12th International Symposium on District Heating and Cooling

The <strong>12th</strong> <strong>International</strong> <strong>Symposium</strong> on District Heating and Cooling,September 5 th to September 7 th , 2010, Tallinn, EstoniaResource efficiency(kg CO 2 eq./MWh biomass)250200150100500Ref.Comb.Ref.Comb.Ref.Comb.Ref.E1-E2E2Comb.System 1 System 2 System 3 System 4Fig. 4. Resource efficiency of biomass quantified asGHG reduction per used quantity of biomass.ECONOMIC VALUEWhether the cost/benefit analyses return positive NPVsdepend largely on the hurdle rates assigned to them. InTable IV a summary of the economic results arepresented including the initial outlay, the expected freecash flow for the first year and estimated NPVs for 4, 7and 10% discount rates, respectively. With theexception of System 1, where the bioenergy combine isactually cheaper than the reference plant, marginalinitial outlays vary between M€ 140 and 330, andexpected cash flows for the first year of operationsbetween M€ -3 and 57. The largest addition to existingcash flow (both in absolute and relative terms) comesfrom the bioenergy combine investment in System 4.Table IV. Summary of cost/benefit analyses for adding abioenergy combine to the reference investment in thestudied systems.1 2 3 4Initial outlay (M€) - 13.9 144 194 327Cash flow (M€y) -3.4 18.8 15.7 57NPV (M€) for different discount rates4% -40 76 -62 3627% -27 29 -89 20710% -19 -4 -108 101As also can be seen in Table IV, only two projects arevalue adding at a 4% discount rate, and System 4 isthe only one that can bear a 10% discount rate. Theresults for System 1 are a bit upside down, sincecompared to the reference case the investment costand net cash flows are negative for the combine.System 3, perhaps being the weakest of casesanalyzed, will not show positive figures for any positivediscount rate.For robustness control purposes, sensitivity analysesare performed, here presented for System 3. Figure 5illustrates the estimated NPV consequences fromchanges in marginal cash flows, disaggregated into inpayments,out-payments, initial outlays and terminalvalue.Change in NPV (M€, 10% disc. rate)100500-50-100-150-200-250-300In-paymentsInitial outlay-30% -20% -10% 0% 10% 20% 30%Change in cash flowsOut-paymentsTerminal valueFig. 5. Estimated changes in NPV (M€) for System 3 asa result of percentage changes in cash flows assuming a10% discount rate.A percent change in either of these, results (ceterisparibus) in a NPV change, as indicated in the figure. Itis clear that the project is most vulnerable for changesin in-payments followed by out-payments. Assuming ahurdle rat of ten percent, a 20% average increase inyearly in-payments would result in an increase in NPVof about € 100 million. Correspondingly, a 20%increase in yearly out-payments result in a NPVreduction of € 84 millions. Fig. 5 also show that thecost/benefit analysis is not very sensitive to changes ininitial outlay and leave no visible mark for changes interminal value. The order of importance of NPV impactof cash flow changes are similar in the other threesystems, where in-payments being the most importantones.Change in marginal in-payments25%20%15%10%5%0%-5%-10%-15%-20%-25%Ethanol Biogas Pellet-30% -20% -10% 0% 10% 20% 30%Price changeFig. 6. Estimated percentage changes in in-payments forSystem 3 as a result of percentage changes in inputprices.149