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| | {{SPIS Banner}}{{Back to Design}} | | {{SPIS Banner}}{{Back to Design}} |
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| | === '''<span style="color:#879637;">Assess Financial Viability</span>''' === | | === '''<span style="color:#879637;">Assess Financial Viability</span>''' === |
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| − | Solar-powered irrigation systems have become a financially viable alternative to electric and diesel water pumps for irrigation of agricultural crops. This is mainly due to the fact that:<br/> | + | Solar Powered Irrigation Systems have become a financially viable alternative to electric and diesel water pumps for irrigation of agriculture crops. This is mainly due to the fact that: |
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| | *PV module costs have declined in recent years;<br/> | | *PV module costs have declined in recent years;<br/> |
| − | *systems are more reliable and cost effective;<br/> | + | *PV systems are more reliable and cost effective;<br/> |
| | *PV equipment is more accessible in many parts of the world, including expertise for setup and maintenance. | | *PV equipment is more accessible in many parts of the world, including expertise for setup and maintenance. |
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| | | style="background-color: rgb(135, 150, 55); text-align: center;" | <span style="color:#FFFFFF">Used as it shows:</span> | | | style="background-color: rgb(135, 150, 55); text-align: center;" | <span style="color:#FFFFFF">Used as it shows:</span> |
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| − | | style="width: 297px; text-align: center;" | cf - Cash flow analysis | + | | style="width: 297px; text-align: center;" | '''cf - Cash flow analysis''' |
| | | style="width: 444px; text-align: center;" | ...if a project generates enough cash in order to stay liquid; i.e. it can pay all cash. | | | style="width: 444px; text-align: center;" | ...if a project generates enough cash in order to stay liquid; i.e. it can pay all cash. |
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| − | | style="background-color: rgb(232, 232, 232); text-align: center;" | PP - Payback Period | + | | style="background-color: rgb(232, 232, 232); text-align: center;" | '''PP - Payback Period''' |
| | | style="background-color: rgb(232, 232, 232); text-align: center;" | ...how long it takes for the cost of an investment to be recovered; very basic calculation.<br/> | | | style="background-color: rgb(232, 232, 232); text-align: center;" | ...how long it takes for the cost of an investment to be recovered; very basic calculation.<br/> |
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| − | | style="width: 297px; text-align: center;" | NPV – Net Present Value<br/> | + | | style="width: 297px; text-align: center;" | '''NPV – Net Present Value'''<br/> |
| | | style="width: 444px; text-align: center;" | ...if a project generates sufficient income (and surplus) to finance the employed capital and interest on that capital.<br/> | | | style="width: 444px; text-align: center;" | ...if a project generates sufficient income (and surplus) to finance the employed capital and interest on that capital.<br/> |
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| − | | style="background-color: rgb(232, 232, 232); text-align: center;" | IRR – Internal Rate of Return<br/> | + | | style="background-color: rgb(232, 232, 232); text-align: center;" | '''IRR – Internal Rate of Return'''<br/> |
| | | style="background-color: rgb(232, 232, 232); text-align: center;" | ...the estimated profit rate generated by the project / investment over its life-span.<br/> | | | style="background-color: rgb(232, 232, 232); text-align: center;" | ...the estimated profit rate generated by the project / investment over its life-span.<br/> |
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| − | | style="text-align: center;" | Total life cycle cost<br/> | + | | style="text-align: center;" | '''Total life cycle cost'''<br/> |
| − | | ...differences in costs between project alternatives over the entire life cycle of these alternatives.<br/> | + | | style="text-align: center;" | ...differences in costs between project alternatives over the entire life cycle of these alternatives.<br/> |
| | |} | | |} |
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| − | Assessing the financial viability of the SPIS is a complex procedure which should be accompanied by financial experts. This part of the module only gives an overview of key data and indicators to be generated. Note that all projections and calculations:<br/> | + | Assessing the financial viability of the SPIS is a complex procedure which should be accompanied by financial experts. This part of the module only gives an overview of key data and indicators to be generated. Note that all projections and calculations: |
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| | *need to be based on prices which can be determined but also on estimates and assumptions;<br/> | | *need to be based on prices which can be determined but also on estimates and assumptions;<br/> |
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| | </ol> | | </ol> |
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| − | 2. '''Capital expenditure (CAPEX)'''=long term, one-time, investments in non-consumable parts of the business, like<br/> | + | 2. '''Capital expenditure (CAPEX)'''= long term, one-time, investments in non-consumable parts of the business, like<br/> |
| | <ol style="list-style-type:lower-alpha;"> | | <ol style="list-style-type:lower-alpha;"> |
| | <li>costs for solar pumping system, reservoir, irrigation system;</li> | | <li>costs for solar pumping system, reservoir, irrigation system;</li> |
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| | </ol> | | </ol> |
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| − | 3. '''Operating expenses (OPEX) '''= ongoing operational and maintenance costs (fixed and variable)<br/> | + | 3. '''Operating expenses (OPEX)'''= ongoing operational and maintenance costs (fixed and variable)<br/> |
| | <ol style="list-style-type:lower-alpha;"> | | <ol style="list-style-type:lower-alpha;"> |
| | <li>seeds, fertilizer, pesticides and other inputs for production;<br/></li> | | <li>seeds, fertilizer, pesticides and other inputs for production;<br/></li> |
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| | *operating and maintenance costs (prices); | | *operating and maintenance costs (prices); |
| | *macroeconomic variables (inflation, interest rates, etc.); | | *macroeconomic variables (inflation, interest rates, etc.); |
| − | *tax policies (corporate income taxes, VAT dynamics, etc.); | + | *tax policies (corporate income taxes, VAT dynamics, etc.); |
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| | ===== '''Compute, prepare:''' ===== | | ===== '''Compute, prepare:''' ===== |
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| | *OPEX + cash flow: | | *OPEX + cash flow: |
| | **diesel and electric systems have higher regular operating expenses (petrol cost + transport/energy price + grid connection) than PV; | | **diesel and electric systems have higher regular operating expenses (petrol cost + transport/energy price + grid connection) than PV; |
| − | **maintenance costs for the PV system are low (see '''[[SPIS Maintain|MAINTAIN]] ''' module); | + | **maintenance costs for the PV system are low (see '''[[SPIS Maintain|MAINTAIN]] ''' module); |
| | **due to the high initial investment of PV systems they risk having higher regular financing costs (loan instalments and interest rate payments) when compared to diesel-based systems. | | **due to the high initial investment of PV systems they risk having higher regular financing costs (loan instalments and interest rate payments) when compared to diesel-based systems. |
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| | These factors influence the financial viability of the different options; hence, different scenarios should be elaborated before taking a decision. | | These factors influence the financial viability of the different options; hence, different scenarios should be elaborated before taking a decision. |
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| − | | + | <br/>{{SPIS Reference}} |
| − | {{SPIS Reference}} | + | |
Solar Powered Irrigation Systems have become a financially viable alternative to electric and diesel water pumps for irrigation of agriculture crops. This is mainly due to the fact that:
The following key indicators and financial statements help to assess the financial viability:
Assessing the financial viability of the SPIS is a complex procedure which should be accompanied by financial experts. This part of the module only gives an overview of key data and indicators to be generated. Note that all projections and calculations:
1. the revenues from
2. Capital expenditure (CAPEX)= long term, one-time, investments in non-consumable parts of the business, like
3. Operating expenses (OPEX)= ongoing operational and maintenance costs (fixed and variable)
When comparing PV systems to diesel or electric pumping systems the following statements apply:
These factors influence the financial viability of the different options; hence, different scenarios should be elaborated before taking a decision.
