In: Computers and Technology

Submitted By amoretti
Words 9906
Pages 40
Investing in Methane Digesters on Pennsylvania Dairy Farms: Implications of Scale Economies and Environmental Programs
Elizabeth R. Leuer, Jeffrey Hyde, and Tom L. Richard
A stochastic capital budget was used to analyze the effect of net metering policies and carbon credits on profitability of anaerobic digesters on dairy farms in Pennsylvania. We analyzed three different farm sizes—500, 1,000, and 2,000 cows—and considered the addition of a solids separator to the project. Results indicate that net metering policies and carbon credits increase the expected net present value (NPV) of digesters. Moreover, the addition of a solids separator further increases the mean NPV of the venture. In general, the technology is profitable only for very large farms (1,000+ cows) that use the separated solids as bedding material. Key Words: anaerobic digester, stochastic capital budget model, dairy farm, alternative energy

For a host of reasons, U.S. scientists, government leaders, and citizens are increasingly seeking alternative sources of energy. Green energy sources are those that do not emit harmful pollutants and/ or that are renewable. Anaerobic digesters (AD), found on dairy, hog, and poultry farms across the United States, represent potential sources of green energy. AgSTAR, a U.S. Environmental Protection Agency (U.S. EPA) program, whose goal is to increase the number of anaerobic digesters on farms in the United States, estimates there are 6,900 swine and dairy farms that could utilize digesters (U.S. EPA 2002a). However, the operating costs and benefits of AD adoption vary greatly from farm to farm, while the investment costs are very large. Therefore, the objective of this research is to compare the profitability of several digester scenarios. Unlike most previous research, which consists of analyses of specific,
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