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The Economics of Anaerobic Digester Operation on a Minnesota Dairy Farm

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  • William F. Lazarus
  • Margaretha Rudstrom

Abstract

Anaerobic digesters for livestock operations are receiving attention for energy production and odor control. A farm-based digester went into operation in September 1999, on an 800-cow dairy farm in Minnesota. The goals of this paper are to analyze the contribution that a digester system can make to dairy farm profitability, and to demonstrate the impact of government and utility subsidies on profitability. Results indicate that the current selling price of electricity is not sufficient to justify building an anaerobic digester in most cases unless there is a subsidy or significant nonenergy market benefits.

Suggested Citation

  • 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.
    • Handle: RePEc:oup:revage:v:29:y:2007:i:2:p:349-364.
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2007.00347.x
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    1. Ernst, Matthew & Rodecker, Jared & Luvaga, Ebby & Alexander, Terence & Kliebenstein, James & MIRANOWSKI, JOHN A, 1999. "The Viability of Methane Production by Anaerobic Digestion on Iowa Swine Farms," ISU General Staff Papers 199910010700001329, Iowa State University, Department of Economics.
    2. Unknown, 2003. "Easier Access to More Data," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-1, November.
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    1. Di Corato, Luca & Moretto, Michele, 2011. "Investing in biogas: Timing, technological choice and the value of flexibility from input mix," Energy Economics, Elsevier, vol. 33(6), pages 1186-1193.
    2. Benavidez, Justin & Thayer, Anastasia W., 2018. "Poo Power: Revisiting Energy Generation from Biogas on Dairies in Texas," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266636, Southern Agricultural Economics Association.
    3. Thompson, Ethan & Wang, Qingbin & Li, Minghao, 2013. "Anaerobic digester systems (ADS) for multiple dairy farms: A GIS analysis for optimal site selection," Energy Policy, Elsevier, vol. 61(C), pages 114-124.
    4. Li, Xue & Mupondwa, Edmund, 2018. "Commercial feasibility of an integrated closed-loop ethanol-feedlot-biodigester system based on triticale feedstock in Canadian Prairies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 97(C), pages 401-413.
    5. Megan Swindal & Gilbert Gillespie & Rick Welsh, 2010. "Community digester operations and dairy farmer perspectives," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 27(4), pages 461-474, December.
    6. Rojas-Downing, M. Melissa & Harrigan, Timothy & Nejadhashemi, A. Pouyan, 2017. "Resource use and economic impacts in the transition from small confinement to pasture-based dairies," Agricultural Systems, Elsevier, vol. 153(C), pages 157-171.
    7. DeVuyst, Eric A. & Pryor, Scott W. & Lardy, Greg & Eide, Wallace & Wiederholt, Ron, 2011. "Cattle, ethanol, and biogas: Does closing the loop make economic sense?," Agricultural Systems, Elsevier, vol. 104(8), pages 609-614, October.
    8. 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.
    9. Benavidez, Justin R. & Thayer, Anastasia W. & Anderson, David P., 2019. "Poo Power: Revisiting Biogas Generation Potential on Dairy Farms in Texas," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 51(4), pages 682-700, November.
    10. Liebrand, Carolyn Betts & Ling, K. Charles, 2009. "Cooperative Approaches for Implementation of Dairy Manure Digesters," Research Reports 280105, United States Department of Agriculture, Rural Development.
    11. Cowley, Cortney & Brorsen, B. Wade, 2018. "Anaerobic Digester Production and Cost Functions," Ecological Economics, Elsevier, vol. 152(C), pages 347-357.
    12. 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.
    13. Kay Camarillo, Mary & Stringfellow, William T. & Jue, Michael B. & Hanlon, Jeremy S., 2012. "Economic sustainability of a biomass energy project located at a dairy in California, USA," Energy Policy, Elsevier, vol. 48(C), pages 790-798.
    14. Qingbin Wang & Laurel Valchuis & Ethan Thompson & David Conner & Robert Parsons, 2019. "Consumer Support and Willingness to Pay for Electricity from Solar, Wind, and Cow Manure in the United States: Evidence from a Survey in Vermont," Energies, MDPI, vol. 12(23), pages 1-13, November.
    15. 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.
    16. Siegmeier, Torsten & Blumenstein, Benjamin & Möller, Detlev, 2015. "Farm biogas production in organic agriculture: System implications," Agricultural Systems, Elsevier, vol. 139(C), pages 196-209.
    17. Ciliberti, Carlo & Jordaan, Sarah M. & Smith, Stephen V. & Spatari, Sabrina, 2016. "A life cycle perspective on land use and project economics of electricity from wind and anaerobic digestion," Energy Policy, Elsevier, vol. 89(C), pages 52-63.
    18. 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.
    19. 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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