Biogas Incentives and Requirements: Building a Farm-Based Biogas System in Ontario

Table of Contents

  1. Introduction
  2. Funding Programs for Planning a Farm-Based Biogas Project
  3. Tax Incentives
  4. Capturing Value for Energy from Biogas Systems
  5. Adding Feedstocks to Increase Biogas Yield
  6. Requirements to Connect and Build a Farm-Based Biogas System


Biogas, or anaerobic digester (AD), systems treat manure and other materials to produce biogas, which is a mixture of methane, carbon dioxide and other gases. The biogas can be used to generate electricity and heat, or be upgraded into a natural gas replacement. Farm-based biogas systems represent a significant opportunity for the agricultural industry to treat manure to reduce odour and pathogens while capturing new value from agrifood products and byproducts. As farm-based clean energy becomes a new on-farm product, more farmers may be looking for ways to finance and build biogas systems.

The opportunities for developing farm-based biogas systems are growing. The following information presents some key opportunities and requirements for biogas system construction in Ontario. It is based on the information obtained at the time of writing. Successful projects may want to take advantage of the opportunities and be aware of the requirements identified below.

Contact the provider of the programs listed below directly to ensure the information presented on this page is current and accurate. This contact information is included with the description of each program. Another valuable source of information is the Ministry of Agriculture, Food and Rural Affairs' (OMAFRA) Factsheet titled Programs and Services for Ontario Farmers.

Funding Programs for Planning a Farm-Based Biogas Project

Growing Forward 2 funding assistance for Capacity Building and Implementation

Growing Forward 2 (GF2) is a federal-provincial-territorial initiative offering flexible and practical options for farm and other businesses.

The GF2 Capacity Building component supports projects that build capacity (e.g. skills development, training, audits and assessments). For example, development of the feasibility and engineering design for a biogas project may fit the criteria. Farm producers and processors are eligible for up to 50 per cent cost share of projects that fit under this component of GF2. Organizations and collaborations may be eligible to receive up to 75 per cent cost share.

The GF2 Funding Assistance for Implementation funds innovative projects that demonstrate sector benefits for the Ontario agri-food industry. Farmer and processor applicants may be eligible to receive up to 35 per cent cost share for implementation-based projects they propose, and up to 50 per cent cost share for innovative projects. Organizations and collaborations may be eligible to receive up to 50 per cent cost share for implementation-based projects, and up to 75 per cent cost share for projects considered innovative.

Contact the Ontario Soil and Crop Improvement Association for more information on GF2 funding at 1-800-265-9751.

Projects that involve active collaboration of two or more companies or organizations, or projects led by not-for-profit organizations, are eligible for up to 75 per cent cost share for capacity-building projects and 50-75 per cent cost share on project implementation.

Contact the Agricultural Adaptation Council at 519-822-7554 for more information on GF2 funding for organizations and collaborations.

Investing in Business Growth and Productivity

The Federal Economic Development Agency (FedDev Ontario) offers the Investing in Business Growth and Productivity program to support economic growth and job creation. The program helps businesses to expand their markets and facilities, and to adopt new technologies and processes to improve productivity. Operations need to have 15 full-time employees to be eligible.

For more information, call FedDev Ontario at 1-866-593-5505.

SD Natural Gas Fund

The SD Natural Gas Fund, delivered by Sustainable Development Technology Canada (SDTC), supports innovative natural gas projects, including anaerobic digestion, gas upgrading equipment and some activities related to natural gas vehicle fuelling. The fund issues calls for submissions twice per year. Eligibility and cost share levels are determined through the analysis of business case documents to be completed as part of the application process.

For more information, contact SDTC at 613-234-6313, extension 302.

Community Power Fund, Community Energy Partnership Program

The Community Energy Partnerships Program (CEPP), delivered by the Community Power Fund, is a grant program to support community power in Ontario. The program assists eligible applicants by paying for a portion of the costs associated with developing renewable energy projects. These costs include resource assessment, legal services, engineering work and regulatory approvals. Funding under the CEPP is divided into two streams:

  1. The Pre-FIT Organizational Development stream will cover 80 per cent of eligible costs, up to $20,000 for a single project, up to $30,000 for two projects and up to $40,000 for three or more projects.
  2. The Development and Approvals stream will cover 50 per cent of eligible costs up to $500,000 per large project or $100,000 per small project, less any previous CEPP funding.

For more information, contact the CEPP at 1-888-885-8722.

Green Municipal Fund

The Green Municipal Fund (GMF), delivered by the Federation of Canadian Municipalities (FCM), provides funding for municipal environmental projects. GMF leverages public and private-sector funding to help communities improve air, water and soil quality, and climate protection. Projects must result in significant environmental impact and have the potential to be replicated in other communities. GMF funding is available to all municipal governments and their partners on eligible projects. This may include privately developed biogas projects that partner with their municipality. Funding is available to develop plans, conduct feasibility studies and do field tests. The fund also offers below-market loans, usually in combination with grants, to implement capital projects.

Contact the FCM at 613-241-5221.

Northern Business Opportunity Program - Business Expansion Projects

This program supports the expansion of existing businesses in Northern Ontario. Generally, funding up to 50 per cent of a project to a maximum of $1 million is available. Electricity generation projects are not eligible. Other biogas production projects, such as for heating or for vehicle fuel, may be eligible and are reviewed on a case-by-case basis.

For more information, contact the Northern Ontario Heritage Fund Corporation at 1-800-461-8329.

Independent Electricity System Operator- Aboriginal Renewable Energy Network

The Aboriginal Renewable Energy Network is designed to support First Nations and Métis community participation in the development of renewable energy. The Aboriginal Renewable Energy Fund (AREF) assists qualifying First Nations communities develop environmental studies, resource assessments, business plans and engineering designs.

For more information about the AREF, call 1-888-471-2377.

Tax Incentives 

Harmonized Sales Tax - Input Tax Credits

Businesses may recover the Harmonized Sales Tax (HST) paid on many purchases or expenses related to commercial activities, including the construction and operation of a biogas system. These rebates are called Input Tax Credits.

For more information visit Input Tax Credits or call 1-877-4-TAX-FAX (1-877-482-9329).

Federal Accelerated Capital Cost Allowance

The Federal Accelerated Capital Cost Allowance (CCA) for Clean Energy Generation program allows accelerated depreciation of eligible renewable energy system costs. A 50 per cent accelerated CCA under Class 43.2 of Schedule II to the Income Tax Regulations is available for specified energy generation equipment. In general, biogas systems are eligible for this opportunity. Class 43.2 includes equipment used to produce, store and use biogas from the anaerobic digestion of manure, provided the biogas is used primarily for electricity or the production of heat for use in an industrial process.

Generally, costs associated with the purchase and installation of renewable energy property are considered as capital costs of depreciable property, which are deducted over a period of several years, based on a prescribed percentage. Generally, amounts paid for legal, engineering, installation and other fees that relate to the acquisition of the renewable energy property would be included as part of the capital cost of the property.

For more information visit Ontario's FIT/MicroFIT Programs or call 1-800-O-Canada (1-800-622-6232).

Capturing Value for Energy from Biogas Systems

To capture revenue from biogas energy production, operators can consider several choices, including:

  • producing electricity for sale through the Feed-In Tariff Program
  • producing electricity for on-site use through net metering
  • using raw biogas as a fuel source
  • upgrading the biogas to become pipeline-quality Renewable Natural Gas

The following section outlines in brief the opportunities available in Ontario for these options.

Selling or Replacing Electricity

In Ontario, the primary opportunity for obtaining the value for energy from biogas systems is to sell electricity or replace existing electricity purchases. Some options for selling or replacing electricity are listed below.

Feed-In Tariff (FIT) Program

The Feed-In Tariff (FIT) Program gives biogas electricity producers the option to sell electrical power in a long-term contract. The FIT Program is in place for biogas projects larger than 10 kilowatts (kW) and generally projects up to 500 kW. At the time of writing, the value of the power ranges from 16.4 to 26.5¢ per kilowatt hour. The range of prices depends on the name plate capacity of the generator and whether the system is deemed to be an on-farm project. There is a price bonus for generating during peak periods, when electricity demand is high, and a price decrease for non-peak times. Some projects may be eligible for a price adder as a result of community, Aboriginal or municipal participation.

To learn more, visit the Independent Electricity System Operator website, contact the the Independent Electricity System Operator at 1-888-387-3403 or, and visit OMAFRA's Feed-In Tariff, Green Energy Act and Regulated Mixed Anaerobic Digestion Facility Rules web page.

Hydro One Net Metering Program

The Net Metering Program allows an electricity consumer to replace electricity purchased for the site with renewable energy generated on-site. Essentially, the electrical grid is used to "bank" electricity produced by the biogas system to be used at a later time. Any surplus production can be held on credit for a one-year period. As electricity prices increase over time, net metering may become more attractive. Net metering will make the most sense for farms with higher electrical requirements. To obtain full benefit of net metering, the yearly electricity use should exceed the yearly electrical production.

There are several steps to installing a net metered system, including making sure a grid connection can be obtained. For more information visit the Hydro One Net Metering - Frequently Asked Questions web page, or call 1-877-447-4412. You can also call your local distribution company.

Selling renewable natural gas

It is possible to refine biogas to the quality required to be a natural gas replacement. This refined biogas is typically called biomethane or renewable natural gas (RNG). Connection to the natural gas pipeline system will be necessary in most cases to transfer the biomethane to buyers, although some examples of trucked compressed RNG have been demonstrated. Farm-based biogas contains approximately 60 per cent methane and 40 per cent carbon dioxide, with small amounts of hydrogen sulfide, moisture and other constituents. To meet pipeline standards, most of the non-methane components must be removed from the biogas. Several commercially available technologies have now been applied at several farm-based biogas systems across North America to upgrade the biogas to natural gas quality.

In Ontario there is no prescribed pricing process for RNG. In general, the low cost of natural gas means that a gas buyer must be willing to pay a premium to make an RNG project viable. A farm-based biogas system in British Columbia is selling natural gas to the local gas distribution company (Figure 1). The biogas is produced from manure, energy crops, and fats, oils and grease. That gas is upgraded using a water scrubbing technology.

Contact your local gas utility for more information:

Enbridge, 1-877-362-7434.

Union Gas, 1 888 774-3111.

Picture of a two green anaerobic digesters with two tall metal columns for biogas upgrading

Figure 1. Biogas system in Abbottsford British Columbia that adds upgraded biogas to the natural gas pipeline.

Selling or Replacing Heat

Selling heat or replacing existing purchases of fuel for heat may be an effective use of the available energy from a biogas system. Several Ontario farms combust biogas directly in a boiler for heat. The boiler must be properly designed to manage the moisture and corrosive elements within the biogas. The Technical Standards and Safety Authority (TSSA) provides oversight for gaseous fuel safety.

For more information visit TSSA or call 1-877-682-8772.

Using Cogeneration Heat

Usually, farm-based biogas is combusted for electrical production in a conventional internal combustion system, with the engine heat being the source of surplus heat that can be used for other purposes. In general, for a well-designed internal combustion system, 30-40 per cent of the energy is available as electricity and up to 40 per cent of the energy is available as surplus heat (after accounting for losses and for digester heating requirements). A model for selling cogeneration heat to neighbours has not yet been developed in Ontario. In Europe, several examples exist of farm-based biogas systems selling heat to communities and other farmers in the form of hot water.

Biogas systems produce heat daily, year-round. On-farm there is often only limited requirements for daily on-site heat. These include milking centre washwater heating and space heating. Unless a significant heat user can be found that requires ongoing heat (such as a food processing activity), not all of the heat from the biogas system will be used. In Ontario, some biogas systems have been sited at greenhouses, which have a significant heat demand for more than half the year. Some examples of seasonal heat use have also been demonstrated in Ontario, including crop drying. Figure 2 shows an innovative Ontario crop drying system where heat off of the biogas cogeneration system's cooling fans can be drawn into a grain bin by closing the roof covering over the fans.

A steel grain bin has a shed beside it. Inside the shed is a cooling fan. The shed roof and walls slide away from the grain bin, allowing the fan to blow heat into the air.

Figure 2. Grain drying using heat from biogas cogen cooling fans.

Adding Feedstocks to Increase Biogas Yield

Increased Biogas Production and Tipping Fees from the Use of Off-Farm Feedstocks

Off-farm feedstocks have the potential to greatly increase biogas production compared to basic manure and other agricultural byproducts. There may also be an opportunity to receive income from tipping fees when receiving off-farm source materials, as some materials have high disposal costs through other conventional waste management systems. Experience has shown that the consistency, quality and energy density of off-farm feedstocks are critical. Attaining consistent high biogas production and high cogeneration operation time are generally the most important goals when managing off-farm feedstocks.

There are three routes to having biogas systems approved to receive off-farm feedstocks in Ontario:

  1. Regulated Mixed Anaerobic Digestion Facility (RMADF) in the Nutrient Management Act, under
    Ontario Regulation 267/03. The regulation allows qualifying facilities to accept up to 50 per cent (by volume) off-farm feedstocks. See the OMAFRA factsheet Nutrient Management Regulation Requirements for On-farm Anaerobic Digestion Facilities for more information.
  2. Renewable Energy Approval (REA) for electricity projects that do not satisfy the RMADF requirements.
  3. Environmental Compliance Approval from the Ministry of the Environment and Climate Change for non-electricity projects such as biogas upgrading.

There is no formalized approval mechanism for non-electricity biogas systems on a farm using only exempt wastes, such as agricultural waste, although many construction and safety rules and regulations continue to apply.

For more details, contact the OMAFRA Agricultural Information Contact Centre at 1-877-424-1300, or

Energy crops for increased biogas yield

It is possible to digest energy crops, like corn silage or other readily digestible crops, in a biogas system. Many biogas facilities in Europe use energy crops as the major input. Since a digester only removes carbon, the crop nutrients remain in the process and can be recycled onto land as a fertilizer, keeping crop input costs low. The economic return from a digester needs to be high enough to pay for the energy crop production costs. The University of Guelph has developed a spreadsheet to help determine if the project economics are viable.

Requirements to Connect and Build a Farm-Based Biogas System

Obtaining a Grid Connection and Feed-In Tariff Contract

The process to connect to the electrical grid and secure a Feed-In Tariff (FIT) contract involves a number of agencies and players, including your local electrical distribution company (LDC), the Independent Electricity System Operator and the Electrical Safety Authority (ESA).

Your LDC is responsible for connecting and metering electrical generation projects. You must submit a connection request to your LDC and meet the requirements of your LDC before you can be connected. Your LDC will connect your project to the grid when you have:

  • received all necessary approvals, including authorization from the Electrical Safety Authority (ESA)
  • entered into a connection agreement with the LDC, including agreements on costs for line upgrades
  • paid the LDC for the connection and metering costs

For more information, contact your local LDC.

Getting a building permit

Some components of a farm-based biogas system will be classified as a structure. As a result, a building permit will be required before construction begins. You can apply for a building permit through the chief building official in your municipality.

Proponents of a project should ensure that the zoning for their property allows a farm-based biogas system. Under the Green Energy Act, 2009, biogas systems that generate electricity are generally exempt from municipal zoning. It is understood that existing on-farm digesters operating in Ontario are currently treated as part of the farming operation. Most systems are essentially a part of the livestock manure system (improving the handling characteristics of the manure and causing beneficial pathogen and odour reductions).

OMAFRA's Minimum Distance Separation (MDS) Formulae are typically applied when a building permit is sought for on-farm anaerobic digester systems associated with a livestock facility. MDS aims to minimize nuisance complaints associated with livestock production. There are also setback requirements for projects completed under a Renewable Energy Approval. Setback requirements for non-livestock farm biogas systems are outlined in Ontario Regulation 267/03.

For more details, visit the OMAFRA website, or contact the Agricultural Information Contact Centre at 1-877-424-1300 or

Property Taxation of Biogas Systems

Before a biogas system is constructed, farmers should consider and clarify how the digester will be assessed for property tax purposes. Anaerobic digestion facilities of any size that are located on a farm and are operated by the farmer are typically taxed at the farm rate. See the Property Tax Treatment of Renewable Energy Installations Factsheet for more details on property tax treatment of renewable energy installations.

For more information:
Toll Free: 1-877-424-1300
Author: OMAFRA Staff
Creation Date: 22 June 2011
Last Reviewed: 17 January 2014