Simple project evaluation

spreadsheet model

Africa Electricity Institute

Practitioner Workshop
15 November 2011 -- Dakar, Senegal
Chris Greacen

Two very different models

Excel financial model
Used by:

Financers
(also project
developers,
regulators,
researchers)

What it does:

Models cashflow
and return on
investment

HOMER
Engineers
(also project
developers,
regulators,
researchers)
Optimizes component
selection to minimize
levelized cost of
energy (LCOE) in
hybrid minigrids

Simple project viability evaluation model

Inputs
Project Inputs
Plant Capacity
Capacity Factor
Annual Generation
# Connections
Generation Costs
Generation
Soft Costs
Grid Connection
Grid Extension
Total Investment
REA Grants
Investment (excl.
grants)

500
68%
2,978
882

KW
Mwh

USD 000s TSH Mn

1,484
2,226
670
1,005
389
584
596
894
3,139
4,709
441
$662
$2,698

47%
21%
12%
19%

Outputs
Project Returns
Project IRR
Equity IRR
Project NPV
Equity NPV

Revenues
Tsh /kwh US c/kwh
Tanesco
87%
360.0
24.0
Business
11%
360.0
24.0
Households & Inst.
3%
100.0
6.7
Average Tariff
355.8
23.7
Carbon Revenues
9.0
0.6
Operating Costs USD 000s TSH Mn
US c /kwh
Salaries
30
$45
1.01
Maintenance
31
$47
1.05
Fuel Costs
0
$0
0.00
Other
0
$0
0.00
Total
61.4
92.1
2.1

Cost recovery Tariff

Capital Investments
Operating Costs
Output Per Watt
Capital Recovery
Total

21.1%
38.4%
$1,436
$501

6.28
2.1
5.96
15.35
17.4
261

$/W
c/ kwh
Kwh / W
c/ kwh
c/ kwh
TSH / kwh

1
67%
0%

2
33%
67%

$4,047
3
0%
100%

4
0%
100%

14

15

Residual
Value*

30.7
$914
$124
$790

31.3
$932
$131
$801

31.9
$950
$139
$811

$157

$157

$157

$157

$513
$258
$255
$1,464

$513
$220
$293
$1,171

$513
$176
$337
$834

$513
$125
$388
$446

$513
$67
$446
$0

$0
$0
$0
$0

$106
$150
1.50

$121
$146
1.52

$137
$140
1.54

$156
$132
1.56

$176
$122
1.58

$0
$0
0.00

1.5
90%
5%
2.0%
6.0%
0.0
1,500

Cash Flow $ '000s

Investment
Increase in WC
Equity
Debt

1
$2,093
$0
$628
$1,465

2
$1,046
$31
$314
$732

3
$0
$0
$0
$0

4
$0
$0
$0
$0

5
$0
$0
$0
$0

10

11

12

13

Revenue (c/ kwh)

Total Revenues
Operating Costs
Operating Cash flow

24.3
$0
$0
($2,093)

24.8
$492
$43
($597)

25.3
$753
$69
$684

25.8
$768
$73
$694

26.3
$783
$78
$705

26.8
$798
$82
$716

27.3
$813
$87
$726

27.8
$829
$92
$737

28.4
$846
$98
$748

28.9
$862
$104
$758

29.5
$879
$110
$769

30.1
$896
$117
$780

$0

$157

$157

$157

$157

$157

$157

$157

$157

$157

$157

Loan Payments
Interest
Principal
Loan Balance

$0
$0
$0
$1,465

$0
$220
($220)
$2,417

$0
$363
($363)
$2,780

$513
$417
$96
$2,684

$513
$403
$110
$2,574

$513
$386
$127
$2,447

$513
$367
$146
$2,301

$513
$345
$168
$2,133

$513
$320
$193
$1,941

$513
$291
$222
$1,719

Effective tax
Equity CF
DSCR

$0
($628)
0.00

$0
$135
0.00

$49
$635
0.00

$36
$146
1.35

$44
$149
1.38

$52
$151
1.40

$61
$153
1.42

$70
$154
1.44

$81
$154
1.46

$93
$153
1.48

Depreciation

38%

* PV at year 15 for revenues from year 16-25

Capital Structure
Equity Share
Required returns
Loan Rate
Loan Grace Period
Loan Term
WACC***

USD 000s TSH Mn Schedule

501
751 Construction
441
662 Operations
2,197
3,296
Other Assumptions
Depreciation period
Corporate Tax rate
Tax holiday

Other Inputs
Construction Time
Collection Efficiency
Distribution losses
Tariff inflation
CPI
Terminal value
Exchange Rate

Years

times exit FCF

TSH / USD

30%
15%
15%
3
15
11.9%

Equity
REA grant
Loan

*** WACC = Equity share * ROE + Debt Share * Loan rate * (1- tax rate)

20
30%
0

Years
Years

Questions answered by
Simple project viability evaluation model
How does the financial viability of an off-grid or ongrid SPP project vary under diffent assumptions of
tariffs, subsidies, and carbon revenues, exchange
rates, etc.?
Internal Rate of Return (IRR)?
Project IRR
Equity IRR
Net Present Value (NPV)
Project NPV
Equity NPV
Does cash flow meet debt service requirements?

Model inputs
Input basic project data (yellow cells)
Plant Capacity: generation capacity of power plant in kW
Capacity factor: ratio of actual output to potential annual
output if it operated at nameplate capacity fulltime.
# Connections: is applicable to systems that sell electricity
to retail customers and receive REA grants of $500 per
hookup
Investment costs: costs to build project (generator, grid
connection, grid extension, etc.)
Operating costs: costs to keep project going (salaries,
mainteannce, fuel)

Model inputs (continued)

Input basic project data (yellow cells)
Construction time:
Collection efficiency: portion of tariff that can actually be
collected from users.
CPI = consumer price index
Terminal value = value of equipment at end of 15 years
Exchange Rate: value of currency in USD
Capital structure (% and rates): equity, loan, etc.
Depreciation period: Number of years before asset has zero
value
Tax holiday: tax holiday is a temporary elimination of a tax as an
incentive for businesses to invest.

Model outputs
Operating cash flow: cash generated from sales, minus
cash paid out to cover operations costs
Depreciation: A reduction in the value of power plant with
the passage of time, due in particular to wear and tear
Loan payments: installments paid by the SPP to the lender
Loan balance: the amount owed, including principal and
interest;
Effective Tax: Tax paid divided by taxable income
Equity cash flow: Cash flow left over after depreciation,
loan payments, and taxes
Debt Service Coverage Ratio (DCSR): the amount of debt
that can be supported by the cash flow generated from
the project.

Model outputs (continued)

Input basic project data (yellow cells)
WAAC: Weighted average cost of capital.
# Connections: is applicable to systems that sell
electricity to retail customers and receive REA grants
of $500 per hookup
Collection efficiency: portion of tariff that can
actually be collected from users.
CPI = consumer price index
Terminal value = value of equipment at end of 15
years

Thank you
For more information, please contact
chrisgreacen (at) gmail.com
Excel file used here available at:
www.palangthai.org/docs/SPP-SimpleProjectViabilityEvaluationModel.xlsx

Using HOMER to evaluate the

levelized costs of different mini-grid
generation options

Africa Electricity Institute

Practitioner Workshop
15 November 2011 -- Dakar, Senegal
Chris Greacen

HOMER: Hybrid Optimization Model

for Electric Renewables
Developed by National Renewable Energy Laboratory (NREL) of US
Department of Energy (DOE).
Download free: http://homerenergy.com/download.asp

Rural Electrification: Classics

Historically, the primary means of providing
power have been through grid extension and
diesel generators.
Grid Extension: Very high initial cost, poor cost
recovery, time intensive (generation, transmission,
distribution) and usually must be subsidized. Most
often used.
Diesel Generators: Inexpensive installation but
expensive to operate, environmental damage/pollution,
and subject to volatile fuel costs and availability.

Hybrid Systems - Another option

A hybrid energy system consists of two or more renewable
energy sources used together to provide increased system
efficiency as well as greater balance in energy supply.
Higher Reliability (?)
Hybrids reduce daily & seasonal resource variations
but more complex more parts to break.
Lower Cost of Energy
Hybrids reduce daily & seasonal resource variations
Minimizes battery size and fuel usage
Existing Diesel & Distribution System Investment

Questions HOMER answers

How much of which technologies to use?
diesel, solar, wind, biomass, hydro

Fuel consumption, runtime, project economics?

How do these answers depend on assumptions?
Fuel price, interest rates, equipment costs, utility tariffs
Electric and thermal load shapes, reliability
requirements and load management
Resource quality and availability
Sensitivities variations in prices, resource availabilty

Illustrating HOMER using Koh Po,

Thailand

Households: 150
location: Krabi, Southern, Thailand
coordinates: 7 32' 0" North, 99 8' 0" East

How to model with HOMER

How to model with HOMER

Load

8760 hours

Load

Resources: Solar

Resources: Wind

Diesel inputs

PV: inputs

Generator: inputs

Converter (inverter): inputs

Battery: inputs

Results

Search space

Results

Thank you
For more information, please contact
Chrisgreacen (at) gmail.com
HOMER file used here available at:
www.palangthai.org/docs/KohPo.hmr