A biogas digester is a seasoned, time-tested technology. They use sludge, manure, and other organic waste to generate methane (natural gas) fuel. Nobody doubts their technological prowess.
However, the question of their economic benefits remains unanswered. How much economic sense do anaerobic digesters make in terms of dollars and cents?
Consider whether the project is economically viable. You can do this after determining that biogas digestion is technically feasible and measuring your methane generation potential
You can cover many of the capital costs of constructing a biogas digester with grants or low-interest loans.
Consider the net operating costs of a biogas digester before making a significant capital investment. Conduct a detailed financial analysis before purchasing a biogas digester to understand the costs better.
This guide will provide information to determine whether a biogas digester is economically feasible or not.
Table of Contents
Costs Of Biogas Digester in General.
The capital cost of an on-farm biogas digester ranges from approximately $400,000 to $5,000,000. This depends on the size of the operation and technology used, according to the US Environmental Protection Agency AgSTAR.
The average on-farm biogas digestion unit costs around $1.2 million. The cost of a unit varies depending on its size, design, and features.
The type of biogas digester required for your operation, and its cost, vary depending on the number of livestock.
Similarly, most digesters are somewhat customized by the provider, so capital outlay and operating and maintenance costs vary.
You must also consider annual operation and maintenance costs, repairs, parts, labor, and insurance. This is important when calculating the cost of a biogas digestion system, annual operation, and maintenance costs.
You must thoroughly understand the variables of any funding programs before continuing to invest in a system. This is important since biogas digesters are capital-intensive,
It would help if you spoke with an agricultural loan officer about any loan risk associated with a methane digester to ensure that the additional debt will not jeopardize your ability to access capital for your operation.
Determine the extent to which you will offset costs by generating revenue or reducing energy expenditures over the life of the digester as part of the economic analysis. Utility contracts can vary significantly between rural communities.
Some utilities have net metering policies that allow small energy generators, such as those equipped with a biogas digester, to offset their energy consumption by producing electricity. However, the value will differ depending on the utility.
How This Cost Works
Some will credit net-metered power at the retail rate, implying a direct offset for every kilowatt-hour produced.
Credit for other utilities net-metered power at a reduced or wholesale price. In the case of agricultural operations, you may be assessed an electricity demand charge.
Please inquire with your utility company about their net metering policy. Producers should reduce operational and maintenance costs and offset energy usage with a biogas digestion system to increase profitability.
Be cautious about relying on a biogas digestion system to generate revenue by selling electricity to a utility, as they may be unwilling to enter into such an agreement. If they are willing, the offered rate is usually a wholesale price.
Check for any contractual terms that may be problematic for you, such as a clause requiring a certain amount of power in a specific period or an obligation to notify the utility of changes in electrical production.
Outline some of your expected costs and revenues over the life of the digester as you evaluate what is best suited to your operation.
When you contact a technology provider, you can obtain more detailed information that will allow you to calculate actual costs.
Five Economic Feasibility Indicators
There are five signs that a biogas digester may be economically feasible at your facility. These indicators should be regarded as a screening tool, and they can assist you in determining whether you should conduct a comprehensive feasibility study of your operation.
If your operation meets at least two of the criteria, conduct a more thorough examination of your situation:
Utilizes Confined Animal Feeding Operation (CAFO).
The operation is classified as a CAFO. CAFOs are required to follow state and federal laws governing waste management practices. A biogas digester could supplement a CAFO’s plan for managing air emissions, nutrients, or waste.
Possibility of Co-digestion.
There is the possibility of co-digestion. There may be efficiencies that can improve the economic viability of a project when agricultural producers and related industries, such as food manufacturers or municipal waste treatment facilities, are located nearby.
Co-digestion projects have been shown in feasibility studies to be economically viable. If you or your community are interested in a co-digestion project, you should read one of the reports in the reference section.
Has Got Frequent or Credible Complaints About Odor.
When your business receives frequent or credible odor complaints, biogas digestion units can provide measurable odor reduction, which can help to improve neighbor relations and reduce nuisance lawsuits.
Because information on damage awards is not readily available, estimating the financial risk of an odor-related lawsuit can be difficult. Most cases are resolved outside of court, and insurance companies typically pay a portion of the settlements.
The majority of verdicts and settlements are not made public. Avoiding a potential lawsuit and the associated financial liability may help justify the capital investment in a biogas digester project.
If you own a Dairy, Swine, or Poultry Farm
You run a dairy, swine, or poultry farm. These types of operations are the subject of many nuisance claims.
These operations have also resulted in significant punitive damage awards, which may encourage swine and poultry producers to adopt biogas digestion units as a management practice to reduce the risk of a nuisance claim.
The precise cause of these disturbance lawsuits is not always clear; however, it is most likely related to the strength and persistence of odor.
The historical background of disturbance lawsuits involving swine and poultry operations suggests that even operations in rural communities with few neighbors could be sued. A biogas digester could be used to reduce conflict.
If you are Incurring $5,000 Cost in Monthly Electricity or Heating Expenses.
On average, your company spends more than $5,000 monthly on electricity or heating. The ability of an operation to offset average monthly energy costs influences the economic feasibility of a biogas digester system.
A biogas digester may be economically viable if a producer can offset at least $5,000 in electricity or heating costs for an entire operation.
Electricity and heating costs are one type of operating expense that a biogas digester could help to offset. Propane, natural gas, and electricity are examples of these costs.
If your company’s average monthly energy costs exceed $5,000, you should conduct a detailed financial analysis to see if installing a digester could offset those costs.
Furthermore, the type of digester required for an operation will impact its economic feasibility. The use of biogas is the most cost-effective way of harnessing the energy generated by the digester.
If your feeding operation spends more than $5,000 per month on energy, using biogas instead of electricity can save you money.
Converting methane gas to electricity incurs additional costs. Avoiding such costs will have a greater net economic impact than any potential revenues from supplying electricity to the grid.
Converting methane gas into electricity necessitates using a generator, which incurs additional costs. Aside from the extra cost of a generator, you would also need to budget for maintenance, labor, and backup electricity resources. A biogas-only operation would most likely incur fewer costs.
Other Economic Feasibility Considerations
Include water costs in your spreadsheet.
Do not rely on revenue from carbon offsets to fund the system. In the United States, these markets are voluntary, and prices have been volatile and low in recent years.
The state guidelines to determine waste transport policies for on- or off-site locations before calculating potential tipping fees.
Be keen on maintenance and labor costs in addition to the initial investment in an electricity generator.
Costs of backup energy systems in case your system needs to be serviced.
All costs associated with the construction, storage, and transportation of manure showed also be considered. Consider the digester’s location for utility infrastructure. Depending on your operation’s proximity to utility infrastructure, grid connections can be prohibitively expensive.
Estimate your methane generation potential while keeping a realistic perspective on the energy costs you might be able to offset.
Consider risk. Prices can vary greatly, so consider both the most likely and worst-case scenarios.