Real LCOE calculation - discount rates

  • julienmarrec
  • Topic Author
More
28 Aug 2014 08:52 #2512 by julienmarrec
Real LCOE calculation - discount rates was created by julienmarrec
Hi,
First, I'd like to thank you and congratulate you on putting SAM together. NREL usually delivers high quality software and this is no exception. What I'd like to particularly praise here is that it's very transparent and not a black/grey box as it can sometimes be.
The help files are very detailed, complete and well explained. And the "Send to Excel with equation" function is truly a blessing! I absolutely love it, so useful for understanding how things are calculated. Same goes for the "Financial Model Documentation" spreadsheets.
There is one thing that I'd like a little bit of explanation about. When calculating the Real LCOE, the cashflows are discounted to the nominal discount rate, whereas the energy is discounted to the real rate. I'm not sure I understand why the cash flows are discounted to nominal discount rate. My (pretty dumb) first instinct would have been to discount both at the real discount rate. Is it because the cash flows already have been escalated with the inflation rate and therefore the nominal rate must be used to remove its effect?
Also, I've noticed a few very minor typos in the "Send to excel with equation" auto-generated spreadsheet that you might want to correct.
B35: Assessed

B75: Deductible

B109 & B115 & B140: Cumulative

(throughout: cash flow and not cashflow)
Keep up the good work,

Julien

Please Log in or Create an account to join the conversation.

  • Paul Gilman
More
29 Aug 2014 20:08 #2513 by Paul Gilman
Replied by Paul Gilman on topic Real LCOE calculation - discount rates
Dear Julien, The discount rates in the LCOE equations make a little more sense if you follow the derivation of the equations. Please see the Help topic on LCOE under "LCOE Definition" for a description:
SAM Help -- Levelized Cost of Energy
Thank you for pointing out the typos in the spreadsheet. We will fix those for the next release of SAM.
(By the way, when I see HTML code in a post, as in yours above, I can edit the message after you post it to change the formatting so that they appear correctly.)
Best regards,

Paul.

Please Log in or Create an account to join the conversation.

Moderators: Paul Gilman
Powered by Kunena Forum