14/8/2018 12.

Economic analysis of the project

12. Economic analysis of the project

12.1. Introduction
12.2. Illustration of the pilot project
12.3. Collect the data and establish the database
12.4. Search for alternatives
12.5. Evaluate the alternatives
12.6. Identify the best alternative
12.7. Results of economic analysis and proposal plan
12.8. Conclusion

12.1. Introduction
12.1.1. Objectives of the Economic Analysis

Good management consists primarily of making wise decisions; wise decisions in turn involve making a choice between
alternatives. Engineering considerations determine the possibility of a project being carried out and point out the alternative ways in
which the project could be handled. Economic considerations also largely determine a project's desirability and dictate how it should
be carried out. A feasibility study determines either the which or the whether of the proposed project: which way to do it, or whether
do it at all.

In an engineering sense, feasibility means that the project being considered is technically possible. Economic feasibility, in addition
to acknowledging the technical possibility of a project, further implies that it can be justified on an economic basis as well. Economic
feasibility measures the overall desirability of the project in financial terms and indicates the superiority of a single approach over
others that may be equally feasible in a technical sense.

In the study, the project is considered in an engineering sense. The ultimate objective of the economic analysis is to provide a
decision-making tool which can be used not only for the pilot project but also for demonstration purposes.

12.1.2. Procedure for Economic Analysis

Most engineers can recall the "scientific method", which involves five distinct phases: observation, problem definition, formulation of
hypothesis, experimentation, and verification. A similar sequence of ten clearly defined steps is involved in carrying out the
economic analysis of a project:

a. Understand the problem.

b. Define the energy integrated system.
c. Collect the data
d. Interpret the data.
e. Devise the alternatives.
f. Evaluate the alternatives.
g. Identify the best alternative
h. Suggest the best alternative to the director of the project and get the feedback information.
i. Monitor the results.
j. Determine that the energy integrated system could be disseminated, including where, and under what conditions.

In order to devise a decision-making tool for economic analysis, a computer programme has been compiled according to the steps
mentioned above. Fig. 12.1 shows the analytical framework of the study.

12.2. Illustration of the pilot project

12.2.1. Qualitative Description

The pilot project is a more complex agricultural system than the traditional one. It consists of four subsystems: cropping, animal
husbandry, biomass processing and energy end-utilization. Each subsystem may involve different activities. The overall benefit of
the project is directly related to these activities. A different combination of the activities will obtain a different result. The activities are
constrained by local climate, economic conditions, etc. To optimize its structure all constraints must be considered and the possible
activities should be listed before making the economic analysis.

Fig. 12.1 Analytical framework of the study

The activities of the pilot project are described as follows:

- Cropping = {corn, sweet sorghum, fruit trees, vegetables}

- Animal husbandry = {swine, beef cows, meal chickens, egg chickens}
- Biomass processing = {digester, ethanol, pyrolysis}
- Energy utilizing equipment = {boiler, tractor, car, co-generator}

To help understand the systems a material flowchart is given (see Fig. 12.2). The chart clearly shows the relationship between the
activities, the systems boundaries, and the inputs and outputs of the system. The main activities of the project are described in
detail as follows:

A. Sweet Sorghum

B. Animal Husbandry: Swine

C. Animal Husbandry: Chickens

Figure

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* These materials are only used as compensation and for calculating and comparing the economic efficiency of different senarioes.

Fig. 12.2 The material flowchart. D. Ethanol Production Processes

E. Pyrolysis Processes

F. Greenhouses

12.2.2. Quantitative Illustration

A number of forms filled with the data can be used to illustrate the various activities and the whole system according to the
qualitative illustration

A. Description of Single Activities

Table 12.1 Forms of the Activity j.

Products J,F,M, ,.,,.,.,D Total input or output

P1
P2
. ±eit ±aij
.
.
Pm1
C1
C2
.
. -crt Crj

.
Cm2

Notation:

P1, P2,.,.,., Pm1 : nomenclature of products

C1,C2,.,.,.,Cm2: nomenclature of different fixed costs
eit: the quantity of input(-) or output(+) of the product i in the month t
Crt: the amount of fixed cost r in the month %
aij the sum of input (-) or output (+) of the product i during one producing period

crj: sum of the fixed cost r during one producing period in activity j

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B. Description of the Whole System

Table 12.2 The Whole System

The data in the system The data out of the system

X1, X2, .,.,.,.,.,Xn Q V1,V2,......V1 E
P1 aij Pik ei
P2
.
.
.
Pm1
C1
C2
. crj
.
C3
Invest. gj
Life Nj

Notation:

X1,X2,-.Xn: the nomenclature of activities

Q: the column of input (-) or output (+) in physical materials
V1, V2,...V1: the column of input (-) or output (+) in money with various estimated prices
E: the column of input (-) or output (+) in discount energy
j: the number of the activities
qj: the amount of the investment of the activity j per unit
Nj: the available life of the activity j

12.3. Collect the data and establish the database

12.3.1. Classification of Data

The data of any economic analysis of an engineering project can be classified into three groups:

- Technical coefficients: quantity of products produced or consumed during one period by an elementary unit of each
activity. By convention, consumption is given a negative figure while production figures are positive.

- Accounting coefficients: unitary weights of several kinds attributed to each physical unit of product to allow for
aggregation. Prices are the typical example of accounting coefficients. They make it possible to evaluate any set of
heterogenous products.

- Decision variables: these data are related to the scales of different activities.

The technical coefficients related to the level of management and technical development are normally stable. They seldom need to
be modified during the period of economic analysis. But the accounting coefficients are variable. When they change, they affect the
results of economic analysis significantly. The conventional approaches to economic analysis normally calculate parameters within
only one price. The information which results from such approaches is too limited to be used by a decision-making body. In this way
the analysts and decision making-body can input different prices, such as the pessimistic, the most likely, the optimistic, and so on
at the same time. They can also modify the coefficients at any time they like. Therefore, the problem of different prices for a product
in China can easily be dealt with, and more realistic information can be given to the decision-making body.

12.3.2. Methods of Data Collection

Data is the foundation of any economic analysis. Without reliable data, all the results of economic analyses are useless. In order to
get more reliable data, the following methods are used:

- Directly survey the producers or agricultural product sellers

- Consult the statistical sources
- Ask the experts who are working in special fields

12.3.3 Organization of the Data

The pilot project consists of several dozen activities, hundreds of products and thousands of items of data. The structure of the
databank depends on what the data are used for. The main goal of the economic evaluation of a project is to give managers more
information to support their decision. Therefore, the data are organized into one cube of technical coefficients, one rectangle of
accounting coefficients and one rectangle of variables of activities (see Fig.12.3).

Fig. 12.3 Cube and Rectangles of Coefficients

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Notation:

PAT= name of time file regarding products and activities;

PTA= name of activity file regarding products and time;
ATP= name of product file regarding activities and time;
WGT= name of accounting coefficient file;
aijt = technical coefficients;
pik = accounting coefficients;
Xj = variables of activities;
k = type of accounting coefficients;
t = time (month).

The alternative databank is used to store information on decision variables given by decision-making bodies or by the linear
programme.

12.4. Search for alternatives

The economic analysis usually revolves around a special alternative. To seek the best alternative or to improve the present plan is
the main aim. The best alternative is relative to a group of alternatives. Therefore, to seek for a group of alternatives is an important
step in the economic analysis. The following have been used to establish the group of the alternatives:

12.4.1. The "without" Alternative

In the case of energy integrated systems, the without-project situation may be a given area of farm land bearing the crops which suit
the natural and socio-economic environment. In the context of the project, these crops could be two-thirds corn and one-third
soybeans on 60 hectares of farm land.

12.4.2. The "optimum" Alternatives

After establishing the database of the system, linear programming may be applied to seek for the "optimum" alternatives.

A. The constraints of the linear programming

a. Constrained by the balances of the main products

A. The constraints of the linear programming

a. Constrained by the balances of the main products

Where:

Xj - the decision varibles of the activity j

Xm1+i - the total output of the system
Xm1+ i+1 - the total input of the system

b. Constrained by the pre-requirement for some products

Where: Si - the total quantity required to be gained

c. Constrained by resources such as human labour, electricity, coal, etc.

Where: Di - the maximum of the resource I

d. Constrained by the capacity of equipment

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Xj Mm

Where: Mm - the maximum capacity of the equipment j

e. Constrained by the total investment

Where:

qj - the amount of investment required per productive unit

Sn - the total investment in the activity j

Beyond the above constraints, some other constraints could be included, according to the requirements of the decision-maker.

B. Objective Functions

The objective functions are related to the goals of the project. In the case of the energy integrated system, the goals can be
described with the following functions:

b. Minimize energy input from outside the system. In other words, the system could have the highest rate of energy self-
sufficiency.

Where:

ge - discount coefficient of the type of energy e

Xe - the amount of energy imported from outside the system
m3 - the amount of energy imported

To keep the project running economically, the following constraint should be added in this case.

c. Maximize the profit of the project in the case of energy supplied completely by the system itself

The following constraint should be added m3

The above objective functions are applied separately. Therefore, different alternatives are produced.

12.4.3 The Alternatives Raised by the Director

The "optimum" alternatives are subject to special constraints. Only the quantitative elements could be involved in the linear
programming model. Concerning the non-quantitative influences, the "optimum" alternatives may not be the "optimum". In order to
prevent missing the best alternative reasonable judgement is applied. A group of alternatives are raised by the director and a group
of experts according to their experience.

12.4.4 List of Alternatives

With the three approaches, ten alternatives have been produced. They are listed in Table 12.3.

Table 12.3 List of Alternatives

Activities linear program Raised by the director

NO.1 NO. 2 NO. 3 NO. 4 NO. 5 NO. 6 NO. 7 NO. 8 NO. 9 NO. 10
Corn chemical fertil. (1mu) 199.00 195.55 100.00 100.00 0.00 100.00 50.00 50.00 0.00 0.00
Corn organic fertili.(1mu) 0.00 0.00 100.00 0.00 100.00 50.00 100.00 50.00 0.00 200.00
Corn organic/chemica (1mu) 0.00 0.00 0.00 100.00 100.00 50.00 50.00 100.00 200.00 0.00
Sw.Sorgh.var. SN249 (1mu) 0.00 0.00 50.00 100.00 0.00 50.00 50.00 100.00 100.00 0.00
Sw.Sorgh.var. ER1195 (1mu) 0.00 0.00 50.00 0.00 100.00 50.00 50.00 0.00 0.00 100.00
Sw.Sorgh.var. R1195 (1mu) 0.00 0.00 50.00 50.00 50.00 100.00 0.00 0.00 100.00 0.00
Sw.Sorgh.var. Roma (1mu) 201.00 204.00 50.00 50.00 50.00 0.00 100.00 100.00 0.00 100.00
Soya chemical fertil. (1mu) 200.00 200.00 100.00 50.00 50.00 100.00 100.00 0.00 0.00 0.00
Soya organic fertil. (1mu) 0.00 0.00 50.00 100.00 50.00 100.00 0.00 100.00 200.00 0.00
Soya organic/chemica (1mu) 0.00 0.00 50.00 50.00 100.00 0.00 100.00 100.00 0.00 200.00

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Greenhouse/ cucumber(100m2) 3.90 0.00 0.00 3.90 3.00 2.00 1.90 0.90 5.00 0.00
Greenhouse/ tomato (100m2) 0.00 0.00 3.90 0.00 0.90 1.90 2.00 3.00 0.00 5.00
Cattle raising (head) 30.00 30.00 0.00 0.00 0.00 0.00 0.00 0.00 20.00 50.00
Sow (head) 10.00 10.00 10.00 9.00 8.00 7.00 6.00 0.00 12.00 15.00
Pigs (head) 90.00 90.00 90.00 80.00 70.00 60.00 50.00 100.00 100.00 120.00
Chickens for meat (100 chick) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00 0.00
Chickens for eggs (100 chick) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00
Digester medium temp (1M3) 50.00 50.00 40.00 30.00 20.00 10.00 0.00 25.00 35.00 5.00
Digester normal temp (1M3) 0.00 0.00 0.00 10.00 20.00 30.00 40.00 15.00 5.00 35.00
Ethanol /molasses (T) 100.00 0.00 80.00 80.00 40.00 0.00 150.00 100.00 50.00 50.00
Ethanol /starch (T) 100.00 9.90 80.00 40.00 80.00 100.00 0.00 50.00 100.00 50.00
Ethanol/S.Sstem+ Moll (T) 0.00 0.00 40.00 80.00 80.00 100.00 50.00 50.00 50.00 100.00
Pyrolysis (T) 50.00 5.10 40.00 35.00 30.00 25.00 20.00 15.00 0.00 50.00
Housing (1M2) 300.00 300.00 300.00 300.00 300.00 300.00 300.00 300.00 300.00 300.00

12.5. Evaluate the alternatives

12.5.1 Evaluate the separate activities

An energy integrated system consists of many activities. Whether the individual activities are economically feasible or not would
directly influence the feasibility of the whole system. Evaluating the single activities is also important for configuring the system. The
economic criteria are calculated based on the coefficients in the database. Fig.12.4 shows the data transfer.

Fig. 12.4 Analytic Steps for Individual Activities

In Fig.12.4:

ait = aijt
Ait = ait · Xj

The economical parameters include:

a. Gross revenue per year Gk:

(eit>0)

b. Total cost per year Ck:

c. Total profit per year Fk:

Fk=Gk+ Ck

d. Payback time (years)TK:

TK =I/FK

e. Net present value NPVK:

f. Internal rate of return IRRk:

g. Benefit/Cost ratio BCk

h. NPV/In vestment ratio FIk

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12.5.2. Input (-) /Output (+) of Individual Material

The quantity of products produced or consumed by a project is also important to judge whether the project is feasible or not. If the
amount of one or two main materials consumed is greater than the limited resources available, the project has to stop running. In
order to prevent this from happening, both bar graph and curve line are applied to show the changes in each product during a whole
productive period. Fig. 12.5 shows the data transfer:

Fig. 12.5 Steps to Calculate Product Quality

In Fig.12.3:

ajt = aijt
Ajt = ajt · Xj

12.5.3. Evaluation of the Whole System

Three types of indices are applied to evaluate the whole system. They are the volume in kind, the volume in money and the volume
in discount energy. The economic criteria of the whole project are calculated as shown in Fig. 12. 6.

Fig. 12.6 Working Steps for Evaluating the Whole System

In Fig.12.5:

Vijk=Aij· Pik

where:

Aij= the amount of product produced or consumed in the activity j;

Ai = the total amount of product i inputed or outputed to /from the global system;
Vijk= the monetary value of product i produced or consumed by activity j;
Vjk = the profit of the activity j;
Vik = the total monetary value of product i produced or consumed by the whole project;
Vk = the total profit of the project of a special alternative;
Eij= the discount energy volume of product i produced or consumed by activity j;
Ej = the net discount energy produced or consumed by activity j;
Ei = the discount energy of product i produced or consumed by the whole project;
E= the total discount energy inputed into or outputed from the whole system with a special alternative.

The tables PAT01, PAT02, and PAT03 indicate the relationships among activities and between the system and its environment
separately with the quantity of materials, with monetary value and with energy value. They provide more information to the decision-
maker. Table 12.4 and table 12.5, as an example, show the results of the alternative NO. 3.

Table 12.4 The Results of Analysis of the Individual Activities

Activities Units Plan Revenue Cost Profit BC Payback NPV Energy Energy Net energy
(Yuan) (yuan) (yuan) time (yuan) output input
Corn chemical 1mu 100 17707.00 -16784.00 932.00 1.05 0.00 0.00 1208049.00 -106404.60 1101644.40
fertil.
Corn organic fertili. 1mu 100 18992.00 -15450.00 3542.00 1.23 0.00 0.00 1306794.00 - 71637.20 1235156.80
Corn 1mu 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
organic/chemica
Sw.Sorgh.var. 1mu 50 12380.00 - 8005.62 4374.38 1.55 0.00 0.00 314779.00 - 58583.97 256195.00
SN249
Sw.Sorgh.var. 1mu 50 12380.00 - 8005.62 4374.38 1.55 0.00 0.00 333221.50 - 58583.97 274637.53
ER1195
Sw.Sorgh.var. 1mu 50 12250.00 - 8005.62 4244.38 1.53 0.00 0.00 307650.00 - 58583.97 249066.03
R1195

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Sw.Sorgh.var. 1mu 50 15000.00 - 8005.62 6994.38 1.87 0.00 0.00 420625.00 - 58583.97 362041.03
Roma
Soya chemical 1mu 100 15510.00 -18632.50 -3122.50 -0.83 0.00 0.00 829450.00 - 88173.86 741276.14
fertil.
Soya organic fertil. 1mu 50 7217.50 - 6931.62 285.88 1.04 0.00 0.00 366440.00 - 26700.13 339739.87
Soya 1mu 50 7762.50 - 8574.50 -812.00 -0.91 0.00 0.00 422275.00 - 38453.02 383821.98
organic/chemica
Greenhouse/ 100m2 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
cucumber
Greenhouse/ 100m2 3.9 5850.00 - 4530.17 1319.83 1.29 6.21 -80.22 2457.00 -217437.54 - 214980.54
tomatoe
Cattle raising head 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -302223.83 0.00
Sow bead 10 21600.00 -12048.25 9551.75 1.79 0.10 57691.37 69957.00 -1277162.21 - 232266.83
Swines head 90 82080.00 -61450.90 20629.10 1.34 0.44 117756.89 559656.00 0.00 - 717506.21
Chickens for meat 100chick 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Chickens for eggs 100chick 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - 16484.35 0.00
Medium temp. 1M3 40 1080.00 - 3027.84 -1947.84 -0.36 -1.64 - 13591.58 101433.60 0.00 84949.25
Digestor
Normal temp. 1M3 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -2949233.60 0.00
Digestor
Ethanol /mollasses T 80 163600.00 -100056.00 63544.00 1.64 4.41 203320.72 2411200.00 -6498510.45 - 538033.60
Ethanol /starch T 80 162400.00 -84668.00 77732.00 1.92 3.60 311235.77 2411200.00 -2031788.60 -4087310.45
Ethanol/S.Sstem+ T 40 80000.00 -51812.00 28188.00 1.54 4.97 74400.17 1205600.00 -8817174.00 - 826188.60
Moll
Pyrolysis T 40 22280.00 -14124.00 8156.00 1.58 19.62 -7964.82 5681760.00 -3135414.00
Housing 1M2 300

Table 12.5 The Inputs or Outputs of the Project

NO. Products Units Prices (yuan) Amount of materials Quantity in money Quantity in energy
P01 Mechanic. labour std mu 2.00 -2015.00 -4030.00 -59805.20
P02 Man labour day 6.00 -21369.95 -128219.70 -320549.25
P03 Corn seeds kg 2.00 -700.00 -1400.00 -11480.00
P04 Organ.fertilizer T 0.00 -837.50 0.00 0.00
P05 Urea kg 0.53 -3429.25 -1817.50 -37858.92
P06 Ammonia kg 1.40 -8802.92 -12324.09 -74824.82
P07 Potasium nitrate kg 1.00 -2400.00 -2400.00 -21600.00
P08 Herbicide kg 1.10 -60.00 -66.00 -7775.40
P09 Insecticide kg 0.50 -1400.00 -700.00 -141848.00
P10 Corn grain kg 0.45 32254.60 14514.57 531878.35
p11 Corn stalk kg 0.04 90600.00 3624.00 1302828.00
P12 Sweet.Sorgh.seed kg 2.00 -300.00 -600.00 -4821.00
P13 INSECT kg 21.00 -8.00 -168.00 -1230.56
P14 Sw.sorghum grain kg 0.50 71766.60 35883.30 1153289.26
P15 sw.Sorghum stems T 20.00 -99.50 -1990.00 -15024.50
P16 Soya seeds kg 2.00 -800.00 -1600.00 -16408.00
P17 D.D.T. kg 5.00 -20.00 -100.00 -3076.40
P18 Soya beans kg 1.00 0.00 0.00 0.00
P19 Soya stalks T 15.00 -510.00 -7650.00 -7701000.00
P20 Cucumber seeds kg 100.00 0.00 0.00 0.00
P21 Melon seeds kg 23.00 0.00 0.00 0.00
P22 Plastic film 1 kg 10.00 -64.35 -643.50 -1346.85
P23 Plastic film 2 kg 8.00 -5.85 -46.80 -122.44
P24 Plastic film 3 kg 11.00 0.00 0.00 0.00
P25 Bindings kg 30.00 0.00 0.00 0.00
P26 HERB IC kg 40.00 -2.34 -93.60 -359.94
P27 Straw cover piece 8.00 -78.00 -624.00 -1632.54
P28 Paper cover piece 10.00 -35.10 -351.00 -734.64
P29 Coal T 180.00 -199.03 -35825.40 -5831582.98
P30 Planting pot piece 0.35 -780.00 -273.00 -13057.20
P31 Cucumber kg 1.80 0.00 0.00 0.00
P32 Tomato seeds g 0.90 -29.25 -26.00 -244.82
P33 Tomato kg 2.00 2925.00 5850.00 2457.00
P34 Soya cake kg 0.90 16421.40 14779.26 303795.90
P35 Soya oil kg 4.50 4425.00 19912.50 174256.50
P36 Rice mil. residu kg 0.40 -22244.00 -8897.60 -379482.64
P37 Salt kg 0.45 -1230.80 -553.86 -20603.59
P38 Pig feed additiv kg 1.00 0.00 0.00 0.00
P39 Manure T 0.00 1.18 0.00 0.00
P40 Beef meat kg 6.50 0.00 0.00 0.00

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P41 Water m3 0.20 -6035.00 -1207.00 -75799.60
P42 Electricity kwh 0.45 -78481.89 -35316.85 -985732.54
P43 Fish powder kg 1.10 -4116.80 -4528.48 -71838.16
P44 Bone powder kg 0.36 -1356.00 -488.16 -22699.44
P45 Piglets kg 8.00 0.00 0.00 0.00
P46 Pork kg 3.80 21600.00 82080.00 559656.00
P47 Grain wastes kg 0.70 0.00 0.00 0.00
P48 Chicken kg 4.50 0.00 0.00 0.00
P49 Crustac. shells kg 0.16 0.00 0.00 0.00
P50 vitamin g 0.15 0.00 0.00 0.00
P51 Chick.feed add.1 g 0.18 0.00 0.00 0.00
P52 chick.feed add.2 g 0.07 0.00 0.00 0.00
P53 Eggs kg 5.00 0.00 0.00 0.00
P54 Chicks dozen 2.20 0.00 0.00 0.00
P55 Old chickens dozen 5.20 0.00 0.00 0.00
P56 Biogas m3 0.25 0.00 0.00 0.00
P57 Digest.sol.resid T 0.00 192.00 0.00 0.00
P58 Digest.liq.resid m3 0.00 614.00 0.00 0.00
P59 Ethanol T 2000. 197.81 395620.00 5961993.40
P60 Sw.Sorgh.bagasse T 0. 0.00 0.00 0.00
P61 Charcoal T 90. 192.00 17280.00 4508160.00
P62 Bio-oil T 125. 0.00 0.00 0.00
P63 Coal therm 250. 0.00 0.00 0.00
P64 Diesel T 750. -1.81 -1357.50 -75766.60
P65 Gasoline T 1300. -11.30 -14690.00 -520252.00
P66 Transportation T.km 0.25 -13293.91 -3323.48 -203795.64
P67 Molasses T 150. -384.00 -57600.00 -160896.00
P68 Corn starch T 125. -264.00 -33000.00 -4263600.00
P69 Starch enzyme kg 8. -264.00 -2112.00 -2209.68
P70 Sugar enzyme kg 10. -800.00 -8000.00 -10048.00
P71 Levure kg 14. -336.00 -4704.00 -6609.12
P72 CO2 m3 0. -39.50 0.00 0.00
P73 vinasses T 15. 292.00 4380.00 0.00
P74 Sticks for cucum unit 0.1 -585.00 -58.50 -1222.65
P75 Heifers head 5.50 0.00 0.00 0.00
P76 Repair services yuan 1.00 -2953.70 -2953.70 -2953.70
P77 Management servi yuan 1.00 -2796.40 -2796.40 -2796.40

12.6. Identify the best alternative

12.6.1. Specify the Comprehensive Assessment Measures

The assessment measures should correspond to the objectives of the pilot project. Eighteen criteria classified into four groups are
chosen to assess the comprehensive merit of each alternative.

A. High Productivity

a. Measure of crop production

Where:

Qf1 - the total grain production of the alternative f

Q1max - the maximum of grain production in all alternatives

b. Measure of meat production

Where:

Qf2 - the total meal production of the alternative f

Q2max - the maximum of meal production in all alternatives

c. Measure of egg production

Where:

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Qf3 - the egg production of the alternative f
Q3max - the maximum of egg production in all alternatives

d. Measure of vegetable production

where:

Qf4 - the total vegetable production of the alternative f

Q4max the maximum of vegetable production in all alternatives

e. Measure of energy output

B. Measures of high efficiency

a. Measure of the profit

Where:

Ff - the total profit of alternative f

Fmax - the maximum of the profit in all alternatives

b. Measure of the payback times for investment

Where:

Tf - the investment payback times of the alternative f

Tmin - the shortest payback times of in all alternatives

c. Measure of benefit/cost BC

Where:

BCf - the ratio of benefit/cost of alternative f

BCmax - the maximum ratio of benefit/cost in all alternatives

d. Measure of the net present value

Where:

NPVf - the net present value of the alternative f

NPVmax - the maximum of the net present value in all alternatives.

e. Measure of internal rate of return

Where:

IRRf - the internal rate of return of the alternative f

IRRmax- the maximum of internal rate of return in all alternatives

f. Measure of the ratio of NPV/investment

Where:

FIf - the ratio of alternative f

FImax - - the maximum ratio in all alternatives

C. Measures of sustainability

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a. Measure of the organic fertilizer inputed into the system

Where:

Ff1 - the volume of organic fertilizer inputed the system in the alternative f
Fmax - the maximum volume of organic fertilizer inputed the system among all alternatives

b. Measure of the energy self-sufficiency rate

Where:

EIf - the energy inputed from outside of the system in the alternative f (MJ)
EImin - the minimum volume of energy inputed among all alternatives (MJ)

c. Measure of the waste processing rate

Where:

Wf - the waste processing rate of the alternative f

Wmax - the maximum of the waste processing rate among all alternatives

d. Measure of the input/output of the energy

Where:

Rf - the ratio of energy input/output of the alternative f

Rfmin - the minimum ratio of energy input/output among all alternatives

e. Measure of the self-sufficient energy potential

Where:

Kf - the ratio of the self-sufficient energy of alternative f

Kfmax the maximum ratio of the self- sufficient energy among all alternatives

D. Measures of social benefit

a. Measure of employment

Where:

Lf - - the man-days required in alternative f

Lmax - the maximum of the man- days required in all alternatives

b. Measure of pushing the manufacture forward

Where:

If - the total investment required by the alternative f

Imax - the maximum of the total investment required among all alternatives

12.6.2. Specify the Weight Coefficients

The preceding measures may be of varying importance for different decision-makers or in different situations. This ideal is
expressed by weight coefficients. The weight coefficients can be modified by decision-makers at any time. The relationship of all
weight coefficients is illustrated in Fig. 12.7.

All weight coefficients are subject to:

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The comprehensive benefit of an alternative is measured by the volume of H:

12.7. Results of economic analysis and proposal plan

According to the above-mentioned approach, a computer programme has been compiled in dBASE"s-PLUS and BASIC. With this
programme, a dozen alternatives have been analyzed and assessed from the comprehensive viewpoints of social, economic and
ecological benefits. The results of all alternatives are listed in Table 12.6 and Table 12.7. The best alternative is NO.3. Its, main
criteria are:

Main Products:

Grain: 104021.20 kg
Meal: 2925 kg
Vegetables: 21600 kg
Ethanol: 200 T

Economic Benefits:

Total profit: 236757.32

Yuan/Year
Returns: 3.72 year
BC: 1.49
NPV: 801999.58 yuan
IRR: 0.25

Social Benefits:

Employment: 21369.95 man-day

Equipment Investment: 88, 1390 yuan

Ecological Benefits:

Organic fertilizer input: 837.50 T

Rate of energy self-supplied: 0.44
Rate of wastes processed: 0.96
Rate of energy input to output: 0.56
Rate of potential energy self-supplied: 1.58

Fig. 12.7 The Relationship in All Coefficients

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Table 12.6 The Criteria of Alternatives

Alternative High productivity criteria Sustainable criteria

p1 P2 p3 p4 p5 d1 d2 d3 d4 d5
NO.1 119026.20 4387.50 29100.00 0.00 200.00 402.00 0.52 0.67 0.57 1.94
NO. 2 119301.45 0.00 29100.00 0.00 9.90 408.00 0.62 0.67 0.51 2.17
NO. 3 104021.20 2925.00 21600.00 0.00 200.00 837.50 0.44 0.96 0.56 1.58
NO. 4 112904.68 4387.50 19200.00 0.00 200.00 837.50 0.39 0.91 0.49 1.37
NO. 5 123788.16 4050.00 16800.00 0.00 200.00 1025.00 0.36 0.85 0.57 1.34
NO. 6 115171.64 3675.00 14400.00 0.00 200.00 837.50 0.32 0.76 0.62 1.24
NO. 7 136805.12 3637.50 12000.00 0.00 200.00 837.50 0.27 0.64 0.51 1.12
NO. 8 122190.00 3262.50 24000.00 0.00 200.00 1025.00 0.23 0.80 0.66 1.09
NO. 9 71830.24 5625.00 36200.00 0.00 200.00 1150.00 0.02 0.49 1.09 0.81
NO. 10 80311.20 3750.00 29100.00 7820.00 200.00 1150.00 0.46 0.22 0.48 1.56

Alternative High efficiency criteria Social benefits

e1 e2 e3 e4 e5 e6 s1 s2
NO.1 251607.97 3.68 1.47 861870.74 0.26 1.93 20022.90 925940.00
NO.2 77459.41 0.94 1.28 209611.48 1.06 3.88 13480.57 72800.00
NO. 3 236757.32 3.72 1.49 801999.58 0.25 1.91 21369.95 881390.00
NO. 4 231611.42 3.71 1.49 727061.21 0.26 1.85 22198.70 859990.00
NO. 5 236418.70 3.55 1.52 757077.33 0.27 1.90 22400.45 838590.00
NO. 6 230595.63 3.54 1.52 755123.66 0.27 1.92 22306.95 817190.00
NO. 7 206688.16 3.85 1.45 610186.79 0.24 1.77 21165.70 795790.00
NO. 8 223840.22 3.49 1.48 698105.09 0.27 1.89 21063.20 780940.00
NO. 9 240972.82 3.14 1.46 829646.19 0.31 2.10 22049.00 757250.00
NO. 10 253476.38 3.79 1.44 793126.53 0.25 1.82 24146.50 961400.00

12.8. Conclusion
The economic analysis results show that the pilot project is economically feasible at 1992 prices. But we must say that the prices of
all products are changing with reform in China and they will dramatically influence the analysis results, especially the prices of the
main products, such as ethanol, grain, vegetables, and meal. In the economic analysis the price of ethanol was referenced to the
price of using the ethanol as chemicals, not energy. This may be the best way to gain a benefit at present. As fossil fuel prices
increase, ethanol may be used for energy in the near future at that time the pilot project will be more economical than it is today.

Table 12.7 The Results of Comprehensive Evaluation

Alternative High productivity measures W1=0.15 Sustainable measures (%) W3=0.4

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wp1=0.1 wp2=0.3 wp3=0.1 wp4=0.2 wp5=0.5 wd1=0.1 wd2=0.3 wd3=0.2 wd4=0.1 wd5=0.3
NO.1 0.87 0.78 0.80 0.00 1.00 0.35 0.84 0.70 0.84 0.89
NO.2 0.87 0.00 0.80 0.00 0.05 0.35 1.00 0.70 0.94 1.00
NO. 3 0.76 0.52 0.60 0.00 1.00 0.73 0.71 1.00 0.86 0.74
NO.1 0.83 0.78 0.53 0.00 1.00 0.73 0.63 0.95 0.98 0.63
NO. 5 0.90 0.72 0.46 0.00 1.00 0.89 0.58 0.89 0.84 0.62
NO. 6 0.84 0.65 0.40 0.00 1.00 0.73 0.52 0.79 0.77 0.57
NO. 7 1.00 0.65 0.33 0.00 1.00 0.73 0.44 0.67 0.94 0.52
NO. 8 0.89 0.58 0.66 0.00 1.00 0.89 0.37 0.83 0.73 0.50
NO. 9 0.53 1.00 1.00 0.00 1.00 1.00 0.03 0.51 0.44 0.37
NO. 10 0.59 0.67 0.80 1.00 1.00 1.00 0.74 0.23 1.00 0.72

Alternative High efficiency measures W2=0.25 Soc. Benefit W4=0.2 Final result
wel=0.1 we2=0.1 we3=0.2 we4=0.1 we5=0.3 we6=0.2 ws1=0.6 we2=0.4
NO.1 0.99 0.26 0.97 1.00 0.25 0.32 0.96 1.00 0.73
NO.2 0.31 1.00 0.84 0.24 1.00 1.00 0.08 0.09 0.65
NO. 3 0.95 0.26 0.99 0.93 0.25 0.32 0.92 0.85 0.72
NO. 4 0.91 0.25 0.98 0.84 0.25 0.30 0.89 0.76 0.71
NO. 5 0.93 0.26 1.00 0.88 0.25 0.31 0.87 0.72 0.70
NO. 6 0.91 0.27 1.00 0.88 0.25 0.32 0.85 0.66 0.66
NO. 7 0.82 0.24 0.95 0.71 0.23 0.27 0.83 0.57 0.62
NO. 8 0.88 0.27 0.97 0.81 0.25 0.31 0.81 0.36 0.63
NO. 9 0.95 0.30 0.96 0.96 0.29 0.38 0.79 0.28 0.58
NO. 10 1.00 0.25 0.95 0.92 0.24 0.28 1.00 0.96 0.73

References

1. Biet, B., L.Bodrial, et al., Dessemination of Renewable Energies in Farms and Rural Villages: Barrier and Policy Measures,
Rome, Italy, FAO, 1988.

2. Biet, B., G. Pellizzi, et al., Integrated Energy System Design and Assessment: Application to Farms, Rome, Italy, FAO, 1988.

3. Biet, B., G.Castelli, et al., Manual on Design and Assessment of Integrated Farm Energy Systems, Rome, Italy, FAO, 1988.

4. Hafemeister David, Henry Kelly, & Barbara Levi. Energy Sources: Conservation & Renewable, American Institute of Physics,
1985.

5. Lkoku, U; C,: Economic Analysis and Investment Decisions, John Wiley & Sons. 1985.

6. William, R., P.E. Park, Cost Engineering Analysis, John Wiley & Sons, Inc., 1973.

7. L. Bretton, Mission Report, 1992

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