Decision-making procedures backed by hard numbers is a great way for renewable energy developers to optimize their performance. Key performance indicators (KPIs) can be used to help managers quantify how their renewable energy business performs to make smart decisions. Isolating time wasting tasks, predicting financial feasibility, comparing asset performance and many other metrics can be used to make businesses run smarter.
There’s an infinite number of KPIs which vary according to industry and business needs. Here’s a few important metrics that can be monitored with the Arbox HAP® Platform for developers and operators of every kind of renewable asset : wind, solar, biomass, hydro, etc.
ROI – Return On Investment
The Return On Investment (ROI) is a simple calculation that compares a project’s net profit to its original investment. In pre-development projects, the ROI is a critical measure that can be used to help decide if a project proceeds or not. It can also be used as a comparison tool, for example, an investor could choose between two projects to finance based on their projected ROI. Re-evaluating the ROI is an exercise that should be done periodically during the life of the project to ensure the project continues to be profitable.
NPV – Net Present Value
A hundred years ago, you could buy a loaf of bread for a nickel, but now bread costs a few dollars. As time passes, inflation causes money to lose value. Cash that you have now is more valuable than the same sum of cash in the future. This concept is called the time value of money.
Net Present Value (NPV) is a metric that is designed to simplify a project’s financial model and account for the time value of money. By estimating yearly total cash flows in a financial model and assuming a discount rate (the rate at which money loses value over time), the project’s total value, in today’s dollars, can be calculated.
Interpreting NPV is straightforward. The higher the NPV, the more valuable the project. This metric can be really helpful in determining which project is more likely to yield larger returns.
IRR – Internal Rate of Return
The Internal Rate of Return (IRR) is a metric in the same family as ROI and NPV. The ROI is a value that tells you how much your project returns, without considering the time value of money. NPV is one lump sum that considers the time value of money, but doesn’t talk about returns.
IRR addresses these shortcomings by calculating an average yearly return while also considering the time value of money. In technical terms, IRR calculates the discount rate that makes the NPV of a project 0. Calculating IRR is an involved process that is easier to implement with a software based tool like those provided with Arbox HAP®. This value provides a more accurate metric to evaluate a project’s return than ROI.
PR – Performance Ratio
The Performance Ratio (PR) is one of the most important metrics for evaluating the efficiency of various electricity generating facilities. The PR, represented as a percentage, is the ratio between actual electricity production and theoretical production during a reference period. The difference between theoretical and actual production comes from the losses caused by the different equipment installation.
The PR measures the quality of a given plant that is independent of location and is often described as a quality factor. With the PR you can compare the energy output of your assets to figure out which design or equipment produces better returns.
This metric is a percentage that represents the relative time an asset is operating and generating value. A solar powerplant with an availability metric of 90% for example is running the majority of the time, but 10% of the time it is offline. Comparing the availability of similar plants can be used to identify weak designs, equipment that is prone to failures or substandard maintenance practices. Armed with this knowledge, operators can target facilities to make performance improvements.
Greenhouse Gas Equivalency
Arbox develops tools aimed for developers of renewable generation facilities. By developing and operating clean generation facilities, electricity can be produced without harmful greenhouse gasses. The greenhouse gas equivalency calculation allows sustainable technologies to figure out exactly how much of an impact they’ve had on the environment. This metric compares how many tons of CO2 would have been emitted if a dirty technology produced electricity instead of the clean facility.
This metric can be used for many purposes. Besides being great for public relations, it can be used to evaluate the success of government incentive programs for green technology.
The Arbox HAP® Platform
The Arbox HAP® Platform is a software solution dedicated to all the stakeholders in the field of renewable energy which helps them to manage their project life cycle from the beginning to the end, from assessment, financial modeling, project management, design, procurement, document management to live monitoring their assets.
The platform is an innovative all-in-one tool that includes smart analytics that allows benchmarking, pattern analysis, comparison of projects, forecasting models, estimates vs. actuals and smart visuals.
Straight out of the box, Arbox HAP® is configured to automatically track many useful KPIs. This powerful tool doesn’t stop there, Arbox HAP® also allows users to create their own KPIs so they can track their business, their way