CBA Case Study 2

Description

Executive Summary

Energy for cooking is a major cost to households in Tuvalu. Biogas provides a potential means to provide sustainable, affordable, and reliable energy sources for domestic cooking needs. There are a number of potential technical, economic and social reasons why digesters have not been used extensively in Tuvalu to date. These include the technical efficacy of digesters, awareness of the technology and its benefits for households, the broader benefits and costs of using digesters, and access to appropriate funding to cover the significant up-front establishment costs. A preliminary costbenefit analysis (CBA) building on the existing knowledge base will enhance the information base for policy development, decision-making, and future investment in biogas.

A major trial is about to commence to install, monitor, and evaluate the use of household-scale biogas digesters in 40 households across Tuvalu. This report summarises the findings from a preliminary CBA of the use of biogas. Three options were assessed:
■■ Option 1: Household biogas for cooking energy only.
■■ Option 2: Household biogas for cooking energy and home garden benefits in the form of higher yields and avoided fertiliser costs.
■■ Option 3: Biogas at the household scale with a compressor to enable the digester to be located with the pig accommodation and not necessarily adjacent to the house.

While this option has been assessed in the CBA, the compressor technology requires more development and trial before consideration as a mainstream option.
The CBA found benefits to households related to household costs that would be avoided, specifically:
■■ reduced fossil fuel energy expenditure of up to AUD 475 to 500 per annum;
■■ avoided time to collect and prepare firewood worth up to AUD 500 per annum (based on the hourly
returns to labour from home production and sales of agricultural output); and
■■ when output from the digester is used as a substitute for liquid fertiliser, benefits in the form of lower fertiliser costs and increased garden yields are worth around AUD 50 to 75 per annum.

When the costs to households are also included in the analysis (cost of time, cost of water), households could still be better off by around AUD 825 to 900 per annum (assuming similar energy substitution to previous trials). That is, there is a net benefit to the household of up to AUD 900 per annum.
Other benefits include a reduction in the health burden associated with indoor cooking using wood (potentially worth AUD 26 per digester per annum) and marginal reductions in CO2 emissions (potentially worth around AUD 17 per digester per annum).

Overall, the preliminary CBA over a 30-year period1 indicates benefits exceed costs by a ratio of around 1.5 to 1 when the mid-point estimates for inputs are adopted (i.e. a Benefit-Cost Ratio [BCR] is 1.5). Sensitivity analysis conducted for the CBA indicates that:
■■ if the value of time for subsistence activities is ignored (i.e. time has no opportunity cost), the BCR drops to around 1.0;
■■ if the useful life of a digester is <10 years, the BCR falls be low 1 for some options. This reinforces the need to ensure digesters are used and maintained in the long-term;
■■ overall, the sensitivity analysis found that for the digesters to be economically viable, the household generally needs to have some fossil fuel expenses that are substituted by the biogas.

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Language
English
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Corporate Author
Jim Binney