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Treating animal wastes through anaerobic digestion (AD) yields methane-rich biogas that can be used for power generation or heating, and a nutrient-rich digestate that can be land-applied as fertilizer. Furthermore, AD reduces odors from stored and land-applied manures. Despite these benefits, AD deployment rates in the U.S. are only 5% for dairy farms identified as suitable for AD by the U.S. Environmental Protection Agency. The objective of this study was to analyze the economic and technical limitations of farm-scale anaerobic digesters using a simple model permitting insight into the fundamental constraints on the technology. A model was developed to determine the cost of methane produced via AD based on operation size. Dairy plug-flow systems were modeled because of their well-documented economic performance, and model validation used data from AgSTAR's FarmWare program. The analysis shows that farm size is critical to make digestion-derived methane cost-competitive with natural gas. At low herd sizes (<400 animals), carbon credits and odor reductions alone appear insufficient to overcome the low commercial energy rates in the U.S. However, moderate reductions in digester cost and interest rate, coupled with moderate increases in amortization period and/or natural gas prices, could make AD more competitive with commercial energy in the U.S. even at relatively small herd sizes (approx. 400 animals).