Risk analysis of the biogas project

Abstract

The dynamic model of the biogas project was created with changing parameter values over time and compared to the static model of the same project based on constant values of the same parameters. For the dynamic model, the same methods were used to evaluate the biogas project as for the static model to calculate substrate mix volumes, costs, farm production volumes, number of biogas plant equipment, driers, and other numerical characteristics of the farm. Project risks were evaluated by the sensitivity analysis and Monte Carlo simulation. The study was conducted for four scenarios regarding the substrate mix structure and the possibility of selling electricity on the market. In the scenarios, the scale of the project was determined by the size and structure of agricultural and biogas production. The results have shown that when only wastes are used as substrates, net present values (NPVs) of the project are equal to 29.45 and 56.50 M RUB in dependence on the possibility to sell electricity on the market. At the same time, when the substrate mix is diversified, the project NPVs are equal to 89.17 and 186.68 M RUB depending on the ability to sell all the produced electricity to the common power grid. The results of the sensitivity analysis defined that the values of elasticity coefficients are less than 3.14%. Results of the Monte Carlo simulation have shown a probability distribution of positive NPVs for each scenario. This study was conducted to make recommendations for business and municipalities.