Many start-up companies are working to develop alternative energy concepts. Their challenge is to develop a technology that is competitive with current technologies. To compete with current technologies they must have a “short” payback period in order to gain acceptance into the marketplace. The time it takes to recover that initial cost depends on several things.

  • System Cost: The greater the upfront cost, the more difficult it will be to take market share from existing technologies.
  • Operating and Maintenance Costs: The system must operate reliably and efficiently.
  • Environmental Benefits: There needs to be an improved operating efficiency, or a net reduction of pollutants to the environment for the system to make sense.
  • Financial Incentives: There are often utility or government incentives to adopt new technologies. These can make a big difference in the adoption of new technologies.

Each of these areas is important to the overall development and evaluation of the technology. For example, the cost of the system depends on the supply chain for the product. Will they fabricate all of the components internally? Or will they contract out the manufacture of all components and just assemble the final system? Or it will very likely be a combination of the two extremes. Important choices need to be made with respect to the supply chain in order to as cost competitive as possible.

What about operating and maintenance costs? The keys here are the associated “energy” costs and the system design. For example, the “energy” cost associated with wind and solar concepts is zero. But, for example, the cost of natural gas for a combined heat and power (CHP) systems can be a driving factor in the overall operating cost. The challenge is to determine how critical that energy cost is to the overall operating cost of the system. If small changes in natural gas pricing can lead to excessive operating costs, that has to be taken into account.

There has been no mention of maintenance costs, but they can be an issue as well. For example, what if the wrong material is used for the system and unexpected corrosion occurs and the system starts to fail after 2 years, rather than the expected 15 or 20 years? Ouch! The great idea just turned into a major risk. Other maintenance concerns relate to the level of knowledge needed to operate the system. Does it need little or no attention? Or does it need regular attention from a trained technician?

The efficiency of the system is important as well when it comes to operating costs. Understanding all the terminology associated with system efficiency can be a challenge all by itself. SEER, EER, COP, and thermodynamic efficiency are just a few terms that come to mind when system efficiency is talked about. This is a topic for a blog post all by itself. Stay tuned for future discussions in this area.

Alternative energy concepts are needed – there is no doubt about that. The challenge is deciding which ones are worth investing in and which ones are questionable. Let Kevin Kennedy Associates assist you in making this determination.

Technical Due Diligence – Evaluating Alternative Energy Concepts

Randy Clarksean

Randy is a Ph.D., P.E., CFEI, CFII Mechanical Engineer with over 30 years of experience in failure analysis, fires, and forensic engineering. In addition he has expertise in areas of technical due diligence consulting, heat transfer, thermal systems, management, and general technical consulting services.

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