Economic Analysis of Anaerobic Digestion Systems and the Financial Incentives Provided by the New York State Renewable Portfolio Standard (RPS) Customer-Sited Tier (CST) Anaerobic Digester Gas (ADG)-to-Electricity Program

This paper conducts a financial analysis of anaerobic digestion systems on dairy farms and describes a financial model developed for this purpose. The model is flexible and can be utilized with farm-specific data to assist in the evaluation of an anaerobic digestion system. The model is illustrated with two sources of data. The “base” case is the more flexible model and the parameters to utilize the model were developed from a wide range of resources. The second model is meant to be used in conjunction with FarmWare 3.1 which was developed and distributed by the United States Environmental Protection Agency’s AgStar Program. The analysis also explicitly incorporates the financial incentives offered under the New York State Energy Research and Development Authority’s Customer-Sited Tier Anaerobic Digester Gas-to-Electricity Program. The analysis indicates that a variety of parameters are very important in determining the economic viability of anaerobic digester projects. These key variables include the biogas energy yield, current on-farm energy use, prices paid for electricity, the price received for excess electricity generation, the ability to co-digest other waste streams, capital, and operating costs. Based upon reasonable estimates of the costs of such a project for a 1,000 cow dairy operation, it would appear that anaerobic digestion is of marginal profitability. However, there are a variety of reasonable scenarios where the profitability of the system is very attractive.