INVCOST

[ejin]

Hi Community,

I want to confirm the exact unit of INVCOST. Is it should be annualized or not? 

For example, I have the capital investment cost of 100 million $ for a new chemical plant with annual production capacity of 1 million t and the plant lifespan is 25 years. What's my INVCOST for it? Should I calculate it as annualized capital cost considering the discount rate or just simply calculating it by 100/1=$100/t?

Thanks for your answers.

[Antti-L]

> I want to confirm the exact unit of INVCOST. Is it should be annualized or not?

INVCOST is a VEDA attribute, and so you can find its descripition in the VEDA Attributes Master. There it says:
  • Input parameter: NCAP_COST
  • Units, ranges: Monetary unit per capacity unit [0,∞); default value: none; Default i/e: STD
  • Instances, conditions: Provided whenever there is a cost associated with putting new capacity in place.
  • Description: Investment costs of new installed capacity according to the installation year.

Therefore, the unit is Monetary unit per capacity unit. Both the Monetary units and the capacity units are defined by the user, and therefore you can choose these units rather freely (as long as you also define the conversion factors).  For example, you could include MUSD-2010, MEUR-2015 and MEUR-2020 in your currency units, just to mention a few possibilities. The capacity unit of each process is defined by the PRC_CAPACT attribute, again by the user (it defines the conversion factor from the capacity unit to the activity unit, on annual basis).

As shown above, the corresponding TIMES input attribute is NCAP_COST, which represents either the Total Investment Cost (TIC) or the Overnight Capital cost (OCC), depending on the modeler's choice. TIC includes:
  • Overnight Capital Cost (OCC) and
  • Interest During Construction (IDC)

The Overnight Capital Cost (OCC), in turn, includes:
  • Owner’s Cost ― mostly pre-construction
  • Engineering, Procurement & Construction Cost (EPCC), and
  • Contingency Provision

The OCC is the cost as if the full expenditure were spent ‘overnight’, thus at one instance. It therefore explicitly excludes the interest during construction (IDC).  In TIMES, the IDC is calculated endogenously by the model if NCAP_ILED (construction lead time) is defined.

Literature sources on technology data usually provide investment cost data either as TIC or OCC, and you can thus use both the TIC and OCC values directly in TIMES.  If you use TIC (total investment cost), you should leave NCAP_ILED undefined, but if you use OCC, you should define also NCAP_ILED, at least if the construction time is notable.

As an example, onshore wind power plants have been estimated to have an investment cost of 1120 €(2015)/kW in 2020, by the Danish Energy Agency.  This is stated to be an Overnight cost, and the construction time is stated as 1.5 years. Therefore you can define NCAP_COST('DNK', '2020', 'EWINDON', 'EUR15') = 1120, NCAP_ILED(r,y,p)=1.5 and PRC_CAPACT(r,p)=31.536 (assuming the common energy unit has been chosen to be PJ, the capacity unit is GW, and EUR15 stands for M€(2015)).

> For example, I have the capital investment cost of 100 million $ for a new chemical plant with annual production capacity of 1 million t and the plant lifespan is 25 years. What's my INVCOST for it?

As explained above, it somewhat depends:
  • What is the currency unit? Just $ is a bit ambiguous, but let's assume the currency unit is MCAD-2018 (million 2018 Canadian dollars)
  • Is the investment cost (100 million $) the overnight cost or total investment cost?  Let's assume TIC.
  • May I assume both the capacity unit and the activity unit would be Mt (million metric tonnes)?

With these assumptions we can define:
  NCAP_COST('CAN','2025','Chemplant','MCAD-2018') = 100;
  PRC_CAPACT('CAN','Chemplant') = 1;
  NCAP_TLIFE('CAN','2025','Chemplant') = 25;

[ejin]

> I want to confirm the exact unit of INVCOST. Is it should be annualized or not?

INVCOST is a VEDA attribute, and so you can find its descripition in the VEDA Attributes Master. There it says:
  • Input parameter: NCAP_COST
  • Units, ranges: Monetary unit per capacity unit [0,∞); default value: none; Default i/e: STD
  • Instances, conditions: Provided whenever there is a cost associated with putting new capacity in place.
  • Description: Investment costs of new installed capacity according to the installation year.

Therefore, the unit is Monetary unit per capacity unit. Both the Monetary units and the capacity units are defined by the user, and therefore you can choose these units rather freely (as long as you also define the conversion factors).  For example, you could include MUSD-2010, MEUR-2015 and MEUR-2020 in your currency units, just to mention a few possibilities. The capacity unit of each process is defined by the PRC_CAPACT attribute, again by the user (it defines the conversion factor from the capacity unit to the activity unit, on annual basis).

As shown above, the corresponding TIMES input attribute is NCAP_COST, which represents either the Total Investment Cost (TIC) or the Overnight Capital cost (OCC), depending on the modeler's choice. TIC includes:
  • Overnight Capital Cost (OCC) and
  • Interest During Construction (IDC)

The Overnight Capital Cost (OCC), in turn, includes:
  • Owner’s Cost ― mostly pre-construction
  • Engineering, Procurement & Construction Cost (EPCC), and
  • Contingency Provision

The OCC is the cost as if the full expenditure were spent ‘overnight’, thus at one instance. It therefore explicitly excludes the interest during construction (IDC).  In TIMES, the IDC is calculated endogenously by the model if NCAP_ILED (construction lead time) is defined.

Literature sources on technology data usually provide investment cost data either as TIC or OCC, and you can thus use both the TIC and OCC values directly in TIMES.  If you use TIC (total investment cost), you should leave NCAP_ILED undefined, but if you use OCC, you should define also NCAP_ILED, at least if the construction time is notable.

As an example, onshore wind power plants have been estimated to have an investment cost of 1120 €(2015)/kW in 2020, by the Danish Energy Agency.  This is stated to be an Overnight cost, and the construction time is stated as 1.5 years. Therefore you can define NCAP_COST('DNK', '2020', 'EWINDON', 'EUR15') = 1120, NCAP_ILED(r,y,p)=1.5 and PRC_CAPACT(r,p)=31.536 (assuming the common energy unit has been chosen to be PJ, the capacity unit is GW, and EUR15 stands for M€(2015)).

> For example, I have the capital investment cost of 100 million $ for a new chemical plant with annual production capacity of 1 million t and the plant lifespan is 25 years. What's my INVCOST for it?

As explained above, it somewhat depends:
  • What is the currency unit? Just $ is a bit ambiguous, but let's assume the currency unit is MCAD-2018 (million 2018 Canadian dollars)
  • Is the investment cost (100 million $) the overnight cost or total investment cost?  Let's assume TIC.
  • May I assume both the capacity unit and the activity unit would be Mt (million metric tonnes)?

With these assumptions we can define:
  NCAP_COST('CAN','2025','Chemplant','MCAD-2018') = 100;
  PRC_CAPACT('CAN','Chemplant') = 1;
  NCAP_TLIFE('CAN','2025','Chemplant') = 25;

Hi Antti,

Thanks for your reply. So based on your assumptions, the unit of NCAP_COST('CAN','2025','Chemplant','MCAD-2018')=100 is Canadian dollar/metric tonne, right?

[Antti-L]

Right.  MCAD/Mt  ≡ CAD/t