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+--- Thread: Royalty Component for Hydro power plant (/showthread.php?tid=143)
Royalty Component for Hydro power plant - vsaini - 09-05-2019
Dear All, I have to model a hydro power plant for which 15% of the annual generation should be given to the government as Royalty (free of charge). Then based on the system demand either the royalty energy is supplied to domestic consumers or exported. How to model such royalty component in AnswerTIMES ? Regards Vinay Saini
RE: Royalty Component for Hydro power plant - vsaini - 10-05-2019
Dr. Antti, Please share your opinion on this. Regards Vinay Saini
RE: Royalty Component for Hydro power plant - Antti-L - 10-05-2019
The basic assumptions in TIMES and many other partial equilibrium models is competitive markets and perfect information. You can however introduce market imperfections by introducing user-defined explicit constraints, such as limits to technological penetration, constraints on emissions, exogenous oil price, etc., or in the form of taxes, subsidies and hurdle rates. As far as I can see, a 15% royalty of the annual generation given to the government does not seem to fit too well with the ways TIMES can handle market imperfections. If I understand correctly, it means that 15% of the revenues are transferred from the investor/owner to the government. If we consider the situation where hydro power would be marginally competitive, I guess that royalty condition might be reasonably well simulated by introducing a tax of 1/(1-0.15)= 17.6% on top of all costs of new hydro plants (NCAP_ITAX for investment, NCAP_FTAX for fixed O&M, FLO_TAX for variable cost). The tax burden would simulate the burden of the 15% revenue loss. At the moment I don't have any other ideas.