Financial risk comparison of energy generation alternatives from sugarcane bagasse

Direct combustion (DC) and anaerobic digestion (AD) are widely recognized technologies for converting agro-industrial residues into energy. Although numerous studies have evaluated the technical and economic feasibility of biomass-based energy alternatives, existing financial risk assessments are mainly based on stochastic methods focused on sensitivity analysis, expected values, or the probability of financial losses, while overlooking the influence of uncertainty on adverse and extreme risk scenarios. To address this gap, this study conducts a financial risk comparison between DC and AD for a sugarcane mill, evaluating extreme scenarios of potential financial losses and feedstock requirements. Uncertainty in key technical and economic variables is modeled using Monte Carlo simulation, and extreme risk outcomes are assessed through tail-risk measures. Results indicated that DC remains as a financially viable option under current market conditions, while AD exhibits a higher dependence on policy incentives and greater exposure to adverse risk scenarios. Outcomes are also critically discussed under the consideration of sustainability measures and regulatory frameworks. The study provides a transferable risk-based evaluation framework for assessing the economic feasibility of biomass-based energy projects under uncertainty, thereby contributing to informed decision-making in the utilization or residual biomass. • Financial risk assessment of combustion and digestion of sugarcane process residues • Technical and economic variables from a representative Colombian sugar mill are applied • Integration of simulation techniques with risk measures for a realistic decision base • Quantitative description of financial viability of combustion compared to digestion