Prior to the 1990s, dairy producers in the United States who were interested in anaerobic digestion could still build anaerobic digesters with their own equipment and labor. A producer may have been attracted to the idea by the prospect of reducing manure odors, saving some money producing power, and using the digested solids for bedding.
Today, anaerobic digesters require significant up-front expenditures (U.S. EPA AgSTAR 2012). As the cost and complexity of anaerobic digesters has grown, so has the demand for analysis of the technical systems and the financial costs and benefits. Projects often rely on a number of different funding sources, including private funding, grants, loan guarantees, industrial bonds, and other cost-sharing agreements—and many of the parties involved in these projects may require documentation and evidence of the economic viability of the project (U.S. EPA AgSTAR 2012; U.S. EPA AgSTAR 2015). These studies are commonly referred to as feasibility studies.
The feasibility study can be thought of as a decision tool—a way to analyze the pros and cons of undertaking a project. The tool can come in any of several different forms depending on the scope of the potential project. The feasibility study can be structured broadly, say to compare different opportunities in a geographic area, or be more focused, say to compare a single option for one project.
Though a feasibility study for a large anaerobic digestion project is often completed by an outside consultant, there are many other stakeholders, including farmers, project developers, support professionals, and others, who need to be able to evaluate its quality—whether in selecting a consultant to complete a feasibility study, or in understanding and using the output from a feasibility study. This fact sheet looks at different aspects of feasibility studies—including outlines, guidance, cautions, and recommendations—with an eye toward improving the preparation, evaluation, and use of feasibility studies in the development of successful anaerobic digestion projects. Because there are many existing resources that discuss general feasibility studies, this publication focuses on the areas of feasibility studies that tend to be common for livestock-based anaerobic digestion projects.
Why Complete a Feasibility Study?
A feasibility study incorporates research, data collection, and analysis that effectively evaluates investments in new technology or projects. It answers key questions about a project’s technical and financial viability, including project structure and organization and the costs, benefits, and risks involved.
A good feasibility study requires proponents to look at the overall big picture, as well as the many different details involved in creating a successful project. As part of a more formalized decision-making process, the feasibility study works to identify and mitigate risks, and addresses any potential deal breaker or fatal flaw. It also documents the data and analysis, which can help tremendously when the project developer looks for grants or other investment.
The analyses completed are so important that many grant programs require that applicants complete feasibility studies before making project grant awards. Financial investors and banks commonly require more rigorous (“investment grade”) feasibility studies prior to making any investment.
What are the Different Types of Feasibility Studies?
Different types of feasibility studies can support decision-making at several levels, from general to more specific, although the more specific and in-depth, the greater the time and cost investment.