An Economic and Financial Analysis of a Biomass Energy Project

Abstract

Woody and vegetable biomass have long been used to make heat. Recently, there has been a renewed interest in biomass energy production, because it is a carbon-free, abundant energy source in the world. Biomass provides an attractive solution for residential heating systems based on renewable fuels, even though biomass-based domestic heating systems are recognized as significant particulate matter emitters. In particular, for the Region of Sicily the use of biomass as a raw material for producing energy could be interesting for its particular nature and for the soil and climatic features of that territory, with significant, highly positive socio-economic consequences. The objective of this study is to evaluate the potential of a cogeneration system (i.e. electrical, thermal and cooling) in the biomass sector, and to perform a reliable environmental, as well as financial and economic analysis of a production process in an area of Eastern Sicily. Such a study will be carried out by computation of some of the most important financial indicators. With respect to the analysis of financial risk linked to the plant, appropriate sensitivity analyses, calculations of particular elasticities and of threshold values will be carried out, considering different scenarios corresponding to diverse combinations of production capacities. This method of analysis has been chosen, rather than using a fuzzy approach to consider the linguistic imprecision, because the data available are always expressed in crisp figures, but they are subject to the uncertainty of temporal dynamics. The results obtained outline a marginal economic advantage, sometimes negative for the majority of the scenarios considered from the point of view of a private investor. The importance of public incentives to enhance the socio-economic aspects and the reduction of environmental impacts along the production line of plants generating bio-energy is therefore underlined.