Holy cow! A pie-powered dairy farm?

Pacific Gas & Electric isn’t going to the dogs; it’s going to the cows. And rather than causing a ruining effect the ol’ saying implies, PG&E says it’s going to have a greening one.

The San Francisco-based utility (NYSE:PCG) launched a cow-powered contract today with renewable energy company California Bioenergy for its first greenhouse gas emission (GHG) reductions from a dairy farm. The investment is intended to yield 75,000 metric tons of verifiable GHG emission reductions.

PG&E’s ClimateSmart program, which serves 30,000 customers, is purchasing GHG emission reductions from California Bioenergy’s livestock methane capture project on Bidart Dairy near Bakersfield in Kern County, Calif. The project is expected to be completed in 2010.

The ClimateSmart program takes an interesting approach to engaging homeowners, businesses and cities in evening out the GHG emissions produced by the energy they use. Through the voluntary, tax-deductible program, customers pay a separate amount (usually less than $5 per month) on their monthly energy bill, based on their actual energy use. PG&E, in turn, invests the payments into projects that reduce or absorb GHG emissions.

And it’s not quite as stringent as scaling back on meat consumption. Last year, Chairman of the Intergovernmental Panel on Climate Change Rajendra Pachauri suggested people cut back on eating meat by eliminating it from their diet once a week. Pachauri’s logic was that nearly 20 percent of greenhouse emissions are caused by meat production (see Meat is sacred?)

The ClimateSmart project is expected to process the dairy farm’s manure through an anaerobic digester, trapping the methane gas produced as the manure decomposes. The renewable energy produced from the cow pies is planned to power the dairy’s onsite operations.

PG&E has committed $1.5 million in shareholder funds over the first three years of the program to make the energy use in the company’s facilities carbon neutral.

In 2006, Walla Walla, Wash.’s Organix completed a similar dairy manure pilot project that converted the dairy manure slurry byproduct to a peat moss substitute designed for the horticulture industry (see Organix converting dairy waste to peat moss).

Melbourne, Fla.-based TyraTech (AIM:TYR), which develops natural pesticides, designed an on-site system for dairy farmers that can separate the liquid from the solids in cattle dung, then compost the solids, producing an odorless, pathogen-free soil material, which can be used as an alternative to peat moss.

Separate from the ClimateSmart program, PG&E has power purchase agreements for diary biogas, where the methane gas is captured and turned into pipeline quality natural gas that’s piped back into the grid, said PG&E spokeswoman Katie Romans.

With the company’s latest idea, PG&E seems to be steering in the right direction. But whether this turns into a cash cow for Bidart Dairy, only time will tell.