Feasibility Evaluation of Cleaner Production Options

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Select workable CP opportunities

Categorize options into:1. Implement obviously feasible options

2. Reject obviously non-feasible options

3. Remaining options - conduct feasibility analysis

Feasibility of CP options

Technical feasibilityFinancial feasibility Environmental feasibility

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Technical feasibilityAvailability and reliability

of equipmentRequirements for utilities,

process monitoring and control, space etc.

Maintenance requirements

Operator and supervisor skills

Ease of retrofitting into existing system

Projected material balance

Projected energy balance

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Assess technical feasibilityConsumption Rates: Before implementation After implementation Inputs: raw materials labour energy water etc. Outputs: products solid waste wastewater Gaseous emissions etc.

Parameters Weight Score Weighted Score

Level of meeting specifications

3 5 15

Availability and reliability of after sales service

2 2 4

Utility requirements

2 3 6

Availability of auxiliary equipment

2 3 6

Compatibility with other systems

2 4 8

Total 3905/01/23 6

If technically not feasible,

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Reject the optionNot necessary to evaluate financial and environmental feasibility

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Assess financial viability

Consists of:1. Data collection:investments;operational costs & benefits

2. Choice of economic criteria3. Economic calculations

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Assess financial viability

Data collection (from technical evaluation):

1. Investment:equipment, construction, training, start up etc.

2. Operational costs and benefits:before and after comparison

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Operational costs and benefitsElectricityMan powerChemicalMaintenanceTraining costInterest and

depreciation

Direct savings (tangible benefits)

Indirect savingsTreatment costDisposal costHealth and safety

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Timing of Cash Flows

Workingcapital

Annual Operating CostsAnnual Tax Payments

Annual Financing Payments

Salvage ValueEnd of project:

Time zero:

Initial InvestmentWorking Capital

TIMEYear 1 Year 2 Year 3

Annual Revenues/Savings

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Profitability IndicatorsA profitability indicator, or “financial indicator”, is: “a single number that is calculated for characterisation of project profitability in a concise, understandable form.”Common examples are:

Simple PaybackReturn on Investment (ROI)Net Present Value (NPV)Internal Rate of Return (IRR)

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Simple PaybackThis indicator incorporates:

the initial investment cost the first year cash flow from the project

Simple Payback (in years)

Initial Investment

Year 1 Cash Flow=

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How to Interpret Simple Payback

The simple payback calculated for a project is usually compared to a company rule of thumb called a “hurdle” rate:

e.g., if the payback period is less than 3 years, then the project is viewed as profitable

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The Time Value of Moneyand

Net Present Value (NPV)

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Question:

If we were giving away money, would you rather have:

(A) $10,000 today, or(B) $10,000 3 years

from now

Explain your answer...

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InflationMoney loses purchasing power over time as product/service prices rise, so a dollar today can buy more than a dollar next year.

costs $1 costs $1.05

inflation 5%

nownow next yearnext year

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Investment OpportunityA dollar that you invest today will bring you more than a dollar next year — having the dollar now provides you with an investment opportunity

Interest, or “return on investment”

Investing $1 now

InvestmentGives you

$1.10 a year from now

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Present Value Factors Value of $1 in the future, NOW

Discount rate (d): 10% 20% 30% 40% Years into future (n) 1 .9091 .8333 .7692 .7142

2 .8264 .6944 .5917 .5102 3 .7513 .5787 .4552 .3644 4 .6830 .4823 .3501 .2603 5 .6209 .4019 .2693 .1859 10 .3855 .1615 .0725 .0346 20 .1486 .0261 .0053 .0012 30 .0573 .0042 .0004 .0000

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Net Present Value (NPV) Net Present Value (NPV) = the sum of the present values of all of a project’s cash flows, both negative (cash outflows) and positive (cash inflows)

NPV characterises the present value of the project to the company

If NPV > 0, the project is profitable

If NPV < 0, the project is not

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Environmental evaluation

Comparison between the current material balance and the projected material balance

Reduction in quantity of wasteLess hazardous materialsReduction in energy lossesReduction in water consumptionReduction of material consumption

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Selection of feasible options

Tabulate the results of technical, economic and environmental evaluations

Eliminate technically non-feasible optionsEliminate options without significant net

environmental benefitCombine the results to rank the options

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Weighted matrix method

Technical Feasibility - 25 Low: 0 – 5Med: 6 – 14High: 15 – 25

Economic Viability - 50 Low: 0 – 10Med: 11 – 29High: 30 – 50

Environmental Feasibility 25 Low: 0 – 5Med: 6 – 14High: 15 - 25

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Weighted matrix method

Technical – cannot be negativeEconomical – can be negativeEnvironmental – no option should be

negativeRanking – prioritize according to your

needs

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Thank You!