Feasibility Study - Wind Energy

The term Feasibility Study related to wind energy projects is used for assessments of very different extensiveness. Feasibility studies consider the results from wind measures (cp.assessing wind potentials). If the results from wind measures indicate that technical and economical operation of wind energy (projects) can be considered viable or at least expectable, a feasiblity study will be conducted. Based on the wind resource appraisal and other relevant inputs, the feasibility study shall be conducted to

• Determine the optimum unit size of the wind turbines under the technical and transport infrastructure conditions of country
• Optimize the technical lay-out of the wind park site
• Assess the comparative economic and financial viability of the project and propose a decision for implementation

The European Wind Energy Association defines the main contents of a feasibility study as follows:

• The technical aspects already regarded during the pilot study are assessed in a more detailed manner, including on-site wind monitoring to determine a draft design and layout for the installation.
  
• an economic assessment is conducted to establish the commercial viability of the project;
  
• an appraisal and scoping exercise to identify specific environmental constraints and opportunities is implemented
  
• possible planning constraints are assessed
  

Especially the economic assessment of the wind park viability includes several large subtasks to determine all economic parameters and variables of a wind project:

• An energy production estimation to define expected financial returns
• A complete estimation of costs (investment, operation and maintenance, costs of project development)
• An economic assessment of the project benefits concerning economic development and welfare of the region or country. Influence on electricity prices and potential for poverty reduction are important aspects of these economic assessments.
• An assessment of financing options with focus on potential participation with the Clean Development Mechanism (CDM)
• A financial analysis based on the estimation of costs an including a cost-benefit analysis, which allows an exact statement concerning investment returns. Discussion and evaluation of different operation models have to be included.
  

The project appraisal related to environmental and social constraints should be based also on a dialogue with the local population and planning authorities.

Energy Production Estimation

The calculation of the wind resources on-site and the corresponding energy production are based on the processed wind data collected by the measuring masts at Mesobo-Harena plateau and nearby Maymekden (see chapter 5.1) with the energy yield estimation carried out by means of the WindPro and WAsP software packages.

Estimation of costs

Investment costs estimation

Construction period

Potential for local/regional input

Operation and Maintenance Costs

Capacity Credit

Any kind of electrical power plant is required to answer the crucial question: To what extent is a specific energy production unit with an installed nameplate capacity available to meet system demand?

Typically the answer is derived from a statistical analysis of this period, when a unit or technology is not available, even if it is supposed to be working, generally termed as forced outage. For conventional generation units this is mainly a technical question, whereas for intermittent resources like wind, solar and hydro power, it is a question of fuel availability: is wind, water or solar radiation available when it is needed? And if yes, what amount is available and how does the intermittency influence the rest of the electrical supply system? The answer is given by the capacity credit, which should consider each of the posed questions.

There are various definitions of the term capacity credit (CC), and several synonyms are used in parallel, each bearing a similar variety of definitions. The two most common synonyms of CC are "firm capacity" and "capacity value".

The CC can be defined as the firm capacity, which can be replaced by a certain amount of installed wind power or any other energy source. It can be used either as a value in MW or as a percentage of the installed wind capacity. This is the terminology used in recent studies throughout industrialised countries, where wind energy is replacing other forms of energy. In developing countries, which pursue high goals for improving the electrification rate, it is important to analyse how much capacity wind energy can add to the current system.

Economic Analysis

Following the "World Bank Handbook for Economic Analysis of Investment Operations" , the main purpose of an economic analysis is to help to design and select projects that contribute to the welfare of a country. Whereas the financial analysis evaluates the project from the point of view of the operating company or Independent Power Producer (IPP), the economic
analysis evaluates the project from the point of view of the whole economy of the country.
The purpose of the investigation is to compare from a macroeconomic standpoint the benefits of the project with the costs it incurs, as is customary in any cost-benefit analysis. The standard of evaluation for costs and benefits is a monetary quantification. To the greatest possible extent, the project impacts are evaluated in terms of economic market prices. Shadow prices are employed, i.e., internal accounting prices that free the day-to-day (market) prices from multifarious biases. In other words, shadow prices represent an attempt to illuminate the actual costs of a product or service for the economy as a whole. In comparison with micro- and macro-economic prices, shadow prices are devoid of taxes and charges, duties and subsidies.

CDM Assessment

The Clean Development Mechanism (CDM) as established under Article 12 of the Kyoto Protocol (KP) represents a collaborative policy approach between industrialised and developing countries aimed at promoting sustainable infrastructure projects in developing countries whilst simultaneously reducing greenhouse gas (GHG) emissions such as CO2. From the perspective of industrialised countries, CDM represents a cost-effective option to comply with their national emission reduction obligations under the KP. Developing countries benefit from CDM as an additional co-financing source for sustainable energy projects. Its applicability to particular projects, however, depends on how these cope with country-specific and project specific eligibility requirements.

Financial Analysis

This financial analysis is intended to clarify whether or not the wind farm project is financially feasible for the described parameters. And, as the case may be, whether or not and, if so, how the financial efficiency threshold can be reached and surpassed and, if so, how by which means of technical and non-technical modifications.

The main difference between a financial analysis and an economic analysis is that, in the financial analysis, the wind farm is viewed as an enterprise and in the economic analysis the windfarm is evaluated from the point of view of the national economy of the country. In the financial analysis, the windfarm operating company has to earn enough money, by feeding electricity into the existing grid, to cover its operating costs, interest payments, loan payments and distribution of dividends to equity investors. The object of consideration is the commercial or microeconomic.

Framework Analysis for Wind Energy

Financing Options

Regulatory and Legal Framework

References

Portal:Wind