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Financial and Economic Analysis of Ethanol Production from Sugar Molasses: a Case Study of an Integrated Sugar Plant in Ethiopia Sugar Molasses: a Case Study Of An Integrated Sugar Plant In Ethiopia

Abstract: 

The search for and development of alternative sources of energy and its efficient use is increasing with mounting scarcity of petroleum based fuels. Long dependence on fossil fuels particularly for the transport sector has made life vulnerable to erratic price and supply changes of those fuels. As a result interest to produce and use Biofuels as an alternative source of energy increased worldwide. In the run Ethiopia has already started the production and use of ethanol with the aim of partially offsetting impact of petroleum products import on balance of payment. The initiative as well as enforcement of the national Biofuel sector has to be checked for viability with respect to different requirements including financial and economic performances. This study, as part of the caution, employed cost benefit technique to assess the financial and economic potential of Ethanol production by state owned enterprise in Ethiopia. Further, domestic resource cost based project appraisal is also applied to assess comparative advantage in ethanol production from molasses. The studied Finchaa Sugar Factory Ethanol Plant has an installed capacity of 450 hectolitres of pure alcohol per day. The calculations of Net Present Value and Internal Rate of Return of the project show that production of ethanol from molasses is economically viable at current prices. With the assumption that impact of all other factors is the same for both products, energy content based cost comparison shows a cost saving of ETB 0.36 per litre of ethanol replacing imported kerosene in cooking needs of households. Annual cost saving from the project’s ethanol supply is about ETB 3.2 million at full plant capacity. In comparative advantage assessment, the calculated DRC figure of 9.70 is less than the shadow exchange rate (ETB 11.58/USD) signifying home production cost is less than import. The Real added value through ethanol production over the project period is 175 million in Ethiopian Birr. Summarized, ethanol production from sugar molasses is economical; has potential to contribute to energy security through replacing and extending fossil fuel kerosene and helps to reduce climate change impact through reduced wood cutting for fuel purpose and low emission level of ethanol use 

Corporate Author: 
Demirew Getachew; Getenet Alemu; Worku Gebeyehu (Editors) and Ethiopian Economic Association
Publisher: 
Ethiopian Economic Association
ISBN/ISSN: 
978-99944-54-31-10
Primary Descriptors: 

 economic analysis, net present value,

Secondary Descriptor: 

internal rate of return, production cost

Geographic Descriptors: 
Ethiopia
Broad Subject heading: 
Financial analysis - kerosene
Call Number: 
330.963 PRO 2013
Serial Key Title: 
Proceeding of the Tenth International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
I
Publication date: 
2013-06-03 00:00:00
Conference Place: 
EEA Multi-Purpose Building Conference Hall, Addis Ababa
Place of publication: 
Addis Ababa
Type of material: 
Book
Current frequency: 
Annually
Conference date: 
July 19 - 21, 2012