Anaerobic digesters have reshaped the dairy industry, providing a sustainable solution for manure handling and an alternative energy source for U.S. households. In four years alone, dairy-based biogas systems doubled from 2020 to 2024, accounting for more than $3 billion in renewable energy and methane capture infrastructure, according to the American Biogas Council.
“In the early years of digesters becoming operational on farms, we saw farmers, individually, wanting to build and own a digester,” says Patrick Serfass, executive director of the American Biogas Council. “Now, there are thousands more farmers – of small, medium and large sizes – that are learning about the benefits of having a biogas system and are using a third party to help take on the risk and starting new projects.”
For the relatively small portion of those projects that receive funding through the USDA’s Rural Energy for America Program (REAP), that momentum now faces a temporary pause.
In a letter penned by Administrator J.R. Clayes of the USDA’s Rural Business Cooperative Service on Jan. 27, office officials and field staff are directed to follow a 90-day application pause on the acceptance, processing and awarding of loans to be used toward biodigester projects effective immediately.
The notice states that the purpose of the administrative pause is to allow the USDA to “conduct a comprehensive review of the existing portfolio of such projects, including an assessment of delinquency rates, project performance, operational sustainability and underwriting guidelines to ensure prudent stewardship of federal resources.” The pause does not establish new eligibility requirements for applications of anaerobic digesters.
While applications for anaerobic digesters continues to rise, the USDA also claims loan delinquency and operational failure on existing projects has risen concurrently. According to the USDA, 21 loans for anaerobic digesters – making up $386.4 million – are seeing 27% in delinquency, or $102.6 million.
In response, the Rural Business Cooperative Service “has determined that closer examination is warranted at this time …”
“It’s unfortunate for the dairy industry and those using REAP for biogas projects,” Serfass says. “It’s also a very small number affected and even a smaller number who may have defaulted on their loans. By and large, these biogas projects are incredibly successful in helping farmers be more sustainable from both an environmental and economic perspective.”
The letter comes on the heels of a petition delivered Jan. 14 urging the Rural Business Cooperative Service to issue a rule deeming manure digesters ineligible for REAP funding. The 47-page document, supported by 34 environmental groups, alleges anaerobic digesters have received $18.7 million in average loan guarantees over the past five years, nearly three times that of solar projects, and the funding limits operating potential for small livestock operations. Additionally, these petitioners declare digesters cause environmental harm, citing a few dairy projects from California to Michigan that have violations on record.
A statement from a spokesperson with the USDA to Progressive Dairy read, “The unnumbered letter was not prompted by the petition and was drafted before Rural Development received or became aware of it. The decision was based on a review of projects across the RBCS portfolio that indicated losses to taxpayers.”
Serfass adds, “Biogas systems have a bigger impact on reducing emissions and also on generating renewable energy. You’d have to build five times as much solar to get the same amount of energy coming from a digester.”
According to the American Biogas Council, 479 operational biogas capture systems are on dairy farms – which equates to 144,454 cubic feet per minute of biogas produced and 1 million tons of methane equivalent trapped annually. These systems have assisted in a 130% increase in overall biogas capture over the last five years. The council also estimates only about 14% of all potential dairy biogas capture facilities have been built. If all potential projects (those with 500 cows or more) became operational, the dairy industry’s biogas sector alone would meet the electricity needs of 2.6 million U.S. households every year.
Both Wisconsin and California are the frontrunners in highest potential for new dairy biogas systems with each state having the capacity to add 561 and 543 new sites, respectively.
“There’s opportunity for partnerships, co-digestion and clusters of farms all as ways to get those economies of scale,” Serfass says. “And while the market has softened a bit over the last 24 months, we have new markets that are opening up and are really exciting.”
