The Economic Feasibility of Partially Replacing Coal with Poultry Litter during the Production fo Energy in Virginia's Chesapeake Bay Watershed

Nutrient runoff from excess land application of poultry litter in the Chesapeake Bay Watershed has caused damage to the Chesapeake Bay and lead to the need for alternative poultry litter disposal methods. This study provided an economic feasibility analysis of the use of poultry litter as a partial replacement of coal at an electrical generating unit in Virginiaâs Chesapeake Bay Watershed. Previous research on the feasibility of converting litter to energy failed to include uncertainty in benefit-cost variables, therefore, this study used risk analysis to incorporate variable uncertainty. Project net worth in previous studies was measured under a public investment scenario with risk neutral preferences but did not take into account risk averse preferences common in private investment. This paper compared benefits under both public risk neutral and private risk averse investor preferences. NPV results showed the proposed project to be feasible but sensitive to the acquisition cost of poultry litter, the unit ash value of litter, and future coal price projections. The maximum level of risk aversion required for feasibility increased when expected returns were measured on an investment scale compared to an annual income scale. Poultry litter combustion produced lower levels of NOx and SO2 emissions compared to coal, therefore, emission allowance trading through the EPA market based trading programs generated additional benefits to the model and increased the maximum level of risk aversion permitted for feasibility. Results suggested the potential to dispose of 110 thousand tons of poultry litter per year from the Chesapeake Bay Watershed without violating EPA emission standards.