Ranking factors of an investment in cogeneration: Sensitivity analysis ranking the technical and economical factors

A deregulation of the electricity market in Europe will result in increased competition among the power-producing companies. They will therefore carefully estimate the financial risk in an investment in new power-producing capability. One part of the risk assessment is to perform a sensitivity analysis. This paper presents a sensitivity analysis using factorial design, resulting in an assessment of the most important technical and economical factors affecting an investment in a gas turbine combined cycle and a steam cycle fired by woodchips. The study is performed using a simulation model that optimizes the operation of existing power plants and potential new investments to fulfil the desired heat demand. The local utility system analysed is a Swedish district heating system with 655 GWh y(-1) heat demand. The conclusion is that to understand which of the technical and economical Factors affect the investment, it is not sufficient to investigate the parameters of the studied plant, but also the parameters related to the competing plants. Both the individual effects of the factors and the effect of their interaction should be investigated. For the energy system studied the price of natural gas, price of woodchips and investment cost have the major influence on the profitability of the investment. Copyright (C) 2001 John Wiley & Sons, Ltd.