Economic dimension of energy system models

1. Hurdle rates

Activity carried out by: Silvia Laera, Gianvito Colucci, Daniele Lerede, Matteo Nicoli

In collaboration with: Università di Torino

This work presents a methodology to evaluate technology-specific hurdle rates for Energy System Optimization Models. Hurdle rates are usually assumed through educated guesses by energy system modelers, while they are here estimated adopting the weighted average cost of capital methodology where possible and collecting data from the available literature in the other cases. The paper shows the comparison between the original rates of an open-source model (TEMOA-Italy) and the updated values from the methodology, together with the comparison of the model results in the two scenarios. The results suggest that hurdle rates do not significantly affect the optimal system configuration (and the economic competition between the alternative technologies) in a base scenario, while they significantly vary the computed discounted costs of the selected technologies by the model. [1]

References

1. S. Laera, “Development of a methodology to evaluate technology-specific discount rates for energy system optimization models,” Politecnico di Torino, 2023. Accessed: Sep. 06, 2023. [Online]. Available: https://webthesis.biblio.polito.it/27422/