Cost Comparison of Energy Projects: Discounted Cash Flow and Revenue Requirement Methods

摘要

Both the discounted-cash-flow (DCF) and the revenue-requirement (RR) methods are frequently used in the cost analysis of energy projects. Each is uniquely needed in special circumstances, but in the early stages of most ventures, the RR method appears to be more useful. This paper provides simple formulations for the two methods and some special cases of interest to costing practices. Both formulations are applicable to either free or regulated enterprises and in constant or inflated dollars. It is stressed that the interpretation of cost results depends on the selection of cash-flow streams and/or the intent of revenue requirements. Several numerical examples are given. (ERA citation 05:025958)