With the preliminary design and yield estimation finalised the feasibility study can begin. The first step would be to put a cost on the alternative energy plant. This cost is then compared to the expected plant yield and the resulting saving achieved because of this yield. These values are then used to calculate various financial decision making parameters such as:
  • Simple payback
  • Modified internal rate of return
  • Nett present value
In these calculations there are certain key factors that need to be defined or estimated as they have a great influence on the financial attractiveness of an alternative energy plant:
  • Tax benefit due to depreciation
  • Cost of capital
  • Loan term
  • Interest on loan
  • Assessment period
  • Expected rise in energy tariffs
Money is however not always the motive behind establishing an alternative energy plant. There are various other factors to consider such as:
  • The environmental impact
  • Job creation