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Economic And Financial Viability Analysis Of Renewable Energy Projects

2131 words - 9 pages

This chapter discusses the theory underlying measurements of asset utilization as a way to provide support to economic and financial viability analysis of Renewable Energy Projects (REPs). It starts by providing an overview of the literature for economical and financial viability analysis within the Renewable Energy Sector and follows revealing the gap in the literature that this thesis tackles.
2.1 Challenges for Business Evaluation of REPs
There has been advancements on many fronts to make economical and financial viability assessment for Renewable Energy Projects possible, including (but not limited to) production costs (e.g.McAloon, F. Taylor, Yee, Ibsen, & Wooley, 2000); transportation costs (Batidzirai, 2005; Overend, 1982; Searcy et al., 2007); capital costs (Bridgwater & Double, 1991; Gallagher, Schamel, Shapouri, & Brubaker, 2006); resources availability (Graf & Koehler, 2002); environmental performance (Von Blottnitz & Curran, 2007; Taheripour, Hertel, Tyner, Beckman, & Birur, 2008; Pimentel & Patzek, 2007); regional socio-economic development (Swenson & Eathington, 2006), and organizational costs (Altman & Johnson, 2008).
Regarding business development, many studies have focused on the selection of optimum energy-conversion pathways and identification of successful strategies for related business design (e.g. Hamelinck & Faaij, 2006; Junginger et al., 2008). In that sense, full-systems approaches have also been attempted for evaluating overall production performance of particular systems (Bridgwater & Double, 1991; Kerstetter, 2001).
None, however, has successfully presented a simple, yet robust, framework for inferring and comparing economic and financial aspects of Renewable Energy Projects that impact business viability, across varying time and location. In fact, although there have been an increasing number of related studies, this literature seems to be moving towards greater specificity, regionality, and complexity. Duff et al (2003), for example, presented over 45 criteria underlying the successfulness of a single class of REPs located at the Pacific Northwest region of the United States. Other analogous authors (see Appendix A for a list) have also stumbled upon the very large quantity of influential (and sometimes dynamic) factors underlying renewable energy production systems.
As each renewable energy system can present varied composing elements and extend throughout discrete sets of production stages (please refer back to Table 1, page 63), attempts to understand factors tangent to economical and financial viability of REPs have been continually disturbed by both their inherent complexity and by the subjectivity underlying the so far adopted methodologies. Thus, related quantitative studies, as is the case for most of the capital analysis, have been conducted in different ways, not to mention with largely varying data quality and detail.
While several authors attempted to incorporate the influence of multiple varying...

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