title: Investment appraisal of technology innovations on dairy farm electricity consumption.
abstract: The aim of this study was to conduct an investment appraisal for milk-cooling, water-heating, and milk-harvesting technologies on a range of farm sizes in 2 different electricity-pricing environments. This was achieved by using a model for electricity consumption on dairy farms. The model simulated the effect of 6 technology investment scenarios on the electricity consumption and electricity costs of the 3 largest electricity-consuming systems within the dairy farm (i.e., milk-cooling, water-heating, and milking machine systems). The technology investment scenarios were direct expansion milk-cooling, ice bank milk-cooling, milk precooling, solar water-heating, and variable speed drive vacuum pump-milking systems. A dairy farm profitability calculator was combined with the electricity consumption model to assess the effect of each investment scenario on the total discounted net income over a 10-yr period subsequent to the investment taking place. Included in the calculation were the initial investments, which were depreciated to zero over the 10-yr period. The return on additional investment for 5 investment scenarios compared with a base scenario was computed as the investment appraisal metric. The results of this study showed that the highest return on investment figures were realized by using a direct expansion milk-cooling system with precooling of milk to 15°C with water before milk entry to the storage tank, heating water with an electrical water-heating system, and using standard vacuum pump control on the milking system. Return on investment figures did not exceed the suggested hurdle rate of 10% for any of the ice bank scenarios, making the ice bank system reliant on a grant aid framework to reduce the initial capital investment and improve the return on investment. The solar water-heating and variable speed drive vacuum pump scenarios failed to produce positive return on investment figures on any of the 3 farm sizes considered on either the day and night tariff or the flat tariff, even when the technology costs were reduced by 40% in a sensitivity analysis of technology costs.
authors.affiliation: Animal and Grassland Research and Innovation Centre, Teagasc Moorepark Fermoy, Co. Cork, Ireland. Electronic address: john.upton@teagasc.ie.
authors.forename: J
authors.initials: J
authors.lastname: Upton
authors.affiliation: Department of Process Energy and Transport, Cork Institute of Technology, Cork, Ireland.
authors.forename: M
authors.initials: M
authors.lastname: Murphy
authors.affiliation: Animal Production Systems Group, Wageningen University, 6700 AH Wageningen, the Netherlands.
authors.forename: I J M
authors.initials: IJ
authors.lastname: De Boer
authors.affiliation: Farm Technology Group, Wageningen University, 6708 PB Wageningen, the Netherlands.
authors.forename: P W G
authors.initials: PW
authors.lastname: Groot Koerkamp
authors.affiliation: Business Economics, Wageningen University, 6700 EW Wageningen, the Netherlands.
authors.forename: P B M
authors.initials: PB
authors.lastname: Berentsen
authors.affiliation: Animal and Grassland Research and Innovation Centre, Teagasc Moorepark Fermoy, Co. Cork, Ireland.
authors.forename: L
authors.initials: L
authors.lastname: Shalloo
mesh_terms: D000818:Animals; D003246:Conservation of Energy Resources / Q000191:economics; D003365:Costs and Cost Analysis; D003612:Dairying / Q000191:economics* / Q000379:methods; D004560:Electricity; D004777:Environment; D008892:Milk / Q000191:economics*; D008962:Models, Theoretical; D013672:Technology / Q000191:economics*
keywords: dairy technology; electricity; milk production; profitability