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Financing Anaerobic Digestion Projects

Once you determine an anaerobic digester project may be technically feasible at your farm, you need to evaluate whether it will work financially. There are two stages of planning described below: Preliminary Project Planning and Advanced Project Planning.

Preliminary Project Planning

Assessing the financial feasibility of an anaerobic digester project is an iterative process. The first step is to do preliminary project planning. In this step, you do preliminary screening and a technical feasibility assessment to determine if the project can technically work. Then, using those assumptions, you can develop a high level estimate of the project’s financial feasibility considering revenues and expenses.

Preliminary Project Planning

Financial Feasibility - Revenue and ExpensesTechnical FeasibilityPreliminary Screening

Preliminary Screening

Determine whether anaerobic digestion is right for you by considering:

  • manure availability,
  • whether your manure management technique is compatible with an anaerobic digester,
  • potential uses for recovered energy and
  • whether you have the capacity to manage the system.

Technical Feasibility

Start assessing your project’s technical feasibility by identifying the anaerobic digester components:

  • feedstock,
  • onsite conditions,
  • system type and size, and
  • biogas use.

Example Feasibility Study for Dairy Manure Anaerobic Digesters (PDF) (2009, Essential Consulting Oregon, LLC)

Financial Feasibility - Revenue and Expenses

Estimate the annual revenue you could receive from your project based on the anaerobic digester components identified in your technical feasibility analysis:

  • The amount of biogas to be produced and how it will be sold
  • Financial assistance
  • Renewable energy and carbon credits

Estimate the annual expenses associated with your project. Include one-time (capital) and ongoing annual (operation and maintenance) costs of the system.

Advanced Project Planning

After the preliminary project planning is complete, you will likely have to refine your assumptions to optimize technical or financial performance with a new project plan. Next, you need to conduct detailed financial modeling. If the results are favorable, you can implement the project.

Advanced Project Planning

Conduct Detailed financial ModelingRefine Project Plan and Select Approach

Refine Project Plan and Select Approach

The feasibility of an anaerobic digester project depends on site-specific factors. These factors influence the amount and quality of methane generated, variability in electricity prices, availability of incentives and financing rates. In this stage of project planning, you can go through several versions of project plans, refining your assumptions until you identify the best possible anaerobic digester project.

Some of the key ways to improve project economics at this stage include:

  • Increasing income from electricity sales (e.g., tariffs for biogas) or other types of energy sales.
  • Getting direct financial assistance for feasibility studies and/or up-front costs.
  • Using creative financing mechanisms such as tax credits and low interest program investment loans.
  • Developing lower cost digester systems.
  • Seeking additional revenue-generating options (e.g., finding additional uses for on-farm heat; accepting off-farm wastes for tipping fees; concentrating nutrients for fertilizer products).
  • Implementing different business models, such as third party build/own/operate models.

Conduct Detailed Financial Modeling


Resources and Tools

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  • Funding On-Farm Anaerobic Digestion provides an overview and case studies of funding mechanisms available to farm operators. (EPA, 2012)
  • Profits from Manure Power? The Economics of Anaerobic Digesters On-Farm Exit summarizes basic financial considerations for installing on-farm anaerobic digesters, including economies of scale, farm energy use, price of electricity and financing (The Minnesota Project, undated)
  • Digester Project Funding Guide (PDF) Exitis a guide to planning a digester project, conduct a feasibility study, estimate funding needs and develop an application for USDA funding. (Innovation Center for U.S. Dairy, 2012)
  • Biogas Economic Model and Toolkit Exit is an MS Excel tool that models project scenarios and can provide an initial assessment of electricity generation at farms and dairy processing facilities. (Baker Tilly, 2012)
  • RETScreen Exit is an Excel-based analysis tool that helps to quickly and inexpensively determine the technical and financial viability of potential renewable energy and cogeneration projects. Note: this model is not specific to AD. (Canada Natural Resources Council, 2013)