The Essential Dos and Don'ts of Techno-Economic Analysis (TEAs)
- Gustavo Valente
- Aug 9, 2023
- 3 min read
Updated: Sep 22
Dos:
Define Clear Objectives: Before you dive into the analysis, set crystal-clear objectives, clearly outline the objectives of your TEA, and know what you want to achieve and what questions your TEA should answer. Is it to evaluate cost-effectiveness, evaluate technology upgrades, risk assessment, investment decisions, scenario analysis, and process improvement? Remember, the objectives should be specific, measurable, achievable, relevant, and time-bound (SMART) to guide the TEA effectively and yield actionable insights.
Use Reliable Data: Strong decisions rely on accurate data. Tap into credible sources and ensure your TEA's foundation is rock-solid. The quality and robustness of your TEA relies on the accuracy and credibility of the input data, so ensure it is reliable. Pulling numbers out of thin air isn't just misleading, it's a recipe for disaster!
Consider the Full Cost Picture: Embrace a panoramic view of costs and benefits. Uncover hidden expenses and external forces that could sway your project's trajectory.
Analyze Multiple Scenarios: Don't settle for one path. Explore various scenarios, assess the impact of various assumptions and unveil the opportunities and potential risks that lie within different possibilities.
Seek Expertise: If you lack experience in conducting TEAs, consider seeking the help of specialists, and seek experts' guidance. Specialized consultants bring a fresh perspective and add layers of value to your analysis. An external consultant brings an impartial perspective, free from internal biases. This neutrality enables more objective analysis and recommendations, ensuring that decisions are based on data rather than internal preferences.
Start as Soon as Possible: Begin the TEA process early. Starting early allows you to identify potential issues and make adjustments before significant resources are invested.
Don'ts:
Overlook Sensitivity Analysis: Avoid neglecting sensitivity analysis. It helps identify which variables have the most significant impact on the project's outcomes and helps you focus on critical areas.
Ignore Non-Monetary Factors: TEAs often focus on financial aspects, but don't overlook non-monetary factors like environmental impact, social aspects, and regulatory compliance. Some factors are non-negotiable, For example, if the TEA reveals high water consumption in an area with limited water availability, addressing this concern becomes an immediate priority.
Rush the Process: Avoid rushing through the TEA process. Start as soon as possible but take your time to build it, analyse scenarios thoroughly, and validate the results to ensure accuracy.
Disregard Assumptions: Clearly state and make visible all assumptions made during the TEA. Disregarding assumptions can lead to misleading conclusions and affect the validity and robustness of your analysis.
Don't Wait!: Don't stall for the perfect data moment. Start with what you have. While complete information is ideal, waiting for all data to be available can delay the TEA process. Start with available information and update as more data becomes accessible. Data will evolve, and your insights will sharpen as your process develops.
TEA is an ongoing process, not a one-time job. It involves unravelling the complex dynamics of your project, understanding your choices and using that knowledge to make well-informed decisions. By sticking to these practical guidelines, you are well-prepared to enhance your TEA skills and navigate your way to successful outcomes. Once you start developing a basic TEA, you can improve the accuracy of your TEA and gain the confidence to make strategic decisions as you steer your business towards prosperity.
Gustavo Valente
Director, Sustech Innovation
+52 55 3405 0552
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