Level 2 Conceptual & Financial Analysis

If your analysis and research has indicated that your facility has potential, it is time to start getting to reality. A Level 2 Conceptual and Financial Screening helps you determine if CHP is a viable option not only technically (i.e. will it work) but also financially (i.e. is it worth it). It uses a detailed engineering and financial model or spreadsheet that preferably employs hourly load profiles (or at a minimum monthly load profiles and load duration curves). The U.S. DOE Intermountain Clean Energy Application Center can usually help you with this step at no charge, up to a certain number of hours.

A Level 2 Conceptual and Financial Screening involves:

  • Electrical load profiling
  • Thermal load profiling
  • New utility rate structure analysis
  • Unit sizing
  • Thermal host determination (where to put the heat)
  • Installation cost estimations
  • Permitting impacts
  • Utility interconnection requirements
  • Financial calculations (simple payback, ROI, etc.)
  • Financing option availability
  • Analysis of different ownership structures with recommendations as to project structure
  • Discussion of design/construction models

All of these facets are combined to create an hour-by-hour model of the output of a potential CHP system. The hourly fuel consumption, electrical output, useful thermal output, and the value of that output can then be calculated. This resulting cost/savings information can then compared to what your facility would pay if the CHP system were not installed.

This analysis can be used to determine if investing in CHP will meet your facility's long-term goals. Various financing options can be explored at this point to tailor the project to meet your goals.

The output of the Level 2 Conceptual and Financial Screening normally includes a detailed report on savings, installation costs, simple paybacks, cash flow, rates of return, and a conceptual one-line design including equipment sizing. Accuracy should generally be within 10-20%.

Although your facility may be able to perform all of these functions, it may be a good time to get a professional involved. Many engineering companies now have CHP/Energy Efficiency departments that could provide a Level 2 Conceptual and Financial Screening for a facility. However, all Clean Energy Application Centers can also provide these same screening services for free. (Contact Us to discuss your project.)

If the results of the Level 2 Screening look promising, you would next continue to a Level 3 Investment-Grade Analysis.