Biogas Opportunity Cost

II. Biogas is made out of anaerobic digestion of animal dung (cow dung, bull shit, pig waste etc.).   Sometimes even human waste is mixed with it as a way of hygienic disposal of human waste though it does make the digestion process a bit harder.   Some people say that biogas is almost free, since the animal dung is simply collected.   The biogas plant is constructed from local resources abundantly available and from the labour of people who have plenty of time at their disposal.   When the Government constructs it, however, the fixed cost per cubic meter of gas is said to equal its variable cost per cubic meter.
        One cubic meter of biogas when used in a duel fuel engine running a diesel pumpset (in this engine biogas can displace as much as 80% of the diesel fuel) has a value of Rs.20 based on the quantity and market price of diesel displaced.   When the gas is used for cooking, the same quantity of gas replaces 5 kg of fuelwood priced at Rs.2 per kg or dry dung cakes (again made from the same wet dung input)   having more or less the same value as the fuelwood.   When fuelwood is used, people also associate an environmental cost which may be roughly 50% of the market value.
        Find out the opportunity cost of 1 cu.m of biogas (1)when there is unlimited demand for diesel pump sets (2) when there is no demand for diesel pump sets because those places have been electrified and now have access to cheap electricity. (3 x 2 marks)


Just because it is not bought and sold in the market, animal dung is not free, because it has alternative uses, i.e. opportunity costs.   Its best use however, is as bio fertilizer.   But then, the dung slurry, which   remains in the biogas pit after   the gas is produced, is also an equally good fertilizer, almost of the same value.   So, ideally you can cancel out the dung input and the slurry output.

But in this case this alternative of using dung as fertilizer is not given, but only dung is used in its third...