Author

Justin Cole

Document Type

Honors Capstone Project

Date of Submission

Spring 5-1-2011

Capstone Advisor

Peter Wilcoxen

Honors Reader

Elizabeth Ashby

Capstone Major

Economics

Capstone College

Management

Audio/Visual Component

no

Capstone Prize Winner

no

Won Capstone Funding

no

Honors Categories

Social Sciences

Subject Categories

International Business | Labor Relations | Management Information Systems

Abstract

Ukraine is a country heavily dependent on other countries for its natural gas supply, leaving it vulnerable to interruptions in supply. One of its largest suppliers, Russia, has twice taken drastic means of physically closing the pipelines, thereby cutting off this supply and illustrating to Ukraine and the world the leverage that it can exercise. While at the present time the cut-offs have lasted no longer than a few weeks, future cut-offs could become more common and longer in duration. When compounded with the troubled history between the two countries, one can quickly see the precipitous situation that has the potential to escalate into armed conflict.

The methodology used in this thesis sought to identify a renewable energy technology that could help reduce this dependency on foreign energy. The technology must be feasible considering the climate, viable considering the cost, and efficient in the production of an alternative fuel source. Biogas plants (anaerobic digestion) were identified as satisfying all three of these conditions. These plants can use as an input any biodegradable material, but corn silage was quickly identified as the optimal input due to its low cost and high biogas yield. Rural farmers were then identified as the optimal target population for these digesters, due to their ownership of a large amount of land and having the existing infrastructure in place to produce corn silage. The annual natural gas demand of the rural farmers was found to be 4,200 cubic meters, which was used in the calculation of the size of the actual digester that would produce this exact amount of gas annually. The size of the digester was determined to be 9 cubic meters.

A financial analysis of the biogas plants then proved that this technology produced a large amount of natural gas equivalent, and also provided financial profits to those who constructed them. However, a problem soon arose. How could rural farmers be expected to afford the lump sum payment necessary for the construction of the digester?

A microfinance institution was then theorized that would provide the upfront capital to construct these plants, who would then lease these plants to rural farmers. These rural farmers would repay the lease over a five year term and would benefit from the opportunity cost from synthesizing their own fuel. A financial analysis of the borrower and the institution determined that both parties would benefit financially from the institution, with borrowers experiencing profits in year 1 and the institution achieving self-sufficiency in year 7.

The final section reports the impacts and final results that this institution could potentially have on the country of Ukraine. First, it evaluates the amount of carbon dioxide offsets generated by these digesters. Second, it values these carbon offsets by using the market price of Emission Reduction Units (ERUs) to identify a potential funding opportunity for the institution. Finally, it measures the total amount of natural gas that all digesters in operation would generate and its impact on Ukraine’s importation of natural gas from foreign countries.

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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