Gut Instinct: Introducing Bioenergy in Rural Mexico

Not many engineers get to include writing folklore as part of their job descriptions. It certainly was not something Alexander Eaton expected to do when he and his business partner, Camilo Pages, launched their own line of biodigesters in Mexico in 2007. But the small family farmers Eaton and Pages were targeting with their biodigester systems were largely unfamiliar with bioenergy. The entrepreneurs needed a way to introduce the concept to them.

“In Yucatán, Mexico, there is a local legend about a red dragon that eats trees and breathes fire,” says Eaton, who co-founded the clean technology company Sistema Biobolsa with Pages. “I came up with my own legend about a blue dragon that eats waste and breathes blue fire to speak to the origin of energy.”

Sistema Biobolsa’s blue dragon has become an education tool that has supported the sale of more than 3,000 small-scale biodigesters across Mexico. Eaton says the story has also helped the company seed a domestic biogas market for Mexico’s poor, rural communities. “People started calling [biogas] ‘the new flame.’ It was a significant starting point,” he says. “You can build a whole culture around ‘the new flame’ and at no point do you have to mention a biodigester.”

“People started calling biogas ‘the new flame.’ It was a significant starting point. You can build a whole culture around ‘the new flame.’”

Eaton has been studying and working with industrial biodigester designs for more than 10 years, and he has long seen the potential for the technology to positively impact poor family farms as both a waste management and clean energy source. The concept is simple and straightforward: anaerobic biodigesters work by processing waste the same way a cow processes food. A cow’s stomach contains 10 billion bacterial cells per milliliter of fluid that break down everything the animal eats in a process known as enteric fermentation. One of these microbes—methanogenic bacteria—releases the biogas methane as a by-product of this process. Anaerobic digesters similarly use bacteria to convert biodegradable waste into biogas, which can then be harvested for cooking, heating and other daily uses.

Biodigesters are hardly a recent technological development. They have existed as a modern energy tool for roughly 150 years, when the first recorded system was used to power lights in a leper asylum in India. They were applied in the agricultural sector for the first time in Germany around the time of World War II.

Today, advocates of biodigesters often argue for the technology’s environmental benefits. Within the agriculture sector, biodigesters’ ability to harness biogas from waste reduces emissions of methane—a potent greenhouse gas—into the atmosphere. The threat of methane garners less attention than carbon dioxide because it is emitted in lower quantities, but it nevertheless has greater global warming potential: 23-times higher than CO2, according to the Intergovernmental Panel on Climate Change. It also stays in the atmosphere longer than CO2. There are therefore credible environmental benefits to capturing methane at the source—from livestock, for example.

![Biodigester outputs and benefits](/content/images/2017/01/SB-benefits-2.png)

For Sistema Biobolsa, biodigesters offer energy access and poverty alleviation benefits in addition to environmental impact potential. The company specializes in small but scalable anaerobic digesters that are designed to help small farmers in central Mexico manage animal waste and generate biogas for power. Its target market is farmers with two to 50 head of cattle, for whom waste management is a greater sanitation concern than environmental concern. Nearly all of these farmers—95 percent—live below the poverty line and spend a large percentage of their limited income on expensive, price-variant energy sources and on farming necessities, like waste management and fertilizer. The high-intensity, low-productivity nature of their work keeps many of them locked in poverty.

Eaton says biodigestion technology struck him as an ideal solution for this demographic. “The first time I saw a biodigester in action, I was really struck by how it worked,” he says. “All you do is put manure in one end and the [system] does all the work. It turns an ugly waste product into a beautiful, blue flame.” He was surprised, however, that there were no simple, high-quality products catering to small-scale farms at the time. Most of the systems he came across were either too large or too complicated for Sistema Biobolsa’s customer base, or they were inexpensive but flimsy. “If you’re poor, you can’t afford to invest in any of those,” he says.

Building a better system

In 2005, Eaton set to work on his own biodigester design. His work as a project developer for RCM International taught him about advanced biogas technology, and as a graduate engineering student at Humboldt State University, he explored how to incorporate some of the more robust components of these systems into a user-friendly, small-scale model. By 2007, Eaton had a prototype ready for testing and installed a dozen systems in Mexico that year. Three years later, he secured a patent for his design and co-founded Sistema Biobolsa with Pages to manufacture and sell it.

Today, Sistema Biobolsa has sold more than 3,000 biodigesters to small farmers across Mexico. The company offers a variety of digester sizes to meet farmer needs. Its smallest and most popular digester is the BB4, which contains four cubic meters of waste storage. It is meant for farms with only three or four large animals and produces enough gas to heat water for showering and to power two cooking burners for five hours per day. The BB4 costs $600, which includes tubing, installation, a special cookstove, a boiler burner, and gas filters. At the top of the company’s product line is the BB240, which offers 240 cubic meters of waste storage. The digester is meant for farms with up to 110 cattle and can produce enough gas to heat a 60,000 square-foot greenhouse. BB240s cost roughly $12,000 and represent a growing share of Sistema Biobolsa’s sales.

Process-wise, Sistema Biobolsa’s biodigesters operate similarly to other systems on the market. The system relies on live bacteria to breakdown input waste. Just as an animal’s gut needs a certain bacterial balance to function, a well-performing biodigester requires a well-maintained internal mix of bacteria. This means a continual feed of agricultural waste is needed for Sistema Biobolsa’s biodigesters to maintain their internal balance. Farmers also recycle smalls portions of the bacteria-rich output through the system to support its performance.

What makes Sistema Biobolsa’s product unique is how it easily it can be maintained while functioning at a high-performance level. “Those without a formal education can make use of the technology, which is essential in developing countries where people may not have the training or the time to adequately care for a [standard] digester,” says Jason Prapas, co-founder of Factor[e] Ventures, which is a Sistema Biobolsa investor.

The key feature that makes this possible is the body of the digester, called the “reactor”, which is made of a geomembrane—essentially a big bag made of a robust, dense polymer material, similar to liners for landfills and chemical storage ponds. Other geomembrane digesters exist but are most commonly made of PVC bags. These systems can be sold inexpensively but typically have a lifespan of less than 10 years because the PVC material can be easily damaged, especially when exposed to the sun for long periods of time. By contrast, Sistema Biobolsa’s geomembrane material is designed to optimize solar heat to keep the internal bacteria alive. Sistema Biobolsa’s geomembranes are guaranteed to last for 10 years, and are estimated to withstand 30 years of full sun exposure.

“Someone needed to develop a system that is more resilient,” Prapas says. “A variety of unforeseen things can happen on a farm, and this system can withstand them.” For instance, on most of the small farms Sistema Biobolsa serves, livestock roam in open pastures. “A cow can step on this bag and it won’t pop,” Prapas adds. In fact, stepping on—rather, kicking—the geomembrane every few days is how farmers keep the bacteria-rich contents mixed.

![Waste conversion cycle for Sistema Biobolsa's biodigester](/content/images/2017/01/SB-system.png)

Performance-wise, Sistema Biobolsa’s digester converts 75 to 85 percent of volatile solids in organic waste to biogas and reduces 99 percent of waste-based pathogens. Eaton says the highest performing systems he is aware of can achieve conversion rates of 85 to 95 percent, but they have much higher equipment and maintenance requirements. “If we had tried to stretch that extra 10 percent, we would have had to compromise a lot on affordability and usability,” Eaton explains. “To serve the customers we want, we had to strike a balance between function and technical efficiency.”

Selling more than a product

Designing a suitable product was just the first step for Sistema Biobolsa, and the team quickly learned that building a viable business model around that product posed an entirely different set of challenges. Upon launch, Sistema Biobolsa found that there was not only a bioenergy technology gap in rural Mexico, but an entire ecosystem gap, because no one in bioenergy had thoughtfully targeted low-income family farms as potential customers before. “There is a whole chain of innovation that has to happen when you launch a new product,” Eaton says. “There are so many supporting elements that have to become a reality.” As a result, the company has only started to achieve economies of scale in the last three years, he adds.

One of the earliest questions Sistema Biobolsa had to face was how to encourage the adoption of an unfamiliar product among a customer base with limited financial means. The company does a lot of village-level community outreach to introduce the system to rural farmers, and closes its customer engagement loop with 30-, 60- and 180-day follow-ups after each installation. The first of these visits is meant to check that the system is working as intended and that biogas production has started. The second is to check on fertilizer production, and the last is to ensure that all outputs are stable and to gather customer feedback. Sistema Biobolsa uses each meeting as an opportunity to collect information about the impact of its systems on farm productivity and farmers’ lives.

“This process helps them improve the product and maintain high customer satisfaction,” Prapas says. Indeed, Eaton says Sistema Biobolsa’s system has a 93 percent adoption rate. The company also buys back installed systems that go out of use so only productive examples remain in the field.

It is costly to engage so intensely with customers, however, and from the investor standpoint, Prapas explains that his company had to take a very close look at Sistema Biobolsa’s model. “We loved the idea of their customer service model, but we were concerned that it would become unsustainable as the company grew, because it could become a huge expense,” he says. “But they’ve convinced us that this level of engagement is necessary if they want to ensure the long-term use of their product by small farmers.”

Eaton adds: “What everyone thinks you should do with a new product is automate processes so much that you can be low touch. We have had to be insistent that we can’t be lower touch if we want to maximize the product’s benefits. We actually think the reason our digesters work at such a high rate is because we have such close relationships with our customers.”

Most of Sistema Biobolsa’s customers also need financial support from the company, since even the smallest Sistema Biobolsa system costs more than what most farmers can afford upfront. Sistema Biobolsa partners with global microfinance lender KIVA to offer its customers small loans. “KIVA loans us the money, and we pay KIVA back as our customer pays us,” Eaton explains, adding that his company has fully integrated the loan process into its own digital database. Data needed to issue and track the loans is collected on smartphones by sales and technical teams in the field. “[The arrangement] has been useful to breaking down the financial barriers for our clients,” Eaton adds. It is also a first for KIVA, which typically only partners with other microfinance lenders.

Payments from KIVA generally represent 40 percent of the cost of a Sistema Biobolsa’s biodigester; the rest is covered by the customer’s down payment and agricultural subsidies from the Mexican government. This diversified payment system helps Sistema Biobolsa limit its risk while reducing financial barriers for its customers, though the company hopes to gradually phase out government support. “The subsidies are a good way to support new technology, but our strategy is to offer credits ourselves and keep this market-based,” says Esther Altorfer, Sistema Biobolsa’s finance director.

![Sistema Biobolsa's customer service model](/content/images/2017/01/SB-customers-copy.png)

Although it may take 18 to 24 months for customers to repay a loan on a BB4, they begin seeing cost savings almost immediately. The biodigester takes only a month to begin producing fertilizer and biogas, which can be substituted for purchased fertilizers and other energy sources, like liquid petroleum gas. Sistema Biobola estimates that its smallest system saves the average family $20 per month in energy costs alone.

Prapas recalls seeing the impact of Sistema Biobolsa’s technology first hand. On a visit to one farm in the state of Puebla with Sistema Biobolsa’s field team, Prapas witnessed one family using the biogas from their digester to power a gas stove and a boiler for hot water. “I was expecting to see people using the gas for cooking only. Instead, I saw that the family had so much gas, they had bought a boiler so they could have hot showers,” he says. “It represents such a dramatic change in quality of life.”

Among Sistema Biobolsa’s larger clients, one organic farmer with 100 cows explained to the team that he had been overwhelmed trying to manage his farm’s animal waste on a daily basis. With the digester, he now uses the output for fertilizer and the biogas to heat several greenhouses.

A new energy future

Seeing the impact of its products on individual families motivates Sistema Biobolsa to both expand its own operations and work towards the development of Mexico’s small-scale biogas market. Eaton says the company wants to see the options for bioenergy use grow as farmers’ productivity grows. Indeed, Sistema Biobolsa’s own future depends on this: it estimates that the Mexican market for small-scale anaerobic biodigesters is about one million units, representing 25 percent of Mexico’s smallholder farms. Future business will depend on expansion to new markets and “downstream applications,” like biogas-powered farming equipment.

When Sistema Biobolsa launched, there were almost no biogas compatible machines or appliances available locally, however. To give farmers more options for how to use the new fuel source, Sistema Biobolsa began hosting workshops with local mechanics to convert products designed for other power sources to biogas, commissioning everything from stoves to large motors that could power heavy duty farming equipment. Sistema Biobolsa then began purchasing the adapted machinery to sell alongside its biodigesters. Eaton says that these purchase agreements have been necessary to building a supply of new products because the small-scale bioenergy market it so new. “Three to five years down the line, we hope [the market will have grown so much] that we’ll just be able to direct people to a local store if they want to buy a biogas-powered motor,” he adds.

“There is a whole chain of innovation that has to happen when you launch a new product. There are so many supporting elements that have to become a reality.”

Sistema Biobolsa’s team admits that they sometimes questions whether the additional work they have taken on beyond their core technology, like product financing, education campaigns, or downstream product development, fall too far outside of the scope of what they should be doing. “There is definitely a business case for being stricter with the scope of our work,” Eaton acknowledges. But he counters that being part of such a nascent market requires working across the value chain to ensure the long-term adoption and impact of the company’s systems. “In the beginning, I thought we just needed to create a [better] product that would last a long time. But when you start thinking about your mission and vision, you allow that to influence your scope [of work],” he says. “The gains we want to make in agriculture don’t have a one to two year timeline. We want to see the impact continuing 15 years down the line.”

Sistema Biobolsa has experienced limits to what it can and should do. In the early days, for example, it manufactured biogas stoves to sell alongside its biodigesters until local mechanics began building a new model that was more suitable for local cooking preferences. Eaton says the experience helped the company realize that it did not have to do everything itself; rather, looking for opportunities to collaborate is both more efficient and progresses the ecosystem that Sistema Biobolsa is part of. “If we want to see this industry grow, our company has to be a permeable cell wall in terms of what we make and give and what other people make and adopt,” he says.

Building partnerships and collaborative opportunities has gotten easier for Sistema Biobolsa in the last few years, as Mexico’s small-scale biogas community has grown and become better connected. Now with an eye to expanding in more markets in Latin America, as well as in India and East Africa, Sistema Biobolsa’s work is unlikely to become any less challenging, but the company now knows the way.

Written by Jessica Pothering with reporting from Mollie Bloudoff-Indelicato.

Jason Prapas is a member of Demand’s Editorial Advisory Board.