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

Lukuyu, June M., Blanchard, Richard E., Rowley, Paul N.
Renewable energy 2019 v.130 pp. 700-713
Monte Carlo method, biogas, biomass, cooling systems, dairy farming, dairy industry, economic performance, economic sustainability, electricity, farmers, financial economics, income, markets, milk, risk factors, risk reduction, spoilage, viability, wind, Tanzania
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 $9000 and a projected increase in farmers' monthly income of at least 78%. Despite specific risk factors, the 300-L 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.