Post on 22-Feb-2016
description
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Financial and economic performance of domestic
biogas installationsNot making money, still getting rich?
Compact Biogas CoursePPRE
February 27 04, 2011
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Financial and economic performance of domestic biogas installations
Content
1. Biogas cost & benefits, a global overview– Investment, subsidy and GDPppp– Specific biogas costs– Specific energy costs– Biogas substitution value– Capital budgeting tools
2. Financial and economic performance– Detailed example Rwanda
3. Shadow values– Example Bangladesh
4. Sensitivity analysis– Example Pakistan
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaImportance 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
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Financial and economic performance of domestic biogas installations
Overview data origin
AsiaNepalVietnamCambodiaBangladeshLaosPakistanIndonesiaIndia**China**
AfricaRwandaEthiopiaTanzania Kenya UgandaBurkina FasoSenegalCameroon *Benin*
* Starting implementation in 2009** Partial data
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaAssessing valueCost-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 lifeOr a combination of the above?
Financial and economic performance of domestic biogas installations
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Financial and economic performance of domestic biogas installations
Investment costsInvestment costs
-
200
400
600
800
1,000Ne
pal
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
Euro
Investment costs and share of GDP
-
200
400
600
800
1,000Ne
pal
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
Euro
0%
20%
40%
60%
80%
100%
120%
%
Investment
% of GDP
Investment costs, share of GDP and subsidy share,
-
200
400
600
800
1,000
Nepa
l
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
Euro
0%
20%
40%
60%
80%
100%
120%
%
Investment% of GDP% subsidy
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Total Biogas Costs
-
5
10
15
20
25
Nepa
l
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Burk
ina
Faso
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
Euro
/ G
J net
Financial and economic performance of domestic biogas installations
Total Biogas CostsParameters 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.)
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaDomestic fuel mix
Domestic fuel mix
0%
20%
40%
60%
80%
100%Ne
pal
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Burk
ina
Faso
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
%
Electricity
Natural Gas
LPG
Kerosene
Coal
Fuelwood
Charcoal
Agric residue
Cow dung
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Financial and economic performance of domestic biogas installations
Specific domestic energy costsSpecific domestic fuel prices (economic)
0
10
20
30
40
50
60
70
80Ne
pal
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Burk
ina
Faso
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
Euro
/GJn
et
ElectricityNatural GasLPGKeroseneCoalFuelwoodCharcoalAgric residueCow dung
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaSubstitution assumption
Biogas replaces traditional domestic fuels proportionally …
Gross energy mix
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
project baseline
Biogas
Agric res
Charcoal
Firew ood
Electricity
Coal
Kerosene
LPG
Net energy mix
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
project baseline
Biogas
Agric res
Charcoal
Firew ood
Electricity
Coal
Kerosene
LPG
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaBiogas substitution value
Spec biogas prod
Livestock holding
x
Collection ratex
Correction factor
x
Biogas production
=
Biogas production
(Calorific value & stove efficiency)Replacement
ratio
x
Fuel mixx
=Substituted fuel
Biogas production by animal type[m3/plant/day]
Pig - Dairy cattle 0.39 Non-dairy cattle 0.20 Buffalo 1.25
1.84 Annually: 687.49
Substituted fuel[kg/plant/yr]
Agricultural residue 664Fuelwood 1752Dung cake 1095LPG 51
Substituted fuelx
Fuel prices
Biogas substitution
value
=
Biogas substitution value[Euro/m3]
Agricultural residue 0.01Fuelwood 0.07Dung cake 0.02LPG 0.02
0.12
Financial and economic performance of domestic biogas installations
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Financial and economic performance of domestic biogas installations
Biogas Substitution Value (BSV)
Specific Total Biogas Costs
0
10
20
30
40
50
60
Nepa
l
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
daBu
rkin
aFa
soSe
nega
l
Cam
eroo
n
Beni
n
Asia Africa
Euro
/GJn
et
Specific Costs and Benefits (economic)
0
10
20
30
40
50
60
Nepa
l
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
daBu
rkin
aFa
soSe
nega
l
Cam
eroo
n
Beni
n
Asia Africa
Euro
/GJn
et
TBCBSV eco
Specific Costs and Benefits (economic & financial)
05
1015202530354045
Nepa
l
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
daBu
rkin
aFa
soSe
nega
l
Cam
eroo
n
Beni
n
Asia Africa
Euro
/GJn
et
TBCBSV ecoBSV fin
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Financial and economic performance of domestic biogas installations
Summary indices(RBV = BSV – TBC)
Summary indices
-
0.20
0.40
0.60
0.80
1.00
inde
x GDPi
RBVi
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area“Capital budgeting instruments”
Internal Rate of Return (IRR): Discount rate resulting in a nett present value of zero after a series of cash flowsInteresting project: IRR > interest rate alternative investments
Net Present Value (NPV): Present value (future) cash inflows minus initial investmentInteresting project: NPV > 0
Parameters used: Cash flow
Parameters used: Cash flowDiscount rate
Financial and economic performance of domestic biogas installations
Simple Payback Period (SPP): Annual (net) income divided by investment
Parameters used: Cash flow
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaSimple payback
Financial and economic performance of domestic biogas installations
Simple payback period
-
1
2
3
4
5
6
7
8Ne
pal
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Burk
ina
Faso
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
Year
s
SPP tot
SPP min sub
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaNPV example
CER value: Euro 30 per yearCrediting period: 7 years
Cashflow1 2 3 4 5 6 7
30 30 30 30 30 30 30
Total CER value: Euro 210 ?
According to NPV at 7% discount rate:NPV: Euro 146,05
Financial and economic performance of domestic biogas installations
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaNPV
Financial and economic performance of domestic biogas installations
Net Present Value
300-
200-
100-
-
100
200
300
400
500
600
700Ne
pal
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Burk
ina
Faso
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
Euro
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaIRR example
Financial and economic performance of domestic biogas installations
Investment: Euro 400Net savings: Euro 150 per yearEconomic lifetime: 10 years
Total income: Euro 1,100 (10 x 150 – 400)IRR: 36%IRR income Euro 8,090 (400 x 1.3610 – 400)
Year 0 1 2 3 4 5 6 7 8 9 10 Total
Cashflow (400) 150 150 150 150 150 150 150 150 150 150 1,100
IRR 36%
IRR income 8,490
Income 143 194 263 357 485 659 894 1,213 1,647 2,235 8,090 Cumulative income 143 337 600 958 1,443 2,101 2,995 4,208 5,855 8,090
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaIRR
Financial and economic performance of domestic biogas installations
Internal Rate of Return
-10%
0%
10%
20%
30%
40%
50%
60%Ne
pal
Viet
nam
Cam
bodi
a
Bang
lade
sh
Laos
Paki
stan
Indo
nesia
Indi
a
Chin
a
Rwan
da
Ethi
opia
Tanz
ania
Keny
a
Ugan
da
Burk
ina
Faso
Sene
gal
Cam
eroo
n
Beni
n
Asia Africa
%
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaAnd now …
Financial and economic performance of domestic biogas installations
… is this all true?
well …
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaConsiderations (so far)
Financial and economic performance of domestic biogas installations
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
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
and … :
• to which extent does the investor reap the benefits
• to which extent pays the investor for the “real” value
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaFinancial and economic performance
Financial and economic performance of domestic biogas installations
Costs BenefitsInvestment at subsidized rate Fuel savings
Repair and maintenance Time savings
Time for plant operation Fertilizer value (?)
Financing Avoided health expenses
Full investment Fuel savings
Repair and maintenance Time savings
Time for plant operation Fertilizer value
Financing Local employment generation
Subsidy Avoided health expenses
Programme support GHG reduction
Environment improvement
Fina
ncia
l
Hous
ehol
d
Econ
omic
Soci
ety
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaExample for Rwanda
Financial and economic performance of domestic biogas installations
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Cost / benefit calculations on biogas
Shadow values (Bangladesh example)Cost/Benefit Breakdown
Financial EF* Economic(Taka) (%) (Taka)
Costs
cement 4200 0.6 2520materials 8445 0.75 6333.8labour 5550 0.75 4162.5appliances 2595 0.9 2335.5fees & charges 4210 1 4210
Total Capital Costs 25000 19561.8Ann. Maintenance Costs 500 391.2
Benefits (/yr)
biomass savings 3500 1 3500kerosene savings 0 1.1 0nutrients 1 1971labour time 547.5 0.75 410.625tons CO2-eq reduced 1 1600toilet attachments 0 0smoke reduction 1 400employment 0 0
Total Annual Benefits 4047.5 7881.625
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaEconomic analysis
EIRR analysis (B'desh
0%
10%
20%
30%
40%
50%
60%
70%
saved biomass +saved domesticlabour
+saved nutrients +indoor smokereduction
+reduced carbonemissions
EIRR
Financial and economic performance of domestic biogas installations
Biogas Practice AreaBiogas Practice AreaBiogas Practice Area
Cost / benefit calculations on biogas
Sensitivity analysis (Pakistan example)
20%
25%
30%
35%
40%
45%
-50% -25% nominal value +25% +50%
IRR
[%]
IRR sensitivity
Investment rebate
Biogas value
Carbon revenue
Biogas Practice AreaBiogas Practice AreaBiogas Practice AreaThank you for your attention.
Any questions?Financial and economic performance of domestic biogas installations