Financial and economic performance of domestic biogas installations
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Financial and economic performance of domestic biogas installations Not making money, still getting rich?. Compact Biogas Course PPRE February 27 04, 2011. Content. Biogas cost & benefits, a global overview Investment, subsidy and GDPppp Specific biogas costs Specific energy costs

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Financial and economic performance of domestic biogas installations

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Financial and economic performance of domestic biogas installations

Financial and economic performance of domestic biogas installations

Not making money, still getting rich?

Compact Biogas Course

PPRE

February 27 04, 2011


Content

Content

  • Biogas cost & benefits, a global overview

    • Investment, subsidy and GDPppp

    • Specific biogas costs

    • Specific energy costs

    • Biogas substitution value

    • Capital budgeting tools

  • Financial and economic performance

    • Detailed example Rwanda

  • Shadow values

    • Example Bangladesh

  • Sensitivity analysis

    • Example Pakistan

Financial and economic performance of domestic biogas installations


Importance of financial and economical assessment

Importance of financial and economical assessment

Complicated

No fun (for most people)

Without sound financial/economic assessment no funding from governments for biogas programs

Decision whether or not to implement in specific country

Without clear information it is hard to make people purchase the biogas installation


Overview data origin

Overview data origin

Asia

Nepal

Vietnam

Cambodia

Bangladesh

Laos

Pakistan

Indonesia

India**

China**

Africa

Rwanda

Ethiopia

Tanzania

Kenya

Uganda

Burkina Faso

Senegal

Cameroon *

Benin*

*Starting implementation in 2009

**Partial data

Financial and economic performance of domestic biogas installations


Assessing value

Assessing value

Cost-based approach:

  • Investment and repair costs, divided by total (expected) gas production;

  • Interest, depreciation and repair costs over its lifetime, divided by the total (expected) gas production;

  • Total operating and maintenance labour expected over its lifetime, divided by the total (expected) gas production;

  • Benefit-based approach:

  • Total value of substituted fuels divided by the corresponding amount of biogas generated of that period;

  • Total value of increased agricultural produce and substituted fertilizer;

  • Total value of (productive) time saving resulting from operating a biogas plant as compared with using traditional fuel;

  • Total value of improved health and sanitation conditions;

  • Total value of a better life

Or a combination of the above?

Financial and economic performance of domestic biogas installations


Investment costs

Investment costs

Financial and economic performance of domestic biogas installations


Financial vs economic costs and the gigajoule

Financial vs. Economic costs and the gigajoule

  • Financial costs: for the project/individual

  • Economic costs: for the society/country

    G Gas: 33.38 MJ/m3

    One gigajoule is approximately 30 m3 G Gas

    Steven’s financial GJ costs for gas: €16.5/GJ

    Average Dutch household uses1576 m3 (52.53 GJ)

Financial & economic performance of domestic biogas plants


Total biogas costs

Total Biogas Costs

  • Parameters used:

    • Investment costs

    • Maintenance costs (5% of investment p.a.)

    • Biogas loan conditions (interest rate, maturity)

    • Lifetime (15 yrs)

    • Biogas production (584 m3 biogas p.a.)

Financial and economic performance of domestic biogas installations


Domestic fuel mix

Domestic fuel mix


Specific domestic energy costs

Specific domestic energy costs

Financial and economic performance of domestic biogas installations


Substitution assumption

Substitution assumption

Biogas replaces traditional domestic fuels proportionally …


Biogas substitution value

=

Biogas production

Biogas substitution value

Biogas production

Substituted fuel

x

x

x

Spec biogas prod

Livestock holding

Replacement ratio

Fuel prices

x

(Calorific value & stove efficiency)

=

x

Biogas substitution value

Collection rate

Fuel mix

x

=

Correction factor

Substituted fuel

Financial and economic performance of domestic biogas installations


Biogas substitution value bsv

Biogas Substitution Value (BSV)

Financial and economic performance of domestic biogas installations


Capital budgeting instruments

“Capital budgeting instruments”

Simple Payback Period (SPP):

Investment divided by annual (net) income

Parameters used: Cash flow

Net Present Value (NPV):

Present value (future) cash inflows minus initial investment

Interesting project: NPV > 0

Parameters used: Cash flow

Discount rate

Internal Rate of Return (IRR):

Discount rate resulting in a nett present value of zero after a series of cash flows

Interesting project: IRR > interest rate alternative investments

Parameters used: Cash flow

Financial and economic performance of domestic biogas installations


Simple payback

Simple payback

Financial and economic performance of domestic biogas installations


Npv example

NPV example

CER value: Euro 30 per year

Crediting period: 7 years

Total CER value:Euro 210 ?

According to NPV at 7% discount rate:

NPV:Euro 146,05

Financial and economic performance of domestic biogas installations


Financial and economic performance of domestic biogas installations

NPV

Financial and economic performance of domestic biogas installations


Irr example

IRR example

Investment:Euro 400

Net savings:Euro 150 per year

Economic lifetime:10 years

Total income:Euro 1,100 (10 x 150 – 400)

IRR:36%

IRR incomeEuro 8,090 (400 x 1.3610 – 400)

Financial and economic performance of domestic biogas installations


Financial and economic performance of domestic biogas installations

IRR

Financial and economic performance of domestic biogas installations


And now

And now …

… is this all true?

well …

Financial and economic performance of domestic biogas installations


Considerations so far

Considerations (so far)

  • The cost side:

  • what is the actual price paid for the installation

    • local material and labour pricing

    • in-kind contribution of the household

  • Plant financing costs

  • The benefit side:

  • correcting for energy pricing increase

  • differences in energy pricing between areas

  • are households actually paying for their domestic fuel?

  • are households actually feeding the plant

  • and … :

  • to which extent does the investor reap the benefits

  • to which extent pays the investor for the “real” value

Financial and economic performance of domestic biogas installations


Financial and economic performance

Financial and economic performance

Financial and economic performance of domestic biogas installations


Example for rwanda

Example for Rwanda

Financial and economic performance of domestic biogas installations


Shadow values bangladesh example

Shadow values (Bangladesh example)

Cost / benefit calculations on biogas


Economic analysis

Economic analysis

Financial and economic performance of domestic biogas installations


Sensitivity analysis pakistan example

Sensitivity analysis (Pakistan example)

Cost / benefit calculations on biogas


Financial and economic performance of domestic biogas installations

Thank you for your attention.

Any questions?

Financial and economic performance of domestic biogas installations


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