Michigan Milk Producers Association, Canadian Dairy Distillery Partner to Upcycle Dairy Byproduct into Biofuel

May 24, 2023

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(Michigan Milk Producers Association (MMPA)) Partnership will build a low carbon ethanol plant in southwest Michigan to add needed biofuel supply and help lower the dairy industry’s carbon footprint. -- Michigan Milk Producers Association (MMPA) and Canadian Dairy Distillery announced a joint initiative that will transform a dairy byproduct into the world’s lowest carbon-intensity ethanol, adding to the biofuel supply for cars and trucks.

Ontario-based Dairy Distillery developed technology to transform a lactose-rich dairy byproduct, called milk permeate into vodka, aptly named Vodkow. This high value use of milk permeate caught the attention of MMPA whose Constantine, MI facility produces 14,000 tonnes a year that’s being used for animal feed. Looking to create more value for its dairy farmer members, MMPA partnered with Dairy Distillery to build a plant to process its milk permeate into 2.2 million gallons of ethanol. When blended with transportation fuel, the permeate ethanol will offset 14,500 tonnes of carbon a year. This offset will reduce the carbon footprint of the milk processed at Constantine by 5%.

“I’ve been inspired by MMPA dairy farmers and their commitment to sustainability. Using a milk byproduct to reduce the carbon footprint of dairy is an innovation that will make a significant contribution to MMPA’s net zero carbon emissions goal.” explains Dairy Distillery CEOOmid McDonald.

Ethanol production at the $41 million ethanol plant is planned for early 2025. The project received $2.5 million in funding from the Michigan Strategic Fund, showing the state’s commitment to the future of clean energy.

“Constructing an ethanol-processing plant at the Constantine facility compliments our focus on sustainability and provides a progressive, unique opportunity to utilize new technologies that add value to our current processing operations while further diversifying the markets we currently serve,” MMPA President and CEO Joe Digliosaid. “It’s exciting to see innovative solutions such as this facility, which lead to growth and success for our members, employees, stakeholders and our communities.”

“Projects like these are a prime example of the diversity and strength of our dairy industry and demonstrates the Whitmer Administration’s commitment to growing agriculture businesses in Michigan,” said Tim Boring, director, Michigan Department of Agriculture and Rural Development. “In 2022, MDARD provided a $100,000 Value-Added Grant to the Michigan Milk Producers Association and Dairy Distillery in this first of its kind venture. The department is proud to support business expansion with multi-pronged benefits – creates good-paying local jobs; opens up new markets for Michigan’s farmers to continue to thrive; lowers carbon footprints; and reduces the overall waste stream. I hope this serves as a model for others into the future.” READ MORE

Dairy Distillery plans fuel ethanol plant in Michigan (Farmtario)

State boost bringing $41.1 million investment to Constantine dairy facility (Sturgis Journal)

Dairy vodka company to make ethanol at Constantine expansion (WoodTV)

MMPA to help transform dairy byproduct into the world's lowest carbon-intensity ethanol (Dairy Foods)

Canadian company to turn milk into ethanol at $41M Michigan plant (MLive)

Michigan project to convert dairy byproduct into ethanol (Ethanol Producer Magazine)

DAIRY BYPRODUCT-BASED ETHANOL PLANT ANNOUNCED BY MMPA, DAIRY DISTILLERY (Brownfield Ag News)

US dairy farmers want to turn milk production waste into biofuel for cars -- While Australia relies on crops to produce ethanol for biofuels, dairy farmers in the US and Canada claim they can turn waste from milk production into eight million litres of ethanol a year. (Drive)

First vodka, now ethanol: Dairy Distillery sets its sights on fuel from milk (realagriculture)

Michigan co-op plans to turn milk byproduct into ethanol (Farm Progress)

Excerpt from Farmtario: Dairy Distillery is known for its transformation of whey and milk permeate into vodka, called VodKow, which is now available across the province at LCBO stores.

Why it matters: Milk permeate stocks have increased since sales of dairy products like butter and ice cream have risen and fluid milk has declined. Ways to deal with the permeate surplus are needed.

When milk is processed and the useful fat is removed, remaining product has less of a market. It is known in the dairy world as solids-not-fat and usually ends up in lower-paying products like pig feed, if markets are even available. It can be dried for other uses, there is not enough milk dryer capacity in Canada to dry all of the available permeate down to milk solids.

The lactose in the milk-processing byproduct interested Dairy Distillery founder Omid McDonald, and he launched Dairy Distillery to take advantage of it. His company was one of five agri-tech startups that presented to investors and others interested in agri-food technology at the second Spark Symposium recently hosted by the Grand River Agricultural Society in Elora.

“It’s expensive to dry a tonne of permeate and there’s little to no value for farmers or processors,” he said.

However, it’s a sugar that can be made in other products, like alcohol.

“Let’s not waste such a beautiful sugar.”

McDonald and his staff experimented with creating ethanol, not alcohol from permeate and realized they had a process that was more efficient than any others they could find. That led them on the route to commercialize that process.

Enter the Inflation Reduction Act, the massive U.S. subsidy bill that included large amounts of money for carbon-reducing technology. Those subsidies have made new projects viable in the United States that were not viable before, including the new Dairy Distillery and Michigan Milk Producers Association ethanol plant in Constantine, Michigan.

“This will be the world’s lowest carbon intensity ethanol,” said McDonald. The vision is to displace all the permeate in the United States to ethanol, he said, which would be 500 million litres per year in the United States.

He showed a map of the United States with many circles, each of which is an area with enough milk permeate for an ethanol plant.

McDonald was asked why a Canadian company like Dairy Distillery isn’t using its technology at home first. The answer is huge subsidies available in the United States, but McDonald said a supply of permeate and a location have been identified in Canada and can be used when it makes financial sense here.

The plant in Michigan, an equal partnership between the dairy co-op and Dairy Distillery, will produce 2.2 million gallons of ethanol per year, calculated to displace 14,000 tonnes of carbon. That would mean a five per cent reduction in the amount of carbon produced by the co-op.

Like grain-based ethanol, there is a byproduct, which is spent yeast. In Michigan this will be used to create methane that can be burned to power the milk processing plant. READ MORE

Excerpt from Sturgis Journal: Gov. Gretchen Whitmer and the Michigan Economic Development Corporation announced Tuesday (May 23, 2023) the Michigan Strategic Fund approval for a new dairy processing facility that will reduce the carbon footprint of dairy byproduct and bring new jobs and infrastructure to the community. A total capital investment of $41.1 million is expected.

The Michigan Strategic Fund approved a $2 million Michigan Business Development Program performance-based grant and a 15-year State Essential Services Assessment exemption valued at $682,500 in support of the project at Michigan Milk Producer Association's Constantine facility.

The project is expected to create 12 well-paying jobs. Michigan was chosen for the project over a competing site in Indiana.

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The project includes the construction of a new wastewater treatment system that will produce natural gas to power the ethanol plant’s distillation system, further lowering the carbon footprint of the milk permeate ethanol. The output of the wastewater system will be a clean water stream that will eliminate Constantine’s dependence on the local utility to treat its process waste. The plant is scheduled to start production in early 2025.

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The village of Constantine anticipates approval of a property tax abatement in support of the project. The MEDC also authorized a State Education Tax abatement to be used in conjunction with the locally approved abatement. READ MORE

Excerpt from WOOD TV: Dairy Distillery started using milk permeate to make vodka, called Vodkow, in 2018, after partnering with the University of Ottawa to figure out how to ferment the byproduct. During the pandemic, it started making hand sanitizer for its local hospitals and community, McDonald explained.

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Then it started looking for other uses for milk permeate.

“Very early on, we realized that this problem with this excess milk permeate is a problem for the dairy industry as a whole,” McDonald said. “So there’s only so much vodka people can drink and there’s so much of this stuff out there, we said, ‘Well what other high-volume uses are out there?’ and that’s when we started looking at biofuel.”

The company met with the MMPA about two and a half years ago. Its Constantine location was creating a lot of milk permeate and sending it to pigs. It was looking for a better way to reduce its carbon footprint.

“Lot of people are down on dairy for its environmental aspects, and we want to be part of … the story to show that with innovation and with technology, we can eliminate that impact and so people can enjoy the dairy products that they love knowing that the environmental impact is minimized,” McDonald explained.

The milk permeate will be piped from the dairy production facility to the ethanol plant. The ethanol will then be used in fuel.

“When this ethanol is blended with transportation fuel, what it does is it displaces oil,” McDonald said. “So it keeps oil in the ground and replaces it with ethanol that was essentially reclaimed carbon. And that creates what’s called a ‘carbon offset,’ and this ethanol will displace about 14,000 (metric) tons of carbon a year.”

That’s about 5% of the facility’s carbon footprint, he said.

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The company chose Michigan over Indiana for the project. On Tuesday, the Michigan Economic Development Corporation approved a request for incentives that include a $2 million performance-based grant and a 15-year State Essential Services Assessment exemption, worth around $682,500. Constantine is expected to approve a property tax abatement. READ MORE