Topic: Cost Optimization in the power sectorSubscribe | Previous | Next
Jose Antonio Ordonez 3/26/2021
10 Likes Dear all,
we were wondering if a cost optimized power sector can be computed by using technology specific interest rates. RE (renewable) projects in many developing countries face higher risk premiums than conventional projects. Thus, financing costs and LCOE are higher. When performing a cost optimization with LEAP, the software requires the process discount rate to be set equal to the general discount rate. I find this quite unrealistic, as RE project costs are very senstive to discount rates (high upfront investment, low O&M and no fuel costs, as opposed to fossil power plants with high upfront investment, higher O&M and fuel costs). Even better would be if we could change the interest rate of discounting over time, assuming learing and derisking policies over time.
Would highly appreciate an answer!
Best regards and thanks!
Jose
Charlie Heaps 3/26/2021
9 Likes Hi Jose,
Agree with you. This limitation is a holdover from when LEAP relied on OSeMOSYS for cost optimization calculations. I don't see any good reason why LEAP/NEMO should not allow interest rates to vary by technology (and by year, by scenario and by region). I just spoke with Jason, developer of NEMO and he agrees. We will try to make that change in the next major versions of LEAP and NEMO. NB: this would only affect how capital costs are handled. All other costs would continue to be discounted at the global discount rate.
Let me know if that sounds reasonable to you.
Charlie
Jose Antonio Ordonez 3/27/2021
7 Likes Thanks a lot Charlie, this sounds great! By the way, is there any formal description of how LEAP cost optimization works, e.g. if used for academic work, so one can sketch the cost minimizing program and constrains? Also, if we would like to cite LEAP, do you have a prefered way of doing it?
Alpiza Al 3/29/2021
Charlie Heaps 3/30/2021
1 Like The documentation for NEMO is available here: https://sei-international.github.io/NemoMod.jl/stable/
For OSeMOSYS look here: http://www.osemosys.org/
I'm afraid there isn't a lot written up (yet) about how LEAP interacts with NEMO or OSeMOSYS, but there is some here: https://leap.sei.org/help/Optimization/OptimizationIntroduction.htm
Charlie
Muhammad Rafif Thariq Azizi 4/14/2021
Jason Veysey 4/26/2021
1 Like
A quick follow-up: we've added technology-specific discount rates to NEMO (version 1.5) . This capability will be integrated with LEAP in the next LEAP release.
For now, we're not supporting technology-specific rates that vary by year, but we'll consider adding this feature if there's substantial demand for it.
Thanks,
Jason
Charlie Heaps 4/26/2021
Charlie Heaps 5/8/2021
Hi again - this took a big longer than I thought but it is now implemented in 2020.1.32 including allowing interest rates to vary by scenario, year, region and technology. See https://leap.sei.org/new for more info. Make sure you also get NEMO v1.6.
Wajahat Shabbir 6/24/2021
It's a Highly Informative Discussion,
By Charles Heaps
and By Jose Antonio Ordonez
and By Jose Antonio Ordonez
.
Thank You
- Wajahat