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Friday December 3 2021

Agricultural Biogas Plants – A Good Investment for Farmers?

Anaerobic digester (AD) plants have long been thought a good investment for farmers. Historically, they produced electricity and heat that can be used to power other farm enterprises, thereby significantly cutting expenditure on energy bills, or be sold to the national grid to raise revenue, producing a return on investment.

Not only this, but they also provide a solution for dealing with farm waste such as animal manures and slurries and produce a rich digestate fertiliser at the end of the process.

They help farm businesses meet their sustainability objectives too, by producing renewable sources of power.

However, with many government incentive schemes now closed, do they still represent a good investment for farmers? In this article, we take a look at the pros and cons.

On-farm AD plants

So, what type of AD plants are typically found on farms?

Unsurprisingly, due to the size of an average farm enterprise, plants found on British farms tend to be at the smaller end of the spectrum. Feedstocks employed include animal manures and slurries, as well as purposely grown energy crops such as maize, rye, and sugar beet.

Sadly, it is the smaller end of the AD industry that has been hit hardest by the closure of government support schemes such as the Feed-in Tariff and Renewable Heat Incentive, which can make it difficult for individual farmers to justify the capital investment of a plant.

Green Gas Support Scheme

That said, a new scheme is set to be introduced in the UK to encourage investment in new biomethane plants, called the Green Gas Support Scheme (GGSS). Applications for the scheme opened on November 30, 2021, and successful applicants will receive quarterly payments for 15 years based on the volume of biomethane they inject into the national gas grid.

Whereas this does provide incentives for farmers, there are drawbacks. Firstly, the scheme is only open to AD plants that produce gas that is of sufficient quality to be injected into the national grid. Incentives are not available for plants producing electricity, or poorer quality biogas used to heat local buildings.

From a commercial perspective, plants generating a return from biomethane tend to be bigger than those required to produce electricity via CHP. Therefore, they command larger capital expenditure.

Also, the incentive is directed at AD plants that use a minimum of 50 per cent feedstock from waste and by-products. Therefore, a maximum of 50 per cent of the gas generated can come from purposely grown crops, but the remaining 50 per cent has to be from straw or other crop residues, manures and slurries, food production by-products or food waste to qualify for the incentive.

Advantages of on-farm AD

But it’s not all bad news – there are certainly advantages of farm-based AD plants.

Farms, or land adjacent to farms, will likely remain the most popular locations for new plants to be developed either as new builds, or as significant expansions to existing facilities, for a number of reasons.

Firstly, the majority of feedstocks can still be found on farm as purposely grown energy crops, straw and slurries and manures still have a value in the production of biomethane.

Farms tend to have the space for such developments, and a direct outlet for the product of the process, the digestate fertiliser, which can be spread on directly surrounding fields.

There are also some other incentives that could help farmers to make a return on investment that are specific to the agricultural industry. They include:

  • Trading with other farmers

Farmers in your area with AD plants may grow too much of a particular feedstock, such as rye or maize. Equally, other farmers might not be able to use all the digestate fertiliser their biogas plant produces.

Here would provide a good opportunity to trade some feedstock for some digestate, producing efficiencies at both ends of the process.

  • Reduced need to buy nitrate fertiliser

At the time of writing, nitrate fertiliser has reached eye-watering prices north of £700 per ton. This has got many farmers looking for alternatives, or at the very least, optimising the use of ammonium nitrate to ensure nothing is lost.

The digestate produced by anaerobic digestion is a nutrient rich alternative that can be applied directly to crops at the right times of year.

There are a couple of considerations when looking at the use of anaerobic digestate. One is storage. Along with other organic fertilisers, there are restrictions on applying digestate during the autumn months which means farmers need the capacity to be able to securely store it until it can be applied.

Also, any fertiliser that includes animal bioproducts does need to be pasteurised. But if you stick to using purpose grown crops, slurries and manures, and straw as feedstocks, you don’t have to do this.

Other ways for farmers to make AD pay

Although the majority of the incentive schemes have now closed, it’s not all about the GGSS. Some slightly more obscure ones still exist, and these could be worth exploring. These include:

  • Renewable Transport Fuel Certificates (RTFC)

One way farmers might be able to supplement income from the GGSS is instead of selling all biogas to the grid, sell some of it for road transport instead.

Selling biogas as road fuel attracts two revenue streams. Firstly, there is the revenue generated by the sale itself, and then there are the RTFCs which can be traded with larger businesses that cannot fulfil their energy needs through renewable sources only.

Earlier this year, the government raised the buy-out ceiling for RTFCs from 30p per litre to 50p per litre, so if you already have an AD plant, now is a good time to look into this.

As fleets continue to convert to renewable sources of fuel, this scheme could help justify the capital costs for new farm biogas plants.

  • Carbon Capture, Utilisation and Storage (CCUS)

Designing a new plant with carbon capture technology in mind is another way of generating an ROI.

Although anaerobic digestion is a carbon neutral process, the process does generate a lot of carbon dioxide which is a potent greenhouse gas.

Capturing this is one way of turning anaerobic digestion from a carbon neutral process into a carbon negative one.

It can also be profitable for farmers. For example, if you negotiated a five-year contract at £75 per ton of carbon dioxide, investing in carbon capture technology would be worthwhile.

  • Work with an experienced AD plant support partner

Each farm business is different and there is no one-size fits all solution for farmers. However, by consulting an experienced AD plant service, maintenance, and operating company such as Birch Solutions from the very start of the process, will ensure you get the best advice from design through to commissioning the plant.

We will take an in-depth look at your farm business and give an honest appraisal as to whether AD would be profitable for you or not and hence, a sensible investment. If it is, we will then work with you to design and deliver a plant that generates the highest return possible.

From then on, we can hand the plant over to you or we can operate it to ensure it is always run at optimum efficiency, thereby delivering the greatest ROI.

Conclusion

So, are farm-based AD plants still a good investment?

The answer to this is yes, AD plants, either new ones or significant extension and upgrades to existing plants are often sound investments for farmers. But the commercial case needs to be examined closely before a final decision is made.

Always take professional advice and always look at the farm and investment holistically, for example, will creating digestate significantly reduce your fertiliser bill? It’s not always all about the government incentive!

For expert advice about farm-based AD plants, feel free to get in touch.