A market analysis task included personal interviews by GE personnel and supplemental mail surveys to acquire statistical data and to identify and measure attitudes, reactions and intentions of prospective small solar thermal power systems (SPS) users. Over 500 firms were contacted, including three ownership classes of electric utilities, industrial firms in the top SIC codes for energy consumption, and design engineering firms. A market demand model was developed which utilizes the data base developed by personal interviews and surveys, and projected energy price and consumption data to perform sensitivity analyses and estimate potential markets for SPS

Goff, H. C.

English

NASA Technical Reports Server

SPS MARKET ANALYSIS	
24786
I1. C. Goff, Program Manager
General Electric Co.
ABSTRACT
Advanced Energy Department of General, Electric is performing a study for aPL on
the Effects of System Factorn on the Economics of and Demand for Small Solar
Thermal Power Systems (S
	 Study goals are to estimate market penetration as
afunction of tune, SPS performance factors, and market/economic
considerations, and to formulate commercialization strategies. A market
analysis task has included personal interviews by GE personnel and supplemental
mail surveys to acquire statistical data and to identify and measure attitudes,
reactions and intentions of prospective SPS users. Over 500 firms were
contacted, including throe ownership classes of electric utilities, industrial
firms in the top SIC codes for energy consumption, and design engineering
firms. A market demand model was developed which utilizes the data base
developed by personal, interviews and surveys, and projected enezqy price and
consumption data to perform sensitivity analyses and estimate potential, markets
for SPS.
INTRODUCTION
This presentation reviews the on-going GE Advanced Energy Department study of
Effects of System Factors on the Economics of and Demand for Small (110 MWe)
Solar Thermal Power stems (SPS). The study goals are to estimate market
penetration rates for t:hesa tyetems as a function of time, SPS performance
factors and market/economic considerations, and to develop cost effective
strategies for accelerating the market penetration rate for promising near-term
applications. Three major tasks comprising this study include; market;
analysts, market penetration sensitivity analysis, and commercialization
strategy formulation. This review summarizes the market analysis tasks, with
emphasis on results obtained from the personal interviews and mail survey
conducted. The market demand model is also presented.
STUDY APPROACH
A nationwide study was conducted among three major classes of utility
ownership, :i.e., investor-owned utilities, rural electric cooperatives, and
municipal systems, among the top eight energy consuming classifications of
industrial firms, and among selected design engineering firms. Types of
industrials contacted in the study included chemicals, paper, food,
transportation equipment, textiles, stone, clay, glass, petroleum refining, and
others. Firms in all fifty states were included in the study sample. The
selection of industrial firms included an equal number of firms with and
without to-plant generation equipment to help remove bias caused by this
variable. Similarly, the electric utility firms contacted included both firms
which generated all or part of their power requirements as well as non-
generators which function as distributors and resellers of electric power.
over 240 industrial, 200 utility and 70 design engineering firms were
contacted. Although there were some firms which declined to ra.rtiotpate in the
study for a variety of reasons, the overall, response rate has been high and is
currently about 60%.
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Personal interviews were conducted by projoct personnel and members of GE
industrial Sales and klectric Utility sales DWistons, In additior to the
market study information provided by the .firms being int~.arviewed, many cif the
GE field sales engineers provided their views and ceawtanta on the SPS and
potential for applications of solar electric systems. Gonftdontirlity of data
provided was stressed with all respondents and was a key factor ir their study
participation, particularly in providing financial and inveatrre±nt criteria
information.
In addition to personal interviews, a supplemental mail survey activity was
conducted A list of firms was carefully compiled to assure tlat it was ac
representative as possible and with minimum biases, All firms were contacted
in advance to verify name; title, and address of they survey respondent. Each
individual was sent a personal letter from the y GE Program Manager soliciting
,participation in the sutdy, material doacribtng the SPS and a comprehensive
questionnaire. After a reaconahle pertod of time, all who had rot responded
were contacted to verify receipt of the survey package. . Duplicate mailings
were sent to anyone who had not received the original mail,lntt. 'telephone
intertvews were conducted by p^ .,fesstonal interviewers in those cases in which
the survey package had beer received, and the respondent preferred such an
interview rather than returning the completed questionna ires. To reduce bias
resulting
 from a dqt&tied technical evaluation of vyetemo, concep to ":r ottiay
participants, only a broad overview of the solar systems retng considered by
dPL was given. System configuration data and cc-st estimates were derived from
data provided. by 4rPL. Both the distributed collection central, generation and
distributed generation concepts were presented to encompass systems with and
without process stream	 output. sufficient detail was given to entiale
respondents to answer questions regarding the possibility that they would
consider an SIPS as a possible power plant option in the 1990 time frame. SPS
land area requirements for three representative solar regions of the country
were developed, as well as projected system and bulbar energy costs for each
region. SPS capacity factor o2 forty percent was used in the system
descriptions.
INITIAL FINDINGS
Industrial Firm Responses
Primary reasons for in--plant generation were determined from responses of
industrial firms which now generate all or some of their electric power
requirements. Reasons stated in descending order of importance includes the
fact that generation is a by-product of steam production, that is is less
expensive than purchased power, that it provides a non-interruptible power
source, or that the firm has an inexpensive fuel source.
Information on plans for dealing with future energy requirements was also
solicited, and provided data on plans for conversion to other fuel types,
adding or replacing existing in-plant generation equipment, or purchasing of
greater proportions of electrical, needs.
186
Among the factors which would have the most influence in consideration of
purchase of a BPS in the 1990 time frame, the list included; meeting the
company's financial criteria for capital investmento, lower operating costa
than conventional systems, tax credits, delivered energy costs ()d/kWh), and
ability to fossil fixe the BPS to achieve higher capacity factor. 'rho least
influential factors includedi appearance or aesthetics of the f3yntem sp
modularity and relocatability, loan guarantoos, and the exchange of excess
power with local utilities.
Fifty-six percent of the industrial firms contacted stated that they would
consider the BPS as an option in the 1990--time frame. Of these posttttves
responses, 59W felt that the spS would most: likely be considered as an addition
to their present generating equipment, 27% as a replacement for the generation
equipment now on-Mina, and 21% as a► system to repower existing power plant;.
Due to multiple answers by some firms, these total.. over 100%. Major SPS
benefits perceived included fuel availability, energy price protection, clean
non-polluting system, and availability of steam or process heat. Major
drawbacks were cited as land cast and availability, bulbar energy cast, system
capital, cost, and low capacity factor.
The mean after tax rate of return on investment (ROI) required was 19 percent.
The	 e ric Industrial a
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,600 per acre. hand prices varied from a few hundred dollars to over
$100,000 per acre.
Electric Utility Responses
An overall positive response rate of Fifty-five percent was expressed by
utility firms with regard to whether they would consider an BPS as a power
plant option in the 1990-time frame. Among those responding in the
afftrmative, 76% perceived the BPS as an addition to present generating
capacity,14% as a system for repowering existing power plants, and 16% as a
replacement for generating equipment now on-line.
The most influential factors considered by utilities in the purchase of an BPS
were meeting the firms' capital investment requirements, busbar cost of
electricity, lower operating costs than conventional systems, initial system
price ($ per kilowatt) and demonstrations o r
 BPS in the local area. The least
influential were availability of process steam, usability to power existing
plants, and tax credits. Major benefits perceived included transmission
savings, price protection, fuel availability, and clean non-polluting system.
Major drawbacks to BPS perceived by utilities were low capacity ,factor, land
cost and availability, system capital costs, and non-proven technology.
The average fixed charge rate for utility firms was approximately twenty
,percent, while the required Rol was about twelve percent. The price of
suitable land for BPS utility installations averaged $8,700 per acre.
Design Engineering Respons es
The seventy design engineering firms were contacted for qualitative data and to
18 7
obtain their views and reactions to the two system configurations presented,
The BPS configuration option featuring central generation wa3 preferred 2:1 by
the design engineering firma responding. Most were concerned about solar
onaergy variability and felt that supplemental fossil fuel firing for added
capacity factor was important. The availability of process steam as an output
was a desirable feature. In general, these firms were not as concerned about
land cost and availability as industrial and electrical firms contacted,
perhaps reflecting the fact that they may be somewhat insulated from the
effects of Land costs.
MART DEMAND MODEL
A schematic diagram of the BPS demand model is shown below.
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 DEMAND MODEL. FLOWCHAR T	. iN gUITnY
Principal user inputs to the model include: year for which BPS market
estimate is desired, SPS cost estimate at that time. ^SPS performance -
electrical and thermal. output (including variation with tnsolation level),
applicable economic incentives such as tax credits, either a :future energy
prise scenario or, alternatively, price escalation rates which the model can
apply to current price levels.
Model output is an estimate of BPS total industrial, market at the year of
interest and a breakdown by individual sectors industries and states.
Exercise of the model for a series of years and corresponding system costs will
yield a market penetration scenario. input parameters can be varied to test
the sensitivity of each on the rate of penetration.
The data model input includes Edison Electric institute data on energy prices
and Survey of Manufacturers data on energy prices and energy consumption.
Price and consumption data are augmented with data from the personal interviews
and mail survey.
188
Principal interview and survey inputs to the model. include (in approximate
order of importance): economic criteria applicable to investment in equipment
such as SPS, land availability and cost, non-economic influences (such as
pollution problems, energy curtailment protection, etc.), strategies to meet
future energy requirements, and desirable SPS system characteristics.
Actual treatment of these inputs in the model depends on the type and quality
of interview responses. Items si,cb an land costa and economic criteria are
found to be statistically distributed so as to be representable by standard
distribution curves in most sectors. Where this is not the case, tabular data
is utilized.
Within a sector, given Land cost distribution and the input system cost, a
total cost distribution is first computed. Energy price for the sector at the
reference year is obtained either from the input price scenario or from
cvxrent prices and the input escalation rates. The economic criteria
distribution is then employed to determine, based on energy price versus SPS
performance and cost, what portion of the sector will view SPS as economic or
cost effective.
Once economic viability is reached, SPS penetration rate will be assumed to
follow historical patterns typified by the Fisher-Pry substitution model.. The
available market within a sector will be established from current sector
energy requirements and future projections. Interviews and surveys have
identified market diluters, such as land non-avatlabtlity, that reduce the
available SPS market size. Combining the available sector market with the
above determined penetration rates yields the estimated SPS market at the
particular point in time of interest. Combining all sectors yields total SPS
market. Data on product technology substitutions experienced by the General
Electric Company in various power generation equipment fields will be used in
establishing a historical trend data base for the model.. The SPS demand model
is easily expandable to more sectors either to enlarge the scope of the market
assessment or to "fine tune" the results.
CONCLUSIONS AND COMMENTS
The high response rate from industrial, utility and design engineering firms
achieved during the market analysis task is a strong indication of a high
level of interest in SPS. Data obtained from the personal interviews and mail
survey activities is now on computer files. There are approximately 140
variables associated with each industrial questionnaire and 100 with each
utility questionnaire completed. The data base contains information on
resent and future electrical requirements, electricity purchases and in-plant
generation, process steam use, options for dealing with future energy
requirements, land costs, investment criteria, and factors which would
influence SPS purchase considerations by industrial and utility firms and
other such information. The demand model and this data base provide a means
for performing market penetration rate sensitivity analyses using actual
industrial and electric utility data, and in helping to identify potential SPS
demonstration sites and applications.. Formulation of commercialization
strategies will benefit from and rely heavily on these market analysis
results.
185
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