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Investing in Methane Digesters on Pennsylvania Dairy Farms: Implications of Scale Economies and Environmental Programs

Published online by Cambridge University Press:  15 September 2016

Elizabeth R. Leuer ,
Jeffrey Hyde  and
Tom L. Richard
Elizabeth R. Leuer
Affiliation:
Department of Agricultural Economics and Rural Sociology at the Pennsylvania State University in University Park, Pennsylvania
Jeffrey Hyde
Affiliation:
Department of Agricultural Economics and Rural Sociology at the Pennsylvania State University in University Park, Pennsylvania
Tom L. Richard
Affiliation:
Tom Richard is in the Department of Agricultural and Biological Engineering, also at the Pennsylvania State University in University Park, Pennsylvania
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Abstract

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.

Keywords

anaerobic digesterstochastic capital budget modeldairy farmalternative energy
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 37 , Issue 2 , October 2008 , pp. 188 - 203
Copyright
Copyright © 2008 Northeastern Agricultural and Resource Economics Association 

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