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which pay higher rates for purchased power, and use more energy per unit of dairy output, might stand to make relatively larger cuts in the costs of their dairy outputs. Thus, the impact of digestion technology and rate structure on the competitiveness of dairy farms of different sizes is, at least in theory, a qualitatively open question. And if the distribution of farm sizes is revised, then the predicted patterns of adoption must be revised as well. Even if this issue could be adequately resolved empirically, and a policy maker’s preferences with regards to farms size were clear to begin with, the interconnectedness of digestion and dairy operations has another influence on the policy debate. Manure digestion is extremely helpful in the elimination of odors. This could substantially reduce the legal costs, barriers to, and reasons to dislike, larger dairy farms. For all the above reasons, the impact of digester technology cannot be seriously assessed unless close attention is paid to its likely impact on dairy operations, the distribution of farm size and the economic implications of such distributions. Furthermore, while standard economic arguments suggest that the benchmark efficient pricing scheme, propped up with some lump sum subsidies to deal with potential externalities, should still be optimal, agricultural policies tend to be evaluated largely in terms of their distributional impact. Given the plethora of other distortions to the distribution of agricultural production over farms of different sizes, it is not obvious that rationalizing the price system for electricity sales promises obvious efficiency or equity gains. These concerns have led me to conclude that assessment of the correct rate structures for electricity produced from agricultural biogas should not be attempted outside of a complete model of a multi-output dairy farm, or in the absence of good, representative estimates of the parameters of the system. Instead, this paper will serve as a first pass at the economics of digester/generators. It is hoped that the calculations and insights will be of interest to potential adopters and policy practitioners alike, even though they will not yield strong conclusions for the reasons presented above. Some of the information presented in this paper was picked up in discussion with experts, from a tour of Tinedale Farm, and from a presentation by Dr. Robert Fick at the annual meeting of the Wisconsin chapter of the ASAE. Numerical values presented without citation fall into this category. 2PDF Image | The Economics and Feasibility of Electricity Generation using Manure Digesters on Small and Mid-size Dairy Farms
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