Small Scale Business Model - Advantages and Disadvantages

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Jeffrey Mason
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1 Small scale business model Case study : ALTERRE Mali Sustainable Access to Sustainable Energy, Moshi 28 th september Geraldine ALTERRE Palliere mmm September AAAA 2010

2 Description of the local value chain Areas of 10 to 20 villages Production of the seeds by farmers Production and consumption of SVO in the area Local chains : Offer and demand are correlated at local scale Farmers and final users of the services that run with SVO know each other Small distance makes the logistic issue easier to manage with local means Cluster Area of production and consommation of PPO Jatropha fields Champs de Jatropha Energy services Oil extraction unit Unit é d extraction fixe Flux d HVP PPO flow to users vers les usagers Small scale business model ALTERRE 28 sept

distance makes the logistic issue easier to manage with local means Cluster Area of production and consommation of PPO Jatropha fields Champs de

3 Final use of SVO Electrogen groups of rural electrification Yéelen Kura runs small rural grid powered by electrogen group (100 to 300 kva) Diesel represents more than 70% of the production cost of 1 kwh Direct injection motors Usages des moteurs diesels 80 Energy services operators Millers represent 80% of diesel consommation of services 99% of them are indirect injection motors => Both have production costs highly dependant to diesel price Services et artisans Service de l'etat Commerçant Menuiserie métallique Meunier 10 0 Yorosso Koury Small scale business model ALTERRE 28 sept

represent 80% of diesel consommation of services 99% of them are indirect injection motors => Both have production costs highly dependant to diesel

4 SVO utilisation projections ALTERRE limits his support to farmers for extending jatropha fields in the limit of the evaluation of the local market Average yield expected is 1,5 t/ha in field, 1,1 t/1000 plants in hedges liters/year liters/year liters/year Small scale business model ALTERRE 28 sept

expected is 1,5 t/ha in field, 1,1 t/1000 plants in hedges 67 500 liters/year 18

5 Production cost of 1 liter of oil (1) The production cost is still depending on hypothesis that will be cheked up (and optimized) in the next years Technical solutions are adapted to the investment capacity and know-how of rural populations Example with an extraction unit of liters/year, full capacity Efficiency : 0,225 l/kg seeds Half of the presscake is sold at 10 FCFA/kg (0,02$/kg) Total investment at 15 M FCFA (30 700$) Price of seed to farmer : 50 FCFA/kg (0,1$/kg) Small scale business model ALTERRE 28 sept

extraction unit of 67500 liters/year, full capacity Efficiency : 0,225 l/kg seeds Half of the presscake is sold at 10 FCFA/kg

6 500,00 450,00 400,00 350,00 300,00 250,00 200,00 150,00 100,00 50,00 0,00 Coût de Coût de revient si 1 2 production d un vente tourteaux litre d HVP Production cost of 1 liter of oil (2) Emprunts Amortissement Charges d'exploitation Autres charges opérationnelles Transport Matières premières - graines Diminution du prix de revient par la vente à 50 FCFA/kg de la moitié des tourteaux produits Efficiency : 0,24 l/kg seeds Half of the presscake are sold at 50 FCFA/kg (0,1$/kg) Total investment at 25 M FCFA (51000 $) Price of seed to farmer : 70 FCFA/kg Production cost is highly correlated to the extraction efficiency and the valorisation of the by-products Farmers are beneficiaries of the presscake and energy services : many ways to share out the profits between farmers, oil extractor and users Small scale business model ALTERRE 28 sept

Efficiency : 0,24 l/kg seeds Half of the presscake are sold at 50 FCFA/kg (0,1$/kg) Total investment at 25 M FCFA (51000 $) Price of seed to farmer : 70 FCFA/kg Production cost is highly correlated

7 Benefits for farmers (1) Monetary benefits : 50 FCFA/kg minimum price today- provides profit, but limited compare to other crops Other benefits : access to presscake => a balance between the price of the seeds and price of the presscake Better access to energy (milling cost of 1kg of corn is linked to the price of diesel) Feedstock for soap production for women (oil and sediments) If the number of plants is limited compare to the other crops of an exploitation, economical risk is also limited : Jatropha can gives regular revenues If there is a problem on labour force one year, farmers just won t harvest this year Small scale business model ALTERRE 28 sept

for soap production for women (oil and sediments) If the number of plants is limited compare to the other crops of an exploitation, economical risk is also limited :

8 Benefits for farmers (2) Hypothesis to be confirmed : Annual yield at 1,5 t/ha and technical ways to obtain it Competition for labour force with other crops Farmer s interest for money at the time of harvest Time of work (weeding, pruning, harvesting, dehulling, drying) Hedge just pruned, at beginning of its 2 nd year Field at the beginning of its third year Small scale business model ALTERRE 28 sept

harvest Time of work (weeding, pruning, harvesting, dehulling, drying) Hedge just pruned, at beginning

9 Benefits for energy users (1) Yéelen Kura rural electrification Simulation of their annual profit margin either with 100% diesel either with bicarburation diesel-svo SVO at 450 FCFA/l, diesel at 550 FCFA/l : FCFA/ year A win/win solution, that increases power demand and proposes a cheaper fuel Small scale business model ALTERRE 28 sept

at 450 FCFA/l, diesel at 550 FCFA/l : FCFA/ year A win/win solution, that increases

10 Benefits for energy users (2) Small energy operators : Diesel represents 35 to 40% of miller s turnover Margin of operators are limited Quality of local diesel is low In small village, diesel price increases from 10% Small scale business model ALTERRE 28 sept

limited Quality of local diesel is low In small village, diesel

11 Questions on the business model High expectations on market for presscake, but no certainty Lack of scientific results on toxicity issue for human beings, livestock, plants and soil (oil, presscake, soap) Scientific results are required before commercialisation Market for seeds is extremely tensed now: Between the seed price for seedling, for pressing, or for soap One shot strategies (high prices or high promises but no duration or no realisation) What impact on farmers? How will it stabilise? Need of sustainable concertation mecanism between farmers, oil extractor, SVO sellers and energy services operator to avoid : One shot strategies for farmers Alignment of SVO price on diesel price for extractor Small scale business model ALTERRE 28 sept

strategies (high prices or high promises but no duration or no realisation) What impact on farmers? How will it stabilise?

12 Conclusion A business model that aims to maximise the local benefit before answering an external demand A local way to develop and perpetuate energy infrastructures Inside concertation of local chain need to be strong and efficient The local chain should be connected to national chains : Anticipation of economical and technical trends, legal frame, Markets for extra-production Carbon finance for substitution of diesel : 2,65 kg CO 2 /liter of SVO consumed (0,07$/liter, or max $/year on the three areas of the project) Can t make the chain profitable, but can allow a sustainable way of following it up Small scale business model ALTERRE 28 sept

trends, legal frame, Markets for extra-production Carbon finance for substitution of diesel : 2,65 kg CO 2 /liter of SVO consumed (0,07$/liter, or max 16 000$/year

PROGRAMMA SVILUPPO 76 ONLUS ENERGY PRODUCTION WITH JATROPHA OIL

PROGRAMMA SVILUPPO 76 ONLUS ENERGY PRODUCTION WITH JATROPHA OIL GUINEA BISSAU 1 Where we operate Our objectives Guinea Bissau Genova < Ruanda Etiopia Supporting people in developing countries to improve