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| − | {{SPIS Banner}} | + | {{SPIS Design}} |
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| − | === '''<span style="color:#879637;">Assess Financial Viability</span>''' === | + | {| cellpadding="1" |
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| | + | | {{Back to SPIS Toolbox 2}} |
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| | + | | {{Back to Design}} |
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| | + | | {{Next Chapter}}[[SPIS Toolbox - Pre-select Potential Suppliers|►Go to the Next Chapter]]'''</span></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/>
| + | === '''<span style="color:#879637;">6. Assess Financial Viability</span>''' === |
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| − | *PV module costs have declined in recent years;<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: |
| − | *systems are more reliable and cost effective;<br/>
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| − | *PV equipment is more accessible in many parts of the world, including expertise for setup and maintenance.
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| − | The following key indicators and financial statements help to assess the financial viability:
| + | *PV module costs have declined in recent years; |
| | + | *PV systems are more reliable and cost effective; |
| | + | *PV equipment is more accessible in many parts of the world, including expertise for set up and maintenance. |
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| − | {| style="width: 764px;" cellspacing="0" cellpadding="5" border="1" | + | The tools '''INVEST – Farm Analysis Tool''' and '''INVEST – Payback Tool''' (under the '''[[SPIS Invest|INVEST]]''' Module) are both designed to assist in determining financial viability of the SPIS. While the former allows for assessing the profitability of the farm enterprise, the latter compares that payback potential of different irrigation technologies. |
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| | + | {| style="width: 100%" cellspacing="1" cellpadding="1" border="0" |
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| − | | style="width: 297px; background-color: rgb(153, 153, 102)" | <p style="text-align: center">Assessment criteria<br/></p> | + | | style="background-color: rgb(225, 229, 205)" | |
| − | | style="width: 444px; text-align: center; background-color: rgb(153, 153, 102);" | | + | Note: cost estimates needed for these tools should be secured from technology and service suppliers. |
| − | Used as it shows:<br/>
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| | + | The following key indicators and financial statements help to assess the financial viability: |
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| | + | {| style="width:100%;" cellspacing="0" cellpadding="1" border="1" |
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| − | | style="width: 297px" | cf - Cash flow analysis<br/> | + | | style="background-color: rgb(135, 150, 55); text-align: center;" | <span style="color:#FFFFFF">Assessment criteria</span> |
| − | | style="width: 444px; text-align: center;" | ...if a project generates enough cash in order to stay liquid; i.e. it can pay all cash.<br/> | + | | 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; background-color: rgb(204, 204, 204)" | PP - Payback Period<br/> | + | | style="width: 297px; text-align: center;" | '''cf - Cash flow analysis''' |
| − | | style="width: 444px; text-align: center; background-color: rgb(204, 204, 204);" | ...how long it takes for the cost of an investment to be recovered; very basic calculation.<br/> | + | | 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="width: 297px" | NPV – Net Present Value<br/> | + | | 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/> |
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| | + | | 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="width: 297px; background-color: rgb(204, 204, 204)" | IRR – Internal Rate of Return<br/> | + | | style="background-color: rgb(232, 232, 232); text-align: center;" | '''IRR – Internal Rate of Return'''<br/> |
| − | | style="width: 444px; text-align: center; background-color: rgb(204, 204, 204);" | …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="width: 297px; background-color: rgb(204, 204, 204)" | Total life cycle cost<br/> | + | | style="text-align: center;" | '''Total life cycle cost'''<br/> |
| − | | style="width: 444px; text-align: center; background-color: rgb(204, 204, 204);" | ...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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| | <br/> | | <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 a SPIS is a complex procedure, which should be discussed with financial experts. This module only gives an overview of key data required. Note that all 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; |
| − | *will be contemplating the current situation and future scenarios; | + | *will have to consider the current situation and future scenarios; |
| − | *should compare options for alternative pumping systems (electric, diesel).<br/> | + | *should compare options for alternative pumping systems (electric, diesel). |
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| | The financial analysis builds on three major inputs:<br/> | | The financial analysis builds on three major inputs:<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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| | </ol> | | </ol> |
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| − | === '''<span style="color:#879637;">Outcome/Product</span>''' === | + | ==== '''<span style="color:#879637;">Outcome/Product</span>''' ==== |
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| | *Cash flow projections; | | *Cash flow projections; |
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| | *Total life cycle costs of the SPIS investment. | | *Total life cycle costs of the SPIS investment. |
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| − | === '''<span style="color:#879637;">Data Requirements</span>''' === | + | ==== '''<span style="color:#879637;">Data Requirements</span>''' ==== |
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| | ===== '''Research, collect, analyze, cross-check:''' ===== | | ===== '''Research, collect, analyze, cross-check:''' ===== |
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| | *capital expenditures / initial capital investment (i.e. prices for components to be financed) for solar and alternative options | | *capital expenditures / initial capital investment (i.e. prices for components to be financed) for solar and alternative options |
| | *sales revenues (market prices); | | *sales revenues (market prices); |
| − | *operating and maintenance costs (prices); | + | *operating and maintenance costs; |
| | *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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| | *CAPEX (capital expenditure); i.e. total/annual sum for financing investment in SPIS (and alternative system). | | *CAPEX (capital expenditure); i.e. total/annual sum for financing investment in SPIS (and alternative system). |
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| − | === '''<span style="color:#879637;">People/Stakeholders</span>''' === | + | ==== '''<span style="color:#879637;">People/Stakeholders</span>''' ==== |
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| | *Agricultural service provider; | | *Agricultural service provider; |
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| | *Market analysts/consultants; | | *Market analysts/consultants; |
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| − | === '''<span style="color:#879637;">Important Issues</span>''' === | + | ==== '''<span style="color:#879637;">Important Issues</span>''' ==== |
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| | When comparing PV systems to diesel or electric pumping systems the following statements apply: | | When comparing PV systems to diesel or electric pumping systems the following statements apply: |
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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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| | + | |
| | + | {| cellpadding="1" |
| | + | |- |
| | + | | {{Back to SPIS Toolbox 2}} |
| | + | | |
| | + | | {{Back to Design}} |
| | + | | |
| | + | | {{Next Chapter}}[[SPIS Toolbox - Pre-select Potential Suppliers|►Go to the Next Chapter]]'''</span></span> |
| | + | |} |
| | {{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 a SPIS is a complex procedure, which should be discussed with financial experts. This module only gives an overview of key data required. Note that all 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.
