Real Discount Rate, Nominal Discount Rate

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Hamza Ali
Topic Author

30 Jun 2022 10:52 #11201 by Hamza Ali

Real Discount Rate, Nominal Discount Rate was created by Hamza Ali

Hello everyone.
This is Hamza.

I am doing Economical Analysis in two software. SAM and RET Screen software.
I have financial parameters let suppose,
Inflation = 8
Discount Rate = 10
So why nominal discount rate (NDR )is calculated in SAM? what is the purpose of NDR when i have inflation and real discount rate.

And when I input the same values in RET Screen software i get different results (NPV, payback period) why? even though other parameters/costs everything is same in both software.

Sam uses real discount rate or nominal discount rate for calculations?
What values I should use in both software so that i may get same NPV and PP.?

Please reply as soon as possible. I am doing a research work and I am confused what to do.

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pgilman

30 Jun 2022 20:41 #11203 by pgilman

Replied by pgilman on topic Real Discount Rate, Nominal Discount Rate

Hi Hamza,

See the explanation for real and nominal discount rate on the Financial Parameters Help topic, for example, here is a link to the topic for the Single Owner financial model (the explanation is the same for all of the financial models): samrepo.nrelcloud.org/help/fin_single_owner.htm

In SAM, the NPV calculation uses the nominal discount rate as described in the Net Present Value topic in Help: samrepo.nrelcloud.org/help/mtf_npv.htm

SAM's financial model calculations are based on Short W et al, 1995. Manual for the Economic Evaluation of Energy Efficiency and Renewable Energy Technologies. National Renewable Energy Laboratory. NREL/TP-462-5173. www.nrel.gov/docs/legosti/old/5173.pdf

Best regards,
Paul.

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