Evaluating financial viability of boilers in palm oil mills under processing capacity variability: a case study approach
DOI: https://doi.org/10.3846/bmee.2026.23679Abstract
Purpose – This study evaluates the financial feasibility of boiler investments in palm oil mills, examining the variability in processing capacities resulting from seasonal yields and operational constraints.
Research methodology – A case study was conducted at a palm oil mill in Indonesia, assessing five investment scenarios through sensitivity analysis to compare repair and new boiler strategies at capacities of 48, 51, and 58 tons of FFB per hour. Financial metrics including Net Present Value (NPV), Internal Rate of Return (IRR), and payback period were employed.
Findings – Results exhibit that repairing the boiler, specifically at a capacity of 58 tons/hour, provides the greatest financial returns, with a Net Present Value (NPV) of USD 9.5 million and an Internal Rate of Return (IRR) of 21%, surpassing investments in new boilers. Scenario 5 demonstrated the highest financial resilience in response to variations in costs and revenues.
Research limitations – This research is based on financial assumptions and a singular case study context. Wider generalizations necessitate analysis across various operational contexts.
Practical implications – The findings provide decision-making tools for palm oil mills to optimize capital expenditure in relation to capacity variability and cost efficiency.
Originality/Value – This research incorporates operational variability into financial modeling, offering a novel perspective on boiler investment strategies within the palm oil sector.
Keywords:
financial feasibility, boiler investment, palm oil mill, processing capacityHow to Cite
Share
License
Copyright (c) 2026 The Author(s). Published by Vilnius Gediminas Technical University.
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Abas, R., Abdullah, R., & Hawari, Y. (2013). Economic feasibility study on establishing an oil palm biogas plant in Malaysia. Oil Palm Industry Economic Journal, 13, 14–21.
Abdullah, L., Jamaludin, Z., Chiew, T. H., Rafan, N. A., & Yuhazri, M. Y. (2012). Extensive tracking performance analysis of classical feedback control for XY stage ballscrew drive system. Applied Mechanics and Materials, 229–231, 750–755. https://doi.org/10.4028/www.scientific.net/AMM.229-231.750
Aziz, M., Oda, T., & Kashiwagi, T. (2015). Design and analysis of energy-efficient integrated crude palm oil and palm kernel oil processes. Journal of the Japan Institute of Energy, 94(1), 143–150. https://doi.org/10.3775/jie.94.143
Bennett, G., & Elwell, C. (2020). Effect of boiler oversizing on efficiency: A dynamic simulation study. Building Services Engineering Research and Technology, 41(6), 709–726. https://doi.org/10.1177/0143624420927352
Brunerová, A., Müller, M., Šleger, V., Ambarita, H., & Valášek, P. (2018). Bio-pellet fuel from oil palm Empty Fruit Bunches (EFB): Using European standards for quality testing. Sustainability, 10(12), Article 4443. https://doi.org/10.3390/su10124443
Buana, G. A., Wahyuda, & Sitania, F. D. (2023). From palm waste to profit: Feasibility of bio-oil industry in Indonesia’s East Kutai. IOP Conference Series: Earth and Environmental Science, 1242(1), Article 012031. https://doi.org/10.1088/1755-1315/1242/1/012031
Chakrabarty, S. P., & Nag, S. (2023). Risk measures and portfolio analysis in the paradigm of climate finance: A review. SN Business & Economics, 3, Article 69. https://doi.org/10.1007/s43546-023-00449-w
Chiew, T. H., Jamaludin, Z., Bani Hashim, A. Y., Abdullah, L., Rafan, N. A., & Maharof, M. (2017). Second order sliding mode control for direct drive positioning system. Journal of Mechanical Engineering and Sciences, 11(4), 3206–3216. https://doi.org/10.15282/jmes.11.4.2017.23.0289
Delapedra-Silva, V., Ferreira, P., Cunha, J., & Kimura, H. (2022). Methods for financial assessment of renewable energy projects: A review. Processes, 10(2), Article 184. https://doi.org/10.3390/pr10020184
Dewi, M. N. (2020). Economic feasibility study biogas power plant at 80 ton/hour palm oil mill. Journal NX – A Multidisciplinary Peer Reviewed Journal, 6(8), 36–42.
Ebazadeh, Y., Alayi, R., & Jamali, E. (2024). Investigation and sensitivity analysis of economic parameters on the operation of cogeneration systems to supply required energies for residential buildings. Eng, 5(3), 2092–2107. https://doi.org/10.3390/eng5030111
Foong, S. Z. Y., Andiappan, V., Tan, R. R., Foo, D. C. Y., & Ng, D. K. S. (2019). Hybrid approach for optimisation and analysis of palm oil mill. Processes, 7(2), Article 100. https://doi.org/10.3390/pr7020100
Ghavidast, N., & Khakzar Bafruei, M. (2024). Adjusting the factors affecting the internal rate of return on investment in production-sharing oil contracts to stabilize the interests of the investor. International Journal of Industrial Engineering: Theory, Applications and Practice, 31(3). https://doi.org/10.23055/ijietap.2024.31.3.9247
Hadiguna, R. A., & Tjahjono, B. (2017). A framework for managing sustainable palm oil supply chain operations: A case of Indonesia. Production Planning & Control, 28(13), 1093–1106. https://doi.org/10.1080/09537287.2017.1335900
Iizumi, T., & Kim, W. (2019). Recent improvements to global seasonal crop forecasting and related research. In T. Iizumi, R. Hirata, & R. Matsuda (Eds.), Adaptation to climate change in agriculture: Research and practices (pp. 97–110). Springer. https://doi.org/10.1007/978-981-13-9235-1_7
Julio, A. A. V., Batlle, E. A. O., Rodriguez, C. J. C., & Palacio, J. C. E. (2021). Exergoeconomic and environmental analysis of a palm oil biorefinery for the production of bio-jet fuel. Waste and Biomass Valorization, 12, 5611–5637. https://doi.org/10.1007/s12649-021-01404-2
Li, D.-P., Cheng, S.-J., Cheng, P.-F., Wang, J.-Q., & Zhang, H.-Y. (2018). A novel financial risk assessment model for companies based on heterogeneous information and aggregated historical data. PLoS ONE, 13(12), Article e0208166. https://doi.org/10.1371/journal.pone.0208166
Liew, W. L., Kassim, M. A., Muda, K., & Loh, S. K. (2016). Feasibility study on palm oil processing wastes towards achieving zero discharge. ARPN Journal of Engineering and Applied Sciences, 11(4), 2400–2405.
Manzoor, T., Gohar, G. A., Manzoor, T., Jamil, S. R., & Bashir, A. (2020). Integrated thermo-economic analysis of industrial boilers: A cost-effective approach. International Journal of Energy and Water Resources, 4(4), 403–410. https://doi.org/10.1007/s42108-020-00083-4
Nur Chairat, A. S., Antono, V., Prayudi, P., Nurhasanah, R., & Batih, H. (2021). Performance of a gasifier reactor prototype without a blower using palm oil waste. Processes, 9(11), Article 2094. https://doi.org/10.3390/pr9112094
Panjapornpon, C., Satjeenphong, T., Bardeeniz, S., & Hussain, M. A. (2024). Enhancing sustainability in palm oil industry: Reinforcement learning for renewable energy management considered climatic variability. Discover Chemical Engineering, 4, Article 25. https://doi.org/10.1007/s43938-024-00066-5
Pushpalatha, R., Roshni, T., Gangadharan, B., & Kutty, G. (2024). Computer-aided crop yield forecasting techniques – systematic review highlighting the application of AI. Environmental Modeling & Assessment, 29, 1095–1110. https://doi.org/10.1007/s10666-024-09978-6
Rusdi, M. R. I., Bashkeran, T., & Ahmad, Z. (2022). Data driven technique for palm oil mills boiler water quality monitoring in the State of Perak Malaysia. Malaysian Journal of Fundamental and Applied Sciences, 18(2), 171–183. https://doi.org/10.11113/mjfas.v18n2.2242
Shen, B., Han, Y., Price, L., Lu, H., & Liu, M. (2017). Techno-economic evaluation of strategies for addressing energy and environmental challenges of industrial boilers in China. Energy, 118, 526–533. https://doi.org/10.1016/j.energy.2016.10.083
Shou, T. (2022). A literature review on the Net Present Value (NPV) valuation method. In Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022), (vol. 219, pp. 826–830). Atlantis Press. https://doi.org/10.2991/aebmr.k.220603.135
View article in other formats
CrossMark check
Published
Issue
Section
Copyright
Copyright (c) 2026 The Author(s). Published by Vilnius Gediminas Technical University.
License
This work is licensed under a Creative Commons Attribution 4.0 International License.