Farm based Anaerobic Digestion (AD) has potential economic savings by converting agricultural by-products such as manure to generate renewable electricity and biogas, which can be used to power farm equipment and displace fossil fuel use. Besides financial savings, recovery of energy would have environmental benefits by reducing GHG emissions as opposed to coal based electricity generation. Other non-financial benefits include odour management and earnings from fertilizer sales.
However, construction, transactional and on-going maintenance costs of AD outweigh its benefits. Until the advent of recent support mechanisms such as, renewable energy credits and carbon farming initiative, the financial revenue and environmental benefits of AD will be insufficient to offset the high costs of AD.
In order to examine the scale at which AD of agricultural by-products will be viable, in the light of these support mechanisms, an economic and environmental evaluation of AD in Australia was performed, to determine at what scale, will the recovery of energy from agricultural by-products be economically viable and evaluate the environmentally sustainability role of AD. At the same time, this research examines barriers that prevent a wider adoption of AD in Australia, through an online survey.
Net Present Value (NPV), Internal Rate of Return (IRR) and Discounted Payback Period capital budgeting matrices and sensitivity analysis was used to validate the impact of farm size on economic viability and environmental impact of AD systems. This thesis demonstrated that when on-farm animal units for piggeries are in the range of above 5,000 to 8,000 animal units, AD systems such as covered anaerobic lagoons, may become economically viable through savings from avoided use of purchased electricity and displacement of liquefied petroleum and natural gas. And revenue streams from the sale of fertilizer, renewable energy credits and carbon credits with an estimated pay-back period of 2.5 years. Additionally, on-farm AD systems result in significant GHG reductions and they are environmentally sustainable means of generating renewable energy.