Clean Energy Project Analysis with

RETScreen® Software
Clean Energy Project Analysis Course

© Minister of Natural Resources Canada 2001 – 2004.

Objectives

• Illustrate role of preliminary

feasibility studies

• Demonstrate how the RETScreen®

Software works

• Show how RETScreen® makes it easier

to help identify & assess potential
projects

© Minister of Natural Resources Canada 2001 – 2004.

Energy Project
Implementation Process

Pre-feasibility
Pre-feasibility
Analysis
Analysis
Feasibility
Feasibility
Analysis
Analysis
Development
Development
&&Engineering
Engineering
Significant barrier
Construction
Construction&&
Clean Energy projects Commissioning
Commissioning
not being routinely
considered up-front!
© Minister of Natural Resources Canada 2001 – 2004.
Questions

• What is an acceptable level of

accuracy for project cost
estimates?

• How much do these studies

typically cost?

© Minister of Natural Resources Canada 2001 – 2004.

Accuracy vs. Investment Cost Dilemma

$100 to $1,000,000!
Energy Project
What is involved in each step? LR

Pre-feasibility
Pre-feasibility Feasibility
Feasibility Development
Development Construction
Construction&&
Analysis
Analysis Analysis
Analysis &&Engineering
Engineering Commissioning
Commissioning

• Use available • Collects refined • Design and • Build and put

site and resource site, resource, planning of into service
data cost and physical aspects
• Training
equipment data
• Coarse cost • Planning and
• Customer and
estimates • Typically arrangement of
community
involves site financial,
• Some relations
visits, resource contractual and
calculations and
monitoring, regulatory aspects
judgements
energy audits and
involve rule of • price info from
price info from
thumb equipment
equipment
suppliers
suppliers
© Minister of Natural Resources Canada 2001 – 2004.
When should clean energy
technologies be assessed?

• Need for energy system

Pre-feasibility
Pre-feasibility • New construction or planned
Analysis renovation
Analysis
Feasibility • High conventional energy costs
Feasibility
Analysis
Analysis • Interest by key stakeholders

• Approvals possible
Preliminary • Funding & financing accessible
feasibility studies
• Good local clean energy
resource, etc.

© Minister of Natural Resources Canada 2001 – 2004.

Project Viability (Wind Example)
Depends on Several Factors

• Energy resource available at project site Wind Turbine & Tower

(e.g. wind speed)

• Equipment performance
(e.g. wind turbine power curve)

• Initial project costs

(e.g. wind turbines, towers, engineering)

• “Base case” credits

(e.g. diesel generators for remote sites)

• On-going and periodic project costs

(e.g. cleaning of wind turbine blades)

© Minister of Natural Resources Canada 2001 – 2004.

Project Viability (Wind Example)
Depends on Several Factors - cont.
Wind Energy

• Avoided cost of energy

(e.g. wholesale electricity price)

• Financing
(e.g. debt ratio & length, interest rate)
Photo Credit: Middelgrunden Wind Turbine Co-operative

• Taxes on equipment & income (or savings)

• Environmental characteristics of energy displaced
(e.g. coal, natural gas, oil, large hydro, nuclear)

• Environmental credits and/or subsidies

(e.g. greenpower rates, GHG credits, grants)

• Decision-maker’s definition of cost-effective

(e.g. payback period, IRR, NPV, Energy production costs)
© Minister of Natural Resources Canada 2001 – 2004.
Why Use RETScreen®?

• Simplifies preliminary evaluations

 Requires relatively little user input
 Calculates key technical and financial
viability indicators automatically

• Costs 1/10th the amount of

other assessment methods

• Standardized procedures
allow objective comparisons

• Increases potential for successful

clean energy project implementation

© Minister of Natural Resources Canada 2001 – 2004.

What is RETScreen® Approach? LR

• Comparison between a “base case” —typically the

conventional technology or measure—and a “proposed
case”—the clean energy technology

• Cost analysis based on incremental values, i.e., costs of

proposed case in excess of base case’s. Thus, user can
introduce either incremental costs, or absolute costs of
proposed case and credits stemming from avoided costs in
base case as a consequence of proposed technology

• Energy benefits are the same for base and proposed case.
Thus, X units of energy produced by proposed technology are
compared to X units of energy from base case

• End goal is to determine whether or not the balance of costs

of the proposed technology is attractive along the life-cycle of
the project
© Minister of Natural Resources Canada 2001 – 2004.
RETScreen® Validation- Examples

• All models validated by

100%
Manufacturer
comparison with
80%

Efficiency (%)
RETScreen
monitored and 60%

manufacturer’s data… 40%

20% Hydro Turbine Efficiency Curves:

RETScreen vs. Manufacturer
160
0%
HOMER
140 RETScreen
0% 20% 40% 60% 80% 100%
120 Percent of Rated Flow
PV Power (kWh)

100

80

• … and/or by
60

40

20 comparison with
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec hourly simulation tools.
Month

Comparing PV Energy Production Calculated by RETScreen and HOMER

© Minister of Natural Resources Canada 2001 – 2004.

RETScreen® Software Demonstration
(Wind Energy Project Model Example)
 ®
RETScreen Software Structure LR

Energy Model:

• User specifies:
• location of project
• base case system
• proposed case technology
• loads
• renewable energy source. Typically a
resource/equipment worksheet is provided
• RETScreen calculates:
• annual energy production or savings
 ®
RETScreen Software Structure LR

Cost Analysis:

• User specifies:
• Level of analysis: Pre-feasibility or
Feasibility
• Initial, annual and periodic costs for
proposed case
• Credits for any base case costs that are
avoided in proposed case
• Alternatively, incremental costs might be
used directly
 ®
RETScreen Software Structure LR

GHG Analysis:

• Optional

• Choice of: simplified, standard or custom

analysis

• Helps to determine the annual reduction

in GHG emission as the result of using the
proposed technology instead of base case
 ®
RETScreen Software Structure LR

Financial Summary:

• User specifies financial parameters:

• avoided cost of energy
• production credits
• GHG emission reduction credits
• incentives
• inflation, discount rate, debt and taxes
• RETScreen calculates viability indicators:
• Net Present Value (NPV), Year-to-Positive Cash
Flow, Payback year, Internal Return Rate (IRR),
etc.
• Cummulative cash flow table and graph
 ®
RETScreen Software Structure LR

Sensitivity and Risk Analysis:

• Optional

• Helps the user to determine how uncertainty in

estimates of various key parameters may affect
financial predictions (and therefore, viability)

• User can perform either Sensitivity Analysis or Risk

Analysis or both
Cell Colour Coding

white

yellow

blue

grey

© Minister of Natural Resources Canada 2001 – 2004.

 ®
RETScreen Software
Financial Analysis Method

Comparison:
• Base Case vs. Proposed Case

• Conventional system vs.

clean energy system

Example:
• Standard building cladding
(siding) and a natural gas
fired air heater
vs.
• Solarwall™ cladding with Yellowknife School Solarwall Under Construction
solar air heating plus the Photo Credit: Arctic Energy Alliance

conventional natural gas

fired air heater
© Minister of Natural Resources Canada 2001 – 2004.
Software Demo
20 MW Wind Energy Project

Input/Output Scenario #1 Scenario # 2

®
(RETScreen ) (Merchant Plant) (Green Power Plant)

• Project location: • Calgary, AB • Pincher Creek, AB

• Wind speed: • 4.4 m/s • Lethbridge → 7.0 m/s
• GHG emissions reduction: • 25,123 tCO2/yr • → 63,486 tCO2/yr
• Wind turbine cost: • $1,200/kW • → $1,000/kW
• RE production credit: • $0/kWh • → $0.025/kWh
• GHG credit (coal plant): • $0/ton • → $5/ton
• Debt term: • 10 years • → 15 years
• Positive cash flow: • 42.7 years • 5.2 years
• Return on investment: • - 7.1% • 22.8%

© Minister of Natural Resources Canada 2001 – 2004.

Software Demo
Scenario 1

Scenario #1
(Merchant Plant)
Calgary, AB
4.4 m/s
$1,200/kW
25,123 tCO2/yr
$0/kWh
$0/ton
10 years
42.7 years
- 7.1%

© Minister of Natural Resources Canada 2001 – 2004.

Software Demo
Wind Speed & GHG Emission Reduction

Scenario # 1a

(Green Power Plant)

Pincher Creek, AB
Lethbridge → 7.0 m/s

63,486 tCO2/yr

18.2 years
4.8%

© Minister of Natural Resources Canada 2001 – 2004.

Software Demo
Wind Turbine Cost

Scenario # 1b

$1,000/kW

16.5 years
6.5%

© Minister of Natural Resources Canada 2001 – 2004.

Software Demo
RE Production Credit

Scenario # 1c

$0.025/kWh

10.1 years
17.7%

© Minister of Natural Resources Canada 2001 – 2004.

Software Demo
GHG Emissions Credit

Scenario # 1d

$5/ton

7.5 years
20.1%

© Minister of Natural Resources Canada 2001 – 2004.

Software Demo
Debt Term

Scenario # 2

15 years

5.2 years
22.8%

© Minister of Natural Resources Canada 2001 – 2004.

Questions?

Clean Energy Project Analysis with RETScreen® Software Module

RETScreen® International Clean Energy Project Analysis Course

For further information please visit the RETScreen Website at

www.retscreen.net
© Minister of Natural Resources Canada 2001 – 2004.