Assessing the Economic Aspects of Anaerobic Digester Adoption on U.S. Swine Operations

By: Brent Gloy                                                                                                       October 19, 2011


PDF Version Here​

Anaerobic digestion (AD) of livestock waste presents a promising technological response to the challenges of renewable energy production, greenhouse gas mitigation, and livestock waste management.  While AD systems have been commercially available for many years, they have not been widely adopted on U.S. livestock operations. Among livestock species, AD systems have been more rapidly adopted by dairy operations.  According to the U.S. EPA’s AgSTAR program website, http://www.epa.gov/agstar/projects/index.html, dairy operations account for 140 of the 171 active sites, whereas swine installations account for 23.  This stark difference in adoption rates raises many questions about why the systems have been adopted so much more widely amongst dairy operations.    

While there are many possible explanations for the differences, a common perception is that the economics of adopting AD on dairy operations is more favorable than on swine operations.   However, a 2007 NRCS study that examined the energy production costs on a variety of digester operations concluded that: 

“The case study evaluation indicates that producing energy from swine facilities can be achieved at a lower cost than from dairy facilities.”  Page 5

If accurate, such conclusions would cast doubt on whether economic considerations are truly the reason that few swine operations have chosen to adopt AD systems.  This would cause one to question whether other factors are discouraging swine operations from adopting AD systems. While the NRCS study notes that the costs of generation for all types of AD systems are in excess of the cost of purchased electricity, it is perplexing why dairy operations, whose costs of generation would be even higher, have chosen to adopt AD at a more rapid pace.  As a result, it is worthwhile to carefully re‐examine the costs of adopting AD systems on swine operations.    

The NRCS study also notes that the costs of electrical generation typically account for 36% of the capital costs and a large share of the annual operating and maintenance costs associated with AD systems.  They suggest that farms should consider other possible benefits of digesters that might be obtained without electrical generation. These could include substitution for other fuels such as propane, odor reduction, or carbon credits.  However, in all cases it is important for the farmer to accurately understand the costs of adopting an AD system in order to obtain these benefits.  Presently there is little information available to make such an assessment.  This again makes it important to carefully re‐asses the economics of AD adoption on swine operations.   

Given policy maker interest in encouraging farmers to use technologies such as AD, it is important to understand the economic parameters associated with AD so that one might be able to accurately predict how farmers would respond to changes in policy incentives for AD installation.  For instance, in order to understand how farmers would respond to incentive 2 payments for greenhouse gas emission reductions, one must have an accurate model to determine the costs of adopting AD systems on a wide range of farm types.   


 

For a PDF of the full paper, click here​.

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