This study was conducted to assess socio-economic and environmental benefits of biogas energy and its challenges. The study used descriptive type of research design consisting of quantitative and qualitative research approach. The data collection instruments were household survey, key informants interview and self-observation to collect quantitative and qualitative data types. The study revealed that the biogas installation made each household to save on average 144 min per day from fuel wood collection, cooking, cleaning utensils/kitchen materials) and the reduction in the physical stress was also remarkable. Use of biogas provide an annual saving of 3833.28 Birr from fuel wood, Birr 1243 .20 from charcoal, Birr 128.50 from dung cake and Birr 266 and 717.65 from kerosene and chemical fertilizer, respectively, with net cash flow of Birr 1530 per HH/year. The households encountered lack of skills for adding raw materials to the biogas digester and fertilizer application to their farm land. Training for operation and liquid bio-slurry application is vital for the continuity of the project and revision of feeding material to the digester in different season needs consideration.
Key words: Biogas energy, environment benefits, biomass, alternative energy.