Hepburn Shire Council is conducting a small-scale bioenergy pilot project with the aim to divert organic waste from landfill.

It had been investigating a waste to energy project for a number of years before it settled on the anaerobic digestion technology, which involves breaking down organic waste to create biogas (a kind of fuel), digestate (a fertiliser) and water.

The project, being conducted on the grounds of Creswick Transfer Station with waste sourced from local businesses, will continue for the remainder of the year.

Hepburn Shire Council's sustainability officer Dominic Murphy said that consultants testing the digester were working to the point of feeding it up to 100-kilograms of organic waste per day.

It has not yet expanded to household collection, but is speaking with businesses contributing about how to reduce contamination like straws, plastic, plates and forks, so they do not end up being fed into the digester.

If the trial goes well, the project will be expanded to a full-scale waste to energy project that will allow the shire to process between five to seven tonnes of organic waste each day, dealing with the majority of its waste.

It is a small project compared to other waste-to-energy projects around Australia but is a big deal for a small, regional council to take on such a sizeable project and deal with the associated regulations and overheads.

It is part of Hepburn Shire's Z-Net community transition project, which aims to transition the community to 100 per cent renewable energy and completely offset carbon emissions by 2029.

The council is investing $525,000 towards funding the full-scale waste-to-energy plant, including the pilot, while the Department of Environment, Land, Water and Planning (DELWP), through the New Energy Jobs Fund, granted $650,000.

At the moment the digester offsets itself and biogas produced from it is used for heating at the transfer station. If expanded, the digester will generate electricity for the site, with any extra electricity generation pumped back into the grid. But electricity production is not the main objective of the project.

"The bigger benefit is the environmental and financial benefit of diverting organic waste and then potentially adding value by treating and re-using the digestate," Mr Murphy said.

Waste is a "large slice of the pie" in the Z-Net project, with around 8000 tonnes of C02e emitted from waste in 2018.

"So if we are able to divert that then we can address a portion and generating electricity would be going above and beyond," he said.

Mr Murphy said unlike Ballarat's proposed waste to energy project that would process all kinds of waste, Hepburn's was a smaller scale project being implemented as a "last resort for organic waste" and if expanded, would be done so in conjunction with a variety of waste reduction workshops for households and businesses, along with composting programs.

"The solution is really to not buy more food than you need, to eat leftovers, feed scraps to animals and compost. Then this, the digester, is a tool at the end of the process to avoid anything left over from going to landfill."

It will come in hand with sourcing further data around the shire's waste and then scaling the size of the project to those needs.

The council is currently working on the 'recipes' of food it feeds into the digester, the pH levels and the temperature it is processed at so that it is possible to use the fertiliser it produces in the community, according to EPA guidelines.

It is also working with Central Highlands Water in relation to the regulations around discharging the water into the drain, but ideally, it would love to treat the water and remove enough organic material so that it can be used for council operations.