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Developing and Deploying CHP _ Renewable Energy Technologies_1_

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Developing and Deploying CHP _ Renewable Energy Technologies_1_ Powered By Docstoc
					        An Overview of
      RELCOST Financial

    Farm Energy Assessments
        Kick-Off Meeting
       September 18, 2009


            Carolyn Roos, PhD
Washington State University, Energy Program
         roosc@energy.wsu.edu
              Program Overview



RELCOST for Financial Analysis of Energy Projects.

• Evaluate financial viability of energy projects

• Create financial statements needed for support
• Quickly evaluate performance visually
• Test sensitivity of viability to unknown factors
              Program Overview

Evaluate financial viability of energy projects

• General purpose analysis tool
   Multiple user-defined products and fuel-sources


• Intended for a variety of energy projects
    •   Power generation
    •   District energy
    •   Combined heat and power
    •   Alternative energy
         Wind, Solar, Biomass, Geothermal, etc.

   Especially tailored for anaerobic digester projects
                   Program Overview
MS Excel spreadsheet template

  • Template facilitates input:
     • From Rule-of-Thumb & preliminary input
     • To detailed, project-specific factors

  • Unprotected spreadsheet:
     • Create templates of common project types
     • Any user familiar with Excel can customize
             e.g country-specific tax structure

  • Easy integration with other tools
     • Excel used as output and input for many programs
     • Extends reporting, analysis, and integration with the tools you use.
                       Program Use
Use in design and analysis with other energy analysis tools
Requires information from other analyses, such as
   • Energy use
   • Cost estimation
   • Emissions calculation
   • Systems design                Evaluate energy projects
   • Plant simulation              • Ranking, prioritization
   • Power generation              • Bid evaluation
   • Renewable energy              • Contract negotiation
                                   • Funding needs
                                   • Sales price, valuation


                                   Develop Policy analysis
                                   • Tax, production credits
                                   • Tax relief, incentives
                                   • Environmental credits
                             Inputs
                Enter detailed input on a number of sheets


Inputs                               Sensitivity Factors
Enter expected values for:           Multipliers on inputs to test
                                     variation from most likely values:
• Plant Operating Factors
• Capital Expenditures
• Funding Plan
                                     • Cost overruns
• Purchased Fuels                    • Sales price changes
• O&M Expenses                       • Etc.
• Major expenses
• Income, Sales
• Carbon Offsets, RECs
• Taxes, Fees
• Dividends
• Cost escalation
• Cash accounts
                 Four Types of Results
                More Than Life Cycle Cost Analysis

Pro-Forma Statements
• Income Statement
• Cash Flow Statement
• Balance Sheet
• Use of Funds


Life Cycle Cost Analysis
•Net Present Value
•Internal Rate of Return
•Benefit-Cost Ratio


Financial Indicators
•Margins (e.g. Gross Margin)
•Ratios (e.g. Debt-Equity ratio)


Levelized Costs
                    Pro Formas
Pro forma financial statements
    Income Statement
    Balance Sheet
    Use of Funds
    Cash Flow

Stakeholders need pro formas to support a project
• Lenders
• Equity investors
• Policy analysts
• Project developers
20 year analysis period
         Presentation of Results
Quickly evaluate performance visually

“Financial Scorecard”
   • Red, yellow and green indicators
   • Decision values defined by user
                                               Plots from Pro Forma Statements

                                                       Net Profit After Taxes                                                                                                                        Discounted Cash FLows

                        $4,000                                                                                                                                          $1,200

                        $3,500
                                                                                                                                                                        $1,000
                        $3,000
                        $2,500




                                                                                                                                                    Cash Flow ($1000)
                                                                                                                                                                         $800
     Costs ($1,000)




                        $2,000
                        $1,500                                                                                                                                           $600

                        $1,000
                                                                                                                                                                         $400
                            $500
                               $-                                                                                                                                        $200

                            $(500) 1   2   3   4   5    6       7       8       9        10    11    12   13   14   15   16   17   18   19    20
                                                                                                                                                                            $-
                       $(1,000)                                                                                                                                                  1   2   3   4   5   6   7   8   9   10   11   12   13   14   15   16   17   18   19   20
                                                                                    Project Year                                                                                                                 Project Year



                                                         Benefit/Cost Ratio
                                                        (BCR =1 at payback)

                      1.4

                      1.2                                                                                                                                                            New graphs and charts
                       1

                      0.8
                                                                                                                                                                                     easily added by user
BC Ratio




                      0.6

                      0.4
                      0.2
                     0
                  -0.2 1           2   3   4   5   6        7       8       9       10        11    12    13   14   15   16   17   18    19    20

                                                                                Project Year
                     Sensitivity Analysis
“What If” Analysis:
  e.g. What if I have a cost over run? What if I don’t get the sales price I
   expect? What if I don’t get the grant I’m expecting? How does that impact
   my internal rate of return?

  • Sensitivity factors multiply inputs across
    many sheets all in one place.

  • View results on same screen as sensitivity factors
                                                    Sensitivity Analysis
                                                     Graphical Results
                                                                            Sensitivity Analysis
                                                                                                                                                 Sales Price
                                                    30%                                                                                          CapEx


                                                    20%
Variation in Parameter




                                                    10%


                                                     0%
                                                           0
                          -4,000,000




                                       -2,000,000




                                                               2,000,000




                                                                                  4,000,000




                                                                                               6,000,000




                                                                                                           8,000,000




                                                                                                                       10,000,000




                                                                                                                                    12,000,000
                                                    -10%


                                                    -20%


                                                    -30%


                                                    -40%
                                                                           Net Present Value




                         Sensitivity diagrams are used to identify which
                         factors most impact the viability of your project
A Review of Input Sheets
    •   General Information
    •   Plant Operating Factors
    •   Capital Expenditures
    •   Funding Plan
    •   Purchased Fuels
    •   O&M Expenses
    •   Major expenses (overhauls)
    •   Income, Sales
    •   Taxes, Fees
    •   Dividends (shareholder)
    •   Cost escalation
    •   Cash accounts
 General Information
• Facility Description
• Discount and inflation rates
                                                                         RELCOST Tab
                                                                         of screen shot

                                  Input
                Plant Operating Factor




Dispatch factor
   How much of what can be generated occurs when there is demand for it?

Availability factor
   How much of the time is the plant available to meet plant demands?
   Planned maintenance outages are also modeled her
             Capital Expenditures
                             • Detailed or simple estimate

                             • 3 General Categories




•   Expenditures can occur in each project year
•   Inputs in current dollars, escalated values calculated
                        Depreciation
•   “Recovery” of the cost of an asset whose value
     declines over time
     Machinery, equipment, structures, etc.

                                         Three classes of capital
                                         expenditures that can be
                                         accelerated at different rates.



                                       IRS depreciation schedule library
Funding Plan
        Three fund source types
          Loans, grants, equity
          Multiple types can be used in
           same project period

        Up to 10 sources for each type
          Any project year
          Multiple investors, lenders

        Monthly calculation used for
         borrowed funds
          Short duration loans
          Construction financing or
           working capital.
                               Purchased Fuels
Applies operating factors to
all project years

                                      • Can have multiple fuel types in
                                          same year
                                           Separate inputs for each project year


                                      •   Energy units can be changed

                                      •   Inputs in current dollars, escalated
                                          values calculated
 Operation & Maintenance
Multiple expense categories
    Sales & Administration Costs
    Overhead
    Operating Labor
    Insurance, property Taxes
       Operating Reserve
     Deposits & Withdrawals
• “Cash Accounts”
  Current account
  Operating Reserve account

• Save up for major expenses
  Major Overhaul, bond payment
    Major Expenses
• Repeating or one-time major expenses
  e.g Equipment overhaul
  e.g. Every 5 years starting in year 6
Income from Sales

          • Nine sales income types
             • Can be user defined for
               specific project needs



          • Products
             •   Power sales
             •   Heat, cool sales
             •   Co-products
             •   Direct use by-products such
                 as greenhouse for flowers,
                 plants, vegetables
             Environmental Credits
• Carbon Offset, Renewable Energy Credits, Production Incentives
Income Taxes and Fees

            • Tax incentives:
               • Refundable tax credits
               • Tax credit carry forward


            • Multi-jurisdictional:
               • Federal, state, local
               • Tax rates can vary by project
                 year
                        Dividends




• Dividends are annual cash distributions
    made to investors


•   Dividend payout policies vary greatly
     • User defined logic can be created for specific projects.
         Cost Escalation Forecasts
Escalated costs are calculated using factors from a forecast
   Forecast values are user defined for each item
   e.g. 3% escalation on electricity sales but 3.5% on gas sales.


Four forecast types
     None – costs are not escalated
     Conservative – lowest cost escalation
     Likely – most probable escalation
     Aggressive – highest cost escalation
                 Questions ?


Download blank spreadsheet, examples, and User’s Manual
       http://www.energy.wsu.edu/software/relcost/




                Carolyn Roos, PhD
    Washington State University, Energy Program
             roosc@energy.wsu.edu

				
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