Master of Engineering (Sustainable Energy) Sustainable Energy ...

Master of Engineering (Sustainable Energy) Sustainable Energy Systems and Design MIET2129 Semester 2, 2018 Week 2, Tuesday 6 March 2018 Professor John Andrews Sustainable Energy Systems and Design MIET2129 RMIT University This weeks session Triple bottom line evaluation Economic and financial assessment Your biomimicry examples Triple Bottom Line evaluation an example Sustainable Energy Systems and Design MIET2129 RMIT University

Evaluation techniques TECHNICAL ECONOMIC EVALUATE TECHNOLOGICAL OPTIONS TRIPLE BOTTOM LINE SOCIAL ENVIRONMENTAL Sustainable Energy Systems and Design MIET2129 RMIT University FINANCIAL (Simple payback period, IRR, PW, levelised unit cost, lifecycle

cost) SOCIAL COST BENEFIT ANALYSIS ENVIRONMENTAL ECONOMICS SOCIAL IMPACT ANALYSIS (incl. surveys, interviews, focus groups, forums, public meetings, social groups and impacts on these, intra and intergenerational impacts ) LIFECYCLE ANALYSIS ENVIRONMENTAL IMPACT ANALYSIS ECOLOGICAL FOOTPRINT The triple bottom line ECONOMIC SOCIAL

ENVIRONMENTAL What do you understand by the TBL? Sustainable Energy Systems and Design MIET2129 RMIT University The Triple Bottom Line ECONOMIC Private Profit, Payback period, Rate of return, Lifecycle cost Social benefits and costs (in dollar terms) SOCIAL Impacts on society as a whole, communities, employees and their

families ENVIRONMENTAL Impacts on the natural environment (flora, fauna, ecosystems, and natural resources energy, minerals, land, air, water, biomass) Sustainable Energy Systems and Design MIET2129 RMIT University Financial and economic analysis Simple payback period Discounting Present worth

Internal rate of return Lifecycle costing Sustainable Energy Systems and Design MIET2129 RMIT University Simple payback period CAPITAL _ COST NET _ ANNUAL _ BENEFIT For example, a solar water heater costs $1000 more than a conventional gas water heater, and results in annual savings in gas bills of $100 Hence simple payback period = 1000/100 = 10 years Sustainable Energy Systems and Design MIET2129 RMIT University Simple payback period more general definition

If Bi = net benefit (that is, saving or benefit minus cost) in year i K = capital cost (or incremental capital cost) of a technology/project Simple payback period is given by the value of N such that: N B i K i 1 Sustainable Energy Systems and Design MIET2129 RMIT University Discounting Having money in your pocket now is worth more than

gaining the same amount of money at some time in the future Paying a bill at some time in the future is better for you financially than paying it now DISCOUNTING is the method used in economics and finance to convert future benefits and costs to PRESENT VALUES Sustainable Energy Systems and Design MIET2129 RMIT University Discounting 2 Invest $100 at an interest rate of 5%: After 1 year it will be worth 100(1+0.05)=$105 After 2 years, its worth will be 100(1+0.05)2=$110 After 10 years, 100(1+0.05)10=$163 In general, after n years, 100(1+0.05)n Hence, $100 in 1 years time is really worth only 100/(1+0.05) now, since 100/(1+0.05) invested now for one year at 5% interest rate will give 100x(1+0.05)/(1+05) = $100 after one year Sustainable Energy Systems and Design

MIET2129 RMIT University Discounting 3 $100 in n years time at 5% discount rate will be worth 100 (1 0.05) n In general, the present value (PV) of $Xn in n years time at a real discount rate of f is given by the Single Payment Present Worth factor: Xn PV ( X n ) n (1 f ) If X is positive, it represents a benefit or income If X is negative its represents a cost or expenditure Sustainable Energy Systems and Design MIET2129 RMIT University

Discounting 4 Note: Discounting is NOT the same thing as allowing for inflation Work with constant $ values, e.g. $A(2017), that is, all costs and benefits expressed in terms of dollar values as in 2017, and real discount rates and you dont need to worry about inflation Sustainable Energy Systems and Design MIET2129 RMIT University Discounting 4: discount factor = 1/(1+f)n YEAR (n) 0 5 10 15 20

5% 25 0.29 10% 20% 0.78 0.16 0.48 0.01 Sustainable Energy Systems and Design MIET2129 RMIT University 25% Present Worth or Net present value

(NPV) of a project One-off initial capital investment of K Real discount rate of f, over N years Recurrent cost in year i = Ci Benefit (revenue) in year i = Bi Salvage or residual value of plant/equipment at end of assessment period = SN ( Bi Ci ) SN NPV K i 1 i N (1 f ) (1 f ) N Sustainable Energy Systems and Design MIET2129 RMIT University

Present Worth (or NPV) Residual/salvage value: Positive if can sell equipment at end of year N Negative if have to pay to dispose of or clean up wastes Take care to get signs right in Class Exercise! Normally a project should show a positive NPV if it is to get the go-ahead The higher the NPV the more economically attractive the project is. Sustainable Energy Systems and Design MIET2129 RMIT University Rate of Return Compares financial returns from an investment in a project over a given period with those from an investment at a fixed interest rate over the same period. E.g. If a company seeks a 15% rate of return on an investment of $1000 over 5 years, it will need to get net annual earnings equivalent to those from investing $1000 over 5 years at a 15% interest rate. Real rate of return = Nominal rate of return rate

Sustainable Energy Systems and Design MIET2129 RMIT University Inflation Internal rate of return Internal rate of return (r), given by the value of f for which NPV = 0, that is, r is found by solving the equation: ( Bi Ci ) SN 0 K i 1 i N (1 r ) (1 r ) N In other words, the internal rate of return (IRR) is the discount rate that makes the net present value of the

net benefits over the assessment period equal to the Sustainable Energy Systems and Design initial capital cost. MIET2129 RMIT University To calculate Internal Rate of Return Usually hard to solve for r analytically Use trial and error to find value of f that makes NPV =0 Or plot NPV against f and the intercept of the curve on the f axis gives r. A helpful formula if (Bi Ci) is constant is the Uniform Series Present Worth factor: 1 1 1 i1 (1 r ) i r 1 (1 r ) N N Sustainable Energy Systems and Design

MIET2129 RMIT University IRR methods 1. Excel spreadsheet + formulae Write PW = Formulae for component terms in spreadsheet keep discount rate f a variable in formulae, with value defined in a particular cell Iterate f (or use Solver) until PW=0 to desired level of accuracy IRR = value of that makes PW=0 Sustainable Energy Systems and Design MIET2129 RMIT University IRR methods 2. Excel spreadsheet: cash flow by year List costs and benefits in each year (0 20) Use Single Payment Present Worth factor to convert net benefit in each year to present values (keep f a variable in formulae, defined in a particular cell) Sum series of annual present values

Iterate f (or use Solver) until sum annual present values=0 to desired level of accuracy Sustainable Energy Systems and Design MIET2129 RMIT University IRR methods 3. Excel spreadsheet: graph List costs and benefits in each year (0 20) Use Single Payment Present Worth factor to convert net benefit in each year to present values (keep f a variable in formulae, defined in a particular cell) Sum series of annual present values to get PW Repeat for a few values of f Plot PW(f) vs f and find value of f that gives PW=0 (intercept of f-axis) Sustainable Energy Systems and Design MIET2129 RMIT University IRR and payback period A technology paid for by a single capital payment at the beginning of its operational

lifetime and yielding equal annual net benefits has a simple payback period of two years. Assuming the annual benefits keep accruing over each year, what is the internal rate of return of the technology over (a) 5 years, (b) 10 years. WORK OUT ANSWERS IN CLASS Sustainable Energy Systems and Design MIET2129 RMIT University Lifecycle costing Compare technologies by calculating the NPV of their total costs (capital and operating) over their entire lifetimes, including residual value (e.g. through resale or recycling) or costs of disposal and any ongoing waste treatment. If K = capital cost of technology Ci = operating cost in year i L = lifetime of technology in years RL = residual value (+ or -) at the end of year L f = discount rate L

Ci RL LIFECYCLEC OST K i L ( 1 f ) ( 1 f ) i 1 Sustainable Energy Systems and Design MIET2129 RMIT University Your examples

Biomimicry Constructive Technology Assessment Industrial Ecology Design for Environment TBL Other? Sustainable Energy Systems and Design MIET2129 RMIT University Biomim egs Sustainable Energy Systems and Design MIET2129 RMIT University The Triple Bottom Line: ECONOMIC Private Profit, Payback period, Rate of return, Lifecycle cost Social benefits and costs (in dollar terms)

SOCIAL Impacts on society as a whole, communities, employees and their families ENVIRONMENTAL Impacts on the natural environment (flora, fauna, ecosystems, and natural resources energy, minerals, land, air, water, biomass) REFERENCE: Cannibals with Forks: The Triple Bottom Line of 21st Century Business, J Elkington, 1999 Sustainable Energy Systems and Design MIET2129 RMIT University Environmental 1 Environmental impact analysis

Projects of national significance: Commonwealth Environment Protection and Biodiversity Conservation Act 1999 Projects of State significance: State Government legislation: E.g. Environment Effects Act Victoria Firm level: ISO14001 certification EPA regulations Greenhouse Challenge Sustainable Energy Systems and Design MIET2129 RMIT University Environmental 2 Greenhouse gas emissions impact National Greenhouse Accounts Factors 2017 (Blackboard/Course Content) https://www.environment.gov.au/system/files/resources/5a16

9bfb-f417-4b00-9b70-6ba328ea8671/files/national-greenhous e-accounts-factors-july-2017.pdf Coal: Table 1 (scope 1) Natural gas: Table 2 (scope 1) Petroleum fuels for transport: table 4 (scope 1) Electricity: Table 5 (scope 2) Scope 3: Table 41 Sustainable Energy Systems and Design MIET2129 RMIT University NGA Factors 2015: Scope 1 emissions: Direct (or point-source) emission factors kilograms of carbon dioxide equivalent (CO2-e) emitted per unit of activity at the point of emission release (i.e. fuel use, energy use, manufacturing process activity, mining activity, on-site waste disposal, etc.). Scope 2 emissions: Indirect emission factors Calculate kilograms of CO2-e per unit of electricity consumed by an organisation Emissions produced by the burning of fuels (coal, natural gas, etc.) at power station.

Scope 3 emissions: indirect emissions attributable to the extraction, production and transport of fuels to point of consumption indirect emissions from the extraction, production and transport of fuel burned at power stations indirect emissions attributable to the electricity lost in delivery in the transmission and distribution network. Use scope 1 + 2, or scope 2 + 3 factors in your project reports Sustainable Energy Systems and Design MIET2129 RMIT University Environmental 2 Life Cycle Assessment LCA lectures, weeks 6 and 7. Sustainable Energy Systems and Design MIET2129 RMIT University Social Social:

Identify relevant social goups How are they affected? What are their interests, and how do these impact on design and implementation of a project/technology NB: Do not just talk about the impact alone, without mentioning the group(s) of people causing it, and the group(s) affected by it! Sustainable Energy Systems and Design MIET2129 RMIT University DESIGNERS, PROPONENTS, INVESTORS Values, interests affect design, deployment PROJECT / NEW

TECHNOLOGY IMPACT A IMPACT B IMPACT B SOCIAL SOCIAL SOCIAL GROUP 1 EnergyGROUP 2 Design GROUP 3 Sustainable Systems and MIET2129 RMIT University Processes for social impact analysis

No formal requirement for SIA as such. Usually covered at Federal and State level by issue/project specific processes, such as: Health impact studies Employment impact studies Government Commissions of inquiry (e.g. current building industry inquiry) Parliamentary Committee inquiries (e.g. Senate inquiry into treatment of refugees) Inquiries by Government agencies (e.g. Productivity Commission report on gambling) Studies of impacts on indigenous people Also federal and state environmental impact legislation requires

impacts of projects on the social environment to be considered Sustainable Energy Systems and Design MIET2129 RMIT University METHODS OF ASSESSING SOCIAL IMPACTS Quantitative Social benefit-cost analysis Census Surveys Qualitative Interviews Focus groups Community/consultative meetings/forums Case studies Field research Comparative cross-cultural/historical research Sustainable Energy Systems and Design MIET2129 RMIT University

Social impacts - examples Employment number, type of jobs, location, job satisfaction Distribution of costs and benefits OH&S Health and well-being generally individual/community Noise, vibration Aesthetic visual pollution, scenic degradation Impacts on users (behaviour, convenience, acceptance) Relocation Sustainable Energy Systems and Design MIET2129 RMIT University Start from here in week 3 Start with IRR for payback = 2 y over 5 and 10 years. From fin eval spreadsheet, worksheet 2 Sustainable Energy Systems and Design MIET2129 RMIT University

TBL Assessment: Case study Solar hydrogen systems for remote area power supply Sustainable Energy Systems and Design MIET2129 RMIT University A basic stand-alone PV-hydrogen RAPS system Li LOAD SPLITTER PHOTOVOLTAIC PANELS YES Pi - Li ELECTROLYSER open if Pi

  • H2 STORAGE Is Pi>Li ? FUEL CELL Pi Li-Pi Pi NO ` Sustainable Energy Systems and Design MIET2129 RMIT University L O A D,

    (Li) Competing options PV array + battery storage Diesel generator + battery storage PV array + diesel generator + battery storage Solar hydrogen energy system Sustainable Energy Systems and Design MIET2129 RMIT University TBL evaluation criteria Economic average unit cost of electricity energy supplied taking into account full lifecyle cost of each component 5% real discount rate Environmental Greenhouse gas emissions (in operation) LCA of whole system (including components) [useful, but not done here]

    Sustainable Energy Systems and Design MIET2129 RMIT University TBL criteria - continued Social Level of service provided, including reliability User attitudes and experience Safety, including regulations and standards Sustainable Energy Systems and Design MIET2129 RMIT University Economic evaluation System component Photovoltaic array PEM Electrolyser

    PEM Fuel cell Balance of System Hydrogen Storage System Relative cost of the components Discount rate (d) Annual Life Operation & time(n) Maintenance cost ( percent of

  • initial investment) (US$) (%) (%) (y) 5000/kW 5 2 25 3000/kW

    5 2 20 6000/kW 5 2 15 6000/Unit 5 2 25

    500 2000 /kgH2 Input data/ assumptions 5 2 Sustainable Energy Systems and Design MIET2129 RMIT University 25 Economic evaluation - 2 RAPS System options PV +H2 system PV alone + Battery

    PV + Diesel Gen +Battery Diesel Gen + Battery Unit cost of power (US $/kWh) Conditions For a unit storage cost of US$500/kg For a unit storage cost of 2.5 US$2000/kg Deep-cycle batteries with a total storage capacity of 2.7-2.8 6.25 kWh. PV panel size 60 m2

    Delivered fuel cost $1.30/litre. Battery 2.2-2.3 storage capacity 3.12 kWh. PV area of 30 m2 Delivered fuel cost $1.30/litre. Battery 1.7-1.9 storage capacity 0.3 Sustainable Energy Systems and Design kWh. 1.5 MIET2129 RMIT University Environmental evaluation RAPS Options PV +H2 system

    PV alone + Battery PV + Diesel Generator +Battery Diesel Generator + Battery Green house emission Total annual (kg of CO2/kWh) ( tonne of CO2-e per yr) 0 emissions 0

    0 0 1.55 2.8 3.1 5.7 Sustainable Energy Systems and Design MIET2129 RMIT University Social evaluation PV +H2 PV + battery

    PV + Diesel gen diesel gen + battery + battery Service level High, as long as works to design goal May be interruptions in winter High, though diesel gen can fail High, though

    diesel gen can fail User attitudes Resistance, unfamiliarity with new system Positive for low maintenance, but interruptions a big negative Good supply security, but diesel refuelling and maintenance a negative Good supply

    security, but diesel refuelling and maintenance a negative Safety, incl regs and standards Need for new safety regs and standards High High, but care needed with diesel gen High, but care

    needed with diesel gen Sustainable Energy Systems and Design MIET2129 RMIT University TBL ASSESSMENT SUMMARY TECHNO Technical Financial/ Environm Social LOGICAL performan economic ental Impacts OPTION ce benefits impacts A B C Sustainable Energy Systems and Design MIET2129 RMIT University TBL ASSESSMENT SUMMARY Solar H2 system case study Option

    Economic Environmental Solar PV hydrogen + Unit cost US$1.5- Zero greenhouse 2.45/ kWh. emissions in operation. Embodied emissions? No noise as system operation is quiet. Diesel generator + Unit cost US$1.69- Emissions per kWh battery 1.90 /kWh = 3 kg CO2-e. Safe disposal/

    recycling of battery. Embodied emissions? Solar PV + battery Unit cost US$ 2.68- Zero greenhouse 2.80/kWh. emissions in operation. Embodied emissions? Safe disposal/ recycling of battery Sustainable Energy Systems and Design MIET2129 RMIT University Social User education, and safety regulations and standards needed. Reliability high but to be proven

    Users familiar with mature technology Frequent maintenance. Proven safe operation Now commonly used. Likely to be supply interruptions in winter Conclusions Weigh up evaluations on all three criteria Recommend a preferred option if a clear preference is evident Sustainable Energy Systems and Design MIET2129Systems RMIT University Low-temperature Multi-Effect Evaporation Desalination

    coupled with SGSP Food providers See week 1 presn Sustainable Energy Systems and Design MIET2129 RMIT University Tasks for coming weeks Economic assessment class exercise: due to be submitted via Blackboard/Assignments-Turnitin by end of 8 April 2018. For one question (on LCOE) you will need the week 3 presentation. Week 3 session, Tues 13 March. Economics 2, plus PROJECT TOPICS preliminary discussion in second half of the session Post Project Brief on Assignments on Blackboard by end of Week 5, 30/03/18, for feedback Note Week 4 and 5 sessions on TRNSYS modelling are in the computer lab room at RMIT Bundoora East 253.02.05 on Tuesday 20 and 27 March, 6.00 9.00 pm Sustainable Energy Systems and Design

    MIET2129 RMIT University

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