I was trying to change the inflation rate in my scenario through the costs tab in the settings, and whatever value I put, LEAP gives the same results. I have doubts that LEAP is not applying inflation at all no matter what inflation rate is set.

On another note, I am trying to verify the Capital Recovery Factor annualization method using Excel. It is evident that LEAP uses this relationship

PV=PMT*[(1-(1+r)^(-n))/r]

where PV is the present value of a capital cost, PMT is the annualized payment, r is the interest rate and n is the annualization period. Both LEAP and this formula give the same answers. However, I have doubts that this formula incorrectly represents the PV of capital in my cash flow, especially that my capital costs are incurred at the end of the year, which means that the PV used in this formula is not the true PV, and should be discounted for an additional year before annualizing it. Can you please provide more clarification on the issue?

Thank you so much.

Danny.

Hi Dany,

All LEAP's cost calculations are in real/constant dollars. You can also show results discounted at a global discount rate in results view (click on the More/Less button to see this option). Although inflation rate is still shown in the settings

screen, we don't make use of it anymore in showing results.

In terms of the NPV calculations, yes, LEAP uses a standard CRF formula to annualize Transformation capital costs and spread them forward over N years from the year when capacity is added, where N is the lifetime of the technology. The NPV for each scenario (shown in the Summaries view) is the sum of discounted costs over the scenario period. So any capital costs occurring after the end year are NOT included in the NPV.

Fuel and O&M costs are assumed to occur in the middle of each year, while capital costs occur at the end of each year. So in the first year, entered O&M costs are discounted by a half year (1 / (1 + R^0.5), while entered capital costs are discounted by a whole year (1/(1+R)).

I'm attaching an example here in two forms: a really simple LEAP data set, and a spreadsheet that recreates the same calculations. In both cases we show 100 MW of capacity added in 2015 costing 2$/MW (real).

Hope this helps!

Charlie

P.S. All of the above is based on how LEAP2020 works but it should also hold true in earlier versions.