Table of Contents

Introduction

Biogas or anaerobic digester (AD) systems generate electricity and heat from the biogas produced from organic inputs. Farm-based biogas systems represent a significant opportunity for the agricultural industry to capture new value from agricultural product and byproducts, and from off-farm organic inputs. As farm-based clean energy becomes a new on-farm product, more farmers will be looking for ways to finance and build biogas systems.

This infosheet presents some key opportunities and requirements for biogas system construction in Ontario. It is based on the information obtained at the time of writing. Since this is an evolving sector with frequent new developments, it is necessary to ensure that all issues involved in building a biogas system are fully explored.

To obtain more current information on any of the programs listed in the infosheet, contact the provider of the program directly. This contact information has been included with the description of each program. Another valuable source of information is the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) Publication No. 10-061 Programs and Services for Ontario Farmers.

Funding Programs for Planning a Farm-Based Biogas Project

Agricultural Adaptation Council

The Agricultural Adaptation Council has two programs that may support feasibility and design work for biogas systems. Under both the Farm Innovation Program (FIP) and the Canadian Agricultural Adaptation Program (CAAP), funding is available for soft costs for investigation, planning and design of innovative on-farm technologies. For both programs the proposed technology would have to be new to Ontario. The technology should also be something that could be widely adopted by other producers in the sector.

FIP requires the applicant be an eligible commodity group, whereas for CAAP a producer can be an applicant to the program. If a producer is the applicant it is important to have the support of at least one industry group to show the need/benefits of the project to the broader industry sector.

For more information visit the Agricultural Adaptation Council or call 519-822-7554.

Business Development for Farm Businesses

Building a biogas system requires good planning to ensure the system fits within the larger farm business. The Business Development for Farm Businesses program helps producers improve their business planning. The program incorporates self-assessment and action plan development with a range of cost-share advisory services and skills development opportunities to help producers reach their farm business goals.

The cost-share opportunities available through this program include training, hiring consultants and skilled planners (which can include costs related to technical work developing your biogas system plan), as well as legal and contractual activities.

To be eligible for cost share funds, you must first attend a Growing Your Farm Profits Workshop, complete an Action Plan Review, and receive a sign-off. This program is delivered by Ontario Soil and Crop Improvement Association.

For more information visit Growing Forward Best Practices Suite: Business Development or call 1-888-479-3931.

Community Power Fund, Community Energy Partnership Program

The Community Power Fund delivers the Community Energy Partnerships Program (CEPP) on behalf of the Ontario Power Authority. CEPP is a program to support community power projects in Ontario in the form of grants of up to $200,000 for individuals, or up to $500,000 for corporate cooperatives. The CEPP will fund up to 90 per cent of eligible costs.

Eligible costs under the Community Power Fund include a broad range of soft costs related to project design and development, including site assessment, application costs for the Feed-In Tariff or Renewable Energy Approval (including studies and contracts), and engineering design.

For more information visit Community Energy Partnerships Program or call 1-888-907-2377 (CEPP).

Northern Ontario Heritage Fund, Northern Energy Program

The Northern Ontario Heritage Fund Corporation (NOHFC) is a provincially funded agency working to build strong, prosperous northern communities. Through their Northern Energy Program's "Renewable Energy Planning" category, funding is available to eligible applicants for engineering and design costs and environmental studies required to undertake project development activities.

The maximum contribution by the NOHFC to a project will generally not exceed 50 per cent of eligible project costs up to a maximum of $100,000. Applicants are required to demonstrate that they have the capacity to bring the capital project to fruition by having a Feed-in-Tariff offer, and an established partnership with a municipality and/or First Nation to undertake the project.

Applicants for projects must be located in Northern Ontario.

For more information visit Northern Energy Program or call 1-800-461-8329.

Funding Programs for Building a Farm-Based Biogas System

Agricultural Adaptation Council

The Agricultural Adaptation Council has two programs that may support capital costs for innovative biogas systems. Under both the Farm Innovation Program (FIP) and the Canadian Agricultural Adaptation Program, (CAAP) some capital expenses may be covered.

For both programs the technology would have to be new to Ontario. The technology should also be something that could be widely adopted by other producers in the sector.

For CAAP, capital expenses can be up to 25 per cent of the CAAP request. For FIP there may be flexibility for a higher coverage, likely up to 50 per cent. Both programs require a strong knowledge transfer component to the project.

FIP requires the applicant be an eligible commodity group, whereas for CAAP a producer can be an applicant to the program. If a producer is the applicant it is important to have the support of at least one industry group to show the need/benefits of the project to the broader industry.

For more information visit the Agricultural Adaptation Council or call 519-822-7554.

Canada-Ontario Farm Stewardship Program

Canada Ontario Farm Stewardship Program (COFSP) is a voluntary cost-share program to encourage producers to improve the management of agricultural land through the adoption of Best Management Practices (BMPs) to reduce risks to water and air quality, improve soil productivity, enhance wildlife habitat, or that result in energy conservation. Cost share for specific COFSP categories is set at either 30 per cent or 50 per cent, up to the category caps.

Anaerobic digesters may be eligible for a cost share of 30 per cent up to $30,000 under either the Manure Treatment or Renewable Energy Production for Agricultural Purposes categories. There are a number of eligibility criteria, including the need for an up-to-date Environmental Farm Plan that is deemed appropriate.

For more information visit the Ontario Soil and Crop Improvement Association or call 1-800-265-9751.

Federal Economic Development Agency for Southern Ontario (FedDev Ontario) Prosperity Initiative

FedDev Ontario is targeting its investments to support strategic projects that will create a southern Ontario Advantage. The "Building a Competitive Advantage" program targets projects that will build on the assets and strengths of southern Ontario businesses and regions to create or expand economic clusters and enhance their global competitiveness. The focus for "Building a Competitive Advantage" includes Energy and the Environment.

Eligibility is limited to small and medium sized companies or not-for-profit organizations in Southern Ontario. Target areas include adaptation and adoption of new technologies, processes and skills development in an industry/sector; technology demonstration and piloting; business opportunity development and expansion; and facilities improvement or expansion. Capital funds matching up to 50 per cent may be available.

For more information visit FedDev Ontario Prosperity Initative Guidelines or call 1-866-593-5505.

Innovative Demonstration Fund

The Ontario Ministry of Research and Innovation's Innovation Demonstration Fund (IDF) focuses on the commercialization and initial technical demonstration of globally competitive, innovative green technologies, processes and/or products.

The objective of the IDF is to help companies in their efforts to commercialize innovative technologies in Ontario by mitigating the risk of projects with significant pilot-scale technical hurdles. The IDF is not aimed at routine engineering, upgrading, or improvements to existing processes, designs or products. Some costs associated with deploying innovative biogas systems may be eligible.

For more information visit Innovation Demonstration Fund Program Guidelines or call 416-326-9658.

Northern Ontario Heritage Fund, Northern Energy Program

The Northern Ontario Heritage Fund Corporation (NOHFC) is a provincially funded agency working to build strong, prosperous northern communities. Through the Northern Energy Program's "Internal Energy Generation" category, funding is available to eligible applicants that intend to establish energy generation systems for their own use which reduce demand on external energy sources. The project must generate energy (heat, electricity, bio-fuels or a combination of heat and power) from a renewable energy source, including biogas.

Funding assistance will be provided for capital equipment costs and for its installation. The program intent is to reduce the client's demand on external power sources. The applicant must demonstrate energy and financial savings resulting from the project. Projects associated with the Feed-in-Tariff (FIT) or MicroFIT programs are not eligible. The maximum contribution by the NOHFC to any one internal energy generation project will generally not exceed 50 per cent of eligible project costs up to a maximum of $250,000.

Applicants for projects must be located in Northern Ontario.

For more information visit Northern Energy Program or call 1-800-461-8329.

Rural Economic Development Program

OMAFRA's Rural Economic Development (RED) Program invests in projects that support sustainable rural economic development and community partnerships. In particular, program priorities include projects with an emphasis on supporting the food processing value chain, and on community revitalization.

For more information visit Rural Economic Development Program or call 1-877-424-1300.

Tax Incentives 

Harmonized Sales Tax - Input Tax Credits

Businesses may recover the Harmonized Sales Tax (HST) paid on many purchases or expenses related to commercial activities, including the construction and operation of a biogas system. These rebates are called Input Tax Credits.

For more information visit Input Tax Credits or call 1-877-4-TAX-FAX (1-877-482-9329).

Federal Accelerated Capital Cost Allowance

The Federal Accelerated Capital Cost Allowance (CCA) for Clean Energy Generation program allows accelerated depreciation of eligible renewable energy system costs. A 50 per cent accelerated CCA under Class 43.2 of Schedule II to the Income Tax Regulations is available for specified energy generation equipment. In general, biogas systems are eligible for the program. Class 43.2 includes equipment used to produce, store and use biogas from the anaerobic digestion of manure, provided the biogas is used primarily for the production of heat for use in an industrial process or electricity.

Generally, costs associated with the purchase and installation of renewable energy property are considered as capital costs of depreciable property, which are deducted over a period of several years, based on a prescribed percentage. Generally, amounts paid for legal, engineering, installation, and other fees that relate to the acquisition of the renewable energy property, would be included as part of the capital cost of the property.
For more information visit Ontario's FIT/MicroFIT Programs or call 1-800-O-Canada (1-800-622-6232).

Capturing Value for Energy from Biogas Systems

To capture revenue from biogas energy production, operators can consider producing electricity for sale or for on-site use, using raw biogas as on-site fuel source, or selling the biogas or using it on-site in an upgraded form similar to natural gas. The following section outlines in brief the opportunities available in Ontario for these options.

Selling or Replacing Electricity

In Ontario, the primary opportunity for obtaining the value for energy from biogas systems is to sell electricity or replace existing electricity purchases. Some options for selling or replacing electricity are listed below.

Feed-In Tariff (FIT) Program

The Feed-In Tariff (FIT) Program gives biogas electricity producers the option to sell electrical power at fixed rates for a period of 20 years. At the time of writing, the value of the power ranges from 14.7 to 19.5 ¢/kilowatt hour (¢/kWh). The range of prices depends on the name plate size of the generator and whether the system is deemed to be an "on-farm" project. There is a 35 per cent price bonus for peak periods and a 10 per cent price decrease for non-peak times. Many projects may be eligible for a 0.4 ¢/kilowatt hour (kWh) community adder. To learn more visit the Ontario Power Authority website below, and see OMAFRA's infosheet entitled Feed-In Tariff, Green Energy Act and Regulated Mixed Anaerobic Digestion Facility Rules.

For more information visit Ontario Power Authority FIT Program or call 1-800-797-9604.

Hydro One Net Metering Program

The Net Metering Program allows an electricity consumer to replace electricity purchased for the site with renewable energy generated on-site. Essentially, the electrical grid is used to "bank" electricity produced by the biogas system to be used at a later time. Any surplus production can be held on credit for a one-year period. As electricity prices increase over time, net metering may become more attractive. Net metering will make the most sense for farms with higher electrical requirements (to obtain full benefit, yearly electricity use should exceed electrical production).

Farms that are demand metered are at a disadvantage since significant demand charges may occur in periods when electrical use exceeds production. Building a biogas system specifically designed to shave instances of high demand may be advantageous for such operations.

For more information visit Hydro One Net Metering - Frequently Asked Questions or call 1-888-688-4636.

Selling Refined Biomethane

It is possible to refine biogas to the quality required to be a natural gas replacement. This refined biogas is typically called biomethane. Connection to the natural gas pipeline system will be necessary in most cases to transfer the biomethane to buyers, although some examples of trucked compressed biomethane have been demonstrated. Farm-based biogas contains approximately 60 per cent methane and 40 per cent carbon dioxide, with small amounts of hydrogen sulfide, moisture and other constituents. To meet pipeline standards, most of the non-methane components must be removed from the biogas. Several commercially available technologies have now been applied at farm-based biogas systems to upgrade the biogas to natural gas quality.

In Ontario there is no prescribed pricing process for biomethane. In general, the low cost of natural gas means that a gas buyer must be willing to pay a premium to make a biomethane project viable. A farm-based biogas system in British Columbia is selling natural gas to the local gas distribution company (Figure 1). The biogas is produced from manure, energy crops and fats, oils and grease. That gas is upgraded using a water scrubbing technology.

Figure 1. Biogas system in Abbottsford British Columbia that adds upgraded biogas to the natural gas pipeline.

Contact your local gas utility for more information:

Enbridge, 1-877-362-7434.

Union Gas, 1 888 774-3111.

Using Biogas as a Vehicle Fuel

Compressed biogas can be used as a vehicle fuel. Only moderate pre-treatment of the biogas is necessary to remove most of the water vapour and other contaminants such as hydrogen sulphide. The carbon dioxide remains in the biogas, avoiding a potentially costly gas cleaning step. The City of Guelph has demonstrated a pilot program converting a pick-up truck for biogas use (Figure 2). The Guelph pilot project uses municipal sewage treatment digester gas which has a similar methane and carbon dioxide content to farm-based biogas.

A "Vehicle Refueling Appliance" is required to fuel the vehicle. Depending on the conversion technique, the vehicle may be operated as a bifuel vehicle, with gasoline operation available as a reserve fuel. A number of companies in Ontario have experience doing natural gas vehicle (NGV) conversions. Minor changes are required for biogas conversions compared to natural gas conversions.

For more information contact Natural Gas Powered Vehicle Department, Enbridge, 1-888-648-4728.

Figure 2. City of Guelph Pilot Biogas Pick-Up Truck.

Selling or Replacing Heat

Selling heat or replacing existing purchases of fuel for heat is an effective use of the available energy from a biogas system. Biogas can be directly combusted in a boiler, although the boiler must be properly designed to manage the moisture and corrosive elements within the biogas. A separate valve train may be required if a boiler is to be operated with both biogas and another gaseous fuel. The Technical Standards and Safety Authority (TSSA) provides oversight for gaseous fuel safety.

For more information visit TSSA or call 1-877-682-8772.

Using Cogeneration Heat

Usually farm-based biogas is combusted for electrical production in a conventional internal combustion system, with the engine heat being the source of surplus heat that can be used for other purposes. In general, for a well-designed internal combustion system 30-40 per cent of the energy is available as electricity and approximately 40 per cent of the energy is available as surplus heat. A clear process for selling cogeneration heat to neighbours has not yet been developed in Ontario. In Europe, several examples exist of farm-based biogas systems selling heat in the form of hot water to communities and other farmers.

Biogas systems produce heat daily, year-round. On-farm there is often only limited requirements for daily on-site heat including milking centre washwater heating, and space heating. Unless a significant heat user can be found that requires on-going heat (such as a food processing activity), not all of the heat from the biogas system will be used. In Ontario, some biogas systems have been sited at greenhouses which have a significant heat demand for more than half the year. Some examples of seasonal heat use have been demonstrated in Ontario, including crop drying. Figure 3 shows an innovative Ontario crop drying system where heat off of the cogen's cooling fans can be drawn into a grain bin by "closing" the roof covering over the fans.

Figure 3. Grain drying using heat from biogas cogen cooling fans.

Adding Feedstocks to Increase Biogas Yield

Increased Biogas Production and Tipping Fees from the Use of Off-Farm Source Materials in the Anaerobic Digester

Off-farm source materials have the potential to greatly increase the biogas production compared to basic manure and other agricultural byproducts. When receiving off-farm source materials that have high disposal costs through other conventional waste management systems, there may be opportunity to receive income from tipping fees obtained for processing the materials. In many cases the consistency, quality and energy density of off-farm source inputs is thought to be more important than the tipping fee.

There are three routes to having biogas systems approved in Ontario to receive off-farm materials:

For more details contact OMAFRA at the Agricultural Information Contact Centre, 1-877-424-1300.

Requirements to Connect and Build a Farm-Based Biogas System

Obtaining a Grid Connection and Feed-In Tariff Contract

The process to connect to the electrical grid and secure a Feed-In Tariff contact involves a number of agencies and players including your local electrical distribution company (LDC), the Ontario Power Authority (OPA), and the Electrical Safety Authority (ESA).

Your LDC is responsible for connecting and metering electrical generation projects. You must submit a connection request to your LDC and meet the requirements of your LDC before your LDC will connect you. Your LDC will connect your project to the grid when you have:

For more information, contact your local LDC, and the Ontario Power Authority, call 1-800-797-9604.

Obtaining a Building Permit

Some components of a farm-based anaerobic digester will be classified as a structure. As a result, a building permit will be required before construction begins. The building permit is obtained from the municipal chief building official in your municipality.

Proponents of a project should ensure that the zoning for their property allows a farm-based digester system. It is understood that existing digesters operating in Ontario are currently treated as part of the farming operation. Most systems are essentially a part of the livestock manure system (improving the handling characteristics of the manure and causing beneficial pathogen and odour reductions). Projects approved under the Renewable Energy Approval may not be subject to local zoning restrictions.

OMAFRA's Minimum Distance Separation (MDS) Formulae (with an objective to minimize nuisance complaints associated with livestock production) is to be applied when a building permit is sought for on-farm anaerobic digesters systems that use manure as an input that are not approved under the Renewable Energy Approval Process. There are also setback requirements for projects completed under a Renewable Energy Approval.

For more details contact OMAFRA at the Agricultural Information Contact Centre or call 1-877-424-1300.

Property Taxation of Anaerobic Digesters

Before a biogas system is constructed, farmers should consider and clarify how the digester will be assessed for property tax purposes. Anaerobic digestion facilities of any size that are located on a farm and are operated by the farmer will be taxed at the farm rate. See Property Tax Treatment of Renewable Energy Installations for more details on property tax treatment of renewable energy installations.

Conclusions

The opportunities for developing on-farm biogas systems are growing. Successful projects will take advantage of the opportunities and requirements identified in this infosheet and ensure that all steps in development are considered. Since the biogas sector is rapidly evolving, it is necessary to ensure that all issues involved in building a farm-based biogas system are fully explored. Be sure to contact these agencies individually to ensure that the information presented here is accurate and up-to-date.

For more information contact OMAFRA at the Agricultural Information Contact Centre, 1-877-424-1300.