Technical Economic Analysis Guide - DRAFT

Technical Economic Analysis Guide - DRAFT

July 2015

DRAFT for Review, Not Dissemination

Independent Statistics & Analysis

U.S. Department of Energy Washington, DC 20585

This report was prepared by the U.S. Energy Information Administration (EIA), the statistical and analytical agency within the U.S. Department of Energy. By law, EIA's data, analyses, and forecasts are independent of approval by any other officer or employee of the United States Government. The views in this report therefore should not be construed as representing those of the U.S. Department of Energy or other federal agencies.

U.S. Energy Information Administration | Technical Economic Analysis Guide DRAFT for Review

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DRAFT for Review, Not for Dissemination

July 2015

Table of Contents

Table of Tables ............................................................................................................................................. iv Introduction .................................................................................................................................................. 1

Assessing technology maturity ................................................................................................................ 1 Defining technical economic analysis ...................................................................................................... 2 Reporting analytical results ..................................................................................................................... 2 Choosing a project cost estimating method ................................................................................................. 4 Estimating project capital costs .................................................................................................................... 7 Overnight capital cost.............................................................................................................................. 7 Total project cost ..................................................................................................................................... 8 International cost estimates .................................................................................................................... 9 Estimating O&M costs................................................................................................................................. 11 Feedstock costs...................................................................................................................................... 13 Non-feedstock costs: fixed O&M........................................................................................................... 14

Interest on debt, property taxes, and insurance ............................................................................ 14 Maintenance and Repairs ............................................................................................................... 14 Depreciation.................................................................................................................................... 14 Salvage, scrap, and land value ............................................................................................................... 15 Non-feedstock costs: variable O&M costs............................................................................................. 16 Operating labor ............................................................................................................................... 16 Utilities ............................................................................................................................................ 16 Patent and royalties ........................................................................................................................ 17 Non-feedstock costs: plant overhead costs........................................................................................... 17 Market demand and prices......................................................................................................................... 18 Breakeven analysis................................................................................................................................. 18 Breakeven price of the key product ...................................................................................................... 19 Comparative analysis ............................................................................................................................. 21 Sensitivity Analysis................................................................................................................................. 21 Market penetration analysis.................................................................................................................. 22 Appendix A. Glossary .................................................................................................................................. 23 Appendix B. Initial assessment of technology ............................................................................................ 26

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DRAFT for Review, Not for Dissemination

July 2015

Appendix C. Fundamental questions .......................................................................................................... 28 Appendix D. Capital cost breakdown.......................................................................................................... 30

Fixed capital cost ................................................................................................................................... 31 Civil and structural costs ................................................................................................................. 31 Mechanical equipment supply and installation .............................................................................. 32 Piping............................................................................................................................................... 33 Electrical, instrumentation, and control ......................................................................................... 34 Project indirect costs....................................................................................................................... 34 Owners' Cost ................................................................................................................................... 35

Working capital...................................................................................................................................... 36 Health, Safety, and Environmental Costs .............................................................................................. 36 Cost of project financing and cost of capital ......................................................................................... 37 Salvage, scrap, and land value ............................................................................................................... 37 Interest during construction (IDC) ......................................................................................................... 38 Learning, Scaling and Optimism ............................................................................................................ 38

Learning........................................................................................................................................... 38 Scaling ............................................................................................................................................. 40 Optimism ......................................................................................................................................... 41 Appendix E. Reporting analysis results ....................................................................................................... 42 Appendix F. Top-down technology analysis example................................................................................. 44 Order-of-magnitude estimate (top-down estimate) ............................................................................. 44 Estimation of feedstock cost ........................................................................................................... 45 Amortized capital cost..................................................................................................................... 46 Estimation of O&M costs ................................................................................................................ 46 Revenue........................................................................................................................................... 46

U.S. Energy Information Administration | Technical Economic Analysis Guide DRAFT for Review

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DRAFT for Review, Not for Dissemination

July 2015

Table of Figures

Figure 1. Project cost terminology................................................................................................................ 7 Figure 2. O&M cost categories.................................................................................................................... 11 Figure 3. Breakeven curve example ............................................................................................................ 20

Figure B-1. Initial technology assessment steps ......................................................................................... 26

Figure D-1. Working capital components ................................................................................................... 36 Figure D-2. Learning curves at various rates............................................................................................... 40 Figure F- 1. Overnight capital cost estimate (top-down approach)............................................................ 45 Figure F-2. Breakeven analysis ? GTL example ........................................................................................... 47

Table of Tables

Table 1. Liquid fuel technologies analyzed by EIA in its long-term outlooks................................................ 1 Table 2. Estimating project costs by category and method.......................................................................... 4 Table 3. Estimating capital costs using Lang factors ..................................................................................... 5 Table 4. Summary of O&M costs ................................................................................................................ 12 Table 5. Depreciation estimation methods ................................................................................................ 15 Table 6. Sensitivity analysis parameters ..................................................................................................... 21

Table B-1. Technology readiness levels explained..............................................................................................27

Table D-1. Typical cost-scaling indices for equipment cost as function of capacity................................... 33 Table D-2. Estimated cost of piping ............................................................................................................ 34

Table F-1. Comparative data of existing plants .......................................................................................... 44

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