Techno-Economic Analysis in Agricultural Value Chains - Revision history

Ranisha at 19:22, 14 July 2020

2020-07-14T19:22:00Z

Rebecca Navarro: /* Analysis Tools */

2019-09-13T20:14:03Z

Analysis Tools

Rebecca Navarro: /* Investment Planning on Micro-Level */

2019-09-07T10:34:29Z

Investment Planning on Micro-Level

Hector Alfaro at 12:08, 11 May 2016

2016-05-11T12:08:48Z

Show changes

Ranisha at 13:52, 18 April 2016

2016-04-18T13:52:21Z

Ranisha at 13:51, 18 April 2016

2016-04-18T13:51:57Z

Ranisha at 11:33, 13 April 2016

2016-04-13T11:33:59Z

Avinash Kumar: /* Investment Planning on Micro-Level */

2016-04-13T11:24:05Z

Investment Planning on Micro-Level

Admin at 15:36, 12 April 2016

2016-04-12T15:36:03Z

Avinash Kumar: /* Overview */

2016-04-12T14:48:47Z

Overview

@@ Line 105: / Line 105: @@
 = Further Information =
-*[[Portal:Powering Agriculture|Powering Agriculture Portal]]<br/>
+*[[Portal:Water and Energy for Food|Water and Energy for Food (WE4F) portal on energypedia]]
 *[https://gc21.giz.de/ibt/var/app/wp385P/2624/wp-content/uploads/2015/03/PAEGC_MOOC_COMPILED_READER.pdf Reader of the MOOC "Powering Agriculture - Sustainable Energy for Food"]<br/>
 *[http://www.fao.org/publications/card/en/c/0ca1c73e-18ab-4dba-81b0-f8e480c37113/ Opportunities for Agri-Food Chains to become Energy-Smart]<br/>
@@ Line 126: / Line 126: @@
 {{Go to Top}}
 [[Category:Powering_Agriculture]]

@@ Line 55: / Line 55: @@
 {{Go to Top}}
 == Analysis Tools ==
@@ Line 60: / Line 61: @@
 Cost-Benefit Analysis can be unfriendly to a non-professional audience. Several online tools are available to support small and medium businesses in performing cost-benefit evaluation of their investment in an energy-food context. A non-exhaustive list with some examples is provided below:
-*'''''WinDASI - a software for Cost-Benefit Analysis (CBA) of investment projects:'''''FAO provides this tool to carry out cost-benefit calculations of investment projects. After cost and benefit data are inserted in the database, WinDASI guides the user how to calculate. In addition, WinDASI allows for calculation and comparisons of different projects alternative scenarios (with–project versus without-project). The WinDASI program is downloadable from the [http://www.fao.org/easypol/output/browse_by_training_path.asp?pub_id=539&id=539&id_elem=539&id_cat=319 FAO EASYPol website].<br/>
+*'''''WinDASI - a software for Cost-Benefit Analysis (CBA) of investment projects:'''''FAO provides this tool to carry out cost-benefit calculations of investment projects. After cost and benefit data are inserted in the database, WinDASI guides the user how to calculate. In addition, WinDASI allows for calculation and comparisons of different projects alternative scenarios (with–project versus without-project). The WinDASI program is downloadable from the [http://www.fao.org/3/a-am370e.pdf FAO EASYPol website].<br/>
-*'''''VCA Tool - a software for Value-Chain Analysis to assess socioeconomic and environmental policy impacts''''': developed by FAO, this tool allows different scenarios to be built and to analyse the socio-economic impact of various policies such as the adoption of new low-carbon energy efficient technologies or support for renewable energy. The information about how inputs and outputs would change before and after the intervention is exogenous and can come from other sources. The software is available at: [http://www.fao.org/energy/88788/en/ HERE]<br/>
+*'''''VCA Tool - a software for Value-Chain Analysis to assess socioeconomic and environmental policy impacts''''': developed by FAO, this tool allows different scenarios to be built and to analyse the socio-economic impact of various policies such as the adoption of new low-carbon energy efficient technologies or support for renewable energy. The information about how inputs and outputs would change before and after the intervention is exogenous and can come from other sources. The software is available at: [http://www.fao.org/docs/up/easypol/432/value_chain_analysis-brochure-e-version.pdf HERE]<br/>
-*'''''Power Irrigation Tool''''': this FAO tool evaluates economic, environmental and social aspects of different energy sources for irrigation in order to help operators to assess the economic viability of different power supply options and water pumping technologies. The tool assesses the economics associated with different energy sources for irrigation including the cost, price, and payback time. It can be accessed: [http://www.fao.org/energy/88788/en/ HERE]<br/>
+*'''''SPIS Payback Tool''''': this tool evaluates economic, environmental and social aspects of different energy sources for irrigation in order to help operators to assess the economic viability of different power supply options and water pumping technologies. The tool assesses the economics associated with different energy sources for irrigation including the cost, price, and payback time. It can be accessed: [https://energypedia.info/wiki/File:INVEST_Payback_Tool_V1.0.xlsx HERE]<br/>
-*'''''RuralInvest - A Participatory Approach to Identifying and Preparing Small/Medium Scale Agricultural and Rural Investments''''': developed by the FAO Investment Centre, it provides support to local communities, private entrepreneurs or producers’ associations to conceive and implement their own investment projects through a range of materials and training courses including technical manuals, custom developed software, user guides and instructor’s materials. More information: [http://www.fao.org/investment/ruralinvest/applyingruralinvest/en/ HERE]<br/>
+*'''''RuralInvest - A Participatory Approach to Identifying and Preparing Small/Medium Scale Agricultural and Rural Investments''''': developed by the FAO Investment Centre, it provides support to local communities, private entrepreneurs or producers’ associations to conceive and implement their own investment projects through a range of materials and training courses including technical manuals, custom developed software, user guides and instructor’s materials. More information: [http://www.fao.org/fileadmin/templates/tci/pdf/RuralInvestBrochure_en.pdf HERE]<br/>
 *'''''RETScreen''''': the tool performs cost and financial analysis considering for instance: base case system energy cost (e.g. retail price of heating oil); financing (e.g. debt ratio and length, interest rate); taxes; environmental characteristics of energy displaced (e.g. oil, natural gas, grid electricity); environmental credits and/or subsidies (e.g. GHG credits, deployment incentives); indicator such as payback period, ROI, NPV, energy production costs. It has been developed by CanmetENERGY and can be downloaded [http://www.nrcan.gc.ca/energy/software-tools/7465 HERE]
 {{Go to Top}}
 == Steps in Economic Cost-Benefit Analysis ==

@@ Line 2: / Line 2: @@
 This article presents steps to plan investment in renewable energy technologies and energy efficiency in [[Agri-food Enterprises in the Energy-Agriculture Nexus|agricultural and food enterprises]]. It highlights opportunities for sustainable energy interventions along agri-food chains and analyses their feasibility and financial and economic cost-benefits related to the investment. Lastly, this section presents existing tools that can be used to assess the financial and economic viability and environmental impact of such interventions.
 = Investment Planning on Micro-Level =
@@ Line 7: / Line 8: @@
 When planning an investment, the operator or project manager should first perform a feasibility analysis (and sometimes a prefeasibility analysis). This is an analysis of the ability to complete a project successfully, taking into account legal, economic, technological, scheduling and other factors. A feasibility study allows investigating the possible negative and positive outcomes of a project before investing too much time and money.
-A clear identification of financial, economic, institutional, social and technical opportunities and risks is required as a first screening for the goodness of the investment. In fact, the identification of significant barriers or constraints could make an investment in a specific technology unfeasible in a particular environment, even though it would seem financially attractive. In case of investment in renewable technologies, examples of constraint are: lack of access to finance, high cost of capital, market failures, network failures, insufficient legal and institutional framework, lack of skilled personnel, social, cultural and behavioral factors, geographic constraints and sustainability concerns.
+A clear identification of financial, economic, institutional, social and technical opportunities and risks is required as a first screening for the goodness of the investment. In fact, the identification of significant barriers or constraints could make an investment in a specific technology unfeasible in a particular environment, even though it would seem financially attractive. In case of investment in renewable technologies, examples of constraint are: lack of access to finance, high cost of capital, market failures, network failures, insufficient legal and institutional framework, lack of skilled personnel, social, cultural and behavioural factors, geographic constraints and sustainability concerns.
 While deciding whether to invest in renewable energy technologies and energy efficiency, an agricultural and food enterprise would compare this option with the energy source or technology currently used (e.g. fossil fuels). Analysis from many demonstration and commercial renewable energy plants show that costs of projects are very site-specific. Levelized costs of many renewable energy technologies are becoming more and more competitive with current average costs of fossil-fuel powered electricity, heat and transport fuels they displace. Moreover, costs for renewable energy technologies are declining as the size of their markets is increasing. For example, in remote rural regions with no electricity grid access, autonomous renewable energy systems avoid expensive grid connection costs and are already competitive.
@@ Line 18: / Line 19: @@
 {{Go to Top}}
 = Financial Cost-Benefit Analysis =

← Older revision		Revision as of 13:52, 18 April 2016
Line 1:		Line 1:
−
	= Overview<br/> =		= Overview<br/> =

Line 124:		Line 123:

	{{Go to Top}}		{{Go to Top}}
		+
		+	[[Category:Financing_and_Funding]]
		+	[[Category:Powering_Agriculture]]

@@ Line 1: / Line 1: @@
 = Overview<br/> =
-This article presents steps to plan investment in renewable energy technologies and energy efficiency in [[Agri-food Enterprises in the Energy-Agriculture Nexus|agricultural and food enterprises]]. It highlights opportunities for sustainable energy interventions along agri-food chains and analyses their feasibility and financial and economic cost-benefits related to the investment. <span lang="en-us">Lastly, this section presents existing tools that can be used to assess the financial and economic viability and environmental impact of such interventions. </span><br/>
+This article presents steps to plan investment in renewable energy technologies and energy efficiency in [[Agri-food Enterprises in the Energy-Agriculture Nexus|agricultural and food enterprises]]. It highlights opportunities for sustainable energy interventions along agri-food chains and analyses their feasibility and financial and economic cost-benefits related to the investment. <span lang="en-us">Lastly, this section presents existing tools that can be used to assess the financial and economic viability and environmental impact of such interventions.&nbsp;</span>
 = Investment Planning on Micro-Level<br/> =
@@ Line 19: / Line 18: @@
 The financial and economic analysis basically consists in the following two main steps.<br/>
-<br/>
+<br/>{{Go to Top}}
 = Financial Cost-Benefit Analysis<br/> =
@@ Line 28: / Line 26: @@
 Generally speaking, a project is considered “viable” if the sum of expected incremental benefits is larger than the sum of all costs accrued in project implementation. This can be assessed through profitability indicators. In general, CBA provides four main indicators, the Net Present Value (NPV), the Internal Rate of Return (IRR), the benefit/cost (B/C) ratio and the payback time. These indicators assess attractiveness of investment by comparing the present value of money to the value of money in the future, taking the time value of money (discount rate) and returns on investment into account.<br/>
-<br/>
+<br/>{{Go to Top}}
 == Profitability Indicators<br/> ==
@@ Line 39: / Line 37: @@
 *'''''Payback Time (PBT):'''''The (PBT) measures the time required for the net cash inflows to equal the original capital outlay. It is the number of years required for the discounted sum of annual savings to equal the discounted investment costs, or in other words the time span after which the investment will start to pay back.<br/>
-<br/>
+<br/>{{Go to Top}}
 == Steps in Financial Cost-Benefit Analysis<br/> ==
@@ Line 47: / Line 45: @@
 #Calculate the project financial profitability indicators of each scenario (i.e. financial NPV, financial IRR, B/C ratio, payback time), applying these investment criteria to make an investment decision (positive or negative).<br/>
-<br/>
+<br/>{{Go to Top}}
 = Economic Cost-Benefit Analysis<br/> =
@@ Line 55: / Line 53: @@
 An economic analysis takes into account energy subsidies and taxes, the impacts of the renewable energy project on land, labor and human rights, local people livelihood, environment, GHG emission, etc. (FAO, 2015). These and other externalities and co-benefits are context specific and can be inserted in the analysis in order to modify the structure of economic costs and benefits of the project. These include for example economic incentives to renewables or fossil fuels, or costs to mitigate climate change or to ensure the more efficient use of water and land, costs accrued in the treatment of water, measures to contain negative environmental impact, etc. which are of course part of the picture, although not present in the financial investor business plan.<br/>
-<br/>
+<br/>{{Go to Top}}
 == Analysis Tools<br/> ==
@@ Line 67: / Line 65: @@
 *'''''RETScreen''''': the tool performs cost and financial analysis considering for instance: base case system energy cost (e.g. retail price of heating oil); financing (e.g. debt ratio and length, interest rate); taxes; environmental characteristics of energy displaced (e.g. oil, natural gas, grid electricity); environmental credits and/or subsidies (e.g. GHG credits, deployment incentives); indicator such as payback period, ROI, NPV, energy production costs. It has been developed by CanmetENERGY and can be downloaded [http://www.nrcan.gc.ca/energy/software-tools/7465 HERE]<br/>
-<br/>
+<br/>{{Go to Top}}
 == Steps in Economic Cost-Benefit Analysis<br/> ==
@@ Line 77: / Line 75: @@
 #Perform sensitivity analysis in order to deal with the main risks and uncertainties that could affect the proposed project.<br/>
-<br/>
+<br/>{{Go to Top}}
 = Investment Planning in Agricultural and Food Enterprises<br/> =
@@ Line 87: / Line 85: @@
 #The third step is the determination of the project’s incremental net flows (financial and/or economic), which results from comparing costs and benefits of the project with the benchmark scenario. With these elements, it is possible to calculate the corresponding project profitability indicators.<br/>
-<br/>
+<br/>{{Go to Top}}
 = Conclusion<br/> =
@@ Line 100: / Line 98: @@
 *Perform Sensitivity Analysis in order to deal with the main risks and uncertainties that could affect the proposed project<br/>
-<br/>
+<br/>{{Go to Top}}
 = Further Information<br/> =
@@ Line 114: / Line 112: @@
 *IEA/IRENA Joint Policies and Measures database: [http://www.iea.org/policiesandmeasures/renewableenergy/ Global renewable Energy]<br/>
-<br/>
+<br/>{{Go to Top}}
 = References<br/> =
@@ Line 122: / Line 120: @@
 *[http://www.fao.org/docrep/014/i2454e/i2454e00.pdf FAO, 2011. Energy-smart food for people and climate. Issue paper. Food and Agriculture Organization of the United Nations, Rome.]<br/>
 *[https://gc21.giz.de/ibt/var/app/wp385P/2624/wp-content/uploads/2015/03/PAEGC_MOOC_COMPILED_READER.pdf Reader of the MOOC "Powering Agriculture - Sustainable Energy for Food"]<br/>

@@ Line 1: / Line 1: @@
 = Overview<br/> =
-This articel presents steps to plan investment in renewable energy technologies and energy efficiency in [[Agri-food Enterprises in the Energy-Agriculture Nexus|agricultural and food enterprises]]. It highlights opportunities for sustainable energy interventions along agri-food chains and analyses their feasibility and financial and economic cost-benefits related to the investment. <span lang="en-us">Lastly, this section presents existing tools that can be used to assess the financial and economic viability and environmental impact of such interventions. </span><br/>
+This article presents steps to plan investment in renewable energy technologies and energy efficiency in [[Agri-food Enterprises in the Energy-Agriculture Nexus|agricultural and food enterprises]]. It highlights opportunities for sustainable energy interventions along agri-food chains and analyses their feasibility and financial and economic cost-benefits related to the investment. <span lang="en-us">Lastly, this section presents existing tools that can be used to assess the financial and economic viability and environmental impact of such interventions. </span><br/>
 <br/>
@@ Line 83: / Line 83: @@
 In [[Agri-food Enterprises in the Energy-Agriculture Nexus|agricultural and food enterprises]], renewable energy technologies are usually adopted as substitutes to traditional energy sources usually fossil fuels- therefore the financial and economic analysis of the investment requires a comparison with this benchmark. Project FEA is concerned with the incremental costs and benefits of a project, and therefore it requires a comparison between the potential situations “with” and “without” the project.<br/>
-#The first step is the identification and description of both the benchmark scenario (which normally consists in fossil fuelpowered and/or inefficient technologies) and the post-energy intervention scenario (where the technology is adopted). For instance, an irrigation system can be powered by a diesel pump (benchmark scenario) or by a solar photovoltaic (PV) powered pump (post-energy intervention scenario). The financial analysis of an investment in the PV pump would require the comparison between the two scenarios.<br/>
+#The first step is the identification and description of both the benchmark scenario (which normally consists in fossil fuel powered and/or inefficient technologies) and the post-energy intervention scenario (where the technology is adopted). For instance, an irrigation system can be powered by a diesel pump (benchmark scenario) or by a solar photovoltaic (PV) powered pump (post-energy intervention scenario). The financial analysis of an investment in the PV pump would require the comparison between the two scenarios.<br/>
 #The second step is the identification of the investment’s outcomes, including the capital and operating costs and the monetized benefits. Because costs and benefits do not occur at the same time – with costs generally preceding and exceeding benefits during the first years of the project – the comparison requires discounting techniques.<br/>
 #The third step is the determination of the project’s incremental net flows (financial and/or economic), which results from comparing costs and benefits of the project with the benchmark scenario. With these elements, it is possible to calculate the corresponding project profitability indicators.<br/>

← Older revision		Revision as of 11:24, 13 April 2016
Line 20:		Line 20:

	<br/>		<br/>
		+

	= Financial Cost-Benefit Analysis<br/> =		= Financial Cost-Benefit Analysis<br/> =