Advanced BioFuels USA

by Daniel A. Lane (Lee Enterprises Consulting, Inc./Biofuels Digest/Saille Consulting)  At its most basic level, technoeconomic analysis or assessment (TEA) is a cost-benefit comparison tool used to evaluate the commercial viability of a process.  While many companies are quite familiar with this tool, a number of startups often forgo TEAs of their processes until quite late in the development timeline, which can be a fatal mistake. Considering the TEA early – and often – during process development can highlight future problems early, can provide due diligence to prospective investors and partners, and can help prepare for a successful scale-up effort.  In this article, I will demonstrate the value of using TEAs not just to determine commercial viability, but to focus and to direct R&D efforts, and to improve the likelihood of a successful scale-up. 

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Technoeconomic analysis utilizes a blend of technical modeling, engineering design, and economic evaluation to produce a meaningful result that qualifies – and can be used to quantify – the commercial viability of a process.  A typical methodology is to produce a mass and energy balance of the process, then create a preliminary facility design that identifies and sizes major equipment.  From the mass and energy balance and the facility design, information such as capital costs, operating costs, and financial performance of the overall process can be determined, thereby allowing a detailed economic evaluation of the proposed venture … 

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TEAs, while powerful, do not consider everything needed to properly evaluate a process.  For example, while TEAs offer the opportunity to determine carbon utilization efficiency, they do not consider environmental impacts and permitting.  While TEAs do not include market analyses, they can be used for go/no-go decision making based on detailed market analyses.  As with any tool, the value of the result depends significantly on the quality of the information fed into it.

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One of the biggest misunderstandings about TEAs is the assumption that they are only necessary when it comes time to scale up a technology.  Some companies don’t even consider TEAs until after they have built a pilot plant.  The truth is, TEAs offer value to organizations at almost every stage of development: from early-stage startups seeking seed money to fully established organizations looking to fund their next big project.  They offer value to R&D directors looking to determine how to assign resources and to business development VPs looking to land the next big corporate partnership.

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 “Will this even make money?”  It’s common to hear the ‘better mousetrap’ metaphor as a driving force for innovation, but how can an organization determine whether people will actually pay for that mousetrap?  Preliminary TEAs can help answer this question be providing an estimate of the cost to produce said mousetrap, which can then be considered relative to a market analysis.  If the cost looks too high versus the existing market, the TEA can be used to estimate decreasing costs with increasing scale.

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Government granting agencies love to see TEAs.

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In addition to helping to secure financing, the TEA will also provide information needed to apply for permits and negotiate off-take agreements, waste handling contracts, and utility contracts.  More importantly, a rigorous TEA will help determine whether scale-up from demo should be modular or scaled.  READ MORE