Economics of anaerobic manure digesters
Digesters are of interest with respect to climate change, energy, air quality and water quality. However, digesters are capital-intensive and difficult to maintain. Profitability of a farmbased digester usually requires utilizing the energy as well as other co-products such as manure solids that are separated out and composted.
Anaerobic digestion is the process in which microbes in the absence of oxygen convert volatile acids in livestock manure into biogas consisting of methane, carbon dioxide, and small amounts of water and other compounds. The methane produced by this process can be burned to generate electricity and/or heat. Under favorable circumstances, there is also a potential for purifying the methane into a marketable, natural gasgrade biogas suitable for household and industrial use.
While the focus here is on manure, any organic matter (“digestate”) can be processed in a digester. Wastewater sludge, municipal solid waste, food industry wastes, grain industry and crop residues, and paper and pulp industry wastes are other materials that are processed in digesters. Addition of organic matter from off-farm sources to a farm digester is referred to as “co-digestion.”
Benefits of digesters
There are at least two ways that a farm digester operator can generate revenue by burning biogas that contains methane. One way is to sell carbon credits. Such sales are generally handled through a third-party intermediary aggregator firm that audits the digester initially to verify the methane quantity and aggregates those quantities into an account that is sold to a buyer who has committed to some level of greenhouse gas reduction. The aggregator then monitors performance over some agreed-upon contract period.
Another way of generating revenue is by marketing renewable energy credits (RECs) to an electrical utility that is under mandate to generate part of their electricity from renewable sources. In Minnesota, for example, utilities must obtain at least 25 percent from renewable sources by 2025.
The REC value would typically be negotiated as part of the power purchase agreement between the utility and the digester operator. More stringent water quality regulations are also pressuring livestock operations to minimize nonpoint nutrient losses and in the future may also offer nutrient credit trading opportunities to generate additional revenue.
Rather than using the biogas to generate electricity, a few digester systems are beginning to upgrade the biogas to natural gas standards and trucking or piping it to off-site industrial users. One U.S. digester operator is following Sweden’s lead by powering milk trucks with compressed biogas.
Digestion itself has little effect on the nutrient content of manure, but integrated nutrient removal systems have been proposed that would use digester energy to power other equipment that would divert nutrients away from land application to other uses that have less impact on water quality.
In addition to generating renewable energy, anaerobic digestion leads to reduced odor pollution, fewer pathogens, and reduced biochemical oxygen demand. Digestion stabilizes the volatile organic compounds that remain in the manure so that they can be land-applied with fewer objectionable odors; so many farm digesters have been installed to address neighbors’ complaints.
Nutrients do not disappear in a digester, although some may settle out. Organic nitrogen is converted to ammonium during digestion, so the ammonium level in the digestate typically rises. This conversion may make the nitrogen more rapidly available to the crop once land applied, which may offer opportunities to change application rates and timing.
Without a change in nutrient amounts, adding a digester is unlikely to have a large impact on water quality. Digesters are often included along with manure storage facilities, solids separators, and composting facilities in an improved overall system. Taken together, the system may offer great opportunities to improve water quality by transporting the manure nutrients to fields where they are most needed and applying them when the crops need them most.
Capital and costs
(Editor’s note: This article was written with a focus on confined dairies in mind, and the numbers quoted below reflect that perspective. However, there is potential for crossover between confined diary systems and beef feedlots.)
The capital requirements to install a digester will vary widely depending on digester design chosen, size, and choice of equipment for utilization of the biogas and/or for separating out manure fiber. The current capital cost range for complete digester systems is estimated at $1,000-2,000 per cow depending on herd size, with the cost to maintain an engine-generator set at 1-2 cents/kWh of electricity generated. An AgSTAR regression of investments made versus herd size at 19 recent dairy farm plug-flow digesters gave a result of $566,006 $617 per cow in 2009 dollars.
There is considerable interest in digester designs that are economically feasible for smaller farms, but some digester components are difficult to scale down. A complete mix digester with separator installed on a 160cow Minnesota dairy farm in 2008 cost $460,000, or $2,875/cow. Another recent study found that the electrical generation equipment made up on average 36 percent of total investment for a group of 36 digesters, suggesting that substantial cost savings may be possible in situations where the biogas can be used for heating rather than to produce electricity.
The federal government and many states offer incentives for installing digesters.
The 2008 Farm Bill included two grant and loan programs that cover digesters—the Rural Energy for America Program (REAP) and the Value-Added Producer Grant Program.
REAP provides grants of up to 25 percent of project cost and loan guarantees of up to $25 million. Value-Added Producer Grants can provide planning costs and working capital. Utilities will also sometimes underwrite part of the cost of the electrical generating equipment.
While most farm-based digesters in the U.S.—of which there were 151 in 2010—generate electricity with the biogas, negotiating an acceptable agreement with the local utility is often a challenge. Arranging financing and obtaining permits are other challenges that producers have noted.
A digester is a major capital investment, and calls for a careful engineering and economic analysis of the particular situation. Consultants and computer decision tools are available to assist with the analysis.
Published digester economic assessments tend to show that the most successful digesters are those that have generated added value from separated manure fiber, charged tipping fees from accepting off-farm food processing wastes, or had a nearby high-value use for the biogas or electricity. Pathogen reduction is another frequently-cited benefit of digestion. Electricity sales alone are not usually enough to cover costs.
Even an unprofitable digester may be regarded as successful if it provides nonmonetary benefits such as odor and pathogen control. — William F. Lazarus, University of Minnesota