Small-scale AD worth a second look

The increase in Feed-in Tariffs for anaerobic digestion earlier this year has tipped the balance in favour of the technology on some farms, as Paul Spackman discovered at last week’s Dairy Event & Livestock show.

Small-scale biogas production from anaerobic digestion technology may have been slow to take off compared with solar or wind, but times are changing.

The government’s “fast track” review of Feed-in Tariffs saw payments for smaller-scale AD increase slightly by 2.5p to 14p/kWh, which although was less than many had hoped for, it should be enough to give a decent return in the right circumstances, Charles Baines of rural business consultants Laurence Gould said.

“Smaller scale (less than 500kW) AD units aren’t for everyone, but they are now worth consideration – before the Feed-in Tariff increase it was a very marginal call.”

The firm has just published financial costings for a hypothetical 120ha (300-acre) dairy farm that is considering selling its 200-cow dairy herd to invest in a 150kW AD unit. Most of the land will be turned over to producing 3870t of feedstock for the plant, one-third of which will be maize silage, and two-thirds grass silage.

A small suckler herd of continental crossed heifers was retained on 30ha (75 acres) of the farm to provide 350t of fresh manure as an extra feedstock for the digester.

Figures suggested the £822,000 capital cost could be recouped in nine years, or 12 years if the finance at 6% interest and five-yearly overhaul of the CHP engine (costing £40-50,000) was included (see table). With the plant equipment and index-linked support payments due to last well beyond that, such systems could prove a good long-term investment, Mr Baines said.

“We looked at halving the herd instead of giving it up completely, but the land needed for feedstocks for cows and the AD plant meant this would not have been possible,” he added. “Banks require security of supply for feedstocks and if this could only be achieved by renting extra land in, we’d have struggled to get this security.

“It also means that digestate can be used on the farm, which helps avoid any potential waste transfer issues.”

In terms of funding, Mr Baines said that the increased Feed-in Tariffs rate meant this was now the best option for smaller-scale plants, whereas prior to the increase, Renewables Obligation Certificates were probably the preferred option.

There was very little grant money available for AD, so any project would most likely need to be a collaborative venture, he said. Grant funding could be available for ancillary items such as silage clamps even when claiming FiTs, but it would depend on how the grant application was put together, he suggested.

“ROC funded facilities might be able to claim for more core plant related items without breaching dual funding rules, but again only likely on a collaborative basis at the moment.”

Summary of annual returns/costs

Source: Laurence Gould