Renewable Energy and Energy Efficiency

The recent rise to prominence of renewable energy and energy efficiency has been driven by their potential to lower the environmental impacts of energy use. As these technologies mature they must demonstrate not only their environmental benefits, but also their economic competitiveness. The relative costs and benefits of each potential project, whether large or small, must be systematically modelled and assessed before they can be financed and implemented.Renewable Energy and Energy Efficiency: Assessment of Projects and Policies deals with the appraisal of such projects against financial and non-financial criteria, illustrating the assessment tools necessary to make appropriate, evidence based decisions as efficiently as possible. The most important technologies are first described, stressing their economic and performance characteristics. Key project appraisal concepts are then introduced, approaches to modelling the cash flows in energy projects are described, and the issues of uncertainty and optimisation are fully discussed. These financial concepts, together with methods for estimating greenhouse gas emissions, are extended to address aspects of energy policy. Illustrated with many case studies this is an ideal introduction to financial and non-financial appraisal techniques as applied to energy efficient and renewable energy technologies.

The recent rise to prominence of renewable energy and energy efficiency has been driven by their potential to lower the environmental impacts of energy use. As these technologies mature they must demonstrate not only their environmental benefits, but also their economic competitiveness. The relative costs and benefits of each potential project, whether large or small, must be systematically modelled and assessed before they can be financed and implemented.Renewable Energy and Energy Efficiency: Assessment of Projects and Policies deals with the appraisal of such projects against financial and non-financial criteria, illustrating the assessment tools necessary to make appropriate, evidence based decisions as efficiently as possible. The most important technologies are first described, stressing their economic and performance characteristics. Key project appraisal concepts are then introduced, approaches to modelling the cash flows in energy projects are described, and the issues of uncertainty and optimisation are fully discussed. These financial concepts, together with methods for estimating greenhouse gas emissions, are extended to address aspects of energy policy. Illustrated with many case studies this is an ideal introduction to financial and non-financial appraisal techniques as applied to energy efficient and renewable energy technologies.

Symbols, Units and Abbreviations ixAbout the Companion Website xv1 Introduction 11.1 Background 21.2 Aim 41.3 Aspects of renewable energy project appraisal 61.4 Book layout 8References 102 Technologies 112.1 Introduction 112.2 Key concepts 112.2.1 Heat of combustion 122.2.2 Efficiency 122.2.3 Rated power and energy 122.2.4 Capacity and availability factors 132.2.5 Technology learning 132.3 Electrical power generation 142.3.1 Natural-gas-fired power plant 142.3.2 Coal-fired power plant 152.3.3 Hydropower 172.3.4 Wind power 192.3.5 Ocean energy 222.3.6 Photovoltaics 252.4 Heat generation 282.4.1 Boilers 282.4.2 Solar water heaters 302.5 Combined heat and power 342.5.1 Micro-CHP 362.5.2 CHP engines 372.5.3 CHP turbines 372.5.4 Combined heat, power and cooling 382.6 Energy storage 392.6.1 Electrical 402.6.2 Pumped hydroelectric storage 402.6.3 Compressed air energy storage 422.6.4 Thermal energy storage 442.7 Energy efficiency 452.7.1 Thermal insulation 462.7.2 High-efficiency lighting 48References 503 Modelling Energy Systems 533.1 Introduction 533.2 System, model and simulation 543.2.1 Systems 543.2.2 Models 583.2.3 Simulation 713.3 Modelling and simulating energy systems 763.3.1 Steps in simulating energy projects 763.3.2 Simulation tools 793.3.3 Data sources 793.4 Case studies 833.4.1 Office PV system 833.4.2 Gas heat pump for data room cooling 873.4.3 Compressed air energy storage 903.5 Conclusions 93References 954 Financial Analysis 974.1 Introduction 974.2 Fundamentals 984.2.1 Investor perspective 984.2.2 Types of projects and decisions 994.2.3 Cash flows 1004.2.4 Real and nominal prices 1044.2.5 Present value 1064.2.6 Discount rates 1094.2.7 Taxation and depreciation 1124.2.8 Unequal project lifespan 1144.3 Financial measures 1164.3.1 Payback and discounted payback periods 1174.3.2 Return on investment 1204.3.3 Profitability index and savings-to-investment ratio 1214.3.4 Net present value 1234.3.5 Internal Rate of Return 1274.3.6 Life cycle cost 1314.3.7 Levelised Cost of Energy 1324.3.8 Uncertainty and risk 1344.3.9 Financial measures compared 1364.4 Case studies 1394.4.1 Municipal bus fleet conversion to compressed natural gas 1394.4.2 New wind farm development 1424.5 Conclusion 148References 1495 Multi-Criteria Analysis 1515.1 General 1515.2 Simple non-compensatory methods 1525.2.1 Introduction 1525.2.2 Dominance 1535.2.3 Satisficing methods 1555.2.4 Sequential elimination methods 1575.2.5 Attitude-oriented methods 1585.3 Simple additive weighting method 1605.3.1 Basic simple additive weighting method 1605.3.2 Sensitivity analysis of baseline SAWresults 1635.3.3 Assigning weights to the decision criteria 1645.4 Analytic hierarchy process 1685.4.1 Introduction 1685.4.2 Hierarchies 1695.4.3 Establishing priorities within hierarchies 1695.4.4 Establishing and calculating priorities 1715.4.5 Deriving priorities using an approximation method 1725.4.6 Deriving exact priorities using the iterative Eigenvector method 1735.5 Concordance analysis 1815.5.1 Introduction 1815.5.2 PROMETHEE I 1845.5.3 ELECTRE TRI 1885.6 Site selection for wind farms - a case study from Cavan (Ireland) 1895.6.1 Introduction 1895.6.2 National and international guidance 1895.6.3 Decision framework chosen 1945.6.4 Decision model utilised to categorise each of the 18 sites 1955.6.5 Selection of potentially suitable sites 1985.6.6 Concluding comment on case studies 1985.7 Concluding comments on MCDA models 200References 2026 Policy Aspects 2036.1 Energy policy context 2036.2 Energy policy overview 2066.2.1 Policy instruments and targets 2066.2.2 Designing policy instruments 2086.3 Marginal abatement cost 2106.3.1 Environmental life cycle assessment 2116.3.2 Estimating marginal abatement costs 2216.4 Subsidy design 2246.4.1 Types of energy subsidies 2246.4.2 Calculating feed-in-tariffs 2266.5 Social cost-benefit analysis 2306.5.1 Define the objective and identify base case 2316.5.2 Identify costs and benefits 2316.5.3 Value costs and benefits 2336.5.4 Discount the costs and benefits 2356.5.5 Interpret results 2376.5.6 Assess who bears the costs and benefits 2376.5.7 Uncertainty 2386.5.8 Make decision 2386.6 Case studies 2386.6.1 Marginal abatement costs of emission mitigation options in a building estate 2386.6.2 PV feed-in-tariff design 2436.7 Conclusions 248References 248Appendix A: Table of Discount Factors 251Index 253