Feasibility Study Review
Unless the initial feasibility study clearly indicates that a CHP plant would be economically or practically unattractive, the management review of the study should approach the findings with a view to progressing the CHP evaluation process on to its next and more detailed stage.
Specific topics that are likely to be reviewed include:
- Levels of confidence in the input data and assumptions.
- The thoroughness and reliability of the economic modelling.
- Potential hurdles that could make a project nonviable.
- Findings of the sensitivity analysis.
- Perceived risks and the extent to which they can be mitigated.
As with all capital project proposals, the better the preparation for the review, the greater the chance of the project moving forward to the next stage.
The findings of the initial feasibility study should be presented clearly and simply, and should avoid the use of jargon or other terminology that may cause confusion. While it is important to cover as much detail as possible, it is equally important not to obscure the overall findings by paying too much attention to less significant details.
The review should concentrate on whether the economic benefits of CHP are considered to be worthwhile. As a minimum, it should include indicative data to show the estimated costs and savings associated with each of the CHP options considered. It should also give some initial consideration to the method of implementation and finance that is appropriate.
Those presenting the findings must be aware, in advance, of the questions and issues that are likely to be brought up, and be ready to respond to them in as much detail as necessary. The less familiar the audience is with the concept and technology of CHP, the more important this is. The review may need to cover old ground to clarify the issues for those less familiar with the evaluation and its details.
Where the results of the study are positive, the review should not allow uncertainties about individual issues to be promoted to a level of importance that obscures these results. It is essential to remember that many issues have been seen as insurmountable hurdles at this stage of the evaluation process, but have subsequently been successfully overcome. The review should provide a list of all such areas of uncertainty, so that they can be fully addressed during the next stage of the process.
The review will normally result in one of three decisions:
- CHP appears to be a viable option and a detailed feasibility study is the next logical step.
- The option of financing or owning a CHP plant is not a viable one and the company should adopt the energy services contract approach. Moving directly to this option avoids the need for the company to undertake a detailed feasibility study.
- CHP is not a viable option for the company.
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