Investment Analysis: Proper Risk Evaluation makes Conservation Projects the RIGHT CHOICE

Abstract

Investment opportunities in renewable and low environmental
impact generation capacity are abundant, and green energy has become
the media darling. In the shadows of this limelight are probably better
opportunities for investment-conservation projects. Proper risk analysis
is the essential tool used to divine between stereotypically mundane
conservation projects and the more glamorous green power ones.
Business analysts measure investment opportunities based on the
SUHGLFWHGULVNRIIXWXUHFDVKÁRZDQGLWVH[SHFWHGPDJQLWXGH$VHQHUJ\
HQJLQHHUVDQGPDQDJHUVRXUWDVNLVWRJHQHUDWHSURMHFWVZLWKVXIÀFLHQW
credibility to warrant investment. These analysts are accustomed to
evaluating projects using metrics, including IRR, NPV, ROI, and other
more sophisticated decision tools such as the Capital Asset Pricing
Model. We as energy engineers are accustomed to conversing in Btus,
kWh, therms, quads, and tons of cooling. Our role is to be the translator
RI H[SHFWHG HQHUJ\ LPSDFW LQ %WXV N:K DQG RWKHU XQLWV LQWR FUHGLEOH
H[SHFWHG GROODUV )DLOXUH WR GR WKLV FRQVLVWHQWO\ ZKLOH GHOLYHULQJ FRVW
avoidance as predicted, is the daily challenge we face as we compete
with other investment opportunities for project funds.