Holsteins on the Blue Spruce Farm step gingerly around a mechanical shovel that scoops their waste and shoots it into a "cow-powered" electric generator. Besides pumping out 8,000 gallons of milk a day, these 2,000 dairy cows also light up 400 homes. The fuel is methane gas that bubbles from manure treated with bovine bacteria in heated underground tanks.

Environmentally conscious utility customers in the Green Mountain State can pay an extra $20 a month to get their electricity from such manure-fueled generators. Vermont is a leader in a new alternative energy movement to get states to produce 25 percent of their power from farms and forests by 2025.

"We want to make Vermont the ‘Green Valley’ – the Silicon Valley for environmental technologies," said Gov. Jim Douglas, a Republican.

About 6 percent of the nation’s energy is generated from renewable sources such as ethanol, biodiesel, wind and water, and almost three-quarters comes from coal, oil and gas, said Ernie Shea, a coordinator with the 25 by 25 Initiative.

About a dozen states, including Maryland, have signed on to the initiative, although none is nearly as far along as Vermont.

Shea points out that fossil fuels create more air pollution and contribute to global warming. They also make the United States vulnerable to international conflicts, he said.

"This nation needs a new energy future," he said. "And this campaign is all about looking at what role farms, forests and ranches can play in helping to address our energy needs. … Vermont has done a lot of work on this."

More than 3,500 people have signed up to receive "cow power" from Central Vermont Public Service Corp. Blue Spruce Farm is the first to start generating, but four methane gas digesters are under construction, and eight more are being planned.

The state is also trying several other new sources of energy. Grass Energy Collaborative, in Peacham, Vt., is manufacturing pellets from grass and corn that can be burned for heat.

In Montpelier, entrepreneur Gail Busch is designing greenhouses to grow algae that can be squeezed to produce an oil to fuel diesel engines.

At least 10 grain farms have installed presses and tanks to convert canola beans, sunflower seeds, flax and other plants into biodiesel fuel.

And 26 schools have received state subsidies of up to 90 percent to convert their oil-burning furnaces so that they can instead burn wood chips and scraps thrown away by lumber companies.

Focusing on agricultural products and wood as energy sources serves a secondary purpose of pumping cash into the state’s struggling dairy and timber industries, said Dave Lane, Vermont’s assistant agriculture secretary.

The number of dairy farms in the state has fallen from 1,800 in 2001 to about 1,150 today, in part because of low milk prices and high fuel costs.

"It’s been very hard for the dairy farms, with milk prices down, and they see energy production as one of their alternatives," Lane said.

Vern Grubinger, an adjunct professor who studies sustainable agriculture at the University of Vermont, cautions that there are limits to the power that farms can provide.

"People sometimes say, ‘If we made all our fuel from switch grass or other plants, we wouldn’t have to get our oil from the Middle East and people wouldn’t hate us anymore,’" Grubinger said. "Yes, but then we wouldn’t have any food to eat."

He notes that cow methane digesters, which can cost more than $1 million, are too expensive for many smaller dairy farms.

Nevertheless, the idea has caught the attention of the Maryland Department of Agriculture. Maryland is offering $100,000 grants to farmers willing to install the methane generators, said Pat McMillan, an assistant secretary at the agency.

Matt Hoff, owner of a 1,000-cow dairy farm in Carroll County, said he would like to use one of the grants to become the first in Maryland to replicate what’s happening in Vermont.

"I’d like to get as much money for my electricity as they do," Hoff said. "These anaerobic digesters also reduce odors and help farmers manage their waste."

Maryland also hopes to get power from agriculture through incentives to manufacturers of ethanol and biodiesel. A law passed this year requires half of the state’s diesel vehicles to run on a blend containing 5 percent biodiesel by 2008, said Chris Rice, a program manager at the Maryland Energy Administration.

"They are pretty progressive up there in Vermont," Rice said. "It’s very important to reduce our consumption of fossil fuels as the supply dwindles."

Marie Audet, whose family owns Blue Spruce Farm, said they installed the $1.3 million system last year as an alternative to pouring the 30,000 gallons of manure their cows produce daily into a lagoon.

"There’s no money in milk anymore," Audet said. "The cow power does help us financially, but, more important, it takes care of the manure and the strong odors."

Several other dairy farms in Wisconsin and California have methane digesters. But Vermont is the only state to allow its utility customers to subscribe to cow power.

Here’s how it works at Audet’s farm: The cows spend their days lined up, munching hay, in a green metal building almost the size of an airplane hangar. When it’s time for milking, they are marched into computerized stalls where a worker attaches automatic milking devices.

The animals’ waste is swept up by a V-shaped machine that rumbles across the floor along tracks. The manure is then pumped through pipes into a huge tank, where the liquids are mechanically separated from the solids.

The liquids are spread on nearby fields as fertilizer. The solids drop into a heated, 600,000-gallon tank – 112 feet long, 72 feet across and 14 feet deep – called the digester. There the waste is mixed for 21 days with bacteria from the cows’ digestive systems at 101 degrees, the temperature of the animals’ stomachs.

From this brew bubbles methane gas, which rises through pipes and is burned by a 220-kilowatt generator. The system provides all of the farm’s power and extra that the Audet family sells for $45,000 a year to Central Vermont Public Service Corp.

That’s a small percentage of the farm’s annual income, Marie Audet said, although she declined to reveal specifics.

"The whole premise is that it’s financially supporting itself," Audet said. "It’s an environmentally responsible way to manage all the waste we have on the farm. We couldn’t pay to treat all our waste, but this system pays for itself."

Left over after the electricity generation is a sterilized, odorless powder that looks like peat moss. The farmers use some of it as bedding for the animals in the barn instead of paying $60,000 a year for sawdust, Audet said.

The powder is also bagged and sold in stores as "moo doo," a potting soil. Add all that together and cow power is a small but reliable source of income in an unstable business.

"The wind isn’t always blowing," noted David Dunn, a consultant for the power company. "But the cows are always going."