Environmental Engineering Reference
In-Depth Information
customers and maximum shareholder value. Not provisioning for a rigorous ongoing
value analysis program is foolish. Experience shows that a value analysis program
with an annual budget of at least 1
1.5% of an organization's overall engineering
budget will establish and maintain the system of continuous innovation and value
assessment needed for successful technology development and new product designs.
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2.1.2 Concepts and defi nitions
AEP - Annual energy production; kWh or MWh
Turbine price - Cost of the WT equipment to the project developer
BOP price - Cost of the balance of plant to the project developer; everything
else needed to build a WPP beyond the WT equipment
Other capital costs - Financing terms and requirements
Operational costs - O&M required to produce and deliver electricity
CoE - The cost to produce 1 kWh (or 1 MWh) of electricity for a given time;
e.g. for a given year
LCoE (levelized CoE) - Average CoE over the WPP life; e.g. 20 years
Energy price - Power purchase agreement (PPA) - wholesale price paid to the
WPP owner for the electricity produced
Taxes - Paid to local and federal government (in some instances may be an
income to the WPP owner in the early years of the WPP life)
PTC - Production tax credit; any of a number of government policy incentives
that provide income to the WPP owner. Typically a function of power production
and over a specifi ed time schedule
OEM margin - The amount of profi t required by the OEM to satisfy shareholders
and provision for long-term sustainability of the business
Customer value -NPV for the customer
OEM value - NPV for the OEM
Total value (TV) - NPV for the customer and OEM combined
A simplifi ed illustration of the main contributors to value for both the customer
and OEM are shown in Fig. 5. While hundreds of parameters are considered in a
Figure 5 : Main contributions determining CoE and TV.
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