Application of the Concept of Terminal Value in the Analysis of Projects Based on Renewable Energy

Projects for energy supply based on the exploitation of renewable energy have a very predictable cash flow. The initial costs are usually high, with the acquisition of technologically evolving equipment. However, maintenance costs are relatively low and easily predictable. Likewise, operating costs are often very low as there is no need to buy inputs. Power storage devices are often short-lived and contribute to a relative cost increase. At the same time, these projects are often not approved because they are directly compared to projects based on non-renewable resources, with cash flows that may not be so easily predictable and with much lower start-up costs. Fossil fuels have hardly predictable costs, established by non-technical criteria and related to geopolitical issues. In addition, their operating costs are usually very high, precisely because of the need to purchase fossil fuels. This paper proposes the calculation of terminal value in cash flows of power generation projects and its application for feasibility analysis of projects based on renewable resources. The proposed method suggests the calculation of terminal value as the moving average calculated for five-year intervals with constant growth rate of 5%. This method also encourages the inclusion in the cash flow of annual values that add up to the end of the analysis period the sufficient value to renew the system components at the end of the usual analysis period of 20 - 25 years. The application of the proposed method to a diesel wind system simulated with the well-known Homer software indicates the modification of the results of the Homer with the preference for systems with greater wind penetration instead of the systems with greater consumption of fossil fuels.

Biomass energy cost and feasibility of gasifier based biomass power generation system

The present research work has been carried out on biomass based on 10 kW capacity gasifier power generation system installed at College of Agricultural Engineering and Technology,Dr.Panjabrao Deshmukh Agricultural University(Dr.PDKV),Akola Maharashtra,India.The main objectives were to evaluate various costs and benefits involved in the power generation system.The costs of energy per unit were calculated for the first year of operation.The economics of gasifier based power generation system and thereby the feasibility of the system was examined by estimating per unit cost,Net Present Value(NPV),Benefit Cost Ratio(BCR),Internal Rate of Return(IRR)and payback period.The discount cash flow method was used to find out the IRR.In the present analysis,three costs viz.,installed capital cost,operation and maintenance cost,and levelised replacement cost were examined for the evaluation of the power generation per unit.Discount rate on investment in case of subsidy(Case I)and in case without subsidy(Case II)for installation cost of system was considered as 12.75%.The BCR comes in Case I for operating duration of 22 h,20 h,and 16 h are 1.24,1.18,and 1.13,respectively.Similarly for Case II BCR comes 1.44,1.38,and 2.39.The IRR comes in Case I for operating duration of 22 h,20 h,and 16 h are 26%,22%,and 19%,respectively.Similarly for Case II,IRR comes 52%,44%,and 39%for operating duration of 22 h,20 h,and 16 h,respectively.The payback period in the present analysis was worked out.The payback period for biomass based gasifier power generation system was observed to be for Case I from three to four years and for Case II it was one to two years.

Uncertainty Analysis of Value for Money Assessment for Public-Private Partnership Projects

In recent years, private sectors are encouraged to take an active part in franchising of urban infrastructure investments and operations, which promotes the rapid development of public-private partnership(PPP)in infrastructure and public service supply. Value for money(VFM) assessment has been officially proposed to provide a reference for selection of projects planning to adopt PPP. Based on the bottlenecks of VFM application in China and the uncertainties for urban infrastructure PPP projects, a discounted cash flow(DCF) model is established for VFM of infrastructure PPP projects. Then, a Monte Carlo simulation model is established on the basis of uncertainty factors for VFM. Through the analysis of Huai'an trams PPP project, coping strategies of uncertainties for VFM are put forward. Findings of the research may propel the establishment of a complete VFM evaluation system for PPP projects. Key instructional functions of VFM during the process of decision-making can be brought into full play and PPP may develop orderly.