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An economic and functional tool for assessing the financial feasibility of farm-based anaerobic digesters

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  • Anderson, Robert C.
  • Hilborn, Don
  • Weersink, Alfons

Abstract

Anaerobic digester (AD) technology is a form of renewable energy with significant upside potential and little public resistance. However, previous studies have generally found ADs to be a poor investment for private firms without public assistance. The mixed results on the financial feasibility of ADs could be due to the site of the analysis since results vary with size, geographic location or the type of AD system, which are not standardized but rather customized to the individual situation. Given the public and private interest in AD technology and the need to assess the feasibility by site, a decision-making tool that can be adapted for each location and system would aid assessing the investment. This paper presents a freely available workbook to determine the financial feasibility of a farm-based AD and to demonstrate its use. The decision-making tool identifies the technical and financial parameters affecting the returns to an AD and the sensitivity of the assumption to changes in the value of those parameters. An application of the workbook for the Ontario livestock sector demonstrates its usefulness. Investment in an AD is financially feasible only for the largest dairy farms in Ontario under current electricity prices, which are approximately six times greater than the wholesale price. Shifting to a duel fuel continuous system would improve returns, as would the availability of additional substrate material in the form of solid grease and vegetative waste. Reductions in capital cost and improvements in the efficiency of the technology are probable given the relatively infant status of the biogas sector but these future enhancements would likely only alter the investment decisions for large commercial dairy farms.

Suggested Citation

  • Anderson, Robert C. & Hilborn, Don & Weersink, Alfons, 2013. "An economic and functional tool for assessing the financial feasibility of farm-based anaerobic digesters," Renewable Energy, Elsevier, vol. 51(C), pages 85-92.
    • Handle: RePEc:eee:renene:v:51:y:2013:i:c:p:85-92
    DOI: 10.1016/j.renene.2012.08.081
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    References listed on IDEAS

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    1. White, Andrew J. & Kirk, Donald W. & Graydon, John W., 2011. "Analysis of small-scale biogas utilization systems on Ontario cattle farms," Renewable Energy, Elsevier, vol. 36(3), pages 1019-1025.
    2. Clark P. Bishop & C. Richard Shumway, 2009. "The Economics of Dairy Anaerobic Digestion with Coproduct Marketing," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(3), pages 394-410.
    3. Wang, Qingbin & Thompson, Ethan & Parsons, Robert L. & Rogers, Glenn, 2011. "Economic feasibility of converting cow manure to electricity: A case study of the CVPS Cow Power program in Vermont," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104564, Agricultural and Applied Economics Association.
    4. William F. Lazarus & Margaretha Rudstrom, 2007. "The Economics of Anaerobic Digester Operation on a Minnesota Dairy Farm," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 349-364.
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    Cited by:

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    2. Herbes, Carsten & Halbherr, Verena & Braun, Lorenz, 2018. "Factors influencing prices for heat from biogas plants," Applied Energy, Elsevier, vol. 221(C), pages 308-318.
    3. Diamantis, Vasileios & Eftaxias, Alexandros & Stamatelatou, Katerina & Noutsopoulos, Constantinos & Vlachokostas, Christos & Aivasidis, Alexandros, 2021. "Bioenergy in the era of circular economy: Anaerobic digestion technological solutions to produce biogas from lipid-rich wastes," Renewable Energy, Elsevier, vol. 168(C), pages 438-447.
    4. Namuli, R. & Pillay, P. & Jaumard, B. & Laflamme, C.B., 2013. "Threshold herd size for commercial viability of biomass waste to energy conversion systems on rural farms," Applied Energy, Elsevier, vol. 108(C), pages 308-322.
    5. Yakubu Abdul-Salam & Melf-Hinrich Ehlers & Jelte Harnmeijer, 2017. "Anaerobic Digestion of Feedstock Grown on Marginal Land: Break-Even Electricity Prices," Energies, MDPI, vol. 10(9), pages 1-21, September.
    6. Robert C. Anderson & Alfons Weersink, 2014. "A Real Options Approach for the Investment Decisions of a Farm-Based Anaerobic Digester," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(1), pages 69-87, March.
    7. T. Chen & M. Liu & Y. Takahashi & J.D. Mullen & G.C.W. Ames, 2016. "Carbon emission reduction and cost--benefit of methane digester systems on hog farms in China," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 59(6), pages 948-966, June.
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    9. Willeghems, Gwen & Buysse, Jeroen, 2016. "Changing old habits: The case of feeding patterns in anaerobic digesters," Renewable Energy, Elsevier, vol. 92(C), pages 212-221.

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    Keywords

    Farms; Biogas; Finance; Feasibility; Tool;
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