MSc RESE University of Strathclyde

Financial access is a major reason why renewable energy projects do not implement successfully in off-grid rural developing communities [1]. It is therefore important to assess the financial viability of a renewable energy system before implementing it in a community. Of course, it is also important to assess if and how the community can afford the system.  It is best if a system can sustain itself economically over its lifetime and provide an opportunity for the users to either save on energy costs or earn income from the energy use. Subsidies or schemes run by the Government or by private funders should be looked into to help ease costs for the community. Key aspects to consider when carrying out an economic assessment of a system are listed below:

The system therefore needs to be economically feasible and sustainable. In assessing the economic viability of a system, it is important to ask questions such as: 

The first five questions relate to the economic feasibility of the system while the remaining two questions relate to the economic sustainability of the system. 

Economic Analysis Steps

Determine the overall costs of the electrical and thermal system

1. Calculate the initial capital costs and the annual operating and maintenance costs of the system over its life span. This can be expressed as discounted value over the system’s life cycle and can be done using a tool such as Excel or HOMER. 
2. Calculate how much each household would need to pay for the costs outlined in step 1. 
3. Determine cost of energy output to the consumers, i.e. how much the end users would need to pay for the electricity or the thermal energy supplied. 
4. Determine the cost of increasing the capacity of the electrical system in case of growth in demand or staggering deployment. 
5. Determine the cost of replacing the system. 

Determine the level of affordability of the end users

1. Determine household income levels and amount used for fuel.
2. Match this amount with the cost per household obtained in Step 1 Point 2 above to determine amount of external financing required. 
3. Identify modes of external financing for the energy system as well as repayment periods. The repayment periods should be within the system’s life span.

Assess the economic sustainability of the energy system

1. Calculate the return on investment of the system to the community and/or to each household. 
2. Determine the potential for operating and maintaining the system without the need for external financing. 
3. Identify direct and indirect economic benefits for using the system, for example, job opportunities from the construction, installation, operation and maintenance of the system, income generating activities arising from use of the energy system, fuel savings from demand optimisation and/or fuel substitution etc.  

References

[1]  X. Shi, X. Liu and L. Yao, “Assessment of instruments in facilitating investment in off-grid renewable energy projects,” Energy Policy, vol. 95, pp. 437-446, 2016.

 

When designing a sustainable energy system, the impact it will have on the surrounding environment must be investigated to avoid any negative long-term effects. Environmental impact assessment considers all aspects of the environment, including air, water, ecology and habitat. Relevant areas of interest are where the energy project will have a significant impact (positive or negative) on the environment.

There can be many different impacts to the environment caused by renewable energy systems and perception of the impact can depend on the view point of the people affected. For example, wind turbines are conspicuous on the landscape by nature, which some people like, and others do not. Assessment of environmental impacts can be largely subjective, and they must be weighed up against the impacts caused by conventional energy sources and other important criteria such as cost.

Some of the main considerations when analysing environmental impacts are listed below:

A social impact assessment involves analysing the potential effect the system will have on the community's wellbeing and can identify any barriers to community acceptance of new technology. This step needs to take into account what social benefits the community could get from using the energy system and if the system will contribute to the community's development plans. The technology also needs to be easily operated and flexible enough to be adapted into the user's day to day activities.

Perhaps one of the most significant aspects of energy for development projects is to have an implementation model in place to ensure that there are people responsible for the use and maintenance of the system. Implementation models can take many forms, depending on the social and political setting of the community. It could be through a public-private partnership, or a private company providing energy services to the community, or the community itself owning and operating the energy system.

An implementation model usually has three main roles: the oversight, the facilitators and the implementers.