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Paul Gilman

Location and Resources Input: If the specific location is not provided in the Weather Data File, I assume I should select the closest geographic location?

The choice of weather file depends on how you plan to use the results of your analysis. For example, for a preliminary study to get a rough idea of the potential of a site or area, you could use the TMY2 file for the location nearest your site. For a more detailed pre-feasibility study, you might want to run simulations using several weather files: Perhaps for the two or three 10 km grid cells in the Solar Prospector dataset (Location Lookup in SAM) surrounding the site, and for the TMY2 and TMY3 files within a certain radius of the site. The results of those simulations will give you a sense of the weather data uncertainty for your site.

For more information about weather files and SAM, see the Weather Data Overview topic in the Help system. (You can also find the same topic in SAM's built-in Help system.)

Financing Inputs: How does the discount factor used by this model?

SAM uses the nominal discount rate to calculate the net present value (NPV) and levelized cost of energy (LCOE) values. As described in Help topics for the Financing page, SAM calculates the nominal discount rate using the following equation:

Nominal Discount Rate = (1 + Real Discount Rate) × (1 + Inflation Rate) - 1

I’m not seeing how the WACC is calculated. In my example I have permanent financing debt at 7% and the IRR is 15%. Assuming debt fraction of 50%, shouldn’t the WACC be 11% (.5 x .07 + .5 x .15). The model shows 9.62%. How is this calculated?

The equation for the weighted average cost of capital (WACC) is described in detail in the Financing page Help topic. Note that SAM only displays the WACC for reference. It does not use the value in any calculations. Scroll down about one third of the page to see the description under "Loan Parameters:"

Financing page Help topic for the Utility IPP financial model

SAM's equation includes the effect of income tax, which I suspect explains the difference between your value and SAM's.

The specified IRR input, is that after tax, before tax, levered/unlevered?

SAM calculates the PPA price, NPV, and other metrics based on the after-tax cash flow, which accounts for debt if you model a project with debt. So, it is an after-tax and levered IRR if the project includes debt.

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