The third and final level in the site assessment process.
The Detailed Project Plan is the 3rd level of site assessment and completes the site assessment process.
This step assumes your site has successfully passed the first two steps of the site assessment process and therefore warrants a detailed project plan preparation.
As mentioned the detailed project plan is designed to give you all the information you need to make your final decision whether to invest in the project or not. The main tool for making this decision is the 40 year financial projection based on the optimal system design for the site. This begs the question, “How do we define optimal?”
An “optimal” system to someone could mean for example:
- a system that maximizes kilowatt hour production during a year (to maximize revenue or energy available for use).
- a system with a high utilization rate (one that runs 100% all the time).
- a system with a high efficiency (water to wire).
- a system with a small payback period ( payback period equals number of years to payback original investment).
However, we define the “optimal” as the size and other specifications that maximizes Internal Rate of Return (IRR ) on the project.
Why optimize IRR? Because every other measure is less perfect. Utilization rate or system efficiency or kilowatt hour production or payback period are all poor proxies for overall performance. Your investment performance is best measured by IRR which captures all of these other concepts.
As we have decided that an “optimal” system is one that maximizes IRR, we estimate all costs and revenues over a 40 year period for the purposes of calculating IRR. We use our proprietary “Waterwatts” model to “solve” for the optimal size and system specifications that will maximize IRR.
Every system size is considered along with its unique costs and unique expected revenue streams based on expected water flows and heads, and the system with the highest IRR is determined as the result.
Are several systems possible? Yes, but only one is likely optimal. One is almost always going to have a higher IRR than the others.
The Detailed Project Plan is more than just the 40 year financial projection however.
It also includes detailed site diagrams and drawings of the turbine and the installation in the existing site environment, turbine specifications, planned maintenance (to support maintenance related financial projections) as well as descriptions of how the system will work and installation timelines.
