Page 320 - Fluid Power Engineering

286 Chapter Thirteen

This project would be profitable if the energy can be sold at an
effective price that is greater than pr . However, the effective price
LCOE
is usually not easy to compute because of the variability of the price
of RECs and whether PTC are fully utilized. In this situation, a project
with a fixed price PPA with a guaranteed power purchase price that
is greater than or equal to pr will be profitable; the revenue from
LCOE
PTC and REC will be the profit.
Often, a simpler method is used to compute LCOE: 8

TIC
pr = fcr + rc (13-6)
LCOE
en
where en is the annual average energy generation in kWh, fcr is
the fixed charge rate, rc is the annual average recurring charge per
kilowatt-hour. fcr is the fraction of TIC that must be allocated annu-
ally to account for capital cost, interest on debt, return on equity, and
other fixed charges. In the following calculation, value of fcr is set to
8
9
11.58%, the value used in the NREL report. Gipe has a more detailed
exposition of fcr for different investors and situations.
$27 million $1.1 million
LCOE = 0.1158 + = $0.077/kWh
50 million kWh 50 million kWh

Net Present Value (NPV)
NPV is computed using the net after-tax cash flow (cf(i),i = 1 to L) time
series. It is the last row in Table 13-3.

NPV = L cf(i)/(1 + r) i (13-7)
i=0

where r is the discount rate and i = 0 is the year when investment is
made and project is installed, i = 1 is the year when project is com-
missioned and starts producing energy for sale, and cf(0) = TIC. In a
more rigorous model, multiyear investments may be modeled.

Payback Period
Simple payback period is a measure of the number of years it takes for
a project to return the total investment. A concept of accumulated liq-
uidity is used, which is the sum of net after-tax cash flow. For instance,
accumulated liquidity after n years (n ≤ L) of a project is:

Accumulated Liquidity (n) = n cf(i) (13-8)
i=0