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

Elizabeth R. Leuer, Jeffrey Hyde and Tom L. Richard

Agricultural and Resource Economics Review, 2008, vol. 37, issue 2, 188-203

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.

Date: 2008
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