[Donaldson Tan]

We have to go beyond Discounted Cash Flow and Internal Rate of Return.

One reason why renewable energy still cannot compete financially with conventional energy is that the value of future energy output from a renewable source is discounted when calculating, for example, an internal rate of return. These economic models put a time-value on money, making long-term receipts not worth as much as near-term receipts.

This approach does not necessarily be applied to energy. Traditional models of economic analysis for an energy system lasting 50 years treat the free energy in years 11 through 50 as nearly worthless. The underlying assumption when discounting returns beyond 10 years is that BTUs are as fungible as currencies; something that is arguable but not certain.

If a society as a whole desires energy independence, a renewable energy system's return on investment in year 50 is no less valuable than the return on investment in year one.

[Donaldson Tan]

126 views and no reply at all?

Doesn't anyone has a clue?

[lemonoman]

We have to go beyond Discounted Cash Flow and Internal Rate of Return.

You lost me here.  What is "Discounted Cash Flow" ? lol

And what's this business about "the free energy in years 11 through 50 is nearly worthless" ?  You mean, because the energy will be worth more dollar-wise in the future, and this isn't taken into account, then anything past 10 years isn't appraised at the right value?

[Donaldson Tan]

You mean, because the energy will be worth more dollar-wise in the future, and this isn't taken into account, then anything past 10 years isn't appraised at the right value?

Yes