Depending on the price of carbon, the additional income from offset sales could substantially increase the number of livestock producers who would find it profitable to install methane digesters. In recent decades, the scale of production in the dairy and hog sectors has increased dramatically. Dairies with at least 1,000 head now produce almost a third of output, despite accounting for only about 2 percent of all operations. The additional profits that large farms could earn from digesters could enhance existing economies of scale in dairy and hog production and promote further consolidation of production over time.

One way for smaller scale livestock operations to achieve a more efficient scale is by supplementing manure with food waste from nearby crop or meat processing facilities, breweries, bakeries, and restaurants. When mixed with manure, food waste can provide an efficient feedstock for biogas production, and as an added incentive, livestock operators could collect waste disposal fees from the food facilities. However, the availability and suitability of food waste for use in methane digesters may restrict the feasibility of such mixtures to certain locations.

A centralized digester is another way that smaller scale operations could take advantage of a more efficient digester size. With several nearby farms using a single large digester, participating operations could share construction and maintenance costs; increase their leverage to negotiate electricity sales; improve access to financing, tax credits, or grants; and allow a manager to develop specialized skills in digester maintenance and operations. The main disadvantage to centralized digesters is the additional cost of transporting manure to and from the central facility.

If carbon offset prices are sufficiently high, a lower cost biogas system that flares methane rather than uses it to generate electricity may become profitable. This approach removes electricity generation from the biogas system, which eliminates the costs of the generator, electrical connections, and much of the maintenance. The lower cost biogas system might be economically viable for smaller scale operations that would find it difficult to finance or maintain an electricity generator. This option has the greatest potential for operations with lagoons, since lagoon covers can be installed relatively inexpensively, and offers other benefits to producers, such as reducing odor and increasing lagoon storage capacity by excluding rainwater.

Policies that raise returns to or lower costs of digesters can provide incentives for smaller scale operations to adopt the technology. Policies could include grants, such as USDA’s Rural Energy for America Program Grants, and incentive payments, such as the U.S. Department of Energy’s Renewable Energy Production Incentive. Other policy options include tax credits, such as the Renewable Electricity Production Tax Credit, accelerated depreciation (allowing construction costs to be written off faster for tax purposes), property and sales tax exemptions (usually at the state level), and other regulations, such as renewable energy mandates that raise the effective price of electricity sold to the grid. Many of these policies can be targeted toward smaller scale operations.