Project Economics

This chapter explains some of the commonly used tools to determine the levelized cost of energy generation (LCOE) as well as the internal rate of return (IRR). It begins by explaining the parameters required for computing these parameters, along with their typical values. It then elucidates the methodology to determine LCOE using two approaches. The next section describes the process to ascertain IRR (both project and equity). Concepts and techniques to derive Debt Service Coverage Ratio (DSCR) as well as accelerated depreciation benefits have been explained in the last part of this chapter. LCOE and IRR for different set of assumptions have been computed and explained with the help of spreadsheets.