An Introduction to Clean Energy Technology Assessment Methodology

BeijingEnergy Club, April2016

To enablea robust, consistent, rigorous, flexible evaluation across different types of cleanenergy technologies, with the assistance of the Asian Development Bank, the BeijingEnergy Club developed a methodology for Clean Energy Technology Assessment.

For a giventechnology, the assessment system evaluates the technology along with thefollowing four dimensions:

1.Technology Attractiveness

2.Market Potential

3.Regulatory & Policy Environment

4.Health, Safety & Environment

In addition to the above four key dimensions,the assessment system also evaluates the future prospect of the technology andthe risks and uncertainities related to its applications.

1. TechnologyAttractiveness

To assess the technology attractivenessof a given technology, the assessment system considers a few critical elementsin terms ofits maturity, innovation (intellectual property and patent),complexity, advanced level, and its advantages and disadvantages compared tosimilar or alternative technologies.

In assessingthe maturity of a given technology, the Technology Readiness Levels (TRL9[1])method is widely used internationally (see diagram on the right side). The TRL9is based on a scale from 1 to 9 with 9 being the mostmature. InChina, on the basis of TRL9, business value-addition is added as anindicator to assess the maturity of a technology, which evaluates commercializationreadiness of the technology.

In considerationof Chinese context and incorporatinginternational common practices, the assessment methodology we developed streamlines TRL with thefollowing five levels:

1.Technologyconcept

2.Laboratoryprototype

3.Successfulpilot projects

4.Commercialization

5.Deploymentat scale

The technology complexity is analyzed by considering following aspects:

·Isthe technology easily replicatable, substitutable and replaceable by othersimilar technologies?

·Isthere mature supply chain for the technology?

·Whatassociated supporting facilities are needed for the technology？

·Whatdistincts this technology from other similar technologies?

·Isit considered as core and essential part of a larger technological system?

For each specific technology to beevaluated, e.g energy storage technology, the methodology will also analyze andassess its key technical components (such as recycling life of the storagetechnology, economic scale, safety, efficiency and cost)

2. Market Potential

Theassessment of market potential of a technology focuses on its application scope,market reach in current and future times, growth rate of its market, economicviability of the technology etc.

Targetedmarket reach represents the potentials of a specific technology to be widelyused in China or globally. It reflects expected revenue to be generated by thetechnology (expressed in US dollars or RMB). However, this is only anassumption for evaluating market prospect of the technology application, ratherthan a forecast for its market size.

Marketgrowth is a growth rate of the sales volume or sales value of the technologyand its products for a given period.

Economicviability of technology solution refers to its economic ability of technology /productto attract users through competitive price. Economic viability indicates expected benefits generated within its lifecycle. Economic viability of a technology is evaluated through comparing itscost with other conventional technologies. It is also necessary to analyze whetherthe technology will become leading standard of the sector.

The economicviability assessment of a technology needs to consider integrated factorsincluding investment cost, operating margin and maintenance cost, unit cost forlife-cycle, and return on investment(ROI). Cost competitiveness is related totechnological maturity. In general, as new and advanced technology matures, itscost is gradually close to ones of the conventional technologies and then it isgetting more economically attractive.

Inaddition, market reach for each technology cannot be isolated from a rationalbusiness model. In the evaluation of market potential, following essentialquestions should be answered:

·What market problems can be solved by the technology and what is its contributionto market?

·Who is its user base?

·Compared with other competitors, what is competitive advantage of thetechnology?

·What are the business model and profit-making mode?

Aseries of discussions on these questions will provide technology owners effectivefeedback on developing their business models.

3. Regulatory&Policy Environment

For aspecific technology, its regulatory& policy environment is measured by two sub-indicators, industrial policy support and market openness.

Extentof industrial policy support is evaluated based on an integrated consideration ofsubsidies, tax incentives, other policies to support R&D, relevant regulatorymeasures and industrial standards. Apart from that, it needs to analyze whetherthere are concrete assistance measures and means to implement given supportingpolicies at the national and local levels. And local implementing capacity alsoneeds to be assessed.  

Sincenot all technology markets are fully open to foreign investors and privatesector, the openness of market is to reflect the permission for foreign andprivate investors access to relative markets. It intends to identify whetherthe market is open or not, and to assess the extent of market openness of eachmarket.

4. Health, Safety and Environment（HSE）

HSE assessmentis to identify those risks that may harm health, safety and environment, and todetermine level of such risks whenthe technology is applied.

Forthose technologies with potential huge risks to harm human health and safety, HSEassessment will be scored zero, and the technology will be considered unfit forapplication.

In termsof environmental effect of a technology, environmental benefits and its impactbrought by application of the technology should be analyzed and then evaluated,for example to reduce one or more contaminants (such as carbon dioxide, sulfurdioxide, ammonia, or solid waste), or to improve integrated resources utilizationefficiency (such as energy, water or raw material).

Thebenefits generated from improving resource efficiency and eliminating pollutantemissions should be evaluated over the whole life cycle of a technology (frompre production to production and use). Although clean technology as a whole is generallybeneficial for environment, it may create negative effect in certain stage ofits full life cycle. Additional attention should be paid to identify thosenegative impacts on environment that are most likely to occur in specific siteand particular stage.

Inaddition, attention should be also given to the impacts on labor-intensivelevel of industrial chains and employment of the sector brought by applicationof the technology.

5. Prospect of technology developmentand risk analysis

Basedon the assessment of technology attractiveness, market attractiveness, regulatory& policy environment, and HSE risks, the assessment system will make an integratedjudgement to the prospect of the technology being evaluated.

Lastly, the assessment system willestimate risk exposure during commercialization process of the technology,including technology risks, market risks, competition risks, and regulatory& policy risks.

[1]TRL9rating system was first developed by US NASA, it is today widely used bycompanies and other institutions. By rating a technology’s maturity from 1 to9, it helps people to better understand the current situation of the technologyand its commercialization process.