KNOWLEDGE REPOSITORY

Cost Benefit Analysis

Project appraisal is central to deploying smart grid investments well — these frameworks help evaluate feasibility and impact from multiple perspectives.

Framework 01

Project Appraisal Approaches

Financial Analysis

Looks purely at the investor's return — whether a project's expected monetary payoff justifies the spend. Cost-benefit analysis (CBA) is the standard tool here.

Economic Analysis

Widens the lens to national/societal impact, weighing direct and indirect monetary effects. Often framed as a social CBA, assessing welfare beyond pure financial return.

Comprehensive Project Assessment

Goes further still, factoring in intangible and non-monetisable effects — social and environmental impact — for a fuller picture of a project's value.

Diagram

Project appraisal approaches, from investor viewpoint to wider societal viewpoint.

Framework 02

CBA for Smart Grids — the JRC Approach

The European Commission Joint Research Centre's (JRC) CBA methodology runs in three stages, from characterising a project through to calculating and stress-testing its viability.

Characterise the Project

Define objectives, context, and key technologies; establish a baseline and the relevant economic parameters.

Identify Benefits

Map likely benefits to the project's functionalities, using the baseline to set a reference point for quantifying them.

Calculate & Test

Compute indicators like Net Present Value (NPV) from discounted costs vs. benefits, then run sensitivity analysis to check robustness.

Diagram

The eight-step JRC process for calculating and testing project viability.

Framework 03

Scalability & Replicability Analysis (SRA) — the BRIDGE Methodology

With many EU-funded projects running their own SRA, the H2020 BRIDGE initiative built a standardised framework so results can be compared consistently across projects.

Define Scope

Decide which SGAM layers/dimensions to analyse — regulatory, economic, business model, stakeholder, functional, ICT, components.

Set Methodology per Dimension

Technical dimensions (functional, ICT) lean on simulation and sensitivity analysis across KPIs; non-technical ones (regulatory, stakeholder) lean on qualitative methods like interviews.