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On a Somerset farm, three large containers full of farm and dairy waste are rotting away.

"Some people call it manure and farm waste - we call it fuel," said Rich Clothier, from Wyke Farms.

His cheese-making firm has spent £4m on an anaerobic biodigester (AD) plant he hopes will make his dairy farm and cheese factory 100% self-sufficient.

It uses gas from rotting manure, crops or slurry to produce electricity, which can then be fed back into the National Grid.

But does the biodigesting industry have a long-term future in UK farming?

In Germany there are some 8,000 plants operating but in the UK the National Farmers' Union (NFU) says there are only 112, up to 40 of which are exclusively for farm waste.

One reason for this is more farms in Germany are organised as collectives, making start-up costs easier to meet, while in the UK most farmers are independent and smaller.

Farming struggles

The German government also offers incentives that are more attractive than those available to farmers in the UK.

Now, the NFU has warned proposed cuts to government incentives pose a serious threat to the industry.

The Department of Energy and Climate Change (Decc) is proposing to reduce Feed-in Tariffs (FiT) - through which the government rewards farmers for providing electricity to the National Grid - by 20% from next April.

Dr Jonathan Scurlock, chief adviser on renewable energy at the NFU, said the government was not doing enough to encourage investment in the technology.

He said: "We're seeing a fair amount of investment coming through at a relatively large scale.

"But the smaller plants... are struggling because the government has done not enough yet to incentivise these smaller-scale anaerobic digestion projects."

He added: "Decc, under pressure from the Treasury, is in a struggle to show it is delivering value for money and not over-incentivising renewable energy.

"With small-scale plants. which are the most sensitive with high capital costs and really being dependent on FiT for income, if the government cuts the FiT by 20%... there's very little prospect of farm-based AD after that."

Labour and costs

Despite this, AD plants make good business sense for some.

"A business like ours uses over £100,000 worth of energy per month," said Mr Clothier.

"If we can control one of our major input costs that gives the business more security going forward."

Mr Clothier's AD plant will also enable him to feed back 300 kilowatts an hour, providing a £130,000 return a year.

In 2011, pig farmer James Hart and his business partner, Jeremy Iles, opened their plant after securing £300,000 from the Rural Development Programme for England.

The plant meant they could diversify their farming business.

Mr Hart said: "We sell about £350,000 of electricity a year - but there's costs involved in running it.

"The fact that it cost £1.5m to build, and obviously the £350,000 a year isn't all profit as you've got labour and costs in engineering and running a plant.

"It'll pay for itself over six or seven years as we'd expected."

Biogas tractors

Despite the concerns over the future for farm-based plant, there has been growth in developing the technology suitable for smaller AD plants on farms.

Some of this funding comes from Defra.

Matt Hindle of the Anaerobic Digestion and Biogas Association (ADBA) said: "Ultimately, that sort of fund can only do proof of concept on a relatively limited number of projects and it's for the industry to step in and deliver more.

"We know the companies which are ADBA members are looking to roll out a significant number of projects at the end of this year and next year where we hope to see the benefits of anaerobic digestion on a much wider number of farms across the UK."

He added that examples include retro-fitting farm slurry stores to capture methane gas and devices that transform biogas into fuel for tractors.

A spokesman from Decc said: "Any changes to the tariffs would require changes to legislation, on which we need to consult and may require fresh state aid notification.

"The result of this would be renewed uncertainty in the market and would probably result in many projects being stalled due to the withdrawal of investment."