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NPV includes finance costs.

My thoughts exactly @tomcat.

I've done some sensitivity studies with my old friend CROE.

C: Conservative Scenario
R: Realistic
O: Optimistic
E: Euphoric

Although these values can be altered, I've kept them all the same in the results presented below:

Discount rate: 8%
Gas Price: 2.25p per kWhr
Electricity Price: 12p per kWhr
kWe: 6.4
kWt: 15
Lifespan: 10 years
CapEx: £10,000 (sale price and installation)
OpEx: £100 (average maintenance costs per year)

These values are altered:

System efficiency: C:80%, R:85%, O:92%, E:95%
Utilisation per year: C:60%, R:70%, O:80%, E:90%

As an example of the cash flows per year consider the (R)ealistic scenario:

OpEx per year: (£100)
Cost of input gas: (£3,474)
Value of electricity generated: £4,709
Value of thermal generated (assuming 92% efficiency of a conventional boiler): £2,250
Total value (virtual cash flow) per year: £3,385

At an 8% discount rate the sum over 10 years for that cash flow is £22,716 (Using the PV formula in the spreadsheet)

To find the Net Present Value take away the initial Capital Expenditure of £10,000 resulting in £12,716.

For this case the Internal Rate of Return is simply the discount rate which results in an NPV of zero, in this case 31%.

For a CapEx of £10,000 the NPV of the other scenarios are:

C: £8,126
R: £12,716
O: £18,083
E: £22,552

and the IRR's are:

C: 23%
R: 31%
O: 40%
E: 47%

As a result of economies of scale the all in CapEx might be expected to half to around £5,000 in time. The NPV's in this scenario are simply £5,000 larger. Namely:

C: £13,126
R: £17,716
O: £23,083
E: £27,552

and the IRR's are:

C: 53%
R: 67%
O: 83%
E: 96%

Reminder: the utilisation percentages are for those that might be expected from a commercial setting, not a residential setting, and are high because the expectation is that the 15kWt generated is only part of the total thermal energy required, The Inspirit Charger being the lead (i.e. comes on first) boiler in the boiler room. Other conventional (read cheaper), boilers come on when the demand is greater than 15kWt.

DYOR - the above might contain miscalculations or incorrect assumptions.

I'm happy to vary other parameters if there is interest.

Sounds too good to be true doesn't it!? ;-)

Ob.

;-) Perhaps I'll do some NPV/IRR calculations at some point from the point of view of potential customers :-)

I don't know who wrote those articles. I got the impression it was Nick or Paddy, probably Paddy.

Now that is opening a large can of worms! A can I've been through several times over the years on here. Perhaps I'll go over it again another day. For now, the TLDR is if the economics are now better (apparently over twice as good) than those described in the Align Report from 2016, there should be a market for the Inspirit Charger 6.4kWe as it should be a no-brainier for commercial properties who value NPV's and IRR's quite highly - it's all about the bottom line: how to make/save money, and at <3 year pay back, potentially as low as 2... In terms of the climate, I'll repeat: generating electricity locally at the efficiencies we are (hopefully!) talking about in the Inspirit Charger is more efficient than doing the same centrally from gas and transmitting. If you haven't seen it, there is some useful background from the Inspirit blog at:

https://www.inspirit-energy.com/story/blog-inspirit-uncovered

@MorningJan. As an example, imagine that a commercial property has an average demand for heat of say 20kWt. Sometimes it may have no demand. Sometimes the peak might be 70kWt. In this situation they may have an array of 2 or 3 boilers. Let's say 2 to keep it simple: a 15kWt Inspirit Charger, and a 55kWt conventional boiler that are used in commercial properties the world over. The lead boiler is the Inspirit Charger and this is turned on and used when the demand for thermal is below 15kWt. When the demand for thermal exceeds 15kWt the other conventional boiler kicks in as well. In this configuration the Inspirit Charger may be on 80% of the time, but the conventional boiler will be on much less than this. It's job is there to meet demand above 15kWt and peak demand up to 70kWt (sometimes a third cheaper boiler is present to meet peak demand) Any clearer?

@MorningJan It's certainly true that residential boilers spend most of their time off, and from what I gather this is the primary reason the target market for the Inspirit Charger is commercial. Clearly not all commercial properties will have run times of 7,000 hours per year (80% utilisation), but even at half this (3,500 hours, 40% utilisation), the pay back times from the new 6.4kWe model are likely better than those of the older model running at 80% utilisation, as the saving rate per hour running is more than double: 61.5p vs 28p. And especially so if the upfront costs have reduced.

On your 45kW and dolls houses. I still don't think you quite understand. The lead boiler is the Inspirit Charger, producing up to 15kWt, the secondary boiler (there may be more depending on the economics of 1 large conventional boiler vs 2 or more smaller ones), produce as much kWt as you desire. 100's if you like... We are not selling those. ;-)

I think you might need to check your maths @MorningJan. We are talking about 1 charger producing 6.4kWe, but if we were talking about 3 producing around 18kWe of energy flat out the cost to buy that from the grid at 12p per kW/hr would be:

18 * 365 * 24 * £0.12 = £18.9k

As an example of the proposition, if an 80% efficient Inspirit Charger with a saving rate at maximum output of around 50p per hour of operation (see earlier posts) ran for 80% of the year, the saving in a single year of operation would be around: 80% * 24 * 365 * £0.50 = £3,500

It's an eye-watering proposition ;-)

@MorningJan. I'm not sure you are understanding the proposition. 1 lead Inspirit Charger running 70-90% of the time producing 15kWt, 6.4kWe. Initially costing around £10k or so for early models (but price might have significantly been reduced over the past 3 years). Supplemented by 1 or 2 secondary demand boilers running much less frequently costing in the low thousands (perhaps even high hundreds) each producing as much as whatever peak demand is required. Pay back time of this configuration is 3 years or so, and when we are producing at scale perhaps as low as 2 years.

If the thermal demand is sufficiently greater than 15kWt for long periods of time it should be economical for the premise to consider 2 lead Inspirit Chargers in their boiler array, assuming of course they can make use of the "free" electricity produced. ;-)

My money is on payback times being reduced considerably at the compromise of the overall system efficiencies being reduced into the 65-80% range. If this is what was required to make the NPV + IRR more attractive then so be it. Electricity produced from gas at that efficiency is still greater than producing it centrally and distributing it.

@MorningJan I think you are missing the point. The strategy is for the Inspirit Charger to be the lead boiler of 2 or 3 boilers. Meaning it will be producing its 15kWt of energy pretty much all the time, along with the accompanying "free" 6kWe of electricity. If the demand is greater than 15kWt - which it almost certainly will be in larger commercial premises, then this demand is supplemented by the other standard (much cheaper) boilers.

But what if the system efficiencies aren't so high?

Using the Align methodology:

@80%:
"Assuming a gas price of 2.25p/kWh and electricity price of 12p/kWh that means 77p (6.4kW x 12p) of electricity has been self-generated and 42p (15kW x 2.25p/kWh x1/80%) of heat, totaling 119p, on a total input bill of 60.2p (26.75kW x 2.25p), assuming the electricity and heat are consumed on site, so providing a saving of 119p – 60.2p = 58.8p"

A reduction of the saving per hour rate from 61.5p@92% efficiency to 58.8p@80% efficient isn't bad!

@65%:
"... 77p (6.4kW x 12p) ... 52p (15kW x 2.25p/kWh x1/65%) of heat, totaling 129p, on a total input bill of 74p (32.9kW x 2.25p) ... so providing a saving of 129p – 74p = 55p"

That's higher than I expected.

@50%:
"... 77p (6.4kW x 12p) ... 67.5p (15kW x 2.25p/kWh x1/50%) of heat, totaling 144.5p, on a total input bill of 96.3p (42.8kW x 2.25p) ... so providing a saving of 144.5p – 96.3p = 48p"

So is that!

@33%:
"... 77p (6.4kW x 12p) ... 102p (15kW x 2.25p/kWh x1/33%) of heat, totaling 179p, on a total input bill of 145.9p (64.8kW x 2.25p) ... so providing a saving of 179p – 145.9p = 33p"

That can't be right... In fact it's likely that the Align methodology isn't valid for lower efficiencies. In fact the more closely I look at the formula, the more I question the use of the system efficiency in the heat component of the thermal energy produced. I think it might be reasonable for comparison purposes to include the efficiency of none electricity producing boilers, in which case 92% should have been used in all of the above calculations:

With it completely removed:

@92%
"... 77p (6.4kW x 12p) ... 33.8p (15kW x 2.25p/kWh) of heat, totaling 110.8p, on a total input bill of 52.5p (23.3kW x 2.25p) ... so providing a saving of 110.8p – 52.5p = 58.3p."

@80%:
"... 77p (6.4kW x 12p) ... 33.8p (15kW x 2.25p/kWh) of heat, totaling 110.8p, on a total input bill of 60.2p (26.75kW x 2.25p) ... so providing a saving of 110.8p – 60.2p = 50.6p"

@65%:
"... 77p (6.4kW x 12p) ... 33.8p (15kW x 2.25p/kWh) of heat, totaling 110.8p, on a total input bill of 74p (32.9kW x 2.25p) ... so providing a saving of 110.8p – 74p = 36.8p"

@50%:
"... 77p (6.4kW x 12p) ... 33.8p (15kW x 2.25p/kWh) of heat, totaling 110.8p, on a total input bill of 96.3p (42.8kW x 2.25p) ... so providing a saving of 110.8p – 96.3p = 14.5p"

The total savings per hour are increased by around 3p if "33.8p (15kW x 2.25p/kWh)" is changed to "36.7p (15kW x 2.25p/kWh x1/92%) ".

In summary even if the system efficiencies are in the 65-80% range the savings per hour are sufficiently high to result in attractive payback times all else being equal. And @>90% efficiency the payback times are remarkable! I'll be impressed if the 6.4kWe model has a system efficiency greater than 80%, and very impressed if greater than 90%. And if >95% !!!!? ;-)

Ob.

I thought I'd run through some what if's based on the most recent news release.

What would it mean if the Inspirit Charger were capable of producing 15kW of useful thermal energy whilst at the same time producing 6.4kW of useful electrical energy? There are lots of unknowns. For example we have yet to be told the system efficiency of this improved output. For simplicity I'm going to assume 92%. This means that in order to produce that 15kWt and 6.4kWe, on a GCV (gross calorific value) basis 23.3kW of input gas is required.

We also don't know the overall dimensions of the Charger. For the 3kWe model it was initially:

Height 1000mm
Width 630mm
Depth 650mm

and we have been told for the 6.4kWe model the height is below 800mm. The costs have supposedly been reduced significantly since 2016 through reductions in material costs.

Our initial target audience is the commercial sector where it is expected to be the lead boiler, resulting in longer running hours and consequently reduced payback times when compared to the residential sector.

With the help of the Align report it's possible to get a feel for just how important the 6.4kWe is

"On the cusp of cogeneration commercialisation & trading at a fraction of replacement IP cost" (13th June 2016)
http://www.alignresearch.co.uk/wp-content/uploads/2016/06/Inspirit-Energy-Align-Research-13th-June-2016-Final.pdf
===[
Assuming a gas price of 2.25p/kWh and electricity price of 12p/kWh that means 36p (3kW x 12p) of electricity has been self-generated and 37p (15kW x 2.25p/kWh x1/92%) of heat, totaling 73p, on a total input bill of 45p (20kW x 2.25p), assuming the electricity and heat are consumed on site, so providing a saving of 73p – 45p = 28p. This compares to no savings at all from a nonmCHP boiler, which only generates heat.
]===

(it's worth reading the paragraphs around that text!)

For the new model that paragraph becomes:

"Assuming a gas price of 2.25p/kWh and electricity price of 12p/kWh that means 77p (6.4kW x 12p) of electricity has been self-generated and 37p (15kW x 2.25p/kWh x1/92%) of heat, totaling 114p, on a total input bill of 52.5p (23.3kW x 2.25p), assuming the electricity and heat are consumed on site, so providing a saving of 114p – 52.5p = 61.5p."

The follow on paragraph then becomes:

"The payback period for the Charger 6.4 (with no tariffs) based on 7,000 hours of use per annum (only likely to be achieved in a commercial setting) is estimated ... to be 2.7 years - also assuming a purchase price of £10,000, installation cost of £1,500, maintenance at £100 per annum, a gas price of 2.25p/kWh and electricity price of 12p/kWh."

Quite remarkable especially since we were previously estimating the sales price to reduce to £4,400 within a few years of production from economies of scale, and in the light of recent cost improvements...?

Come on JG - time to deliver the mother of all RNS's ;-)

Ob.

By the way, the more I think about it, the more it seems likely that that 6.4kWe is the steady state power output when the boiler is running at maximum power. We have been told the accompanying thermal output @6.4kWe is 15kWt, and it's likely to be 90-95% efficient overall:

(15 + 6.4) / 0.9 = 23.8kW
(15 + 6.4) / 0.95 = 22.5kW

100% (!?) would simply be 15 + 6.4 = 21.4kW

A system efficiency of 90-95% equates to an electrical efficiency of around 27-28.5% (6.4/23.8) (6.4/22.5), which sounds about right for a world leading Stirling Engine! ;-)

Ob.

"Half-year Report" (29 March 2019)
http://www.lse.co.uk/share-regulatory-news.asp?shareprice=INSP&ArticleCode=7e1sjwet&ArticleHeadline=Halfyear_Report

In addition to the (£845k) CLN it looks like we had £212k and (£326k)

"Audited results for the year ended 30 June 2018" (28 December 2018)
http://www.lse.co.uk/share-regulatory-news.asp?shareprice=INSP&ArticleCode=x62aeths&ArticleHeadline=Final_Results
===[
On 4 May 2018, the Company announced that it had raised £530,000 in cash from private investors through the issue of Convertible Loan Notes (CLNs) and converted existing debt due to Related Parties and other third-party debt valued at £315,000 into the CLNs. The principal amount of the CLNs are convertible at the higher of either 0.07 p per Ordinary Share of 0.1p each or a discount of 25 per cent. to the previous trading day's closing market share price. The CLNs are interest free, convertible at the Company's option and, in the ordinary course of business, are only repayable by the Company in Ordinary Shares following a conversion notice.
]===

@HoundofHell "So the new unit is 20% smaller than previous versions". We have been told the 6.4kW version is 80% as tall as the 3kW version. What we don't know is whether it got wider to accommodate the improved output. i.e. is the overall volume of the 6.4kW version greater than that of the 3kW version, or is it the same, or is it 20% less?

Come on, own up, who broke my graphs with a 1000% rise!? ;-)

@Brockster. Search for Gunn in the 2018 results posted at the end of last year:

http://www.lse.co.uk/share-regulatory-news.asp?shareprice=INSP&ArticleCode=x62aeths&ArticleHeadline=Final_Results

£80k, but note "£100,000 in accrued director's fees owed to J Gunn and £20,000 owed to N Jagatia were converted into CLNs of equivalent value."