Asset utilization efficiency and energy asset turns: a new approach for evaluating and comparing renewable energy projects

As global demand for food, fuel, and energy resources rise and concerns about climate change and the depletion of fossil fuels become more pressing; demand for renewable energy projects has grown. Thanks to related scientific developments, a variety of innovative conversion technologies is now available. As a result, tools that facilitate business evaluation across the multiple types of production systems are increasingly important to adequate planning and decision-making for investors and regulators working with renewable energy. This thesis contends that although business evaluation of renewable energy projects is complicated by numerous elements (some inherent to the environmental-component they present, and others to the highly integrated production chain they often constitute), the fundamental attributes that affect their financial and economical business performance aggregate on the capital level, in a tangible and measurable manner. While the business literature backs this suggestion for numerous industries, there is a lack of researches and investigative methods available in the field of renewable energy Thus; this thesis presents the foundations of an analytical framework with roots on business analysis through the exploration of financial ratios. More precisely, for comparing the alternatives, a systems-model approach is proposed for allowing uniform assessments of the utilization levels presented by the physical-assets existing within a given energy system, extending the conventional financial analysis of physical assets turnover to the particular needs of the energy industry. Although the propositions herein formulated are designed to be functional across most (if not all) renewable energy system, the focus of this thesis is biomass-based energy for: 1) The prominent contextual relevance these systems currently hold, 2) The broad and comprehensive producing chain they present (which is adequate for mathematical modeling), and 3) The inevitable need for research-scope. Empirical validation is then presented through the mathematical construction and microeconomic interpretation of three case studies. First, the Brazilian biomass-based renewable industry is assessed in terms of the levels of physical-assets performance it presents across three-defined ethanol production clusters. Results show similar levels of asset performance presented by the in-operation ethanol enterprises, despite regional features influencing key-parameters of the proposed model, matching ex-ante expectations based on the regional policy-history of the industry. The second case study examines impacts in the performance of physical-assets that may result from technological advances in a given energy-production system. This case study uses cross-sectional data from surveys and interviews of agents working directly with grid-connected biomass-energy plants in Mato Grosso, Brazil. Additionally, the case study presents regressions of the regional asset-cost plant-size relation. The results offer evidence that, ceteris paribus, reduction in the specialization of physical assets of the systems contribute to increased project viability by allowing increased capital efficiency. Finally, a comparison of the performance of physical-assets across various types of renewable energy technologies is presented, offering evidence that measurement of physical asset utilization may be successfully used to support comparison of alternatives in renewable energy