Implications from WACC differentiation across technologies for energy system modelling
report
Discounting of the future benefits and costs of energy production to earlier dates
needs to be performed in order to conduct meaningful analyses of investments in
energy technologies. Energy models at TNO Energy Transition Studies (ETS), such
as COMPETES-TNO and TIAM-ECN, use a weighted average cost of capital (WACC)
as the discount rate, already for many years.1 The level of the WACC affects the
absolute and relative costs of technologies. If the WACC increases (decreases),
technologies that require high capital investments with low operating expenditures
become more (less) expensive relative to technologies that require low capital
investment with higher operating expenditures. In sustainable energy systems the
share of renewable energy production assets that require high capital investments
is high compared to fossil-fueled energy systems. Hence, with the ongoing energy
transition the sensitivity of energy systems for the WACC increases strongly.
needs to be performed in order to conduct meaningful analyses of investments in
energy technologies. Energy models at TNO Energy Transition Studies (ETS), such
as COMPETES-TNO and TIAM-ECN, use a weighted average cost of capital (WACC)
as the discount rate, already for many years.1 The level of the WACC affects the
absolute and relative costs of technologies. If the WACC increases (decreases),
technologies that require high capital investments with low operating expenditures
become more (less) expensive relative to technologies that require low capital
investment with higher operating expenditures. In sustainable energy systems the
share of renewable energy production assets that require high capital investments
is high compared to fossil-fueled energy systems. Hence, with the ongoing energy
transition the sensitivity of energy systems for the WACC increases strongly.
Topics
TNO Identifier
987336
Publisher
TNO
Collation
34 p.
Place of publication
Petten