Simple project evaluationspreadsheet 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 0% 0.133 $513 $320 $193 $1.447 $513 $367 $146 $2.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.1 5.3 $932 $131 $801 31.500 Cash Flow $ '000s Investment Increase in WC Equity Debt 1 $2.417 $0 $363 ($363) $2.00 $49 $635 0.01 Maintenance 31 $47 1.139 4.52 $137 $140 1.7 Average Tariff 355.4 92.093) 24.0 Households & Inst.6 Operating Costs USD 000s TSH Mn US c /kwh Salaries 30 $45 1.4 $846 $98 $748 28.171 $513 $176 $337 $834 $513 $125 $388 $446 $513 $67 $446 $0 $0 $0 $0 $0 $106 $150 1.44 $81 $154 1.0 0.093 $0 $628 $1.8 $492 $43 ($597) 25.1 Cost recovery Tariff Capital Investments Operating Costs Output Per Watt Capital Recovery Total 21.226 670 1.719 Effective tax Equity CF DSCR $0 ($628) 0.484 2.3 $0 $0 ($2.58 $0 $0 0.464 $513 $220 $293 $1.1 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% 360.35 17.28 2.9% Equity REA grant Loan *** WACC = Equity share * ROE + Debt Share * Loan rate * (1.54 $156 $132 1.00 $36 $146 1.35 $44 $149 1.436 $501 6.465 2 $1.197 3.05 Fuel Costs 0 $0 0.5 $879 $110 $769 30. grants) 500 68% 2. 3% 100.8 $768 $73 $694 26.780 $513 $417 $96 $2.00 Total 61.574 $513 $386 $127 $2.047 3 0% 100% 4 0% 100% 14 15 Residual Value* 30.296 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 11.0 24.9 $862 $104 $758 29.005 389 584 596 894 3.301 $513 $345 $168 $2.1% 38.3 $753 $69 $684 25.00 Other 0 $0 0.00 $0 $135 0.465 $0 $220 ($220) $2.1 $896 $117 $780 $0 $157 $157 $157 $157 $157 $157 $157 $157 $157 $157 Loan Payments Interest Principal Loan Balance $0 $0 $0 $1.709 441 $662 $2.56 $176 $122 1.00 1.684 $513 $403 $110 $2.tax rate) 20 30% 0 Years Years .0 Business 11% 360.38 $52 $151 1.5 90% 5% 2.46 $93 $153 1.7 Carbon Revenues 9.9 $950 $139 $811 $157 $157 $157 $157 $513 $258 $255 $1.40 $61 $153 1.0 6.4% $1.42 $70 $154 1.96 15.8 $798 $82 $716 27.7 $914 $124 $790 31.3 $813 $87 $726 27.046 $31 $314 $732 3 $0 $0 $0 $0 4 $0 $0 $0 $0 5 $0 $0 $0 $0 6 7 8 9 10 11 12 13 Revenue (c/ kwh) Total Revenues Operating Costs Operating Cash flow 24.50 $121 $146 1.8 $829 $92 $737 28.978 882 KW Mwh USD 000s TSH Mn 1.8 23.4 261 $/W c/ kwh Kwh / W c/ kwh c/ kwh TSH / kwh 1 67% 0% 2 33% 67% $4.0 24.48 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 2.3 $783 $78 $705 26.0 1.0% 6.941 $513 $291 $222 $1. subsidies. exchange rates. etc.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.? – Internal Rate of Return (IRR)? • Project IRR • Equity IRR – Net Present Value (NPV) • Project NPV • Equity NPV – Does cash flow meet debt service requirements? . and carbon revenues. • # 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.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.) • Operating costs: costs to keep project going (salaries. grid connection. mainteannce. grid extension. fuel) . etc. . • 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. • 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 inputs (continued) Input basic project data (yellow cells) • Construction time: • Collection efficiency: portion of tariff that can actually be collected from users. etc. Model outputs • Operating cash flow: cash generated from sales. • Effective Tax: Tax paid divided by taxable income • Equity cash flow: Cash flow left over after depreciation. including principal and interest. and taxes • Debt Service Coverage Ratio (DCSR): the amount of debt that can be supported by the cash flow generated from the project. due in particular to wear and tear • Loan payments: installments paid by the SPP to the lender • Loan balance: the amount owed. loan payments. . minus cash paid out to cover operations costs • Depreciation: A reduction in the value of power plant with the passage of time. • CPI = consumer price index • Terminal value = value of equipment at end of 15 years . • # 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.Model outputs (continued) Input basic project data (yellow cells) • WAAC: Weighted average cost of capital. com Excel file used here available at: www.palangthai.xlsx .Thank you For more information. please contact chrisgreacen (at) gmail.org/docs/SPP-SimpleProjectViabilityEvaluationModel. 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).asp . • Download free: http://homerenergy.com/download. . distribution) and usually must be subsidized. Most often used. – Grid Extension: Very high initial cost.Rural Electrification: Classics Historically. poor cost recovery. the primary means of providing power have been through grid extension and diesel generators. time intensive (generation. transmission. – Diesel Generators: Inexpensive installation but expensive to operate. environmental damage/pollution. and subject to volatile fuel costs and availability. 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.Hybrid Systems . Lower Cost of Energy – Hybrids reduce daily & seasonal resource variations – Minimizes battery size and fuel usage Existing Diesel & Distribution System Investment . utility tariffs – Electric and thermal load shapes. project economics? • How do these answers depend on assumptions? – Fuel price. equipment costs. reliability requirements and load management – Resource quality and availability – Sensitivities – variations in prices. solar. interest rates.Questions HOMER answers • How much of which technologies to use? – diesel. wind. hydro • Fuel consumption. resource availabilty . runtime. biomass. Illustrating HOMER using Koh Po. Southern. Thailand Households: 150 location: Krabi. 99° 8' 0" East . Thailand coordinates: 7° 32' 0" North. 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 . com HOMER file used here available at: www.Thank you For more information. please contact Chrisgreacen (at) gmail.palangthai.hmr .org/docs/KohPo.