Project Finance Model for Incremental Economic Analysis with CDM
Project Finance Model for Incremental Economic Analysis with CDM
Incremental economic analysis is the fundamental method of analysis in comparing two or more competing alternatives in order to determine the feasibility of undertaking incremental investments considering the incremental benefits that may be derived. It is useful in analyzing equipment up-grading, replacement, systems improvement and fuel switching.
During implementation of a project feasibility study for a natural gas pipeline that will serve an anchor load 250-500 mw natural gas-fired combined cycle gas turbine (CCGT), it was felt that additional market for the excess Malampaya natural gas (300 mw surplus plus banked gas for sale) needs to be developed to improve the economics of the pipeline.
Doing a market, technical and feasibility study for this end-use conversion economics will thus entail developing a robust project finance model that is versatile enought to handle conversion of existing power generation and steam/process heat technologies (coal fired, bunker fired, diesel fired diesel electric generators, steam and process heat equipment, refrigeration) to natural gas firing.
The author, an energy technology and business development consultant, has prepared an Incremental Economics Conversion Model for comparing a base case (existing coal-fired or oil fired generation, process heat, refrigeration and air conditioning equipment) versus a more energy efficient, less polluting and cheaper to operate natural gas-fired equipment.
Naturally, there will be incremental investments and incremental savings due to higher efficiency, cheaper fuel cost, lower environmental costs.
In addition, if the project will result in higher energy conversion efficiency or lower carbon emission due to fuel switching (from a high carbon content coal or liquid fuels like diesel and bunker to a lower carbon/higher hydrogen fuel such as natural gas), there will be additional cash flows from carbon emission reduction certificates.
Please contact the author for more details.
Marcial Ocampo
email mars_ocampo@yahoo.com
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