Exploring farm anaerobic digester economic viability in a time of policy change in the UK

Abstract

The combination of a post-Brexit agricultural policy, the Global Methane Pledge announced during the last United Nations Climate Change Conference in Glasgow (COP26), and urgency of meeting climate goals means the UK has a unique opportunity to create an exemplar through recognition of the benefits of small-scale farm anaerobic digesters that valorise on-site wastes for renewable electricity and heat, cushioning agri-businesses against energy perturbations. To explore economic viability of farm-based biogas production, combinations of support levels, energy prices, capital cost, internal rate of return (IRR), and digestate value were analysed, employing a 550-cow dairy farm with access to other agricultural wastes. A 145 kWe system utilising 100% of CHP electricity (grid value: £0.1361 per kWh) and 70% of the heat (heating oil value: £0.055 per kWh) could achieve an IRR above 15.5% with a median electricity tariff of £0.1104 per kWh at a heat tariff from £0.0309 to £0.0873 per kWh thermal. Under a subsidy-free regime, the same system could achieve a 10% IRR with electricity prices in the range £0.149 to £0.261 per kWh. High fertiliser prices could increase digestate value, further improving viability. With late-2021 high energy prices, the technology approaches subsidy-free viability, but uptake is unlikely unless wider environmental and societal benefits of on-farm systems can be explicitly valued.