Economic Implications of Anaerobic Digestion for Bioenergy Production and Waste Management

Agriculture and Natural Resources
Dr. Juliana Vasco-Correa, Postdoctoral Researcher; Ashish Manandhar, Graduate Research Associate; Dr. Ajay Shah, Assistant Professor; Department of Food, Agricultural and Biological Engineering, The Ohio State University

Anaerobic digestion (AD) is a biochemical process that uses microorganisms to degrade organic materials. AD is a mature technology used for decades as a waste stabilization and/or bioenergy production process. AD transforms organic matter into biogas and a nutrient-rich effluent or “digestate.” Biogas is a mixture of gases, mainly methane (CH4) and carbon dioxide (CO2), which can be either burned directly for heat and power generation, or upgraded to be used as a transportation fuel. The effluent or digestate is rich in nutrients and is usually land-applied as a fertilizer and soil amendment (Fig. 1).

AD occurs naturally in wetlands, marshes, and landfills, as well as inside the stomach of ruminants. This process is replicated inside enclosed reactors called “digesters” that are fed with organic feedstock. These digesters come in many types, shapes, and sizes. They can be installed in wastewater treatment plants, farms, rural households, or as stand-alone plants.

Feedstocks for anaerobic digestion

AD is mostly used for treatment of liquid and solid wastes, such as industrial wastewater with high organic content, the organic fraction of municipal solid waste (MSW), and sewage sludge. Animal manure, food wastes, agricultural residues, and energy crops are also common feedstocks for AD (Fig. 1).

The feedstock types play significant roles in determining various aspects of the AD process, including mechanical pre-processing (separation, size reduction, mixing), pretreatment, reactor type, inoculum type, nutrients/trace elements requirements, solids/hydraulic retention time, organic loading rate, biogas yield, composition of the digestate, and overall economics of the process.

Figure 1
Figure 1. Anaerobic digestion process and products

Uses of biogas

Biogas from household digesters is burned directly in stoves and lamps. However, in larger plants, biogas needs to be dried, and impurities need to be removed. Biogas can be burned for heat or steam generation (boiler), but the most common use of biogas is for electricity and heat in a combined heat and power (CHP) unit. Nevertheless, biogas has a lower heating value compared to natural gas (600 btu/ft3 vs 1,000 btu/ft3), mostly because of the low CH4 content in biogas (50–70% vs 81–89%) [1]. Thus, biogas can be upgraded into biomethane, which is similar to natural gas, by removing CO2. Biomethane can be injected into the natural gas grid, which allows its distribution over longer distances, or it can be compressed and used as a transportation fuel (bio-CNG) for vehicles adapted to use compressed natural gas (CNG) (Fig. 1).

Advantages of anaerobic digestion

AD provides multiple socio-economic and environmental benefits as listed below:

  • Diverts organic wastes from landfills.
  • Produces biogas, a renewable fuel that burns cleaner than combusting the biomass directly.
  • Generates a nutrient-rich fertilizer that can be land-applied for agronomic benefits, such as inorganic fertilizer replacement, and as a soil amendment that reduces erosion and compaction, and increases water retention.
  • Reduces odors and pathogens from wastes such as manure.
  • Increases revenue via collection of tipping fees from external sources of organic wastes accepted at the digester.
  • Reduces greenhouse gas emissions to the environment from degradation of organic matter, especially CH4 and nitrous oxide, which, respectively, have 25 and 298 times more global warming potential than CO2.
  • Promotes rural economic growth due to the technically trained workforce needed to run the digester at optimal conditions, and the market establishment for the diverse products.

Current state of anaerobic digestion technology around the world

AD is used worldwide, but there are large variations in the way this technology has been adopted. Europe is the leader in AD technology, mainly driven by strict environmental regulations for waste disposal. Asia has the largest number of anaerobic digesters installed, most of them being small-scale household digesters that are used in rural communities for cooking and lighting. The United States has been slower in the implementation of AD, but its value has been increasingly recognized with about 2,100 current operational AD plants [2]. Rural regions in Africa and Latin America have only started implementing small-scale digesters successfully in the last few years [3]. AD implementation around the world is mainly influenced by policy drivers, socio-economic constraints, existing infrastructure, and technology availability and reliability.

Economic analysis of anaerobic digestion systems

Economic benefits of AD systems include reducing fossil fuel expenses for waste management systems by utilizing the energy produced in the form of biogas, electricity, and heat; generating income by selling excess energy; and reducing fertilizer inputs and associated costs while improving soil fertility and structure. However, the economics of AD systems around the world are affected by variations in feedstock types and compositions, digester scale, operating conditions, government incentives, and potential use of products. In addition, depending on the geographic location and the season, the energy required to maintain the digester temperature varies significantly. A farm-based AD system can generate income by fully utilizing energy products from the AD system, charging tipping fees for accepting solid wastes, and generating income from co-products such as compost/organic fertilizer. The synergistic management of an AD plant and farm could allow for shared resources such as labor and machinery, thus contributing toward positive economics of these systems.

AD plants that receive solid waste from external sources can charge a tipping fee that ranges typically from $30 to $50/ton. This tipping fee is typically lower than that of a landfill in order to incentivize organic waste separation from the waste stream at the source and delivery to the AD facility. Biogas use significantly influences the economics of AD facilities. For instance, use of biogas as transportation fuel usually generates more revenue than burning biogas for heat and power, but it also requires a significantly higher capital investment. Digestate utilization also has an important effect in the viability of AD plants, since some high-value products such as fertilizer can be obtained from this material, but in some cases the digestate needs to be transported and land-applied without obtaining extra revenue. Logistics of feedstocks and products are also important for the economic and environmental feasibility of the AD systems as long-distance transportation could increase the biogas production costs as well as associated emissions. In addition to this, in certain regions such as Europe, the majority of AD systems are installed with subsidies from government agencies and various state incentive programs. In order to accurately assess the economic feasibility of AD systems and compare them with other systems, the variability of all the costs associated with energy production and revenues obtained from the operation must be considered (Fig. 2).

Comparison of anaerobic digestion systems
Figure 2. Comparing different AD systems based on
energy production cost and revenue

Digester scale as a regional practice

Unlike other bioenergy technologies, AD could be feasible at many scales, from small-scale digesters of around 50–500 ft3 that produce just enough biogas for a household, to large biogas plants with digester capacities of several thousand cubic feet [4, 5]. Small-scale household anaerobic digesters are more popular in rural areas in developing countries, while large-scale digesters are more common in developed countries, especially in Europe.

Large-scale AD systems
Large-scale digesters are historically more prevalent in developed countries, since they require larger infrastructure and high capital investment. In most cases, the produced biogas is used for heat and power, and sometimes upgraded for use as transportation fuel.

Europe mainly has two models for digester operation: “centralized” systems and “farm-scale” digesters. A centralized or joint system codigests animal manure of several farms with other organic matter, such as food waste and the organic fraction of MSW, and agricultural residues. In this model, a fraction of the digestate is sent back to the farms to be used as fertilizer, and the excess is sold to other farms. These centralized plants have large capacity digesters of up to 300,000 ft3 [6]. Farm-scale AD plants usually have a digester capacity between 7,000 and 42,000 ft3, and are usually built in large dairy or swine farms [7]. They codigest the animal manure from one or more farms with agricultural residues and other available organic matter, including energy crops grown on that farm.

In the United States, AD for the treatment of sewage sludge in wastewater treatment plants is a well-established industry. There are about 250 farm-scale anaerobic digesters, around 1,250 wastewater treatment plants, and only 38 industrial (stand-alone) AD plants [2]. About 90% of the on-farm AD plants were installed in the last ten years, and 86% of them use dairy manure as the main feedstock [8]. According to USDA, U.S. EPA, and U.S. DOE, there is a great prospect for the growth of the AD industry in the United States with a potential to generate enough energy to power 1.09 million homes by utilizing manure from 8,000 dairy and swine farms [9]. Also, there are almost 2,500 wastewater treatment plants that could produce biogas, a significant number of which are currently generating methane but not utilizing it [2].

Economics of large-scale AD systems
Large-scale AD systems require high capital investment and maintenance, and use a variety of feedstocks, including wastes from agricultural or animal farms, food waste, and wastewater/sewage sludge (Table 1). Due to the nature of these systems, the economics of these plants vary considerably.

Capital cost is the main contributor to the production cost for AD systems (Table 1). Operating cost depends on AD plant size, and was found to vary from $18 to $100/ton of feedstock handled by the plant. A study of 38 AD systems in the United States indicated that equipment for electricity generation costs approximately 36% of the total capital cost [11]. The cost of electricity generation by AD plants ($/kWh) varies from $0.06 to $0.23 (Table 1). The electricity production cost depends on the type of AD plant and the feedstock used. Electricity generation cost is usually lower for larger plant sizes due to economies of scale.

Table 1. Cost analysis of AD plants using different types of feedstocks.
Feedstock Product Feedstock cost* Plant Size Capital cost* Operational cost* Product cost* Study region

Animal manure



32,000–37,000 ton feedstock / year

0.06–0.19 / kWh

Turkey, U.S.



0.04 / kWhth


Solid fertilizer


122 / ton fertilizer


Liquid fertilizer


34 / ton fertilizer


Animal manure and energy crops


+59 / ton feedstock

408–544 / ton feedstock

31–82 / ton feedstock

0.11–0.19 / kWh

Germany, U.S., Canada, Italy

Energy crops


26–31 / ton feedstock

0.17–0.23 / kWh

Turkey, Germany, Ireland

Food waste


+61 / ton feedstock

11,000–44,000 ton feedstock  / year

455–608 / ton feedstock

34–91 / ton feedstock

U.S., Canada

Municipal solid waste


+44–53 / ton feedstock

5,500–110,000 ton feedstock  / year

222–571 / ton feedstock

18–101 / ton feedstock

Ireland, U.K, Canada, Spain, Denmark


1,100–11,000 ton feedstock  / year


68 / ton feedstock

333 / ton biogas


*Costs are in USD. When feedstock cost is shown as positive (+), it refers to revenue obtained by tipping fees. Adapted from Vasco-Correa et al. [10].

Capital and feedstock costs have a major influence on the total energy generation cost, depending on the selected AD system and feedstock source. For instance, feedstocks, such as animal manure, might have negligible feedstock cost, but due to their low biogas yield per wet weight, they might require larger digester size, which would lead to an increased capital cost.

Small-scale AD systems
Small-scale digesters are mostly household units located in rural areas in Asia and other developing regions. These digesters lack mechanical mixing and heating systems. Biogas produced from AD is used mostly for stoves and lamps. The amount of biogas required for a household cooking stove used twice a day for a family of five requires a digester size around 400–600 gallons. This requires manure from approximately one pig, five cows, or 130 chickens [12]. The use of biogas at this scale generates environmental, health, and social benefits associated with burning a cleaner fuel and stabilizing residues, besides reducing deforestation by replacing the use of firewood and creating a source of fuel and fertilizer at the same time.

Cost of small-scale anaerobic digesters by region
Figure 3. Cost of small-scale anaerobic digesters by region. Adapted from Vasco Correa et al. [10]. Note: digesters in the range of 35–565 ft3 (1–16 m3) were included, and prices were converted to USD and adjusted with inflation to 2017.

Economics of small-scale AD systems
Small-scale digesters are expected to be low cost, since they are usually implemented in households. Figure 3 summarizes the cost of small-scale digesters in different regions. Several factors influence the large variability in the cost of these systems, including both the cost of construction materials (brick, concrete, and plastic) and labor. In Asia, where these systems have been implemented for a longer time, the cost is more consistent (Fig. 3), but in Africa and Latin America there is higher variability, mainly due to the lack of established technologies that can be reproduced consistently. In addition, in some regions in Africa, the low volume of suppliers of certain construction materials, such as cement, and their transportation requirements could significantly increase the cost. For example, the capital cost of a 350 ft3 plant in Vietnam was about $550 in 2010, but the cost of a similar plant was more than $1,500 in Kenya in the same year [13].

Operating costs for these AD systems include feedstock (usually manure or food waste), maintenance, and repair costs. The repair and maintenance costs may vary considerably depending on the location and the availability of skilled labor. In addition, challenges exist for effective economic analysis of these small systems as the commercial value of the feedstocks and most of the economic benefits of the system are usually not quantified. Further, strong incentives and subsidies exist in some regions, especially in Asia, while other regions lack this government support [5].


AD has several economic benefits due to the generation of renewable energy (biogas and its different uses) and other products (digestate that can be used as organic fertilizer), collection of tipping fees, and government incentives. AD has been adopted worldwide, ranging from small-scale household digesters in rural areas of developing countries to large-scale systems in developed countries. Capital cost is the main cost contributor of AD plants. In large-scale systems, the feedstock selection and availability also contributes significantly to their economics. Small-scale digesters’ capital costs vary widely in regions where their implementation is relatively recent, although prices have stabilized in Asia where the technology has been implemented for a longer time. In the future, technological advancements toward digestate management and biogas utilization could enhance the economics associated with the AD plants, and spur the growth of the AD industry.


Authors thank Dr. Harold Keener, Professor Emeritus, and Mary Wicks, Program Coordinator, Department of Food, Agricultural and Biological Engineering, The Ohio State University; and Dr. Samir Kumar Khanal, Associate Professor, Department of Molecular Biosciences and Bioengineering, University of Hawai’i at Manoa, for technical and editorial review of this fact sheet.


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