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ReportDOI

A manual for the economic evaluation of energy efficiency and renewable energy technologies

TL;DR: In this article, the authors present a guide for analyzing the economics of energy efficiency and renewable energy (EE) technologies and projects, which is intended to help analysts determine the appropriate approach or type of analysis and the appropriate level of detail.
Abstract: This manual is a guide for analyzing the economics of energy efficiency and renewable energy (EE) technologies and projects. It is intended (1) to help analysts determine the appropriate approach or type of analysis and the appropriate level of detail and (2) to assist EE analysts in completing consistent analyses using standard assumptions and bases, when appropriate. Included are analytical techniques that are commonly required for the economic analysis of EE technologies and projects. The manual consists of six sections: Introduction, Fundamentals, Selection Criteria Guide, Economic Measures, Special Considerations for Conservation and Renewable Energy Systems, and References. A glossary and eight appendices are also included. Each section has a brief introductory statement, a presentation of necessary formulae, a discussion, and when appropriate, examples and descriptions of data and data availability. The objective of an economic analysis is to provide the information needed to make a judgment or a decision. The most complete analysis of an investment in a technology or a project requires the analysis of each year of the life of the investment, taking into account relevant direct costs, indirect and overhead costs, taxes, and returns on investment, plus any externalities, such as environmental impacts, that are relevant to the decision to be made. However, it is important to consider the purpose and scope of a particular analysis at the outset because this will prescribe the course to follow. The perspective of the analysis is important, often dictating the approach to be used. Also, the ultimate use of the results of an analysis will influence the level of detail undertaken. The decision-making criteria of the potential investor must also be considered.

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ReportDOI
01 Mar 2011
TL;DR: The conceptual design presented in this paper reports ethanol production economics as determined by 2012 conversion targets and 'nth-plant' project costs and financing for the biorefinery described here, processing 2,205 dry ton/day at 76% theoretical ethanol yield.
Abstract: This report describes one potential biochemical ethanol conversion process, conceptually based upon core conversion and process integration research at NREL. The overarching process design converts corn stover to ethanol by dilute-acid pretreatment, enzymatic saccharification, and co-fermentation. Building on design reports published in 2002 and 1999, NREL, together with the subcontractor Harris Group Inc., performed a complete review of the process design and economic model for the biomass-to-ethanol process. This update reflects NREL's current vision of the biochemical ethanol process and includes the latest research in the conversion areas (pretreatment, conditioning, saccharification, and fermentation), optimizations in product recovery, and our latest understanding of the ethanol plant's back end (wastewater and utilities). The conceptual design presented here reports ethanol production economics as determined by 2012 conversion targets and 'nth-plant' project costs and financing. For the biorefinery described here, processing 2,205 dry ton/day at 76% theoretical ethanol yield (79 gal/dry ton), the ethanol selling price is $2.15/gal in 2007$.

1,220 citations

ReportDOI
01 Jun 2002
TL;DR: In this paper, an update of NREL's ongoing process design and economic analyses of processes related to developing ethanol from lignocellulosic feedstocks is presented, along with a cost basis for the process using a corn stover feedstock.
Abstract: This report is an update of NREL's ongoing process design and economic analyses of processes related to developing ethanol from lignocellulosic feedstocks The US Department of Energy (DOE) is promoting the development of ethanol from lignocellulosic feedstocks as an alternative to conventional petroleum-based transportation fuels DOE funds both fundamental and applied research in this area and needs a method for predicting cost benefits of many research proposals To that end, the National Renewable Energy Laboratory (NREL) has modeled many potential process designs and estimated the economics of each process during the last 20 years This report is an update of the ongoing process design and economic analyses at NREL We envision updating this process design report at regular intervals; the purpose being to ensure that the process design incorporates all new data from NREL research, DOE funded research and other sources, and that the equipment costs are reasonable and consistent with good engineering practice for plants of this type For the non-research areas this means using equipment and process approaches as they are currently used in industrial applications For the last report, published in 1999, NREL performed a complete review and update of the process design and economic model formore » the biomass-to-ethanol process utilizing co-current dilute acid prehydrolysis with simultaneous saccharification (enzymatic) and co-fermentation The process design included the core technologies being researched by the DOE: prehydrolysis, simultaneous saccharification and co-fermentation, and cellulase enzyme production In addition, all ancillary areas--feed handling, product recovery and purification, wastewater treatment (WWT), lignin combustor and boiler-turbogenerator, and utilities--were included NREL engaged Delta-T Corporation (Delta-T) to assist in the process design evaluation, the process equipment costing, and overall plant integration The process design and costing for the lignin combustor and boiler turbogenerator was reviewed by Reaction Engineering Inc (REI) and Merrick & Company reviewed the wastewater treatment Since then, NREL has engaged Harris Group (Harris) to perform vendor testing, process design, and costing of critical equipment identified during earlier work This included solid/liquid separation and pretreatment reactor design and costing Corn stover handling was also investigated to support DOE's decision to focus on corn stover as a feedstock for lignocellulosic ethanol Working with Harris, process design and costing for these areas were improved through vendor designs, costing, and vendor testing in some cases In addition to this work, enzyme costs were adjusted to reflect collaborative work between NREL and enzyme manufacturers (Genencor International and Novozymes Biotech) to provide a delivered enzyme for lignocellulosic feedstocks This report is the culmination of our work and represents an updated process design and cost basis for the process using a corn stover feedstock The process design and economic model are useful for predicting the cost benefits of proposed research Proposed research results can be translated into modifications of the process design, and the economic impact can be assessed This allows DOE, NREL, and other researchers to set priorities on future research with an understanding of potential reductions to the ethanol production cost To be economically viable, ethanol production costs must be below market values for ethanol DOE has chosen a target ethanol selling price of $107 per gallon as a goal for 2010 The conceptual design and costs presented here are based on a 2010 plant start-up date The key research targets required to achieve this design and the $107 value are discussed in the report« less

1,219 citations

Journal ArticleDOI
TL;DR: In this paper, the degradation rates of flat-plate terrestrial modules and systems reported in published literature from field testing throughout the last 40 years have been analyzed, showing a median value of 0·5%/year.
Abstract: As photovoltaic penetration of the power grid increases, accurate predictions of return on investment require accurate prediction of decreased power output over time. Degradation rates must be known in order to predict power delivery. This article reviews degradation rates of flat-plate terrestrial modules and systems reported in published literature from field testing throughout the last 40 years. Nearly 2000 degradation rates, measured on individual modules or entire systems, have been assembled from the literature, showing a median value of 0·5%/year. The review consists of three parts: a brief historical outline, an analytical summary of degradation rates, and a detailed bibliography partitioned by technology. Copyright © 2011 John Wiley & Sons, Ltd.

1,202 citations

Journal ArticleDOI
TL;DR: In this paper, the levelized cost of electricity (LCOE) of solar photovoltaic (PV) generation is compared to other electricity generation technologies. But there is a lack of clarity of reporting assumptions, justifications and degree of completeness in LCOE calculations, which produces widely varying and contradictory results.
Abstract: As the solar photovoltaic (PV) matures, the economic feasibility of PV projects are increasingly being evaluated using the levelized cost of electricity (LCOE) generation in order to be compared to other electricity generation technologies. Unfortunately, there is lack of clarity of reporting assumptions, justifications and degree of completeness in LCOE calculations, which produces widely varying and contradictory results. This paper reviews the methodology of properly calculating the LCOE for solar PV, correcting the misconceptions made in the assumptions found throughout the literature. Then a template is provided for better reporting of LCOE results for PV needed to influence policy mandates or make invest decisions. A numerical example is provided with variable ranges to test sensitivity, allowing for conclusions to be drawn on the most important variables. Grid parity is considered when the LCOE of solar PV is comparable with grid electrical prices of conventional technologies and is the industry target for cost-effectiveness. Given the state of the art in the technology and favorable financing terms it is clear that PV has already obtained grid parity in specific locations and as installed costs continue to decline, grid electricity prices continue to escalate, and industry experience increases, PV will become an increasingly economically advantageous source of electricity over expanding geographical regions.

1,048 citations

Posted Content
TL;DR: The methodology of properly calculating the levelized cost of electricity for solar PV is reviewed, correcting the misconceptions made in the assumptions found throughout the literature and a template is provided for better reporting of LCOE results for PV needed to influence policy mandates or make invest decisions.
Abstract: As the solar photovoltaic (PV) matures, the economic feasibility of PV projects are increasingly being evaluated using the levelized cost of electricity (LCOE) generation in order to be compared to other electricity generation technologies. Unfortunately, there is lack of clarity of reporting assumptions, justifications and degree of completeness in LCOE calculations, which produces widely varying and contradictory results. This paper reviews the methodology of properly calculating the LCOE for solar PV, correcting the misconceptions made in the assumptions found throughout the literature. Then a template is provided for better reporting of LCOE results for PV needed to influence policy mandates or make invest decisions. A numerical example is provided with variable ranges to test sensitivity, allowing for conclusions to be drawn on the most important variables. Grid parity is considered when the LCOE of solar PV is comparable with grid electrical prices of conventional technologies and is the industry target for cost-effectiveness. Given the state of the art in the technology and favorable financing terms it is clear that PV has already obtained grid parity in specific locations and as installed costs continue to decline, grid electricity prices continue to escalate, and industry experience increases, PV will become an increasingly economically advantageous source of electricity over expanding geographical regions.

1,006 citations

References
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Journal ArticleDOI
TL;DR: In this article, a model of individual behavior in the purchase and utilization of energy-using durables is presented, where the tradeoff between capital costs for more energy efficient appliances and operating costs for the appliances is emphasized.
Abstract: This article presents a model of individual behavior in the purchase and utilization of energy-using durables. The tradeoff between capital costs for more energy efficient appliances and operating costs for the appliances is emphasized. Using data on both the purchase and utilization of room air conditioners, the model is applied to a sample of households. The utilization equation indicates a relatively low price elasticity. The purchase equation, based on a discrete choice model, demonstrates that individuals do trade off capital costs and expected operating costs. The results also show that individuals use a discount rate of about 20 percent in making the tradeoff decision and that the discount rate varies inversely with income.

1,361 citations

Journal ArticleDOI
TL;DR: Large variation in WTP responses may compromise this measure's discriminant validity, but there is some evidence of convergent validity for WTP with preferences measured by standard gamble, and the test-retest reliability of WTP is comparable to those of other preference measures.
Abstract: The development of methods to measure willingness to pay (WTP) has renewed interest in cost-benefit analysis (CBA) for the economic evaluation of health care programs. The authors studied the construct validity and test-retest reliability of WTP as a measure of health state preferences in a survey of 102 persons (mean age 62 years; 54% male) who had chronic lung disease (forced expiratory volume < 70%). Interview measurements included self-reported symptoms, the oxygen-cost diagram for dyspnea, Short-Form 36 for general health status, rating scale and standard gamble for value and utility of current health state relative to death and healthy lung functioning, and WTP for a hypothetical intervention offering a 99% chance of healthy lung functioning and a 1% chance of death. WTP was elicited by a simple bidding game. To test for starting-point bias, the respondents were randomly assigned to one of five starting bids. All health status and preference measurements except WTP (controlling for income) showed significant (p < 0.05) difference between disease-severity groups (mild/moderate/severe). WTP was significantly (p = 0.01) associated with household income, but other health status and preference measure were not. The measure most highly correlated with WTP was standard gamble (r = -0.46). There was no association between starting bid and mean WTP adjusted for income and health status. The test-retest reliability of WTP was acceptable (r = 0.66) but lower than that for the standard gamble (r = 0.82).(ABSTRACT TRUNCATED AT 250 WORDS)

492 citations

Book
01 Nov 1982
TL;DR: In this paper, the authors address the question of risk and discounting in connection with energy policy, and address the issues of whether discounting at a positive rate implies intergenerational inequity and whether the benefit-cost framework is sufficiently robust to be used as the basis for choosing between alternatives that may have far-reaching consequences.
Abstract: The volume addresses the unresolved issues pertaining to the choice of the discount rate to be used in benefit-cost evaluation of public investments and public policies in a market economy with many distortions. It analyzes the question of risk and discounting in connection with energy policy, and it addresses the issues of whether discounting at a positive rate implies intergenerational inequity and whether the benefit-cost framework is sufficiently robust to be used as the basis for choosing between alternatives that may have far-reaching consequences. It addresses the practical problems associated with trying to estimate the appropriate rate of discount, and evaluates the discounting practices within the electric power industry. Separate abstracts were prepared for chapters 2 and 4-12 selected for the Energy Data Base (EDB) and Energy Abstracts for Policy Analysis (EAPA).

396 citations

Book
01 Oct 1991
TL;DR: In this paper, a self-contained introduction offers an essential perspective on the understanding of capital investment decisions, beginning by studying analytical techniques based on simplifying assumptions, these restrictions are gradually relaxed to introduce more complex elements from professional practices.
Abstract: This self-contained introduction offers an essential perspective on the understanding of capital investment decisions. Beginning by studying analytical techniques based on simplifying assumptions, these restrictions are gradually relaxed to introduce more complex elements from professional practices.

81 citations

Book
30 Sep 1990
TL;DR: In this article, the authors present a survey of economic evaluation methods for building economics, including the following: 1. Building Economics at a Glance, 2. Life Cycle Cost (LCC), 3. Net Benefit (NB) and Net Savings (NS), 4. Benefit-to-Cost Ratio (BCR) and Savings toInvestment Ratio (SIR), 5. Internal Rate of Return (IRR).
Abstract: 1 Methods of Economic Evaluation.- 1. Building Economics at a Glance.- 2. Life-Cycle Cost (LCC).- 3. Net Benefit (NB) and Net Savings (NS).- 4. Benefit-to-Cost Ratio (BCR) and Savings-to-Investment Ratio (SIR).- 5. Internal Rate of Return (IRR).- 6. Overall Rate of Return (ORR).- 7. Payback (PB).- 2 What You Need to Know to Apply the Methods.- 8. Adjusting Dollar Amounts for Time of Occurrence.- 9. Treatment of Price Changes.- 10. Setting the Study Period.- 11. Selecting a Discount Rate or MARR.- 12. Estimating Costs and Benefits.- 13. Accounting for Taxes and Financing.- 3 Techniques for Treating Uncertainty and Risk.- 14. Risk Exposure and Risk Attitude.- 15. Conservative Estimating, Breakeven Analysis, and Sensitivity Analysis.- 16. Risk-Adjusted Discount Rate and Certainty Equivalent Techniques.- 17. Decision Analysis, Simulation, and Other Techniques.- 18. Selecting the Best Technique.- 4 Applications of Economic Evaluation Methods and Risk Analysis Techniques.- 19. Selection of Building Designs and Building Components.- 20. Decision to Accept or Reject a Project.- 21. Decisions on Building Location.- 22. Lease or Buy Decisions.- 23. Economic Size of Building Components.- 24. Allocating Limited Budgets Among Competing Projects.- 25. Decisions on Timing of Equipment Replacements.- 26. Selecting Combinations of Interdependent Systems.- Appendixes.- A. Glossary.- B. Worksheets and Supporting Reference Tables for Computing Life-Cycle Costs, Net Savings, Savings-to-Investment Ratio, and Payback.- C. Graphs for Converting SPB to DPB.- D. Computer Programs.- E. Derivation of a Utility Function.- F. Guide to Published Sources of Data.- G. Discount Factor Tables.- Subject.

71 citations