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System Advisor Model (SAM)

PPA Single Owner - High IRR!

msohebzaidi
Topic Author

06 Jan 2022 15:53 #10477 by msohebzaidi

PPA Single Owner - High IRR! was created by msohebzaidi

Hi Paul,

I have switched to the Single Owner PPA model, based on our discussions earlier. In order to imitate the Merchant Plant model, I have set the PPA price as 1 $/kWh and have entered the wholesale electricity price in "Edit array" of TOD factors by time step. The wholesale price entered in the TOD factors by time step is extracted from the Cambium model within SAM. (Attached for reference).

I am confident about my financial & Incentive entries, but for some reason my IRR% is coming out to be pretty high (3695%, Image attached). I feel that PPA price ($/kWh) or the TOD factors by time step i.e. the wholesale price are driving factors for such high IRR%, but I'm also suspecting that if there is an error within SAM's Code at the back end.

If you can provide some feedback on how to fix this issue that would be great!

Thanks for your help so far, highly appreciate it!
Best Regards.

IRR.png

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pgilman

07 Jan 2022 19:15 #10489 by pgilman

Replied by pgilman on topic PPA Single Owner - High IRR!

Hi Soheb,

Please be sure to either convert the $/MWh from Cambium into $/kWh in SAM, or set the PPA price to $0.001/kWh if the time series data is in $/MWh.

If that does not fix the problem, please attach a copy of your .sam file so I can investigate.

Best regards,
Paul.

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msohebzaidi
Topic Author

10 Jan 2022 04:28 #10495 by msohebzaidi

Replied by msohebzaidi on topic PPA Single Owner - High IRR!

Hi Paul,

I did have a look at that. After setting the PPA price as 0.001 $/kWh and my wholesale electricity price in $/MWh, these are my results. (Attached image)

The results seems odd as the LCOE is in Cents and is much lower for a Solar + Battery System.

I have attached the SAM file for reference as well.

Thanks for your help so far Paul! I'm really happy to get such prompt support from SAM.

Looking forward.

Regards.

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pgilman

11 Jan 2022 00:37 #10498 by pgilman

Replied by pgilman on topic PPA Single Owner - High IRR!

Hi Soheb,

The combination of negative NPV, unrealistically high IRR (or PPA price if running the model in Specify IRR target mode), and negative minimum DSCR value in the metrics table indicate that the project's financial assumptions are probably not realistic. I did a little investigating, but could not find the cause for this.

The project After-tax Cash Flow graph on the Summary tab of the Results page is a good place to start looking into issues like this. In your case, the initial investment is zero because of your assumption of 100% debt, and the annual project cash flows are negative, indicating that annual costs are higher than annual revenue:

The power prices are pretty low for a PV-Battery system, so it may just be that at those prices and given your other assumptions, the project is not feasible. I did an experiment setting the PPA price to $0.0025/kWh, effectively multilplying the hourly power prices by 2.5 with a debt fraction of 60% instead of 100%, and that resulted in an IRR of about 11% and NPV of about $2.5M.

In the process of my investigation, I did discover that some of the battery-related operating expenses are missing from the cash flow table. We will address that in the first update to SAM 2021.12.02: github.com/NREL/SAM/issues/880.

Best regards,
Paul.

...gative-npv.png

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msohebzaidi
Topic Author

11 Jan 2022 04:08 #10499 by msohebzaidi

Replied by msohebzaidi on topic PPA Single Owner - High IRR!

Hi Paul,

That was very informative, as the part of my study that is exactly what I need to find. Given the experiment which you carried out, by setting debt - 60% and PPA price to be 0.0025$/kWh, I tried entering these values at my end as well and ran the simulation. Even though the IRR and NPV looks fine now, but the LCOE Numbers looks a bit odd. LCOE (Real) is about 8.57 c/kWh? shouldn't this be $/kWh? 8.57c/kWh means 0.0857$/kWh which is really low for Solar + Storage Systems! (Screen Shot Attached) or perhaps I'm interpreting it wrong.

Would love see that patch coming at the end of this month to SAM, as it will also be fixing the Cashflow export to excel with equation. And inclusion of battery operating costs would also be great!

Thanks for this Paul, once the patch is out we will be able to discuss this further, but so far I'm satisfied with your answer! Thanks again Sir!

..._PPA0.0025.png

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pgilman

11 Jan 2022 23:19 #10502 by pgilman

Replied by pgilman on topic PPA Single Owner - High IRR!

Hi Soheb,

I would expect the LCOE to be relatively close to the levelized PPA price. For a positive NPV the LCOE should be less than the levelized PPA price (be sure to compare nominal LCOE to nominal levelized PPA price, and real LCOE to real levelized PPA price). That is the case for the results in your screenshot, so I think the LCOE values are reasonable.

Best regards,
Paul.

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