Profitability Analysis of Family-size Biogas Plant Installation in West Hararghe Zone, Oromia National Regional State, Ethiopia

Tale Gedefa,Emebet Abera

doi:10.11648/j.ijrse.20200902.14

Abstract

Biogas technology, which converts biological waste into energy, is considered as an excellent tool to improve the lives, livelihoods, health, ecosystem and economy. In Ethiopia, biogas technology has been domesticated to improve the rural energy security and household’s income by reducing their dependence on traditional biomass energy and chemical fertilizers. The profitability of biogas installation is rendered doubtful despite its numerous benefits and domestication efforts. Hence, this study aimed at evaluating the cost-benefit analysis and Profitability of biogas technology at household level in West Hararghe zone, Eastern Ethiopia. By using multistage sampling technique, cross-sectional data were collected from 105 systematically selected adopter households. The costs incurred and the benefits gained were analyzed using paired t-test. Payback Period (PBP), benefit cost ratio (BCR) and Net Present Value (NPV) were analyzed using different economic formula. The results indicated the most commonly domesticated plant is fixed dome biogas with volumes of 6 m3 and 8 m3. Investing 6 m3 biogas plant with subsidy (0.73 year) had short PBP than the 8 m3 plant (0.97 year). This implies, subsidy has been attracting households into biogas adoption. The BCR under assumption with subsidy was found to be 1.34 and 1.10 at 10% discount rate for 6 m3 and 8 m3 plants, respectively. Under both assumptions with and without subsidy, the NPV results for 6 m3 and 8 m3 biogas plant sizes turn out positive. In general, the results of PBP, BCR and NPV shown that the biogas investment is preferable and profitable for continuing the investment for the future.

Highlights

The life of human being is highly dependent on energy consumption (IEA, 2011)
The construction costs of biogas plants vary between different plant sizes they are often high relative to the income of farmers and other potential users
On the basis of costs and benefits found in this study, it can be concluded that, the financial analysis of 6 m3 and 8 m3 plant sizes that are installed with subsidy have big Net Present Value (NPV) values, Undiscounted Payback Period (UPBP) of less than one year and benefit cost ratio (BCR) values of greater than one, indicates that as they are financially profitable at 10% discount rate

Summary

Introduction

The life of human being is highly dependent on energy consumption (IEA, 2011). Without any doubt, is the backbone of an economy. It is the most vital instrument for socio-economic development and has been recognized as one of the most important strategic commodities [28]. No country has managed to substantially reduce poverty without increasing energy resources and its efficient utilization [27]. For many Sub-Saharan Africa (SSA) countries including Ethiopia, the energy consumption and demand is continuously increasing as development progresses and population growth is faster increasing. The modern domestic energy supply is disproportionate with its demand [4].

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Conclusion