Which feasibility analysis validates that a proposed system will be used effectively?

III.A. Feasibility Study

The feasibility study investigates existing systems in view of new requirements and considers alternative solutions. System analysts determine whether an identified need for a new system or application is necessary for the organization, cost effective, and compatible with the organization's IT architecture and business strategy. This preliminary project feasibility study contains the following aspects:

Technical feasibility: Examines whether the new system can be developed and implemented using existing technology

Economic feasibility: Is concerned with the availability and cost effectiveness of resources needed to complete the project

Legal feasibility: Examines whether the proposed system conforms to legal requirements

Operational feasibility: Pertains to the compatibility between organizational procedures, existing systems, and operations of the new system

Schedule feasibility: Examines whether the system can be developed on time and identifies alternative options

Organizational and social feasibility: Examines whether the system is acceptable for the organization and its people at all levels

Strategic feasibility: Examines whether the recommended system fits into the strategic business and information technology plan of the organization and whether it contributes to the competitive advantage of the organization

It should be noted that a complete feasibility study is not possible at this stage, since the analysis phase has not even started and the full scale of the project is not yet known. For this reason some authors place this activity after the system analysis phase. Obviously, in practice, some overlapping between the three first phases of the SDLC is inevitable.

13.2 Background

The feasibility study outlines the projects of utilizing renewable energy in a new university (New University), a new hospital (New Hospital), and a new town (New Town) under the regional energy management system. In New Town, solar thermal systems on 60% of the building roofs and a sewage thermal system will be introduced for hot water and for providing excess heat for New Hospital through a heat pipe (Fig. 13.3). At New University a solar power system is to be introduced on the roof of 50% of buildings for electricity and providing excess electricity to New Hospital utilizing batteries. The New Hospital, a large consumer of energy, will introduce a well water thermal system for air conditioning while receiving heat and electricity from New Town and New University. Therefore the following three projects are chosen as major projects under the regional energy management system:

Regional thermal management between New Town and New Hospital;

Regional electricity management between New University and New Hospital;

Utilizing well water thermal in New Hospital.

Feasibility of Visual and Tactile Primes

In a first feasibility study, outlined in Fig. 19.6, we experimented with both different combinations of visible and invisible (i.e., primed) visual stimuli and tactile feedback perceived above/below the driver’s awareness. The aim was to identify the general usability and potential of the front windshield or a HUD for visual cues and the seat and steering wheel as media for tactile feedback. In addition to different settings, combinations of different levels of workload were used in a dual-task setting to assess the influence of workload on subliminal perception.

27.6.1 Cost-benefit analysis

The pre-feasibility study generated initial measures of project costs and travel benefits that were used as an input to TREDIS for the EIA. Study results regarding the cost benefit ratio (or benefit cost ratio (BCR)) are shown in Table 27.1, and key findings are summarised below.

Table 27.1. CBA results: alternative views.

Column A shows the pre-feasibility CBA results issued by Transport for NSW in 2012Transport for NSW, 2012aTransport for NSW, 2012b (Transport for NSW, 2012b), following a refinement of a broad list of alternatives and the analysis of them. These numbers cover only traditional benefit measures (time, cost, safety and emissions), and assume a 7% real discount rate in accordance with Australian standards.

Column B shows the CBA results from the 2012 study for the cost benefit ratio (BCR) (ITLS/EDRG, 2012). The BCR results did not change for options 2 and 3 (median and kerbside BRT), which are the two options providing dedicated BRT service throughout the entire length of the corridor. However, the benefits and hence BCR results were increased over the pre-feasibility study for the other three options as a result of using different data on catchment area and thus different outcomes from the demand modelling.

Column C shows the BCR mark-up that would result from adding wider economic benefits, which in this case is primarily the effect of increased market access (agglomeration) (Institute of Transport and Logistics Studies (University of Sydney) and Economic Development Research Group, 2012). The mark-up rate is similar among the first three options shown but drops for the latter two. This reflects issues identified above where Option 4 provides less direct access for North Sydney residents as the tunnel would limit local access options and thus the BRT use to and from North Sydney and the less direct CBD access for residents located further north (due to bus-rail transfers required at the North side interchange) under Option 5.

The analysis in Table 27.1 was carried out using the 7% rate required by the NSW Treasury. Many other jurisdictions use a rate closer to the real cost of capital (3.5% in the UK, 4% elsewhere). Using a lower discount rate would increase all the NPVs. Further analysis shows that all the options would approach a BCR of 1.0 with a lower discount rate of 4%, based just on traditional CBA calculations and a BCR in excess of 1.0 if wider economic benefits are added. It can be seen from Table 27.1 that adding in wider economic benefits will not change the rankings among the options. However, the methodology has the potential to affect project rankings in other situations, because it is based on specific accessibility measures that can diverge from travel cost savings.

This sets the stage for further consideration of wider economic benefits and interest in EIA results to see if strategic goals are being met.

Multiple Choice Questions

11.

The main purpose of feasibility study is to determine how viable the business idea is. Which one of the following listed items is not a component of feasibility study?

Operational feasibility

Product/Service feasibility

Financial feasibility

Organizational feasibility

Which one of the following is a benefit of feasibility study?

Provides insight into addition service and/or product offerings

Efficient use of capital and time

Helps the entrepreneur get the product right

All the above

A business idea can be tested using three main methods. Which one of the following is not used in testing a business idea?

Building a minimum viable product and running it via a group of critics

Selling the idea to other well-equipped developers and monitor it.

Make failure efficient

Think profitability

Which are the major tests of product/service feasibility study

Usability testing

Concept testing

Prototype testing

A and B

Concept testing entails the preliminary description of the idea for the service or product to the prospective clients to gauge their purchase intent, desirability, and interest. There are three main purposes of concept testing as listed further. Which one is not?

Idea development

Sales estimation

Estimation of target customer base

Validation the underlying premise for the product/service idea

The feasibility analysis of market/industry encompasses three main components. Which one of the following listed items is not one of these components?

Attractiveness of the industry

Validation of the underlying premise for the product/service idea

Niche market identification

Market timeliness

The financial feasibility should include three main components. Which one of the following is not a component of financial feasibility?

Overall financial attractiveness of the prospective venture

Financial performance of other similar businesses

Total start-up capital required

None

How can you evaluate the overall attractiveness of a new business venture?

Evaluating the projected rate of return of the venture

Estimating the total profits and liabilities

Estimation of initial capital

Calculating the return on equity

Several factors have to be considered when investigating whether the return projected is enough to justify launching of the business. Which one among the following should be considered?

Existing alternatives for the efforts and time of the entrepreneur

Risks assumed when launching the venture

The amount of money invested

All the above

When is the most appropriate time to conduct a feasibility analysis?

After idea inception but before developing a business plan

Immediately after developing a business plan

Before idea inception

None of the above

Note: Answers in Appendix Section.

Step 3: Designing and Negotiating the Fund

With the stakeholder analysis and the feasibility studies in hand, the structure of the fund can be designed, contracts can be negotiated, the governance mechanism can be determined, administrative principles can be defined, and a contact can be signed. As water funds involve stakeholders from a wide variety of institutions, it is essential to have a clear definition of roles and responsibilities. The structure should be specified in a contract that formalizes the partnership. From experience, TNC has found that a useful structure is the previously described board of directors, technical secretariat, and technical committee(s). The board is a formal public–private partnership working under a mutually agreed, legal contract to ensure that each stakeholder has a role and the obligation and incentive to carry it out.

Finally, a process for handling administrative details must be determined. These include managing fund activities, the money in the fund, and other administrative matters that arise during formation and implementation.

3.1.4 First Assessment of Users’ Attitude Towards Automation

One of the aims of the research within CityMobil2 is to relatively assess automation with respect to conventional bus services in terms of users' attitudes.

Users' attitudes towards automated buses are largely unexplored. Most of the studies in the available literature (often grey literature) investigated the potential demand on specific routes [3–5]. Only a few studies aimed to assess the relative preferences of the users towards automated versus a conventional bus. One took place in Leeds [6] and one in Rome [7]. Both were based on stated preference (SP) data. Personal rapid transit has been the subject of other studies [6,8–10].

In CityMobil2, SP data, based on questionnaires administered in the cities participating in the project, have been used for the estimation of discrete choice models (logit models) providing preference shares for the conventional and the automated bus. Two sets of surveys have been planned: one ex ante, with individuals without actual experience of the automated bus, and one ex post, with individuals who travelled on board the automated bus during the demonstrations.

The ex ante surveys have been part of the feasibility studies, concerning the implementation of a small-scale automated bus service and conducted in 12 cities. The routes of the feasibility studies include a range of applications:

Within city centre (La Rochelle, Oristano, Reggio Calabria and Trikala)

Within a major facility such as a technology park or a university (CERN, Lausanne EPFL, San Sebastián and Sophia Antipolis)

From public transport node to a major facility (Brussels, León and Milan)

From public transport node to a residential area (Vantaa)

The ex post surveys have been conducted in four cities that have been selected, on the basis of the feasibility studies, for demonstration of the automated bus service: La Rochelle, Trikala, Lausanne EPFL and Vantaa.

For comparability between cities and between ex ante and ex post results, a common SP questionnaire has been designed.

VII. EDI Adoption

Firms considering the adoption of EDI need to conduct a feasibility study, similar in many cases to the adoption of other types of information technologies (IT). However, the business case for EDI is more complicated than for IT innovations that fall strictly within the boundaries of an organization, because two or more organizations are involved in an EDI implementation. Because of the interorganizational nature of the EDI decision, the factors influencing adoption comprise three categories, perceived benefits, external pressure due in part to business partner influence, and organizational readiness.

Perceived benefits refer to the anticipated advantages that EDI can provide the organization. As explained earlier, benefits are both direct and indirect in nature. Direct benefits include operational cost savings and other internal efficiencies arising from, for example, reduced paperwork, reduced data re-entry, and reduced error rates. Likewise, indirect benefits are opportunities that emerge from the use of EDI, such as improved customer service and the potential for process reengineering.

External pressure is multifaceted, encapsulating the influences arising from a number of sources within the competitive environment surrounding an organization. These sources include: competitive pressure, relating to the ability of EDI to maintain or increase competitiveness within the industry; industry pressure, relating to the efforts of industry associations or lobby groups to promulgate EDI standards and encourage adoption, and trading partner influences.

The latter factor captures the potential power of a trading partner to “encourage” EDI adoption, and the strength of the partner's exercised power. Imagine a major supplier or purchaser of a firm's goods or services. Potential power increases with size of the trading partner and its criticalness to the firm. Exercised power ranges from subtle persuasion to decrees requiring EDI adoption as a necessary condition for conducting any further business with the partner.

Organizational readiness is the set of factors necessary to enable the firm to adopt EDI. These include sufficient IT sophistication and financial resources. IT sophistication captures not only the level of technological expertise within the organization, but also assesses the level of management understanding of and support for using IT to achieve organizational objectives. Financial resources is a straightforward measure of an organization's capital available for use toward IT investment.

In the context of IOS, however, readiness is not solely an organization-level concept. Adoption of an IOS requires readiness on the part of, at a minimum, two trading partners. Thus readiness considers a firm that may be motivated to adopt EDI, i.e., having high perceived benefits, and be ready to adopt, i.e., having available financial resources and IT know-how, but is unable to do so due to trading partners that are not ready or able to adopt EDI. For example, the firm may find that its trading partners do not have the resources necessary to adopt EDI, or that the firm anticipates difficulty acquiring the “critical mass” of EDIenabled trading partners to make its adoption worthwhile. Smaller trading partners, even if financially and technologically able to adopt EDI, may not find it worthwhile to do so on a cost/benefit basis due to their limited volume of transactions (i.e., the lower cost of EDI transactions is not able to offset the largely fixed costs of EDI adoption). Thus, even large, solvent, and technologically sophisticated organizations can have difficulty in expanding their networks of EDI-enabled trading partners.

5.10.8 Feasibility of cogeneration in buildings

The starting point for any cogeneration project is the realization of a sufficiently rigorous feasibility study, in order to determine which type of installation is best adapted to the consumer, and whether or not this installation is economically profitable. This study usually consists of the following phases:

Analysis of the current situation.

Forecast of the electric and thermal demands.

Energy evaluation.

Economic study.

Sensitivity analysis.

The potential for cogeneration in the building sector is, as we have said, very high and is a practically untapped sector. However, the profitability of these projects is usually less than that of industrial applications, so it is very important to define the best solution in each case. As we have also commented, the problem with cogeneration in buildings is that the thermal demand is very variable, it is difficult to determine with precision and, in addition, the equipment power required is small, much lower than that of the equipment in industrial applications.

The high variability of the thermal demand is solved, at least in part, by the use of TES, which cover the gaps between production and demand, as well as operating the equipment at partial load. In Chapter 12 of this book, we will address the problem of optimal sizing for TES. The difficulties in the demand prediction can be solved by means of the use of control systems that program the production based on diverse external readings or by means of predictive algorithms. Finally, the demand small values can be solved by trying to centralize the production for several buildings and if this is not possible, resorting to modular solutions of micro-cogeneration.

During the feasibility study we can encounter with three possible situations, Campos et al. 2011 [58]:

That the building exists and there is complete information on consumption and demand (this would be the ideal situation).

That the building is a project, in which case, it will be necessary to carry out simulations, through energy simulation software such as TRNSYS, EnergyPlus, etc. to evaluate the thermal demands that it will have when in use.

That the building exists, but information about the demand is limited and must be completed with simulations and/or measurements in situ.

The data for the thermal demands (heating, DHW, cooling) can be presented either as a chronological demand curve (CDC) or as a monotonic demand curve (MDC). The CDC provides the demand values chronologically, while the MDC orders the demand values from highest to lowest and allows for the application of rapid sizing methods.

Once the demands are known, the essential phase of the study starts, which is the plant design. In this phase, possible technologies (microturbines, micromotors, Stirling engines, etc.) are defined, as well as the plant configuration (number of units, TES, auxiliary equipment, etc.), and the operational strategy, that is, the way of operating and the interaction between the equipments. In the energy systems design, and in particular in the design of cogeneration and trigeneration systems for buildings in the residential-commercial sector, the following factors are involved, Ramos 2012 [59]:

The demand for electric and thermal energy by the consumer.

The availability and guarantee of fuels supply, to ensure the functioning of the consumer equipment during its expected useful life.

The tariffs and prices of fuels and electricity, applicable in the geographical region where the installation will be located.

The commercial availability of different technologies. The choice of the technologies type is subject to the availability of the energy resources they consume.

The investment cost of the equipment, taking into account that economies of scale favour investment in larger equipment.

The technical characteristics and various parameters, such as its electrical efficiency, the recoverable heat sources temperature, heat/electricity ratio, etc. The electrical efficiency and the heat/electricity ratio determine the economic benefits that come from its operation.

The legal framework that regulates the cogeneration facilities operation in the electricity market. Each region or country has legal regulations that control the sale of surplus electricity in the market. In Spain, cogeneration facilities are subject to the obligations and advantages of the Special Regime for the production of electrical energy. Environmental legislation on emission limits applicable to facilities that consume fossil fuels should also be considered.

The overall strategy of the operation, which is conditioned by: (1) the equipment technical characteristics; (2) the consumer demand profiles for heating, cooling and electricity; (3) fuel and electricity prices; and (4) the possibility of exchanging energy (buying and/or selling electricity) with the market.

The sizing of the cogeneration plant is carried out based on the thermal demand, keeping in mind that the cogeneration will work as a complement to the conventional thermal production method. In conventional design methods, the monotonic heat demand curve provides useful information for choosing the capacity to be installed and calculating the coverage rate, the utilization factor and the use degree of the cogenerated heat.

The design must provide a high utilization factor of the installed capacity to favour its amortization. This factor is defined as the quotient between the real annual production and the theoretical maximum annual production; that is, the annual production at nominal load during the 8760 h of the year. It is also advisable to achieve a high coverage rate, which represents the fraction of the user thermal demand served by the cogeneration plant. A very widespread simple method is one that maximizes the coverage rate, that is, the equipment thermal power will be that which maximizes the rectangle area within the MDC, see Fig. 5.40.

Unfortunately, in systems with variable demand, such as in buildings, it is not possible to simultaneously maximize the coverage rate and the utilization factor, since when one of them is improved, the other is adversely affected, which makes it difficult to find the optimal design.

In addition to these conventional design methods, there are other more sophisticated methods, based on mathematical optimization such as integer linear programming (ILP) and others. As we will develop in Chapter 12 of this book, a methodology in the process of synthesis and design of cogeneration systems is as follows, Nemhauser 1999 [60]:

In the first place, an energy superstructure is proposed consisting of technologies (candidates) that will compete with each other on the technical (energy benefits) and economic (investment and operation costs) level. From this set of technologies, the combination is chosen whose total cost over the installation life is minimal. In this step, the approximate capacity to install each technology is also determined.

Next, the size (rated power) and the amount of equipment to be installed from each selected technology is defined. In this stage, for example, decisions are made on splitting the installed power between several units or installing a single unit. The equipment installed, if there are several units, can be of different models or the same model. Again, from the set of alternatives (equipment configurations) one is selected, the total cost of which throughout its life is minimum.

Finally, once the equipment configuration has been determined, feasible operating modes are formulated for the cogeneration system, and from among them, one is chosen that has a minimum operating cost. The optimal operation program is solved for each time interval with which the annual operation is described.

To evaluate the operation cost, we need to bear in mind the fuel cost for the cogeneration plant and the complementary system, income from cogenerated electricity sale, taking into account the complement for efficiency, complement for reactive energy, etc., as well as the maintenance costs of the new plant. Likewise, insurance and financing costs must be taken into account.

Once the investment and the expected economic savings have been evaluated, an economic study should be done. For this purpose, the cash flows generated during the plant useful life are usually calculated (approximately 15–20 years). From these cash flows, the profitability indices most commonly used are obtained, such as the internal rate of return (IRR), the net present value (NPV) or the payback period (PB).

As a final stage, it is usual to carry out a sensitivity analysis. This type of analysis is used to identify the risks of a project since it identifies the sensitivity degree of the project economy compared to various parameters changes. Usually, the worst case and best case scenarios are defined; in the first case, the parameters usually vary in a very pessimistic context and second, under extremely optimistic assumptions. Both evaluations open a range of possibilities within which the project will be developed. Readers interested in feasibility studies of cogeneration plants can consult Sala 1994 [61].