This document analyzes the economics of different configurations for anaerobic digester projects, including combined heat and power, boiler, and renewable natural gas systems. It finds that the operating cost to capital cost ratio and revenues from electricity, renewable natural gas, and environmental credits can significantly affect project profitability as measured by net present value and benefit-cost ratio. Specifically, renewable natural gas projects may have higher net present values and benefit-cost ratios when they can retain more of the revenue from renewable identification numbers.

1. Renewable Natural Gas - Economics
Chad Kruger, Suzette Galinato, Craig Frear
Center for Sustaining Agriculture and
Natural Resources
Washington State University
Photo: Andgar

2. Guiding Questions
Photo: Jim Jensen
1. What is the importance of the relative
difference of an AD project’s operating cost
with respect to its capital cost?
2. How do different end-uses for biogas (e.g.,
heat, electricity, renewable natural gas for
pipeline or transportation fuel) affect the
profitability of a digester project?
3. How important is revenue from fiber and
nutrient co-products to digester profitability?
4. How important are environmental
payments (Renewable Energy Certificates,
Renewable Fuel Standards credit, carbon
credits) to digester profitability?

3. Baseline AD Project
Borrelli, K., S. Kantor, C. Kruger and G.G.
Yorgey.
Baseline Project Capital Cost = $4.4m

4. Alternative 1: Boiler
Borrelli, K., S. Kantor, C. Kruger and G.G.
Yorgey.
Boiler Project Capital Cost = $4.4m

5. Alternative 2: RNG
RNG Project Capital Cost = $9.8m*
*RNG Infrastructure additional to Baseline CHP system

6. Project Capital and Operating Costs / Ratio
AD Project Capital cost
1
Operatingcost
2
Operatingcost-Capital cost
ratio
AD-Combinedheat andpower
(baseline project)
$169,231 $283,270 1.67
AD-Boiler $169,231 $33,000 0.20
AD-Renewable natural gas $377,901 $293,706 0.78
Notes:
1
Average annual capital cost = total capital cost divided by 26 years.
2
Operating costs include maintenance and repair, and labor cost.
Table 1. Average annualcapitaland operating costs of an anaerobic digester (AD) project under different
configuration systems.

7. Revenues by Scenario
Figure 2. AD system revenue from multiple sources, as a percentage of average annual gross revenue.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Combined heat and power
system
Boiler system Renewable natural gas system
As%ofAve.AnnualGrossRevenue
Electricity Renewable natural gas Fiber & nutrients REC & WA REI Carbon credits

8. Net Present Value by Scenario

9. Impact of Economic Parameters on NPV
Reference or acknowledgement information

10. Contributions to Revenue by RNG Price
Scenario
Figure 3. Contribution of different products to the total revenue of the AD-renewable natural gas (RNG) system, given two price scenarios for renewable fuel.
0%
10%
20%
30%
40%
50%
60%
RNG Price Scenario 1 (commodity value + RIN) RNG Price Scenario 2 (CNG retail price + RIN)
As%ofAve.AnnualGrossRevenue
Electricity Renewable natural gas Fiber & nutrients REC & WA REI Carbon credits RIN

11. NPV, BCR and Total Costs by Scenario
AD System NPV BCR Total Project Costs
AD-Combined heat and power $7.5 million 1.80 $11.8 million
AD-Renewable natural gas (RNG)
Baseline RNG price: commodity value $1.4 million 1.10 $17.5 million
RNG Price Scenario 1: commodity value + RIN $16.8 million 2.12 $17.5 million
RNG Price Scenario 2: retail price + RIN $28.5 million 2.50 $25.4 million
Table 4. Net present value (NPV), benefit-cost ratio (BCR) and total costs of different anaerobic digester (AD)
systems.

12. Impact of Project Retention of RIN
NPV
($ million)
AD-Combined heat and power $7.5 1.8
AD-Renewable natural gas (RNG)
Baseline Scenario: commodity value $1.4 1.1
RNG Price Scenario 1: commodity value plus RIN
100% RIN retained by AD Project $16.0 2.1
75% RIN retained by AD Project $12.4 1.9
50% RIN retained by AD Project $8.8 1.6
25% RIN retained by AD Project $5.1 1.4
0% RIN retained by AD Project $1.4 1.1
RNG Price Scenario 2: retail price plus RIN
100% RIN retained by AD Project $28.5 2.5
75% RIN retained by AD Project $24.8 2.3
50% RIN retained by AD Project $21.1 2.1
25% RIN retained by AD Project $17.5 1.9
0% RIN retained by AD Project $13.8 1.7
AD System BCR
Table 5. Net present value (NPV) and benefit-cost ratio (BCR) of anaerobic digester (AD)
systems given different rates of RIN revenue retained by the AD project.

13. http://cru.cahe.wsu.edu/CEPublications/EM090E/EM090E.pdf
Borrelli, K., S. Kantor, C. Kruger and G.G.
Yorgey.
Available
Now!

14. Acknowledgements
This work was funded by the WSU ARC Biomass Research
Program, and USDA National Institute of Food and
Agriculture Award #2012-6800219814.