Renewable energy in sustainable agricultural production: real options approach to solar irrigation investment under uncertainty

Casper Boongaling Agaton, Charmaine Samala Guno

Abstract


Solar-powered irrigation system (SPIS) is a sustainable technology that utilizes renewable energy to pump water for agricultural production. Despite its environmental benefits, its adaptation is challenged by its high investment cost, particularly for small-scale farmers in most developing countries. This study aims to evaluate the attractiveness of shifting to SPIS from diesel-powered irrigation using the case of small-scale farmers in the Philippines. Considering the cost savings from adopting SPIS, this study analyzes the economic viability and optimal timing of investment under diesel price uncertainty. Results found that SPIS is economically attractive with USD 556.26/ha annual cost savings, USD 229.68/ha net present value, 12.49% internal rate of return, and a 5.58-year payback period. Considering the uncertainty in diesel prices, it is more optimal to invest immediately as waiting incurs losses. Investment decisions for SPIS are further favored by decreasing solar PV systems, multiple utilization, and cost-sharing among farmers. Findings provide recommendations for the widespread adoption of SPIS for more environment-friendly and sustainable production in agricultural countries.

 

Received: 22 March 2024

Accepted: 26 April 2024

Published: 29 May 2024


Keywords


optimal timing, real options, renewable energy, small-scale farmers, SPIS, sustainable agriculture

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References


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DOI: http://dx.doi.org/10.21622/resd.2024.10.1.829

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Copyright (c) 2024 Casper Boongaling Agaton, Charmaine Samala Guno

Renewable Energy and Sustainable Development

E-ISSN: 2356-8569

P-ISSN: 2356-8518

 

Published by:

Academy Publishing Center (APC)

Arab Academy for Science, Technology and Maritime Transport (AASTMT)

Alexandria, Egypt

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