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V. Analysis and Conclusions: The conventional wisdom holds that digester technology displays significant economies of scale with respect to farm size. This is due to installation costs that are fixed with respect to the size of the operation. Given the non-availability of measures of fixed costs that vary according to farm size, analysis of this issue is beyond the scope of this paper. However some educated guesses can be made. In the case where ps≥pb, at EPP, both the electric margin per kW of capacity and per cow are equal across farms of different sizes. This is because the farm simply generates as much electricity as it can and sells it. At a capacity equal to EPP, the amount of electricity that can be generated per cow, or per unit of capacity is constant across farm sizes, by construction. If the average fixed cost of a digester-generator indeed decreases in size, two unambiguous results follow: Larger farms will be able to make a larger profit margin on each kWh of electricity sold (because the electric margin per kW is constant while average fixed costs are declining). Larger farms will gain more of a competitive edge through the introduction of digesters than small farms. The reasoning is as follows: the per cow profit increase due to the introduction of a digester (equal to the constant electric margin per cow minus the declining cost of capacity per cow) is higher for larger farms, implying that if milk output per cow is roughly constant across farms of different sizes then the reduction in the break-even price of milk should be larger for larger farms. Thus, the conventional wisdom is borne out in this case. Conversely, however, if psPDF Image | The Economics and Feasibility of Electricity Generation using Manure Digesters on Small and Mid-size Dairy Farms
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