The Beginner's Guide to Techno-Economic Models: Who Needs Them and Why?
A techno-economic model is a quantitative tool used to analyze and evaluate the economic feasibility of a technology or an engineering project. It combines technical and economic parameters to assess the performance and profitability of a particular technology or project.
In a techno-economic model, technical data, such as the design specifications, operating parameters, and performance characteristics of the technology or project, are combined with economic data, such as capital costs, operating costs, revenue streams, and financing options. By integrating these parameters, a techno-economic model can evaluate the overall economic viability of the technology or project, including its potential return on investment, profitability, and cash flows.
Techno-economic models are often used in the energy sector to evaluate renewable energy technologies, such as solar, wind, or bioenergy, and compare them to conventional energy sources. They are also used in other industries, such as manufacturing, transportation, and healthcare, to assess the economic impact of new technologies or processes.
Assume that a company wants to evaluate the feasibility of building a solar power plant in a certain location. The techno-economic model for the project would typically include the following parameters:
Technical data: The model would consider the solar resource availability, the capacity and efficiency of the solar panels, the land required, the system design, and any required infrastructure, such as transmission lines and substations.
Economic data: The model would consider the capital costs of building the solar plant, such as the cost of solar panels, inverters, land acquisition, and construction. It would also consider the operating costs, such as maintenance, insurance, and financing costs. Finally, the model would estimate the revenue streams from the sale of electricity, taking into account any subsidies or incentives that might be available, as well as the price of electricity in the local market.
Financial analysis: The techno-economic model would use financial analysis techniques such as discounted cash flow analysis or net present value to determine the project's profitability and return on investment over the project's lifetime.
Based on the inputs and analysis, the techno-economic model would provide an estimate of the expected levelized cost of electricity (LCOE) produced by the solar plant, which is the cost of generating electricity over the plant's lifetime, divided by the total amount of electricity produced. The LCOE can be used to compare the project's economic feasibility to other energy sources or projects.
Here are some reasons why a solar energy project would need a pitch deck:
Attracting investment: A solar energy project typically requires a significant amount of capital investment to build and operate. A pitch deck can be used to showcase the project's potential to investors and persuade them to invest in the project.
Building partnerships: A solar energy project may require partnerships with other companies or organizations to secure financing, equipment, or permits. A pitch deck can help to communicate the project's goals and value proposition to potential partners.
Educating stakeholders: A solar energy project may have multiple stakeholders, including local communities, government agencies, and regulatory bodies. A pitch deck can be used to educate stakeholders about the project's benefits, such as reducing greenhouse gas emissions, creating jobs, and contributing to energy security.
Marketing the project: A pitch deck can be used to market the solar energy project to potential customers or end-users, such as commercial or industrial customers or utilities. The deck can highlight the project's reliability, cost-effectiveness, and environmental benefits.