Time-dependent discounting - Printable Version +- IEA-ETSAP Forum ( https://iea-etsap.org/forum)+-- Forum: Model Generators ( https://iea-etsap.org/forum/forumdisplay.php?fid=2)+--- Forum: TIMES ( https://iea-etsap.org/forum/forumdisplay.php?fid=8)+--- Thread: Time-dependent discounting ( /showthread.php?tid=67) |

Time-dependent discounting - Birgit Fais - 31-10-2014
Hi all, I have a question on setting a different general discount rate for different time periods: So, for example, if I specify a G_DRATE of 4% until 2030 and 3% afterwards how is this applied to investments? Is an investment made in 2040 discounted for 10 years by 3% and then by 4% until the baseyear or is the discount rate of 3% used for the entire timespan to the baseyear? Also, if no additional technology-specific rates are specified, and G_DRATE is used to annualize investments payments: is the discount rate used for an investment made in 2020 (with lifetime of more than 10 years) 4% over the entire lifetime or is 3% used for all payments made after 2030? I am afraid that using time-dependent discount rates might have a distorting effect if the first option is used. I hope that makes sense! Thanks, Birgit Time-dependent discounting - Antti-L - 31-10-2014
It is a good question. And, in fact, there may be a need to discuss about this among the ETSAP partners. As it is now, there are some inconsistencies between the documentation and the TIMES code in this matter. In the TIMES code, it is always assumed that if no hurdle rate (NCAP_DRATE) is specified, the present value of the annualized investment payments at the beginning of the commissioning year should be equal to the original lump-sum investment cost (plus any interest during construction, if NCAP_ILED is specified). In other words, the annualized investment costs included in the objective function are equivalent to a single lump-sum payment INV that would occur at the beginning of the commissioning year. In the same way, if a
hurdle rate (NCAP_DRATE) is specified, the annualized investment costs included in the objective function are equivalent to a lump-sum cost INV See: http://www.iea-etsap.org/docs/TIMESDoc-Details.pdf However, there is some inconsistency between the cost accounting in the objective function and the annual cost reporting: When the investment costs are reported, they are always annualized by using the standard CRF formula (as given on page 140 in the doc). I hope the explanation above makes sense! Time-dependent discounting - Antti-L - 01-11-2014
Ahh... I realize that my explanation didn't answer to the first part of your question. But that part should be clear already from the documentation: General discount factor for year r(y)=1/(1+d(y)) Present
value factor for costs occurring in year discounted to the beginning of year z:
Therefore,
you can immediately see the answer to your question And the answer to your final question should be equally clear: the
present value factor Time-dependent discounting - Birgit Fais - 03-11-2014
Dear Antti, Thanks for the very clear answer! |