Potential and economic impact of renewable energy in improving african rural food processing

Padi, Richard Kingsley (2016-03)

Thesis (MEng)--Stellenbosch University, 2016.

Thesis

ENGLISH ABSTRACT: Traditional food processing technologies in rural settings of Sub Saharan Africa are characterised by small production scales, labour intensive processes and uneconomical operations, which contribute to high food losses postharvest. Mechanisation addresses some of these limitations although a lack of access to modern energy stands as additional drawback. Hence in order for advancing mechanisation to be feasible, an alternative approach to integrating energy supply into food processing systems is required. Little is known on the cost implications of such mechanisation and alternative energy integration on the profitability of the food processes. The general objective of this study was to investigate the economic impacts of mechanisation and/or bioenergy integration in crude palm oil (CPO), cassava flour (CF) and maize flour (MF) processes. This objective was achieved by developing process models for traditional, semi-mechanised and mechanised processes, with increasing extent or level of mechanisation, in which in-house energy integration was applied. The process/economic models were developed using Microsoft Excel. For each of the referred processes, Base-cases (B/C) entailing conventional energy-mix and corresponding improved-cases (I/C) with potential energy from process residues (in-house energy) were considered. Models of advanced in-house energy schemes were developed in Aspen Plus®. Economics were based on 2014 economic conditions of Ghana. Two funding schemes were assessed: 1. Private investor financing [60% of investment financed by loan (at 24% nominal interest rate) and remaining 40% investment from equity (at 40% nominal interest rate), having weighted nominal (before inflation) discount rate of 30%]. 2. Combinations of grant (at 0% nominal discount rate) and equity (at 40% nominal discount rate) financing (i.e. part of the financing covered by grant and the remaining investment financed by equity from an investor). Feasible advanced energy schemes considered in the I/C scenarios were: electricity/thermal energies from solid biomass residues for the CPO mechanised process, electricity/dryer fuel from anaerobic digestion of cassava peels/cattle dung for the CF semi- and mechanised process and, cob-fired dryer for MF semi- and mechanised drying operations. In the CPO process, there was a decrease in energy demands for the mechanised process at the B/C and I/C levels when compared to the traditional (79.2 and 83.8%) and semi-mechanised (48 and 51%) respectively. Thus an increase in the level of mechanisation was not necessarily associated with an increase in energy savings. In addition, under the private investor financing (nominal discount rate of 30%), only the mechanised process was economically viable with an Internal Rate of Return (IRR) of 47.2% under the B/C scenarios, while the semi- and mechanised processes were the economically viable options for the I/C scenarios with IRRs of 143% and 40.6% respectively. The poor performances of the traditional- B/C and -I/C and semi-mechanised B/C were due to combinations of high capital investment ($0.019 – 0.053/kg) and high production cost ($0.431 – 1.187/kg), as they remained unviable under 100% grant funding. Thus mechanisation is beneficial to the economics at the highest mechanised process level, while in-house energy integration from residues is most promising at the semi- and mechanised process levels. In the CF Process, the energy demand for the traditional process was higher by 37.6, 44.5 and 52.6% (for B/C) and 46.0, 52.0 and 59.0% (for I/C) than the semi-mechanised, mechanised-grating and mechanised-chipping processes respectively. Thus, mechanisation has an energy saving impact on the process. Under the private investor funding (discount rate of 30%), the mechanised chipping process was the only economically viable option (IRR of 36.3%), while the traditional B/C, traditional I/C and mechanised-chipping B/C were promising with IRRs of 16.3, 24 and 24.8% respectively. Under grant-equity funding, semi-mechanised and mechanised-grating processes remained unviable, thus not being able to achieve sufficient cash flows to pay off debt co-financing of new installations. Under the grant-equity financing, the traditional B/C and I/C, and mechanised-chipping I/C processes achieved Net Present Values (NPV) of $22, $60 and $67180 at grant funding of 60%, 40% and 1% respectively (with the remaining funding contributions provided by equity), suggesting their potential viability under grant subsidy. Thus, economic impact of mechanisation and that of in-house energy generation from the residues were inconsistent. The energy demand of the mechanised MF process was higher by 87.3 and 48.0% (B/C) and 89.1 and 51.2% (I/C) than the traditional and semi-mechanised scenarios, respectively. Conclusively, an increase in mechanisation also increased the process energy demands. All B/C scenarios attained negative NPVs and were thus economically unviable. The I/C scenario for the traditional process remained unviable with NPV of -$1854, while semi- and mechanised processes attained IRRs of 18.8 and 132.8% respectively; hence, only mechanised I/C was viable considering the 30% minimum expected IRR. At semi-mechanised I/C, feedstock obtained from farm gates rather than licensed buying companies (LBCs) resulted in production cost savings of 46.2%, while integration of cobs as dryer fuel increased production cost by 25.5%. Sourcing feedstock from farm gates rather than LBCs and using cobs residues as dryer fuel (replacing diesel) in the mechanised I/C process, resulted in production cost savings of 73.2 and 1.7% respectively. The traditional, semi- and mechanised B/C processes remained unviable under 100% grant funding, while semi-mechanised I/C process attained NPV of $1422 at 40% grant and 60% equity financing. Therefore, mechanisation did not improve economic performance; rather feedstock supply chain was the determining factor for profitability of MF processing. Cobs-fuelling dryer was technically viable but most beneficial (economically) to the mechanised process.

AFRIKAANSE OPSOMMING: Tradisionele voedsel verwerking tegnologieë in landelike omgewings van Sub-Sahara Afrika word gekenmerk deur 'n klein produksie skale, asook arbeidsintensiewe en onekonomies prosesse, wat bydra tot hoë na-oes voedselverliese. Alhoewel meganisasie hierdie beperkings adresseer, is 'n gebrek aan toegang tot moderne energie ’n bykomende nadeel. Gevolglik, om die bevordering van meganisasie haalbaar te maak, is 'n alternatiewe benadering tot die integrasie van energievoorsiening in voedsel verwerking stelsels nodig. Min is bekend oor die koste-implikasies van sodanige meganisasie en die effek van alternatiewe energie integrasie op die winsgewendheid van die voedsel prosesse. Die algemene doelwit van hierdie studie was om die ekonomiese impak van meganisasie en/of bio-energie integrasie in ru palmolie (RPO), ‘cassava’-meel (CM) en mieliemeel (MM) prosesse te ondersoek. Hierdie doelwit is bereik deur die ontwikkeling van proses modelle vir tradisionele, semi-gemeganiseerde en gemeganiseerde prosesse, met toenemende mate of vlak van meganisasie, met die toepassing van in-huis energie-integrasie. Die proses/ekonomiese modelle is ontwikkel met behulp van Microsoft Excel. Vir elk van die prosesse na verwys, is basis-gevalle (B/G) wat konvensionele energie-mengsel behels en ooreenstemmende verbeterde-gevalle (V/G) met potensiële energie van die proses reste (in-huis energie) oorweeg. Modelle met gevorderde in-huis-energie skemas was ontwikkel in Aspen Plus®. Die ekonomiese studie is gebaseer op 2014 ekonomiese toestande van Ghana. Twee befondsing skemas was geëvalueer: 1. Privaat belegger finansiering [60% van die belegging gefinansier deur lening (teen 24% nominale rentekoers) en oorblywende 40% van die belegging van ekwiteit (teen 40% nominale rentekoers), met geweegde nominale (voor inflasie) verdiskonteringskoers van 30%]. 2. Kombinasies van subsidie (teen 0% nominale verdiskonteringskoers) en ekwiteit (teen 40% nominale verdiskonteringskoers) finansiering (d.w.s. ’n deel van die finansiering word deur die subsidie gedek word terwyl die oorblywende belegging deur ekwiteit van 'n belegger gefinansier word). Gevorderde energie skemas oorweeg in die V/G scenario’s was: elektrisiteit/termiese energie van vaste biomassa reste vir die RPO gemeganiseerde proses, elektrisiteit/droër brandstof van anaërobiese vertering van ‘cassava’ skille/beesmis vir die CM semi- en gemeganiseerde proses en mieliekop-aangedrewe droër vir MM semi- en gemeganiseerde droging prosesse. In die RPO proses was daar 'n afname in energie vereistes vir die gemeganiseerde proses by die B/G en V/G vlakke in vergelyking met die tradisionele (79.2 en 83.8%) en semi-gemeganiseerde (48 en 51%) onderskeidelik. Daar was dus nie noodwendig ʼn direkte verband tussen 'n toename in die vlak van meganisasie en toename in energie gespaar nie. Daarbenewens, met private finansiering belegging (nominale verdiskonteringskoers van 30%), was slegs die gemeganiseerde proses ekonomies lewensvatbaar met 'n Interne Opbrengskoers (IOK) van 47.2% met die B/G scenario's, terwyl die semi- en gemeganiseerde prosesse was die ekonomies lewensvatbare opsies vir die V/G scenario’s met IOKe van 143% en 40.6% onderskeidelik. Die swak prestasies van die tradisionele B/G en V/G en semi-gemeganiseerde B/G was as gevolg van ’n kombinasie van hoë kapitale belegging ($0.019 – 0.053/kg) en hoë produksiekoste ($0.431 – 1.187/kg), aangesien hulle nie lewensvatbaar gebly het nie onder 100% subsidie befondsing. Meganisasie is dus voordelig vir die ekonomiese lewensvatbaarheid vir die hoogste gemeganiseerde proses vlak, terwyl in-huis energie-integrasie van reste mees belowend is vir die semi- en gemeganiseerde proses vlakke. Vir die CM-proses was die energie aanvraag vir die tradisionele proses hoër met 37.6, 44.5 en 52.6% (vir B/G) en 46.0, 52.0 en 59.0% (vir V/G) as die semi-gemeganiseerde, gemeganiseerde-‘grating’ en gemeganiseerde-‘chipping’ prosesse onderskeidelik. Dus, meganisasie het 'n energiebesparende impak op die proses. Onder die private befondsing belegging (verdiskonteringskoers van 30%), was die gemeganiseerde ‘chipping’ proses die enigste ekonomies lewensvatbare opsie (IOK van 36.3%), terwyl die tradisionele B/G, tradisionele V/G en gemeganiseerde-‘chipping’ B/G belowend was met IOKe van 16.3, 24 en 24.8% onderskeidelik. Onder befondsing-ekwiteit finansiering, was die semi-gemeganiseerde en gemeganiseerde-‘grating’ prosesse steeds nie lewensvatbaar, dus nie in staat om voldoende kontantvloei te bereik om skuld mede-finansiering van nuwe installasies af te betaal. Onder die befondsing-ekwiteit finansiering, het die tradisionele B/G en V/G en gemeganiseerde-‘chipping’ V/G prosesse Net Huidige Waardes (NHW) bereik van $22, $60 en $67180 op subsidie befondsing van 60%, 40% en 1% onderskeidelik (met die oorblywende befondsing bydraes deur ekwiteit), wat op hul lewensvatbaarheid onder befondsing subsidie dui. Dus, die ekonomiese impak van meganisasie en dié van in-huis energie-opwekking uit die reste was uiteenlopend. Die energie aanvraag van die gemeganiseerde MM proses was hoër met 87.3 en 48.0% (B/G) en 89.1 en 51.2% (V/G) as die tradisionele en semi-gemeganiseerde scenario's, onderskeidelik. Onweerlegbaar, 'n toename in meganisasie verhoog die vereiste energie van die proses. Alle B/G scenario’s het negatiewe NHWs bereik en was dus ekonomies onlewensvatbaar. Die V/G scenario vir die tradisionele proses het onlewensvatbaar gebly met NHW van -$1854, terwyl die semi- en gemeganiseerde prosesse IOK bereik het van 18.8 en 132.8% onderskeidelik; dus, net gemeganiseerde V/G was lewensvatbaar met oorweging van die 30% minimum verwagte IOK. Met semi-gemeganiseerde V/G, het die verkryging van roumateriaal vanaf plaashekke eerder as gelisensieerde koop maatskappye gelei tot n produksie koste besparing van 46.2%, terwyl die integrasie van mieliekoppe as droër brandstof produksie koste met 25.5% verhoog het. Verkryging van roumateriaal vanaf plaashekke eerder as gelisensieerde koop maatskappye en die gebruik van mieliekoppe reste as droër brandstof (diesel vervang) in die gemeganiseerde V/G proses, het gelei tot ʼn produksie koste besparing van 73.2 en 1.7% onderskeidelik. Die tradisionele, semi- en gemeganiseerde B/G prosesse het onlewensvatbaar gebly onder 100% befondsing, terwyl die semi-gemeganiseerde V/G proses ’n NWH van $1422 bereik het op 40% befondsing en 60% ekwiteit finansiering. Meganisasie het dus nie die ekonomiese prestasie verbeter nie; eerder, die roumateriaal ketting was die bepalende faktor vir die winsgewendheid van die MM prosesse. Mieliekoppe as brandstof vir droër was tegnies lewensvatbaar maar mees voordelig (ekonomies) vir die gemeganiseerde proses.

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