geothermal power plant projects in central america - Orkustofnun

Symmetrical distributions as normal, uniform and PERT are used in the Monte Carlo simulations.According to Savvides (1994) symmetrical distributions allocate probability symmetrically across thedefined range but with varying degrees of concentration towards the mean values. Palisade (2011)states that normally distributed variables are characterized by mean and standard deviations, wherethe values in the middle near the mean are most likely to occur; uniform distribution gives equalchance of occurring, which is defined by minimum and maximum; PERT distribution is rather like atriangular distribution, in that it is defined by minimum, most likely, and maximum; however, valuesbetween the most likely and extremes are more likely to occur than in the triangular distribution.The second phase entails the selection of the risk variables. Savvides (1994) defined this selection as“one which is critical to the viability of the project in the sense that a small deviation from itsprojected value is both probable and potentially damaging to the project’s worth”. The simulated riskvariables shown in Table 16 include availability factor, exploration and confirmation cost, drillingcost, first development cost, steam gathering cost, equipment and construction cost, transmissionpower line distance, transmission power line cost, O&M cost, O&M annual growth, energy price,energy price annual growth and loan interest.TABLE 16: Input risk variables for scenario 1Variables Units Min. Mean Max. Fix. Val. St. Dev. Distributiona m bPOWER PLANT SPECIFICATIONGross Capacity MW 55.0Resource Temperature °C 240.0Mass Flow Rate kg/s 300.0Availability Factor % 0.8 0.9 0.95 PERTEXPLORATION AND CONFIRMATIONExploration Cost USD/kW 138.4 173.0 207.6 UniformConfirmation Cost USD/kW 138.4 173.0 207.6 UniformDRILLINGDrilling Cost USD/MW 0.3 0.5 1.0 PERTFirst Development Cost MUSD 5.3 15.1 24.8 PERTPOWER PLANTSteam Gathering Cost USD/kW 223.2 279.0 334.8 UniformEquipment and Construction Cost MUSD 120.6 150.8 181.0 UniformTransmission Power Line Distance km 1.0 10.0 12.0 PERTTransmission Power Line Cost USD/km 590000.0 840000.0 920000.0 PERTO&M Cost USD¢/kwh 2.2 2.8 3.4 UniformO&M Annual Growth % 4.0 3 NormalFINANCIALInitial Energy Price USD/MWh 90.0 116.0 170.0 PERTEnergy Price Annual Growth % 5.0 3 NormalLoan Interest % 8.0 9.0 11.0 PERTTable 16 shows the risk variables for scenario 1 (SF, 27.7 MW, 240°C, 300 kg/s). Based on thisinformation, the risk analysis tool has the basic inputs to execute the Monte Carlo simulation; resultsare generated using 1,000 iterations. The variability information permits the study of variations in theIRR of Equity due to the predicted variation of each risk variable.Figure 50 shows the density and cumulative probability distribution of IRR of Equity for scenarios 1and 2. Using the financial model, the expected or deterministic result for the IRR of Equity forScenario 1 is 21.3 %. The results of the risk analysis illustrate the probability of success for an IRR ofEquity greater or equal to 20% to be 0.58, signifying a 58.8% chance of the project exceeding theminimum rate of return expected by investors. The internal rate of return of equity shows someprobability of being positive as well as some probability of being negative; hence the decision rests onthe risk aversion of the investor.58