A risk-adjusted techno-economic analysis for renewable-based milk cooling in remote dairy farming communities in East Africa

Abstract

The dairy industry accounts for 9-14% of East Africa's agricultural gross development product. Due to lack of milk cooling facilities, dairy farmers in areas without access to reliable grid electricity face problems of high milk spoilage and limited access to formal markets, which limits their income and standard of living. This article examines the economic viability for a number of configurations of off-grid solar, wind, biomass and biogas based milk-cooling systems serving a community in Tanzania. Key risk factors having the greatest impact on system viability are identified and a stochastic approach, by means of a Monte Carlo simulation is employed to determine the risk-adjusted economic performance of the project. The results indicate that biogas based systems offer the most viable option, with an internal rate of return of around 25%, a net present value of around $9,000 and a projected increase in farmers' monthly income of at least 78%. Despite specific risk factors, the 300-liter cooling system had an 82% probability of a positive net present value. However, larger system cooling capacities have a significant likelihood of a financial loss. Consequently, risk mitigation strategies designed to increase the probability of economic success are proposed.

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“…Na modelagem da simulação de Monte Carlo observa-se de forma mais usual as distribuições triangular e normal. Na distribuição triangular definem-se em três parâmetros seus valores mínimo, máximo e a moda do input incerto, enquanto que na distribuição normal é necessário conhecer a média e desvio padrão das variáveis cujo comportamento será simulado (Lukuyu et al, 2019).…”

Own Grain Storage Structures: Is It Worth Investing?

“…8, No. 2 distribution is described by its mean and standard deviation (Lukuyu et al, 2019). Triangular distribution was used in this study.…”

“…Gross Operating Revenue The results show that NPV is more sensitive to changes in Gross Operating Revenue and Fixed Investment, which are the most relevant parameters for risk analysis. In addition to other contexts, sensitivity analyzes are also successfully applied to verify economic viability (Gransberg and Kelly, 2008;Lukuyu et al, 2019;Talavera et al, 2011). While sensitivity analysis is useful for indicating the most critical parameters of a given investment, risk analysis provides an estimate of project value variability that is more realistic and easier to interpret (Clarke and Low, 1993).…”

Evaluation of the Energy Utilization Index in Sheep Milk Cooling Systems

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