The economic performance of jatropha, cassava and Eucalyptus production systems for energy in an East African smallholder setting

Abstract

AbstractThis study evaluates the potential economic feasibility of three smallholder energy crop production systems (jatropha, cassava and eucalyptus) under typical semi‐arid conditions in Eastern Africa. This feasibility is determined by assessing net present values (NPV), internal rates of return (IRR), benefit‐cost ratios (BCR) and payback periods (PBP). In addition, the production costs are compared to the costs of reference energy systems, petrol, diesel and pellets. Low and intermediate input systems are considered and specific attention is paid to the opportunity cost of labour, by considering both family labour (no labour costs) and hired labour. The results show that all family labour settings have positive NPVs and high IRR and BCR values. Moreover, cassava has the highest family labour NPV (2900–5800US$ ha−1) and the shortest PBP, but the required investment costs are high in comparision with the other crops. If hired labour is used, the NPV of eucalyptus is highest (380–1400$/ha−1), and it is also the least sensitive to changes in wages and yields. Jatropha performs best only for the indicator IRR and only with family labour or low labour opportunity costs. The analysis and comparison of bioenergy production costs shows that eucalyptus pellets (2.6–3.1$ GJ−1) are competitive compared with reference pellets at current market prices (5$ GJ−1). Jatropha SVO (19$ GJ−1) and cassava ethanol (19–36$ GJ−1) are only competitive with fossil diesel (21$ GJ−1) and petrol (25$ GJ−1) in a family labour setting. At current values jatropha biodiesel (24–37$ GJ−1) is not competitive. The economic performance is sensitive to variations in crop yields and yield data are highly uncertain. However, this study demonstrates that there is considerable potential for increasing the economic performance by further improvements in yield, harvesting efficiency and conversion efficiency as well as reductions in transport and packaging costs.