Maas Energy Works develops, owns, and operates anaerobic manure digesters which produce methane that is turned into electricity and compressed natural gas. Maas harnesses this “cow power” in partnership with dairies and other commercial facilities. Sixteen of the twenty-eight dairy digesters operating in California today were built by Maas.
We spoke with Daryl Maas, CEO and Co-Founder to learn how a small company that started as his brother’s MBA project became a multi-state business.
Do you have a family connection to dairy farming?
My brother Kevin and I grew up in Washington, one generation off the farm. We were surrounded by friends in agriculture, and our tiny Dutch-Christian school was attended by many Dutch-American farmers’ children. So, culturally, we were still in the ag world.
This connection worked to our advantage when we became interested in renewable energy, because we had a network of farmers to whom we could propose ideas. Our first company was focused on wind turbines. We founded it to build a turbine on our grandfather’s farm in the Midwest.
What was the impetus for starting a manure digester firm?
My brother Kevin was working on his MBA and had chosen for his senior project a business plan for a manure digester. I had just come home from military service and had time on my hands, and so I offered to help him out.
We made presentations and pitched to investors. Some of Kevin’s classmates were angel investors and offered to finance a company based on the plan if Kevin and I decided to give it a try. We then spoke with friends who owned a dairy in our hometown, and they offered to provide the land and manure if we could raise the operational funds. So, at that point we thought we had to give it a go.
So, in 2007 we formed Farm Power Northwest. It took over two years and a lot of effort to build the first digester. We never intended to build additional digesters. But we developed a business model that worked and eventually built five operational digesters in Oregon and Washington.
How did you fund the construction of that first digester?
The first project was over half debt-funded through a bank loan, which was feasible because of the ten-year power purchase agreement with a local utility for the electricity generated from the digester. About a quarter came from competitive grants from the State of Washington and USDA. The remainder was from funds we raised from investors.
Have you changed your digester design over time?
Our first five digesters used a patented, brand name design that was licensed to specific companies that we had to retain for build out. The cost was high because of the complicated, proprietary design. On each of these initial projects, we made gradual improvements and eventually learned how to do it ourselves.
Maas uses standard, open-source designs and technology for its digesters. The first digester Maas built using this model was for the Van Warmerdam Dairy in Sacramento County.
You opened a location in Redding, and in 2010 you founded Maas Energy Works. Did you make this move to enter the California market?
Not initially. We actually thought it would be a temporary move. Redding isn’t what you’d call a dairy center – otherwise we probably would have relocated to Visalia or somewhere like that. We had family in Redding.
Redding was a good location from which to drive north and manage our digesters in Oregon. I soon realized the great opportunities in California, and so I decided to found a new firm – Maas Energy Works. The state had increased funding available to build manure digesters and was creating new markets for renewable electricity and gas made from methane through the renewable fuels and low-carbon fuels standards.
My move to Redding made it possible for my brother-in-law, Ted Thompson, to join Maas. Ted’s an electrical contractor, and he was looking for jobs around the time I moved into the state. When I learned that the California projects needed specialized automation and controls, I brought on Ted, who is highly skilled in this area. This has been great, because Ted has been able to grow his company along with mine.
There were companies already building digesters in California. What was the market like when you first came in?
When Maas started in California, many dairy farmers had no interest, because the early digesters had promised big but disappointed.
The first companies in the space required the farmer to own and operate the digester. These digesters did not last long, because the farmers had trouble maintaining them as well as the engines that produced the electricity from the digester gas. In addition, revenues from the electricity produced were not as great as anticipated.
So, what Maas did was to provide the option to build, own and operate the digester. This reduced the risk to the farmer and gave us a long-term incentive to show that the technology worked.
Originally, some farmers opted for a “hybrid” model, where the farmer owned the digester and assisted with some onsite maintenance while we did the remainder of onsite maintenance, all of the remote monitoring, and all of the office work. But over time we realized we could deliver better quality if we owned the system and provided complete services.
What is Maas’ current business model, including financing the systems?
Maas can own and finance the digester, in which case Maas leases the site and pay a percentage of profits to the farmer. Or, the farmer owns the digester and we do the operational and maintenance work for a fee.
Grants are available in both cases for up to half of the costs from the California Department of Food and Agriculture. Maas applies for the grants or applies on behalf of the dairy and handles the ongoing management of the grant funds. The remainder is financed with cash or loans.
State grants have jump-started our business, but we have had to make wise and timely use of private money as well to move the projects along. The grant programs are very good, but as a firm, we’ve learned that we won’t be effective if we spend all of our time chasing government money. We believe this has given Maas a major competitive advantage.
We also now include comprehensive operations and maintenance plans with all of our projects, so the farmer doesn’t have to touch the system. And we obtain all of the permits for the digesters and engines and equipment from the regulatory authorities. We handle all interconnections with utilities, and we manage all of the federal and state carbon evaluations and environmental credits.
What does operations and maintenance (O&M) for a digester involve?
What’s great is that there really is not that much involved, as our system is designed to interact with how a dairy already works. Most dairies use gravity or mechanical separation of manure solids and store liquids in ponds. We build a new pond – or use an existing one – and cover it with high-density polyethylene. The methane that’s naturally produced is trapped under the cover and siphoned off through pipes for initial cleaning. Then it can be run through an engine to generate electricity for the dairy or to be sold back to the utility. So, most operations are fairly passive. Maintenance is mostly cleaning and looking for leaks.
O&M is a more complicated when we want to produce pipeline quality gas. First, we remove sulfur and water from the gas. Then we push the gas through pipes to a central point, where the gas is further cleaned to pipeline standards.
We recently completed the Calgren Dairy Fuels digester pipeline cluster in Pixley, California last year, which involves several dairies. Calgren, an ethanol producer, is the majority owner, and we are a minority owner. Calgren can produce both ethanol and renewable compressed natural gas (R-CNG) truck fuel, which it injects into the utility pipeline and can be delivered to any CNG fueling station in the state.
These cluster projects require at least 10,000 head of milking cows but allow medium-size dairies to come together in a network with shared infrastructure to meet that minimum. We have three new cluster projects in California coming online in 2020 involving a total of 30 to 40 dairies.
What kind of revenue stream and other benefits do your projects create for dairies?
In California, the cash revenues can be upwards of five to 15-percent of gross revenues.
When we have a fixed price long-term utility contract for the electricity, then we pay the farmer a fixed price for the contract term. When we are selling gas, there is no long-term fixed price, so it’s not as easy. Our revenues depend on the carbon credit markets, the price of diesel and other factors, so we usually agree to some division of profits. Farmers can do very well, upwards of $300 per cow per year, but there’s no guarantee because the market is new.
We have seen, however, that most farmers are willing to share this risk for the opportunity for larger returns, because the market is emerging.
Or technology has also led to air quality improvements, beyond the reduced greenhouse gas emissions. Our digesters significantly reduce odors, because we remove the portion of the manure that turns into ammonia and sulfur gases.
The permitting, regulatory and climate policy landscape in California is complicated, and the dairy industry is unique. How did you get up to speed on all of this?
It takes a long time to build a project in California – at least one year between approval and breaking ground. We had to train ourselves about permitting, CEQA, water and air quality regulations, and grant opportunities. At first, we used paid consultants, especially for CEQA compliance, but eventually we learned it all ourselves.
I initially did all of the outreach and relations myself, but it’s a really big state. We found that we really needed people with local knowledge in the Central Valley. Now, Maas has six employees in the San Joaquin Valley, and we plan on expanding that base in the coming years.
In the last nine years, we have grown from a two-man outfit between Maas Energy Works and our sister companies to over fifty employees up and down the state.
What advice do you have for entrepreneurs working to bring new technology to agriculture?
First, it really helps to work in an environment that you’re familiar with, whether it be the industry or geography. We started with industry connections in Washington, and my experience helped greatly when I moved into California and started Maas.
You have to accept that there will be hard lessons, but this will help you keep improving. We learned the hard way about technology that did not work, but we kept at it and this has led to our success.
Maas demonstrates how determination and technological expertise can take advantage of new opportunities to yield multiple benefits and help sustain a critical industry. We look forward to seeing many more Maas digesters come online to fuel the future.