A novel process scheme was developed to achieve economically feasible energy recovery from anaerobic digestion. The new process scheme employs a hybrid configuration of mesophilic and thermophilic anaerobic digestion with sludge ozonation: the ozonated sludge is first degraded in a thermophilic digester and then further degraded in a mesophilic digester. In small-scale pilot experiments of the new process scheme, degradation of VSS improved by 3.5% over the control (mesophilic-only configuration) with 20% less ozone consumption. Moreover, biogas conversion also improved by 7.1% over the control. Selective enrichment of inorganic compounds during centrifugation produced a dewatered sludge cake with very low water content (59.4%). This low water content in the sludge cake improved its auto-thermal combustion potential during incineration and added to the overall energy savings. We conducted a case study to evaluate power generation from biogas for a municipal wastewater treatment plant with an average dry weather flow of 43,000 m3/d. Electricity production cost was 5.2 ¢/kWh for the advanced process with power generation, which is lower than the current market price of 7.2 ¢/kWh. The new anaerobic digestion scheme with power generation may reduce greenhouse gas emissions by about 1,000 t-CO(2)/year compared with the conventional process without power generation.