Business Viability Scenario for Solar Powered Irrigation in Mozambique

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Introduction

This business model case looks into the financial viability of solar powered irrigation in Mozambique. All the data and prices used in this scenario are based on the market information obtained in January 2022 and was collected by contacting leading solar and diesel pumps provider in Mozambique. The information was collected via email and telephone inquiries.

Demand Assumption

For the business scenario, a smallholder farmer in Zambezia province in Mozambique is considered and he/she owns 1,2 hectors of land. The farmer wants to install a solar powered irrigation systems (SPIS) and is practicing two crop systems. This scenario also explores different funding models (grant, PAYGO..) for financing the SPIS system.

To calculate the business scenario for solar powered irrigation systems (SPIS) in Mozambique, our methodology included four steps:

1. Calculating the maximum annual crop water requirement
2. Sizing the SPIS system accordingly
3. Sizing the diesel system accordingly
4. Modelling the financial viability of the SPIS system

Calculating Crop Water Requirement

For this analysis, the farmer adopts a two-farming season with solo cropping i.e., only one crop is planted in the entire area of a farm at one time. The selected crops are Maize and Tomato. Maize is the staple crop in Mozambique and tomato is one of the high value crops. The main cropping season starts from Oct / Nov and the second cropping season starts in May. The farmer uses surface irrigation for maize as it is the most common form of irrigation in Mozambique and has an efficiency of 65%. For tomatoes, he/she will use drip irrigation with an efficiency of 90%.

Using the SPIS Toolbox – Water Requirement Tool, the maximum daily irrigation water requirement of the crops is calculated to be 64 m³ /day in the hottest month, based on the average rainfall and mean daily temperature of Zambezia Province.

Table with the average rainfall and the mean daily temperature

	Jan	Feb	Mar	Apr	May	June	July	Aug	Sep	Oct	Nov	Dec
Mean daily Temperature [°C]	25	24	23	23	21	20	20	20	22	24	24	24
Rainfall (mm/month	290	290	260	150	60	70	30	30	20	60	150	360

Sizing the SPIS system

The SPIS system is based on the technical and financial assumption shown in the table below. The selected system is also already available in the Mozambican market and can meet the desired flow rate.

Technical assumptions

Daily solar irradiance for Zambezia	5.371 kWh/m2
System loss	25%
Array type	Fixed
Daily water pumping rate	64 m3 /day
Head	10 m
Required flow rate if the pump runs for 6 hours	10.6 m3/hr
Selected pump’s flow rate at 10 m head	15 m3
Maximum vertical lift	40
Type of pump	Submersible
Solar panels lifetime	25 years

Financial specifications

Discount rate	13%
Price (CAPEX)	80,000 MZN
Maintenance cost*	4% of CAPEX 3200 MZN per year

*Replacement cost for spare parts such as charge controller, inverter and pumps was not considered in the financial calculation. For simplicity, the scenario looks at 25 years of life time for all components of the SPIS system.

Sizing the Diesel Pump

The selected diesel pump has the following specification and is already available in the Mozambican market.

Diesel Pump’s specification

Flow rate	36 m3/hr
Rated output	2.8kW (3.8hp) @3600rpm
Fuel consumption rate	347ml/kWh @3600rpm
Fuel consumption	Fuel consumption rate*Rated output 0.97 l/hr
CAPEX	34,970 MZN
Maintenance cost	4% of CAPEX 1399 MZN
Operating cost	14,074 MZN/year
Diesel price per litre	62 MZN/liter

Based on the irrigation demand, the diesel pump will run for approximately 227 hrs/year to meet all our water demands (as shown in the table below).

Working time for diesel pump in a year

	May	June	July	Au	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr
water needs (m3/day)	24,2	31,3	59	64,3	59	15,2	3,9	0	10	0	0	0
hours the diesel pump needs to run to meet the daily water need [hr]	0,67	0,86	1,63	1,78	1,63	0,42	0,10	0	0,27	0	0	0
Generator working time [hrs/month]	20,8	26,1	50,8	55,4	49,2	13,1	3,25		8,6
Diesel pump working time [hrs/year]	227,2

Modelling the Financial Viability of the Solar Pumps

Cost comparison between diesel and solar pumps

A cost comparison was done to see how do the diesel and solar pump compare over a lifetime of 25 years. This comparison looks at the CAPEX and operation & maintenance cost for both diesel and solar pumps (shown above).

As shown in the table as well as graph below, after 5 years, the solar pumps will be cheaper than diesel pump.

Financing Schemes for the End Consumers

Model 1: 100% self financing under PAYGO

PAYGO: 1,000 MZN monthly installment

CAPEX: 80,000 MZN

Under this model, the farmer will repay the cost of the entire system in 6.66 years. The farmer do not receive any grant or subsidy and will pay the monthly installment regularly for the indicated time frame.

Model 2 : Grant and PAYGO

Grant: 40% of CAPEX

PAYGO: 60% at 1,000 MZN monthly installment

CAPEX: 80,000 MZN

Under this model, the farmer will payback the system completely in 4 years time frame. The farmer also receives 40% of grant and will only payback the 60% of the system cost over the indicated timeframe.

Grid Electricity

This analysis does not compare with the grid electricity as the grid is available mostly in urban settings and the areas where irrigation is needed, the farmers rely mostly on off-grid solutions. The electricity is also provided at a flat rate irrespective of the usage especially in case of social usage like irrigation.

Conclusion

Solar irrigation has a great potential in Mozambique, considering the demand for irrigation. However, the high upfront cost and lack of after-sales services do pose a challenge for the wider adoption of the solar pumps. There are cheaper models of pumps (mostly Chinese) available in the market but for our analysis we used the more reputed brands.

In terms of PAYGO, the challenge lies in finding a balance between the amount the farmer is ready to pay and a time frame that the company is willing to take risks on. There are other solutions such as asset financing where the payment is distributed to harvest time and the farmer ultimately owns the system.