Relcost industrial chp example walk through of input results
Download
1 / 66

RELCOST - PowerPoint PPT Presentation


  • 309 Views
  • Uploaded on

RELCOST Industrial CHP Example Walk-Through of Input & Results. HEATMAP and RELCOST Workshop Accra, Ghana May 13 to 15, 2009. Carolyn Roos, PhD Washington State University, Energy Program [email protected] The Purpose of this Exercise.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'RELCOST' - Gideon


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Relcost industrial chp example walk through of input results l.jpg

RELCOSTIndustrial CHP ExampleWalk-Through of Input & Results

HEATMAP and RELCOST Workshop

Accra, Ghana

May 13 to 15, 2009

Carolyn Roos, PhD

Washington State University, Energy Program

[email protected]


The purpose of this exercise l.jpg
The Purpose of this Exercise

  • I am presenting a RELCOST example from an actual CHP project in the Northwest U.S.

  • The economics of Ghana differ significantly from the U.S.

    • Inflation and escalation, interest on loans, depreciation tables, labor and capital costs, energy costs, etc.

  • The purpose of this example is to change the RELCOST inputs so this U.S. example is transformed to represent a realistic CHP project in Ghana.

    • I will become more familiar with Ghanaian economics as you become familiar with RELCOST.

  • This is an interactive exercise. We will make changes together as we step through each screen.


Relcost industrial chp example combined cycle gas turbine l.jpg
RELCOSTIndustrial CHP ExampleCombined Cycle Gas Turbine

An industrial site is considering a CHP system:

  • 7 MW gas turbine (natural gas )

  • Heat recovered by heat recovery steam generator

  • Steam from HRSG to a 3 MW steam turbine.

  • Low pressure exhaust steam recovered for use in the plant


Slide4 l.jpg

RELCOST Tab

of screen shot

Industrial CHP ExampleCombined Cycle Gas Turbine

  • This system has been modeled in HEATMAP

  • The results have been imported into RELCOST


Input output cells l.jpg
Input & Output Cells

  • Inputs are in blue

  • Outputs in Green

  • Cells with Calculations in White

  • In general, don’t modify green or white cells unless you are very careful.

  • Keep a back-up copy in case equations are accidentally overwritten.


Slide6 l.jpg

Start on the “General” tab:

  • First tab to the left


Industrial chp example combined cycle gas turbine l.jpg
Industrial CHP ExampleCombined Cycle Gas Turbine

Project Description


Financial assumptions discount rate l.jpg
Financial AssumptionsDiscount Rate

  • Assume a discount rate of 7% for base case.

    • Conservative U.S. equity investors

    • U.S. government project may be less

  • Is this realistic for your projects?


Recent inflation in ghana l.jpg
Recent Inflation in Ghana

  • http://indexmundi.com/ghana/inflation_rate_(consumer_prices).html


Financial assumptions general inflation rate l.jpg
Financial AssumptionsGeneral Inflation Rate

Assume

  • Is a general inflation of 10% a good assumption for Ghana?

    • Inflation was 10.7% in Ghana in 2008 (but inflation varies significantly from year to year in Ghana)


Plant operating factor l.jpg
Plant Operating Factor

Assume:

  • Project will be placed in service mid-year.

  • May require working some bugs out at first

    • Assume 30% availability in the first year and 80% in 2nd

  • Major repairs occur every five years

    • 75% availability in 5th, 10th and 15th years

  • Otherwise:

    • Dispatch factor of 95%

    • Availability of 95%

  • Is this representative of your projects? Are there other factors that could affect availability for your projects?


Project life l.jpg
Project Life

Assume:

  • Project Life = 20 years

    • Used in life cycle cost analysis

    • Life also impacts depreciation (later)

Enter life on “WhatIf” tab:


Capital expenditures l.jpg
Capital Expenditures

  • A preliminary estimate received by project owner:

    • US$20M for the total installed 10MW system

    • This includes contractor overhead and profit.

    • $2000 per kW – Is this realistic here?

  • Contingency Funds:

    • Add a 10% to account for unexpected costs.

    • Is this a realistic contingency?

       Detailed cost estimate is required in final analysis:

    • Can be entered line by line in RELCOST

    • May use lump sum in RELCOST based on other documentation.


Capital expenditures14 l.jpg
Capital Expenditures

  • $20M Lump Sum

  • 10% contingency


A more detailed cost estimate from a different example l.jpg
A More Detailed Cost Estimatefrom a Different Example

  • Detail required in final analysis

  • Not for this CCGT system


Slide16 l.jpg

More on Cost Estimates

More…

Space is provided for detailed cost estimates



Depreciation l.jpg
Depreciation

  • “Recovery” of the cost of an asset whose value declines over time

    • Machinery, equipment, structures, etc.

  • Three classes of capital expenditures that can be accelerated at different rates.


Depreciation19 l.jpg
Depreciation

In the U.S. example it has been assumed:

  • Class: Assume capital assets have a 20 year life

  • Method: 150% declining balance

  • Half year convention

    • (placed in service in mid-year)


Depreciation20 l.jpg
Depreciation

Find depreciation schedule in drop down menu:

  • In this example, code is

    20YR~150DB~HY~ANY

  • Ghanaian schedules that you enter by hand on the “Depreciation Factor” tab might be given labels such as:

    Gh~10YR~80%Rate


Depreciation in ghana l.jpg
Depreciation in Ghana

  • Extracted from Ernst & Young’s “Worldwide Corporate Tax Guide” 2008 http://www.ey.com/Global/assets.nsf/Ireland/Tax_Services_-_2008_worldwide_corporate_tax_guide/$file/2008_world_wide_corporate_tax_guide.pdf


Depreciation factors l.jpg
Depreciation Factors

  • Enter Ghanaian depreciation schedules on the “Depreciation Factors” tab.

  • U.S. tax schedules are provided by default, but any schedule can be added.


Depreciation23 l.jpg
Depreciation

Assume:

  • No salvage value

    Amount has been entered as an equation from funding schedule

    … More about custom equations later


Funding plan grants l.jpg
Funding PlanGrants

Possible grants:

  • In the U.S. example, a grant of up to 70% of the capital cost may be available.

  • A local grant of up to 35% of the remaining cost may also be available.

    • Provided upon successful start up of the project.

      Assume in year 2

      Grants available for your project?


Funding plan l.jpg
Funding Plan

Notice along top of columns, these are source #s

…not years

Two grants:

  • #1 in year 1

    #2 in year 2

Quirk:

Even if annual payments, enter as separate lump sums if accurate life cycle cost results are desired


Funding plan borrowed funds l.jpg
Funding PlanBorrowed Funds

Consider:

  • Short term loan

    • Tide project over until local grant disbursed.

    • 12 month term

  • Long term loan

    • 5 years term

  • For U.S. example, interest rate is 4% with a 1% loan initiation fee

  • What is a more realistic interest rate in Ghana?


Funding plan borrowed funds27 l.jpg
Funding PlanBorrowed Funds

Funds in 1st Year

Start paying after 12 months


Funding plan borrowed funds28 l.jpg
Funding PlanBorrowed Funds

  • Other loan types in RELCOST

Drop down menu for loan type


Funding plan equity investments l.jpg
Funding PlanEquity Investments

Proportion of loans to equity was calculated in RELCOST using equations with sensitivity factors

…We will get to this later


Other possible financial incentives l.jpg
Other Possible Financial Incentives

These are entered later:

  • A production tax incentive

    • Entered on “Sales, Income” tab

  • Tax credit

    • Entered on “Taxes & Fees” tab


Purchased fuels l.jpg
Purchased Fuels

  • This system has been modeled in HEATMAP.

“HeatMap” tab contains

  • Electricity generated

  • Fuel Consumed


Purchased fuels32 l.jpg
Purchased Fuels

  • RELCOST has the option of importing HEATMAP results or entering purchased fuel data by hand


Purchased fuels33 l.jpg
Purchased Fuels

Since HEATMAP results are used, entries in blue are ignored.

Notice purchased fuels in white area is from HEATMAP.


Slide34 l.jpg
O&M

Known:

  • Five year O&M contract from gas turbine manufacturer

    • $40,000/month fixed .

    • Includes a turbine replacement at the beginning of year 5.

      Assume:

  • General maintenance of other equip = 2% of revenues.

  • Major steam turbine maintenance every five to seven years.

    • Cost still unknown (Need to know in final)

    • Assume $50,000

  • Labor: 1.0 FTE for an operator (Labor requirements are typically greater than this.)

  • Administrative costs: Assume 1% of 2nd year sales.


Notes and calculation space l.jpg
Notes and Calculation Space

For convenience use N&C space at top:

  • Much is assumed in preliminary analysis

  • Make it easy to change

    • As we firm up preliminary estimates, or

    • Perform sensitivity studies to see how critical the unknown is.

Enter figures in N&C space to easily

use them in equations.


Slide36 l.jpg
O&M

  • “Variable Costs” vary with plant operating factor.

  • “Fixed Cost” do not

    • Labor, fixed O&M contract, etc.

Titles are in blue = user inputs

I’ve named them “variable” and “fixed” but you can call them whatever you want


Fixed o m costs l.jpg
Fixed O&M Costs

  • Fixed O&M costs are escalated but are not multiplied by plant operating factor

  • “Cost of sales” (variable) versus “operating expenses” (fixed) on Income Statement.


Variable o m costs l.jpg
Variable O&M Costs

  • Multiplied by plant operating factor


Gas turbine o m contract l.jpg
Gas Turbine O&M Contract

  • Fixed until 5th year.

  • Escalation in year 5 is entered on “Cost Escalation” tab

Jump in cost


Labor l.jpg
Labor

  • Add FTE and Full Time Rate


Operating reserve deposits withdrawals l.jpg
Operating Reserve Deposits & Withdrawals

  • See “Cash Accounts”

    • Current account

    • Operating Reserve account

  • Save up for major expenses


Major expenses l.jpg
Major Expenses

Starting in 5th year

Every 5 years


Electricity sales l.jpg
Electricity Sales

Since HEATMAP results are imported

… input in blue is ignored


Production incentive as income l.jpg
Production Incentive as Income

Production Incentive is proportional to units generated so it belongs on “Sales, Income” tab.

Units do change by HEATMAP vs Stand-Alone option.

Enter manually (by equation)


Taxes fees l.jpg
Taxes & Fees

Tax Rates as % of NPBT

Fees as % of gross sales of product

Royalties as amount paid to recipient.

What is tax rate in Ghana?


Tax credits l.jpg
Tax Credits

Are tax credits refundable if credit exceeds liability?

Can credit be carried forward into future years if it exceeds liability?


Tax credit l.jpg
Tax Credit

Tax credit of up to 7% of the CapEx minus grants with a carry-forward of 5 years.

  • Total of $307,230 allowed.

    • $109,242 taken in year 1

    • $197,988 carried forward to year 2


Dividends l.jpg
Dividends

  • Many ways of calculating dividends.

    • Default is % of NPAT up to a maximum


Cash accounts l.jpg
Cash Accounts

  • Current Account ~ checking

  • Operating Reserve ~ savings

Enter:

  • Interest rates on accounts

  • Accounts receivable and payable floats

    (what is due that gets rolled into following year)


Cost escalation l.jpg
Cost Escalation

  • If general inflation is included escalation multipliers will be inflation plus whatever rates are entered on “Cost Escalation” tab.

  • Enter for likely, aggressive & conservative forecasts

High values likely because of Ghana’s high inflation rate.


Cost escalation forecast l.jpg
Cost Escalation Forecast

Defined at top of “WhatIf” sensitivity factors

  • likely, aggressive, conservative, none


Cost escalation52 l.jpg
Cost Escalation

  • Use Notes & Calculation space for convenience


Cost allocation l.jpg
Cost Allocation

  • For calculation of levelized costs of sales

  • Only one product in this example so 100%


Now let s look at results l.jpg
Now let’s look at results…

  • Pro Forma Statements

    • Cash Flow

    • Use of Funds

    • Income Statement

    • Balance Sheet

  • Financial Ratios

  • Levelized Costs

  • Life Cycle Cost Analysis


Cash flow statement l.jpg
Cash Flow Statement

  • Shows how the project makes a profit for each project year

Inflows & Outflows

  • Operations

  • Financing Activities


Use of funds statement l.jpg
Use of Funds Statement

  • Shows how fund sources are used for each project year

  • Sources of funds

  • Uses of funds


Income statement tax and sh l.jpg
Income Statement (Tax and SH)

  • Shows the project’s financial performance for each project year

  • Difference between Tax and SH is depreciation.

  • SH uses straight line

  • “Tax” specified on “Cap Ex”


Detail on income statement l.jpg
Detail on Income Statement

  • Sales, Income

  • Cost of Sales

  • Operating Expense


Balance sheet tax and sh l.jpg
Balance Sheet(Tax and SH)

  • The Balance

    • Assets =Liabilities


Results l.jpg
Results

Plots from Pro Forma Statements

  • Discounted cash flow

  • Cash balance

  • Operating cost

  • Net profit after taxes


Financial ratios in scorecard year l.jpg
Financial Ratiosin “Scorecard” Year

Financial Ratios

Levelized Costs of Sales


Life cycle cost results l.jpg
Life Cycle Cost Results

Life Cycle Cost Analysis Results


Stop light indicators l.jpg
“Stop Light” Indicators

  • Green – Yellow - Red

  • OK - Marginal - Poor


Stop light indicators64 l.jpg
“Stop Light” Indicators

  • Good, marginal and poor values defined on “Financial Indicators” tab


Now let s modify sensitivity factors l.jpg
Now let’s modify Sensitivity Factors

  • Factors multiply inputs on other sheets to see what effect changes have on viability

  • Cost escalation forecast defined at top

    • likely, aggressive, conservative, none



ad