Economic Feasibility of Anaerobic Digesters

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June 2008 Agdex 768-6 Economic Feasibility of Anaerobic Digesters A viable anaerobic digestion system to process organic wastes can be costly, so producers who are considering adopting this type of technology need to examine all aspects of it. One key aspect to consider is the economic feasibility of anaerobic digesters. This factsheet provides a fairly high level, theoretical approach to exploring the costs of the technology. Data is provided in the form of tables as well as through examples that are useful to determine the economic feasibility of adopting an anaerobic digester/biogas plant for agricultural operations. The numbers used in the tables are drawn from existing resources that are listed in the references section at the end of the factsheet. Factsheet topics: background information manure/energy production co-digestion biogas energy potential examples: co-digestion of dairy manure and animal fat, estimation of capital cost and simple payback period Background Alberta has many agricultural operations that generate various types of organic wastes. These organic wastes require proper handling to reduce pollution and contamination. One key aspect to consider is the economic feasibility of anaerobic digesters Using anaerobic digesters to process these organic wastes appears to be an attractive option since the anaerobic digestion process can stabilize most agricultural, domestic and industrial organic wastes and produce biogas, a renewable energy. Biogas can be used as a fuel source to produce electricity and heat, just like natural gas. The total capital costs of anaerobic digester plants are high and may range from a few hundred thousand to a few million dollars. However, most of the other waste processing technologies, which may also require a high capital investment, do not generate revenue like a biogas digester plant does. Some of the feasibility studies in North America on anaerobic digesters concluded that the payback period ranges from 5 to 16 years when operated under optimum and worst conditions, respectively. Government financial incentives for producing green energy can potentially reduce the payback period significantly. Manure/energy production Table 1 contains data for daily manure and biogas production as well as the annual electricity and heat generation potential for the major livestock operations such as beef, dairy, swine and poultry. Table1 provides the data that will help agricultural producers estimate potential approximate annual revenue.

Table1. Manure/energy estimation Manure quantity as Biogas production Electricity potential Energy potential Description excreted (kg/d) (m 3 /d) (kw)/year (GJ)/year Beef 24.0 1.10 663 3.0 Dairy 62.0 2.01 1,227 5.5 Piglet* 3.5 0.16 98 0.4 Poultry (100 - layer) 8.8 0.85 516 2.3 * Multiply the values by 12 for every sow in a farrow-to-finish operation. Example 1 Multiplying the amount of annual electricity and heat energy potentials in Table 1 by average electricity and heating costs provides the approximate annual energy revenue from anaerobic processing of manure as shown in Example 1. Number of animals = 100 dairy cows Average cost of electricity = $0.06/ kwh Average cost of heat = $5.5/GJ Annual electricity potential = 1,227 kwh (from Table1) Annual heating potential = 5.5 GJ (from Table 2) Savings from electricity = 100 x 0.06 x 1,227 = $7,362 Savings from gas = 100 x 5.5 x 5.5 = $3,025 Total annual savings from energy = $10,387 Co-digestion biogas energy potential Table 2 and Table 3 contain the ranges provided in the literature for total solids, volatile solids and biogas yield (m 3 /tonne) and estimated total annual biomass production (tonnes) and energy potential (PJ) across the province. The purpose of these tables is to provide the total biogas energy potential in the province as well as to estimate the biogas energy potential for centralized digesters. To assist in exploring the potential to locate centralized, manure-based biogas facilities, producers should check the following website for information on the relative amount of manure production in Alberta: http://www1.agric.gov. ab.ca/$department/deptdocs.nsf/all/agdex10335 Table 2. Inventory of livestock and municipal feedstock materials and biogas energy potential in Alberta Yearly biomass production in tonnes* Feed material Total solids % Volatile solids % of total solids Biogas yield m 3 /tonne Yearly energy potential in PJ Beef cattle manure 8-12 80-85 19-46 51,890,736 20.0-48.0 53 Hog manure-grower to finisher 9-11 80-85 28-46 2,452,800 1.4-2.3 58 Dairy manure 12 80-85 25-32 3,994,195 2.0-2.6 54 Poultry manure 25-27 70-80 69-96 1,728,987 2.4-3.3 60 Animal fat 89-90 90-93 801-837 87,000 1.4-1.5 N/A Methane content % Animal carcass (homogenized-bovine) 34-39 90-93 348-413 264,023 1.8-1.2 N/A Municipal wastewater sludge 30-20 90 17-140 539,835 0.2-1.5 65 Household waste N/A N/A 143-214 N/A N/A N/A Total manure (including municipal sludge) 60,606,553 25.7-57.4 50-70 Note: 1 PJ is 1,000,000 GJ. 1 GJ is 1000 MJ. 2

Table 3. Inventory of agricultural crops and biogas energy potential in Alberta Yearly biomass production in dry tonnes* Feed material Total solids % Volatile solids % of total solids Biogas yield m 3 /tonne Yearly energy potential in PJ Barley 36-86 90-95 169-291 1,404,671 4.75-8.18 60-70 Wheat 32-97 N/A 48-146 1,390,222 1.33-4.106 N/A Oats 64 68 147-187 172,085 0.51-0.64 49-57 Rye 25-61 91-95 112-457 4,423 0.00-0.04 N/A Triticale 27-66 93-97 150-554 9,526 0.03-0.11 60-70 Sugar beet leaves N/A N/A 40-50 197,887 0.16-0.20 49-57 Fodder corn 25-37 95 182 436 89,674 0.33-0.78 Tame hay N/A N/A 80 699,344 1.1 Leaves 80 90 72-216 N/A N/A N/A Whey 1-5 80-95 6-45 N/A N/A Grass silage 20-25 90 75-126 N/A N/A N/A Distiller grain wastewater N/A N/A 58 N/A N/A 57-60 Total straw and other roughages 70 90 105-158 3,901,007 8.19-12.33 60-70 * In this estimation, the requirement of cattle straw and soil conditioning was taken into consideration. Example 2 Co digestion of dairy manure and animal fat Multiplying the corresponding biogas yield in Table 2 or 3 by the tonnes of available feed stock provides the total biogas potential in m3. One cubic meter of biogas is equivalent to 20 MJ of heat energy. When used as fuel for a co-generator, 1 m 3 of biogas can produce 1.7 kwh of electricity and 7.7 MJ of heat. Multiplying the total biogas potential in m 3 by 1.7 and 7.7 provides total electricity and heat energy potentials, respectively, as shown in Example 2. Number of animals = 100 dairy cows Amount of animal fat available = 250 tonnes/year Biogas potential for animal fat = 801 m 3 /tonne (Table 2) Biogas potential for 1,000 tonnes = 250 x 801 = 200,250 Electricity produced from 1 m 3 of biogas in a co-generator = 1.7 kwh Excess heat available from 1 m 3 of biogas after producing electricity = 7.7 MJ Electricity produced from 200,250 m 3 of biogas = 200,250 x 1.7 = 340,425 kwh Heat available from 200,250 m 3 of biogas = 200,250x 7.7= 1,541,925 MJ=1,541.9 GJ Electricity production from 100 dairy cows = 1,227 x 100= 122,700 kwh (Example 1) Heat production from 100 dairy cows = 5.5 x 100= 550 GJ (Example 1) Total electricity production from dairy manure and animal fat = 340,425 +122,700= 463,125 kwh Total heat production from dairy manure and animal fat = 1,541.9 + 550 =2,091.9 GJ Average cost of electricity = $0.06/ kwh Average cost of heat = $5.5/GJ Savings from electricity = 0.06 x 463,125 = $27,787.50 Savings from gas = 5.5 x 2,091.9 = $11,505.45 Total annual savings from energy or the energy potential for exporting into the grid = $27,787.5 + $11,505.45 = $39,292.95 Methane content % 3

Example 3 Approximate estimation of capital cost Typically, the capital costs of a biogas electricity generating plant are $3,700 to $7,000/kWh. Example 3 illustrates how to estimate the approximate capital cost assuming a period of 30 days/year as a shutdown period for maintenance. Even though it is possible to produce biogas energy continuously, as assumed in the examples, some experiences in North America show frequent interruption of operation due to unforeseen maintenance and process related issues. These types of interruptions may prolong the payback period. Unfortunately, in some worst case scenarios, there will not be any payback. Total electricity production from dairy manure and animal fat from Example 2 = 340,425 + 122,700 = 463,125 kwh Assuming 30 days/year for maintenance shut down, number of operating days/year = 335 Assuming a 24h/d operation, the capacity of the electricity generator = 463,125/335/24 = 57.6 kwh Assuming capital cost of $ 7,000/kWh, total cost of the system = 57.6 x 7,000 = $403,200 Example 4 Simple payback period Typically, the running cost of a biogas electricity generating plant is $0.02/kWh. Example 4 illustrates how to estimate the approximate simple payback period. Capital cost from Example 3 = $403,200 Operating cost assumed = $0.02/kWh Total electricity production from dairies and animal fat = 463,125 kwh (Example 2) Operating cost/year = 0.02 x 463,125 = $9,262.50 Yearly energy revenue = $39,292.95 (Example 2) Subtracting operating cost from the yearly revenue = $39,292.95 - $9,262.50 = $30,030.45 Government incentives for renewable energy production (2007-2012) = $0.06/kWh Total incentives = 0.06 x 463,125 = 27,787.50 Total yearly revenue = 30,030.45 + 27,787.5 = $57,817.95 The simple payback period = 403,200/57,817.95 = 6.97 years Note: Carbon credits and tipping fees may help to reduce the simple payback period. It is estimated that producing 1 MW of renewable energy is approximately equivalent to reducing 0.65 tonne of CO 2 emissions. The nutrient value in the digestate of the manure digester will be more or less the same as the undigested manure. Therefore, the land application cost of digestate is likely to be as same as the cost for land applying manure. Transportation costs for bringing in co-digestion substrate material may increase the simple payback period. However, the co-digestion process may result in increased nutrient value in the digestate. Therefore, approval from Alberta Environment and more testing during land application may be required. Some experiences in North America show that the digestion process is interrupted frequently due to unforeseen maintenance and process related issues which means the payback period will either be significantly increased or there will be no payback at all. Smaller digester facilities may significantly exceed the assumed capital cost per kwh, which also means the payback period will be significantly increased. Government incentives are assumed to be the same throughout the payback period in the above example, which may or may not be the case in the actual scenario. 4

Conclusion The typical simple payback for a biogas plant may be about seven years as long as the existing government incentive program is available and biogas energy is produced continuously without interruption except for scheduled regular maintenance. Some experiences in North America show that biogas energy production is often interrupted due to unforeseen maintenance and process related issues. Even though anaerobic digestion is a century-old process, the adaptation of this process successfully on the commercial scale for producing energy is still evolving. Frequent interruptions in the process show that the technology and process related knowledge still have room to improve. Despite these drawbacks, the potential for carbon trading and increased consumer awareness regarding practicing environmentally sound and sustainable agricultural production methods will certainly add to the benefits of continuing to work with this technology. Links for case studies 1. MUS system, http://himarkbiogas.com/imus/ 2. Iron Creek biogem plant, http://www1.agric.gov. ab.ca/$department/newslett.nsf/all/gm10016 3. US case study, http://www.epa.gov/agstar/pdf/ gordondale_report_final.pdf 4. European case study, http://www.epa.gov/agstar/pdf/ gordondale_report_final.pdf For additional information, check the following web pages: Anaerobic Digesters, Agdex 768-1, http://www1.agric.gov. ab.ca/$department/deptdocs.nsf/all/agdex10945 Anaerobic Digesters: Frequently Asked Questions, Agdex 768-2, http://www1.agric.gov.ab.ca/$department/ deptdocs.nsf/all/agdex11290 Biogas Energy Potential in Alberta, Agdex 768-3, http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/ all/agdex11397 Integrating Biogas, Confined Feedlot Operations and Ethanol Production, Agdex768-4, http://www1.agric.gov.ab. ca/$department/deptdocs.nsf/all/agdex11839 Biogas Distribution Rural Utilities Division of Alberta Agriculture and Rural Development, http://www1.agric. gov.ab.ca/general/progserv.nsf/all/ pgmsrv13?opendocument Incentives for biogas production Alberta Bioenergy Producer, http://www.energy.gov.ab.ca/bioenergy/ bioenergy.asp 5 References Angelidaki. I, L. Ellegaard 2003. Codigestion of manure and organic wastes in centralized biogas plants. Applied biochemistry and biotechnology 209:95-105. Bjornsson, L., D. Batstone, K. Cristenson, B. Mattiasson 2001. Agrigas-Biogas production from crop residues. Department of Biotechnology, Lund University, Lund, Sweden. Biocap. 2003. A Canadian Biomass Inventory: Feedstocks for biobased energy. Prepared for Natural Resources Canada. Brenda, S. 2002. Overview of Alberta Poultry Industry. Alberta Agriculture and Rural Development CFIA, 2005. Report on Feed Ban Review. Canadian Food Inspection Agency. Corbett. R, 2006. Unpublished data from the database. Alberta Agriculture and Rural Development David Spiess, 2006. Value-added opportunities for straw in Alberta. Alberta Agriculture and Rural Development EWMCE 2006. Edmonton Waste Management Centre for Excellence. www.ewmce.com Gao. M, Z. She, Jin. C, 2006. Performance evaluation of a mesophillic (37 C) upflow anaerobic sludge blanket reactor in treating distiller s grains wastewater. Journal of Hazardous Materials. Lapp, H. M, D. Shulte, M. A. Stevens, C. Bernier 1978. Biogas production from animal manure. Biomass Energy Institute, Winnipeg, Manitoba. Lehtomaki, A., J. Rintala 2006. Biogas production from energy crops and crop residues. Department of biological and environmental sciences, University of Jyvaskyla, Finland. Lehtomaki, A., J. Rintala, Huttenen, S. 2006. Laboratory investigations on co-digestion of energy crops and crop residues for methane production: Effect of crop manure ratio. Department of biological and environmental sciences, University of Jyvaskyla, Finland. Lorimor, J. W. Powers, A. Sutton 2004. Manure characteristics. Midwest Plan Service-18 section 1. Iowa State University, IA. Heiermann, M., M. Plochl, B. Linke, H. Schelle 2002. Preliminary evaluation of some cereals as energy crops for biogas production. Institute of Agricultural Engineering Bornim, Potsdam, Germany. Statistics Canada, 2006. Hog Statistics. Vol. 5 no. 4.

Statistics Canada 2006. Cattle Statistics. Vol. 5 no. 2. Statistics Canada 2003. Livestock feed requirement study 1999-2001. Catalogue No. 23-501-XIE. Steffen, R., O. Szolar, R. Braun 1998. Feedstocks for anaerobic digestion. Institute of Agrobiotechnology, University of agricultural sciences, Tulln, Vienna. Prepared by Mahendran Navaratnasamy, Ike Edeogu and Lawrence Papworth Agriculture Stewardship Division Alberta Agriculture and Rural Development U/10/15 6