Policy Landscape of Anaerobic Digestion
Anaerobic digesters can offer renewable energy, increased profitability, and sustainability for farms. For these reasons, state and federal governments have created policies to support digesters. This has created many programs that farmers can use to purchase an on-farm digester.
Federal incentives are available to all farmers within the U.S. One of these is the Rural Energy for America Program (REAP) from the USDA. This program provides grants for 25% and 50% of the project cost up to one million dollars max, depending on your location. The program also offers a loan guarantee for 75% of the project up to twenty-five million dollars. A farm is eligible for funding as long as more than 50% of their gross income comes from farming. More information on the REAP program. The other program that USDA-NCRS offers is the Environmental Quality Incentives Program EQIP, which offers up to 450,000 dollars in grants for eligible projects. This grant is for conservation, so for a digester project to be eligible, you would need to provide a comprehensive nutrient management plan and possibly include other conservation practices in your plans. If you are interested, you can learn more about in the EQIP program.
The Investment Tax Credit (ITC) and Production Tax Credit (PTC) provide tax credits for renewable energy projects available to anaerobic digesters. The ITC was made available for digesters by the Inflation Reduction Act and provides a tax credit for 30% of the project cost. This means that the amount claimed in a tax year can be used to reduce your taxes that year and carry over until the credit is used. There are also bonus credits of up to 10% that can be used depending on several factors. The PTC provides a 1.3 cents per kilowatt (kw) tax credit for anaerobic digesters. These tax credits are available yearly based on how much electricity your project produces in that tax year. One important thing is that the PTC can only be used for anaerobic digesters that produce a nameplate capacity of 150 kw or more, while the investment tax credit is available for anaerobic digesters that produce electricity or sell renewable natural gas (RNG). To take advantage of these tax credits, you should consider talking to a tax expert. Note that you can't receive both the ITC and the PTC; you must choose one or the other.
At the state level, various forms of credits are offered for electricity or RNG produced by anaerobic digesters. In Pennsylvania, you can receive a tier-one energy credit per 1,000 kilowatt hours of electricity produced. In 2022 -2023, this credit sold for about 23.00 dollars on average in the market. Other states have provided incentives for anaerobic digestion in other ways. California offers the Low Carbon Fuel Standards program, which includes credit for various alternative fuels, such as RNG, produced from biogas. Other states have also followed these models, implementing their own programs (such as Washington and Oregon). Net metering requires utilities to credit your digester's electricity towards your electric bill at the same retail rate that they charge you. This only applies to utilities. If you are part of a rural electric cooperative, then you will need to negotiate the connection of your project and price with them.
There are a lot of options that can help make an anaerobic digestor profitable for a farm.
