HO-18-C001 -- Optimal CHP Investments Applying Sensitivity Analyses and Financial Risk Management Indicators

Evaluating combined heat and power (CHP) investments for commercial applications is not a straightforward task. This work assesses the impact multiple techno-economic uncertainties can have on CHP investments. Understanding the impact these uncertainties can have on project viability allows decision-makers to make informed decisions on capital intensive projects. In this work, a mathematical model described previously (Cedillos et al.) was used to select the optimal CHP size and calculate a reference solution on the financial viability of such investments in a set of buildings. After generating these reference CHP solutions, the impact of uncertainty is then assessed by applying Monte-Carlo based sensitivity analyses and financial and risk management key performance indicators (KPIs). Results suggest the four most influential parameters in CHP priojects are heating demand, installation costs, electricity prices, and electricity demand. For attractive investments cost uncertainty made projects vary in their payback from 2.6 to 6.9 years, while for unattractive investments payback ranged from 4 to 11.3 years. Furthermore, Monte-Carlo results illustrate the different distributions of each project, with significant variations in tails risks; indicating which sites are more suitable than others. Results presented show the economic impact uncertainties have on CHP projects, hence allowing decision-makers to make informed decisions before committing their resources to such capital-intensive projects.