part 1: overview of cogeneration and its status in asia - Fire

Sample case study in a pulp and paper mill 115
Changes in the Escalation Rate of Fuel Price
IRR
30%
25%
20%
15%
10%
5%
IRR vs. Escalation Rate of Fuel
Price
IRR(STTM)
IRR(REPM)
5% 7% 9% 11% 13%
Escalation Rate of Fuel Price
Figure 2.5 Sensitivity analysis of IRR for different fuel price escalation rates
Sensitivity of IRR for the two alternatives to changes in the escalation rate of fuel prices from
5 per cent to 13 per cent is presented in Figure 2.5. From this analysis, it may be observed
that the diesel engine (1,500 kW) appears to be more sensitive to changes in fuel prices. For
an escalation rate of 13 per cent, the steam turbine (thermal matching option) using 40 bar
inlet steam is still found to be economically feasible, whereas diesel engine is no longer
financially attractive because the IRR becomes less than discount rate which is 15 per cent.
Changes in the Investment Cost
IR
R
25%
23%
20%
18%
15%
IRR vs.
13%
10%
IRR(STTM)
IRR(REPM)
0% 5% 10% 15%
% of Investment Increase
Figure 2.6 Sensitivity analysis of IRR to increases in the investment cost
Zero to 15 per cent increases in the investment cost are made to analyze the sensitivity of
IRR of the two alternatives (see Figure 2.6). When the increases are less than 15 per cent,
the IRRs of steam turbine cogeneration system using 40 bar superheated steam and diesel
engine cogeneration system remain higher than the 15 per cent hurdle rate.