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Bridging barriers for multi-party investments in energy efficiency – A real options based approach for common utility systems design and evaluation

Conference paper
Authors Johanna Mossberg
Roman Hackl
Simon Harvey
Christian Jensen
Anders Sandoff
Gabriela Schaad
Andreas Furberg
Mattias Haggärde
Published in Proceedings of the ECEEE Summer Study 2014
ISSN 2001-7987
Publication year 2014
Published at Department of Business Administration, Management & Organisation
Department of Business Administration, Industrial and Financial Management & Logistics
Language en
Subject categories Thermal energy engineering, Chemical energy engineering

Abstract

Total Site Analysis (TSA) is a tool for quantifying energy savings targets in large industrial process clusters. Thereafter retrofit design tools can be used to identify efficient solutions in which the different process sites exchange excess energy with each other through the site utility system, thus reducing the overall need for external fuels/energy. Compared to energy efficiency investments identified for single companies, similar investments identified for clusters hold an inherent complexity; they assume joint investments and multi-party collaboration, which often constitute a barrier for implementation. Real Options Analysis (ROA) is a tool that can be used for helping managers to evaluate different investment options. However, previous research almost exclusively concerns single companies/actors and not the increased complexity of joint investments. This paper presents a novel approach, showing how ROA can be applied not only to handle uncertainties regarding market development but also reduce complexity associated with multi-party cooperation in a joint energy efficiency investments based on TSA. The approach is applied on a case study of a joint energy efficiency retrofit investment in a Swedish chemical cluster. Using ROA, the case study shows how the identified solution can divided into “investment packages” distributed over time, allowing for an initial investment by only two actors and permitting for an evaluation of both the cooperation and the market development before expanding the investment and the number of actors involved. Further, an economic assessment of the project is presented together with an analysis of the cost/benefit of gradually expanding the investment.

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