commodity will not only have a significant environmental impact – it will also entice other animal agriculture companies to follow suit.
Smithfield announced earlier this fall that it will invest hundreds of millions of dollars in infrastructure that converts manure methane emissions into renewable natural gas. The new technology will be installed on 90 percent of Smithfield's hog finishing spaces in North Carolina and Utah; and on nearly all in Missouri.
In total, the company will capture emissions from more than 1,000 farms nationwide.
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Smithfield also teamed up with Dominion Energy to feed methane captured at hog farms into the utility's natural gas system. The companies will each invest $125 million in a new joint venture that will convert manure methane into energy for homes and businesses.
These manure-to-energy projects could change the status quo for an entire industry. Here's how.
New revenue for Smithfield – and farmers
While still small in the United States, the market for biogas is expanding with the help of state and federal policies promoting renewable energy development. The initial four projects by Smithfield's and Dominion's new venture, Align Renewable Natural Gas, will produce enough energy to power thousands of homes and the company is planning to expand from there.
The biogas produced by the new company will qualify for federal incentives for biofuels and energy credits in states that, like North Carolina, have renewable energy targets.
Biogas is also a potential new revenue stream for farmers who will receive incentives to invest in manure covers and digesters under a 10-year contract with the new Smithfield-Dominion venture. One North Carolina farmer estimated his annual revenue from biogas sales could be as high as $70,000.
There is plenty of opportunity for progress: The federal government has estimated that hog operations alone can generate and sell 837 megawatts of energy annually, enough to power hundreds of thousands of American homes.
Methane liability becomes a financial asset
Agriculture produces about 9 percent of U.S. greenhouse gas emissions. Livestock manure emissions have increased 68 percent since 1990 as companies transitioned to liquid manure systems such as open lagoons. Methane generated by manure is 84 times more potent in the short-term than carbon dioxide, making capturing such emissions vitally important to maintain a stable climate.
As part of its partnership with Environmental Defense Fund, Smithfield pledged in 2016 to cut greenhouse gas emissions from its operations by 25 percent from 2010 levels by 2025. The company then established a new platform, Smithfield Renewables, to pursue clean energy opportunities while reducing emissions.
Over the next decade, Smithfield will capture more than 85,000 metric tons of methane per year, equivalent to taking 1.5 million cars off the road for a year. By covering open manure lagoons – its largest source of greenhouse gases – the company will turn a liability into a financially viable asset.
To maximize the climate benefits of this shift, Smithfield and its partners will need to identify and address any methane leaks from infrastructure, an area where my organization is pioneering new technologies.
In addition, biogas technology won't address the total environmental impact of manure – most notably, water quality and odor concerns of nearby communities. But this investment provides a foundation for additional management changes or technologies that can also address those challenges.
Smithfield's move is an industry turning point toward farming systems that generate both financial and environmental benefits.
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