Economic assessment of photovoltaic water pumping integration with dairy milk production

Abstract

As dairy consumption grows, domestic dairy farms face challenges in reducing the cost of feeds and the production of high-quality milk for market demands. This paper aims to introduce and integrate solar energy into the milk production chain to investigate its economic performance. By collecting data on milk production processes from 11 dairy farms in China, we quantified electricity usage and costs of milk production to identify the best and worst cases. Crop yields response to the water demand and the electricity requirements of the dairy farms were considered. The study simulated scenarios of self-sufficiency at 20%, 80%, and 100%, in the identified farms by integrating a photovoltaic water pumping (PVWP) system to provide both power and water for alfalfa and other feeds’ irrigation and subsequent milk production. We evaluated annual discounted cost, revenue and net profit under each scenario and case. The results showed that a dairy farm with an integrated PVWP system and self-sufficient feeds would lead to value add-ins, such as electricity saving with solar energy generation, economic cost saving of crops, and CO2 emission reduction. The analysis on return on investment (ROI) and internal rate of return (IRR) revealed that not all the self-sufficient feeds can bring positive marginal profit. Among the investigated scenarios and cases, the dairy farm marked out by the highest ROI with 3.12 and IRR with 20.4%, was the farm where the integrated PVWP system was used to reach 20% self-sufficiency (self-production of only alfalfa). The other scenarios and cases with higher levels of self-sufficiency showed lower ROIs and IRRs. This indicates that high self-production levels of feeds decrease the total profit due to high investment cost. Sensitivity analyses of crop price and operational cost were conducted for ROI with single and double factor approaches. Scale and production of feeds proportions should be carefully considered in improving the economic performance of dairy milk production.