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Real and Nominal LCOE |
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Real and Nominal LCOE |
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This topic describes SAM 3.0 and has not been revised for SAM 2009 Beta. You may find useful information, especially if you are new to SAM, but some of the information may be inconsistent with the new version. |
Solar Advisor calculates both the real LCOE and the nominal LCOE. The form of the discount rate in the denominator's total energy output term determines the form of the LCOE. For the real LCOE, the real discount rate appears in the total energy output term:
Similarly, for the nominal LCOE, the nominal discount rate appears in the total energy output term:
The form of the discount rate in the cost or revenue term of the numerator does not affect its value, as long as the same form is used for the calculation of all cash flows or revenue streams. Solar Advisor uses nominal discount rates for the calculation of cash flows and revenue streams.
The real discount rate and nominal discount rate are related by Equation 7, where dnominal is the nominal discount rate, dreal is the real discount rate, and e is the inflation rate:
dnominal = (1 + dreal)(1 + e) - 1
