Probabilistic techno-economic assessment of anaerobic digestion predicts economic benefits to smallholder farmers with quantifiable certainty

• Published in: Waste management (Elmsford) 2022-02, Vol.138, p.8-18
• Main Authors: Tolessa, Amsalu, Louw, Tobias M., Goosen, Neill J.
• Format: Article
• Language: English
• Subjects: Anaerobic digestion; Anaerobiosis; Cost-Benefit Analysis; Economic feasibility; Farmers; Farms; Humans; Probability; Smallholder farming; Techno-economic analysis; Water-Energy-Food nexus
• ISSN: 0956-053X; 1879-2456
• DOI: 10.1016/j.wasman.2021.11.004

•A techno-economic assessment (TEA) tool was developed for AD technology.•Tool is demonstrated specifically in the context of smallholders in South Africa.•Probabilistic simulation of feasibility indicators using a Monte Carlo method.•Risk assessment was conducted using sensitivity analysis and Monte Carlo method.•Stochastic TEA can be used to assessing other AD technologies. Anaerobic digestion (AD) technology holds numerous potential benefits for farmers, however, challenges persist in terms of implementation costs and sustainability in developing countries. This paper presents a probabilistic techno-economic assessment tool for AD. A clear distinction is made between direct financial feasibility and wider (socio) economic feasibility. The tool identifies the technical- and economic factors influencing the returns of a particular AD process as well as the sensitivity of model predictions to variations in the value of the identified factors using a Monte Carlo approach. The tool is applied to assess the feasibility of a smallholder farm-based AD installation under a variety of substrates and operating conditions as an illustrative case study, where on-going flows of costs and benefits were considered over a 15-year period and discounted at a rate of 8%. The results of the case study revealed that the installation of a 10 m3 smallholder farm-based anaerobic digester are likely to be financially and economically viable with a financial benefit-cost ratio of 1.30–1.38 and an economic benefit-cost ratio ranged from 5.49 to 6.01. Risk assessment results confirmed the strong economic feasibility of a smallholder farm-based AD implementation: under the most conservative cost estimates, there is a 73% probability of achieving a financial benefit-cost ratio > 1, while there is a 96.6% probability of achieving an economic benefit-cost ratio > 1. The case study demonstrated the utility of probabilistic techno-economic assessments for informed decision making, a tool which can be readily generalized to other settings.