Techno-economic assessment
   HOME

TheInfoList



OR:

Techno-economic assessment or techno-economic analysis (abbreviated TEA) is a method of analyzing the economic performance of an industrial process, product, or service. It typically uses software modeling to estimate capital cost, operating cost, and revenue based on technical and financial input parameters. One desired outcome is to summarize results in a concise and visually coherent form, using visualization tools such as tornado diagrams and
sensitivity analysis Sensitivity analysis is the study of how the uncertainty in the output of a mathematical model or system (numerical or otherwise) can be divided and allocated to different sources of uncertainty in its inputs. A related practice is uncertainty anal ...
graphs. At present, TEA is most commonly used to analyze technologies in the
chemical A chemical substance is a form of matter having constant chemical composition and characteristic properties. Some references add that chemical substance cannot be separated into its constituent elements by physical separation methods, i.e., w ...
, bioprocess,
petroleum Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crud ...
,
energy In physics, energy (from Ancient Greek: ἐνέργεια, ''enérgeia'', “activity”) is the quantitative property that is transferred to a body or to a physical system, recognizable in the performance of work and in the form of hea ...
, and similar industries. This article focuses on these areas of application....


Use cases

TEA can be used for studying new technologies or optimizing existing ones. Ideally, a techno-economic model represents the best current understanding of the system being modeled. The following are examples of typical uses. * Evaluating economic feasibility: TEA can be used to anticipate whether a process will be sufficiently profitable under a certain set of assumptions. It can thereby help companies to avoid pursuing dead-ends. * Guiding research and development: When combined with sensitivity analyses like Tornado Diagrams, TEA can be used to identify research and development (R&D) targets with the greatest potential to improve profitability. In this way, it can help companies bring their technologies to market more efficiently. * Quantifying uncertainty and risk: Sensitivity analyses like Tornado Diagrams and
Monte Carlo analysis Monte Carlo methods, or Monte Carlo experiments, are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. The underlying concept is to use randomness to solve problems that might be determini ...
can be used to quantify economic uncertainty in the model results. They can also be used to identify which variables are the source of the most uncertainty.


Methodology

Techno-economic analysis is performed using a techno-economic model. A techno-economic model is an ''integrated process and cost model''. It combines elements of
process design In chemical engineering, process design is the choice and sequencing of units for desired physical and/or chemical transformation of materials. Process design is central to chemical engineering, and it can be considered to be the summit of that ...
,
process modeling The term process model is used in various contexts. For example, in business process modeling the enterprise process model is often referred to as the ''business process model''. Overview Process models are processes of the same nature that a ...
, equipment sizing,
capital cost Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings, construction, and equipment used in the production of goods or in the rendering of services. In other words, it is the total cost needed to bring a projec ...
estimation, and
operating cost Operating costs or operational costs, are the expenses which are related to the operation of a business, or to the operation of a device, component, piece of equipment or facility. They are the cost of resources used by an organization just to main ...
estimation.


Process design

To begin with, the system is defined in the form of a process flow diagram (PFD). A typical PFD shows major equipment and material streams. The term ‘material stream’ refers to liquids, solids, or gases entering or exiting the system, or flowing from one piece of equipment to another.


Process modeling

The process model uses engineering and
material balance In physics, a mass balance, also called a material balance, is an application of conservation of mass to the analysis of physical systems. By accounting for material entering and leaving a system, mass flows can be identified which might have bee ...
calculations to more fully characterize the system being analyzed. The results are often summarized in the form of a material balance table or stream table, which corresponds to the PFD.


Equipment sizing

The output from the process model is used to: # Estimate sizing parameters for each piece of equipment (i.e. one or more parameters that correlate with cost) # Estimate utility requirements for each piece of equipment (i.e. electrical power, fuel, cooling water, etc.)


Capital cost estimation

Capital cost Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings, construction, and equipment used in the production of goods or in the rendering of services. In other words, it is the total cost needed to bring a projec ...
s are typically estimated using a major equipment factored approach.AACE International (2005). Cost Estimate Classification System – As Applied In Engineering, Procurement, And Construction For The Process Industries; TCM Framework: 7.3 – Cost Estimating and Budgeting. Page 2. First, the purchase cost for each piece of equipment is estimated from the results of the equipment sizing calculations, often using power law scaling relationships. Next, the balance of the capital costs are estimated by applying multiplying factors based on similar systems.


Operating cost estimation

Typical
operating cost Operating costs or operational costs, are the expenses which are related to the operation of a business, or to the operation of a device, component, piece of equipment or facility. They are the cost of resources used by an organization just to main ...
s include raw materials, operating labor, waste treatment, and disposal, utilities, and overhead. Raw material and waste treatment costs are estimated by applying prices to raw material and waste flow rates from the process model. Similarly, utility costs are estimated by applying prices to the utility rates from equipment sizing. Operating labor can be estimated based on equipment size, quantity, and type. Overhead is typically estimated by applying
heuristic A heuristic (; ), or heuristic technique, is any approach to problem solving or self-discovery that employs a practical method that is not guaranteed to be optimal, perfect, or rational, but is nevertheless sufficient for reaching an immediate ...
factors to capital costs and operating labor.


Cash flow analysis

Techno-economic models may also include a discounted cash flow analysis to calculate metrics like net present value and internal rate of return. A cash flow analysis will typically incorporate financial parameters like taxes and discount rates.


Platforms

TEA is typically performed using one of two platforms:
spreadsheet A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Spreadsheets were developed as computerized analogs of paper accounting worksheets. The program operates on data entered in c ...
software, like Microsoft Excel, or a process simulator, like Aspen or SuperPro Designer or an open version based in python BioSTEAM. In general, the three platforms use the methodology described above.
Spreadsheet A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Spreadsheets were developed as computerized analogs of paper accounting worksheets. The program operates on data entered in c ...
modeling is often preferred for early-stage technologies and startups since it tends to offer greater flexibility, accessibility, and transparency. Process simulators, on the other hand, offer more powerful process simulation capabilities, greater standardization, and integrated cost-estimation modules.


Accuracy

Assuming a complete process design, the major equipment factored approach that is often used in TEA has an expected accuracy of -30% to +50%. In the early stages of development, however, the process design is often incomplete or inaccurate, so the error bounds are often considerably larger.


Resources

Educational material *
AssesCCUS from University of Michigan
' Online tools *
The Bioprocess TEA Calculator
' *
CatCost
' Guidelines * Techno-Economic Assessment Guidelines for Utilization{{Cite journal, last1=Zimmermann, first1=Arno W., last2=Wunderlich, first2=Johannes, last3=Müller, first3=Leonard, last4=Buchner, first4=Georg A., last5=Marxen, first5=Annika, last6=Michailos, first6=Stavros, last7=Armstrong, first7=Katy, last8=Naims, first8=Henriette, last9=McCord, first9=Stephen, last10=Styring, first10=Peter, last11=Sick, first11=Volker, date=2020, title=Techno-Economic Assessment Guidelines for {{CO2 Utilization, journal=Frontiers in Energy Research, language=English, volume=8, doi=10.3389/fenrg.2020.00005, issn=2296-598X, doi-access=free


References

Technology assessment