Economic implications of anaerobic digesters on dairy farms in Texas



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Texas A&M University


Historically, air and water have been considered common property resources and, therefore, over utilized as waste receptors. Dairy waste is a leading environmental concern in the North Bosque River watershed in Texas. Changing societal attitudes are forcing dairies and policymakers to balance environmental concerns with farm profitability. Dairies are entering a realm filled with technologies to combat waste concerns. Anaerobic digester technology may play a role in helping dairies balance profit and the environment. Digesters capture methane from livestock waste and transform it into electricity which can be sold to utilities or used on-farm. Because a digester facility is confined, air and water pollution can be reduced. Technological advancement and institutional factor changes allowing the sale of on-farm produced electricity and green power requirements have increased the economic feasibility of digesters. The study of the economic implications of anaerobic digesters for Texas dairies provides producers and policymakers with information to make good decisions concerning adoption and subsidization of this technology. At the beginning of this study, no digesters were operating in Texas. Dairies operating digesters in four states, therefore, were interviewed on-site to provide necessary data. The expected net present value, E(NPV), of a plug-flow digester is negative with and without selling electricity, indicating it should not be constructed based strictly on its financial contribution. At the current electricity-selling price, digesters are less economically feasible than current waste management strategies, lagoons, even after considering potential environmental penalties. However, selling electricity and capturing by-product heat for cost savings makes the digester's E(NPV) less negative than lagoons. The E(NPV) of a covered lagoon digester is positive. This indicates digesters are a potentially feasible waste management strategy. For plug-flow digesters to show a positive E(NPV), the selling price needs to be approximately 82.38% higher than the current price. The breakeven selling price is 12% higher than the current price. Below the breakeven price, lagoons have a larger E(NPV) than plug-flow digesters, therefore making lagoons the preferred waste management strategy. Results suggest changes in rules and technology efficiency make digesters economically competitive with current waste management systems.