138.1
141SP85-1
1985
t STAFF PAPERS IN ECONOMICS
Agricultural Economics Economics Dept
College of Agricu t L m ■
College of Letters and ScIcl e ^P
EIASE .RETURN f
Economic Feasibility of Snail Wind
Energy Generator Systems
Cathy Roheim, C. Robert Taylor and Myles Watts
Staff Paper 85-1
STATE DOCUMENTS COLLECTION
AUG 1 ] TO
MONTANA STATE UBR ARY ,
tori. 5E 6thA VE.
HetEAW, MONTANA 59620
Montana State University, Bozeman
r ,
338.1
M41SP85-1
1985
bs STAFF PAPERS IN ECONOMICS
Agricultural Economics & Economics Dept
College of Agriculture
College of Letters and Science
PI EASE .RETURN
15 i
Economic Feasibility of Sraall Wind
Energy Generator Systems
Cathy Roheim, C. Robert Taylor and Myles Watts
Staff Paper 85-1
STATE DOCUMENTS COLLECT/OAT
AUG 1 j 1986
MONTANA STATE L(
HS:LEHA - MONTANA 59620
Montana State University, Bozeman
MONTANA STATE LIBRARY
<;«8Tm41sp851 1965 c.1 Rohe.m
iiniini
3 0864 00052393 9
Economic Feasibility of Snail Wind
Energy Generator Systems
Cathy Rohein, C. Robert Taylor and Myles Watts
Staff Paper 85-1
DATE DUE
MONTANA STATE LIBRARY
] 515 E. 6th AVE
HELENA, MONTANA wwon
^1 — '- ~ l - - '
t
ECONOMIC FEASIBILITY OF SMALL WIND ENERGY GENERATION SYSTEMS*
Cathy Roheim, C. Robert Taylor, and Myles J. Watts**
INTRODUCTION
This report presents estimates of the economic feasibility of
generation of electricity by a small wind energy conversion system (SWECS)
in Montana. Estimates are given for various assumptions about the
properties of the machine and its performance, wind speeds in Montana, price
received for electricity generated, purchase price of the machine, marginal
Federal and State income tax rates, available tax credits, and depreciation
allowances. Any one of these technical and economic variables can determine
whether a particular SWECS installation is profitable. Scenarios considered
in the report cover a wide variety of situations that might be encountered
by a potential SWECS investor in Montana; nevertheless, a potential investor
should calculate the benefits and costs of each potential investment
considering wind speed, expected performance of the machine, expected price
and his or her own tax bracket.
Under the Federal Public Utilities Regulatory Policy Act (PURPA) of
1978, public utilities are mandated to buy-back electricity generated from
SWECS. In addition, the utilities are required to pay a price equal to the
"avoided cost," defined to be the incremental costs to an electric utility
of additional electric energy or of additional generation capacity. The
avoided cost is not a national figure, but a cost based on conditions faced
*The analysis reported in this paper was supported in large part by a grant
//WDG-84-5012 from the Montana Department of Natural Resources and
Conservation.
**Graduate Research Assistant, Professor, and Associate Professor,
respectively, Department of Agricultural Economics and Economics, Montana
State University.
by the relevant local electrical utility. Thus the avoided cost or buy-back
price can vary between Montana and, say California, and also vary within
Montana.
Public utility pricing policy requires utilities to price electricity
to their retail customers at the "average cost"; under current economic
conditions in some parts of the state, this average cost is below the
avoided cost. Thus some utilities must buy electricity generated from SWECS
at a rate that exceeds the rate charged to many residential and commercial
companies. In such a situation, it is more profitable for a SWECS investor
to sell all electricity generated to the public utility at the avoided cost
rate, and purchase any electricity required for a residence, farm, or
business at the average cost rate. In the analysis that follows, the price
of electricity should be set equal to the avoided cost price for a firm that
sells all generated electricity to the utility. On the other hand, if all
electricity generated is used on farm, the price should be set equal to the
purchase price for electricity. Finally, for a situation where electricity
is bought and sold (i.e., the meter is run both directions) an average or
blended price should be used in the analysis.
The first section of this report presents the characteristics of the
representative wind machine used for this study. In the second section, the
economic variables included in the analysis and their application to the
problem are explained. The third section presents the net present value
benefit assessment framework, while the fourth section discusses values of
the primary economic parameters used in the analysis. Presented next are
the net present value profit estimates and conclusions of the study. A
FORTRAN computer program that can be used for economic analysis of SWECS is
presented in an Appendix.
3
CHARACTERISTICS OF THE MACHINE
The representative SWECS used for this analysis has a Jacobs design in
which there are three horizontal blades, 23 feet in diameter with yaw
control to direct the blades in an optimal position with wind direction.
Machines of this common type are used in Montana. Technical data on various
brands of SWECS can be found in The Montana Renewable Energy Handbook ,
pages 45-56.
Three levels of annual energy output from the lOkw machine were
assumed; these were 10,000, 17,500, and 25,000 kwh/year. Assuming validity
of the energy graph in Figure 1 and no down time, the above energy output
levels can be generated from average wind speeds of approximately 9.0, 11.8,
and 15.0 mph, respectively. Average wind speeds in this range are found in
many Montana locations, particularly on the eastern slopes of the Rocky
Mountains. Average wind speed data for eleven major Montana cities are
given in Table 1. It should be noted that average wind speeds may vary
considerably from one location to the next, depending on geographical
location, topographical features, and other factors. Thus, wind
characteristics at particular sites should be considered by potential SWECS
investors.
The total cost of the machine and installation at the time this report
was prepared was $22,630.00, itemized as follows:
Generator (23' diameter, lOkw peak output) $12,995.
Inverter included
100 ft. tilt-up tower 5,400.
Electrical hardware and wiring 1,350.
Kilowatt-hour meter 60.
Excavation and concrete 950 .
Labor (installation and wiring hook-up) 1,875.
TOTAL $22,630.
Actual costs may differ from the above figures due to changing prices,
distance of the installation site from the shipping point, and for different
brand machines. Due to these possible cost differences, the economic
analysis in this study was done for total costs of $20,000, $23,000, and
$25,500, including the cost of installation.
ECONOMIC ANALYSIS FRAMEWORK
Due to substantial Federal energy and investment tax credits that can
be claimed with a SWECS investment, tax considerations are of considerable
importance in any analysis of the profitability of SWECS. Thus the focus of
this analysis is on these tax considerations and the after-tax profitability
of SWECS. For comparative purposes and for completeness, bef ore-tax
profitability estimates are also given. Tax computations were based on 1984
laws, which may change in future years. This section of the report presents
the formula used in calculating the new present value benefits (after-tax
and bef ore-tax) of SWECS.
With current technology, most SWECS have an economic life of at least
twenty years. Since benefits and costs accrue over time, a present value
calculation is used to bring all future benefits and costs back to the
current period. Future benefits and costs are "discounted" to reflect the
fact that a dollar at some point in the future is not worth as much as a
dollar at the present time.
Although the analysis is done in "real" terms net of inflation, it is
necessary to specify the inflation rate because of its interaction with
depreciation of SWECS for tax purposes. That is, the amount of the SWECS
cost that can be written off tax returns in any given year depends on
initial cost, while benefits are tied in with inflation except in the case
of a long term contract for electricity generated. Thus, inflation drives a
tax wedge between benefits and depreciation of SWECS, and must be considered
in an analysis of the type done in this study.
Before tax analysis framework
The before tax net present value return associated with a SWECS was
computed as,
NPV = NPVGR - COST - NPVOM
where NPV is the net present value return from the SWECS, NPVGR is the net
present value of gross revenue, COST is the cost of purchasing and
installing the machine, and NPVOM is the net present value cost of operating
and maintaining the machine. NPVGR was computed by multiplying expected
yearly gross revenue by an annuity discount factor that accounts for life of
the machine, the discount rate, and the expected escalation rate for
revenue. The specific formula to calculate the annuity discount factor for
before tax gross revenue (ADFBTR) is,
ADFBTR = {1 - (1 + r')~ }/r'
where I is the life of the machine in years, and
r' = -1 + {l+norabt}/{l+esc}
where nombt is the nominal before tax discount rate and esc is the
escalation rate applied to gross revenue.
The annuity discount factor applied to operating and maintenance costs
(ADFOM) is calculated as
ADFOM = {1 - (1 + r") _I }/r"
where
r " = -1 + {1 + nombt}/{l + inf}
where inf is the expected inflation rate. The inflation rate was used in
this annuity discount factor because we expect costs to be affected by
inflation, which is not necessarily the same as the expected escalation rate
for revenue which is used in the annuity discount factor for revenue.
After tax analysis framework
The net present value after tax return associated with a SWECS was
computed as,
NPVAT = NPVGRA - NPVOMA - COST + TAXCR + NPVDEP
where NPVAT is the net present value after tax return, NPVGRA is the net
present value after tax revenue generated by the machine, NPVOMA is the net
present value operations and maintenance cost, COST is the initial cost of
maintaining and installing the machine, TAXCR is the investment and energy
tax credits that can be obtained, and NPVDEP is the net present value tax
benefit associated with tax depreciation of the investment. The latter item
is a benefit rather than a cost because it reduces the taxable income of the
investor, thereby reducing taxes paid by the investor.
Net present values of revenues and operating and maintenance costs were
computed by taking the product of an annuity discount factor and yearly
revenue or cost, respectively. The after tax annuity discount factors
differ from before tax discount factors only in that the marginal tax rate
influences the factor. The after tax annuity discount factor applied to
gross revenue (ADFATR) was calculated as,
ADFATR = {1 - (1+i')" 1 }/!'
where
i* = {l+nombt(l-margtr) }/{l+esc}-l
where margtr is the marginal (combined Federal and State) tax rate applied
to ordinary income, and the other terms are as previously defined.
The after tax annuity discount factor applied to operating and
maintenance costs (ADFOMAT) was defined as follows,
ADFOMAT = {l-(l+i") _I }/i"
where
i" = -1 + {l+nombt(l-margtr)}/{l+inf}
The annuity discount factors given above are multiplied by their
respective constant yearly revenue or cost figures to give present value.
For instance, if revenue is expected to be the price paid for electricity by
the utility times the amount of electricity generated for the year by the
machine, assumed constant or perhaps averaged over the life of the machine,
then the annuity discount factor for revenue is multiplied by the revenue to
determine present value. A numerical example may clarify this point.
Consider the following data:
Expected life of machine = 20 years
Expected inflation rate = 7 percent
Escalation rate =7.5 percent
Nominal before tax discount rate = 12 percent
Energy generated each year = 25000kwh
Price received for electricity = $.0525
Marginal tax rate = 30 percent
The before tax annuity discount rate applied to revenue is ADFBTR =
13.3691 and the after tax annuity discount factor applied to revenue is
ADFATR = 18.3448. Therefore, NPVGR = (13 .3691) ($0.0525) (25000kwh/year) =
17547.01 is the present value of before tax gross revenue over the 20 year
life of the SWECS; the after tax present value of gross revenue is NPVGRA =
(18.3448) ($0.0525) (0.7) (25000kwh/year) = $16854.32. The same type of
analysis is applied to present value calculations for operations and
maintenance costs over the life of the machine.
The net present value of tax benefits associated with tax depreciation
of the investment was calculated as
NPVDEP = dep(i)/{l+nombt(l-margtr) }
where i is the year in which the depreciation is taken on the tax return.
Note that financing the wind machine does not enter into the above
analysis. It was not entered because it can be shown that if the discount
rate required on the loan is equal to the nominal before tax discount rate,
then the net present value of the loan payments equals the loan balance,
effectively cancelling out the effect of financing on the analysis.
Therefore, the present value of the loan has no effect on the net present
value of the SWECS machine under this assumption.
Cash flow considerations, in addition to present value considerations,
are also important to some potential SWECS investors. Cash flow
computations were done for both before tax revenues and costs and after tax
revenues and costs; future benefits and costs are shown in current dollars
in analyses that follow.
ECONOMIC PARAMETERS
The 1984 Federal tax law allows for an investment tax credit equal to
10 percent of the initial cost of the SWECS; in addition, energy tax laws
allow for an additional energy tax credit equal to 15 percent of initial
cost. The combined effect of these two tax credits is to reduce the
investor's tax liability by a maximum of 25 percent of the initial cost of
the SWECS in the year in which investment occurs.
A word of explanation is also needed for the Montana tax credit used.
Initially it was thought that the 35 percent energy tax credit was
applicable to this type of situation in which a business such as a farm or
ranch invested in a wind machine. However, this credit, while it could
apply given certain events, is not necessarily the best state tax credit for
the SWECS investor to take. The Montana energy tax credit for commercial
investments in wind systems is defined to be 35 percent of taxable or net
income produced only by the following: (1) manufacturing plants located in
Montana that produce wind energy generating equipment; (2) new or expanding
businesses that purchase wind-generating electricity on a direct sale
contract to meet their power needs; or (3) the wind energy generation
equipment for which credit is being claimed. Note that the State tax credit
is for net income and not initial cost as with the Federal tax credit.
In addition to the above requirements, there must be at least a
$5000.00 capital investment to claim a credit to reduce the investor's State
income tax (Source: Montana Energy Tax Benefits, DNRCF, Jan. 1984). Given
this definition, a farm or ranch which installs a SWECS must produce a
profit (i.e. the revenue from electricity generated must be greater than the
deductible expenses incurred) within the first seven years after
installation of the machine. For the economic and technical situations
considered in this report, returns for electricity generated will not exceed
the deductible expenses in the first seven years. Therefore, analyses in
this report are based on a State investment credit equal to 5 percent of the
total Federal investment credits allowed up to a maximum of $500.00 tax
credit .
Depreciation to the machine was assumed to follow the ACRS (accelerated
cost recovery system) for 5-year property. Even though the SWECS has an
expected life of at least 20 years, it appears that the investment will
qualify for ACRS. The depreciable basis of the machine is taken to be the
cost of installation minus 50 percent of the Federal tax credit allowed.
The percentage of the depreciable basis taken each year over the five years
are 15 percent for the first year, 22 percent the second year, and 21
percent for each of the next three years.
10
RESULTS
An economic analysis was conducted for a variety of assumptions
regarding cost of the SWECS machine ($20,000.00, $23,000.00, and
$25,500.00), price received for electricity generated ($0.0525, $0.65, and
$0.08), electricity generated (10,000kwh, 17,500kwh, and 25 ,000kwh/year) ,
and marginal combined Federal and State marginal tax rates (30%, 40%, and
50%) . Net present value before tax returns and net present value after tax
returns for these scenarios are graphically shown in figures 1 through 9.
From these figures, it can be seen that tax considerations make SWECS
economically more attractive to investors; however, a positive net present
value (i.e. profit) is obtained only under very favorable tax, price, and
wind conditions.
11
References
Montana Department of Natural Resources and Conservation. The Montana
Renewable Energy Handbook , May 1981.
Montana Department of Natural Resources and Conservation. Montana Energy
Tax Benefits , January 1984.
12
Table 1. Annual Wind Information for Major Montana Cities
Average Wind Speed (mph)
Billings 11.65
Cut Bank 12.60
Dillon 9.10
Great Falls 12.40
Havre 10.40
Helena 7.90
Kalispell 6.90
Lewistown 10.10
Livingston 14.10
Miles City 10.80
Missoula 6.50
Source: Robert Harrington, Mechanical Engineering
Department, Montana State University, 1978.
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22
Appendix A
FORTRAN Program for Benefit-cost
Analysis of SWECS
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T MPT TPTT REAL(A~2)
DIMENSION XU4),OMC<30>,D<30),R<30>,PVD(30>,CF<30>
*,RR(30> ,RCFT<30) ,C(30)
INTEGER LIFE, I ,0
COMMON LIFE
OPEN(5,FILE='WIND.DAT' )
OPEN(b,FILE='WIND.LIS' )
READ(5,1> (X
C
C
C EXPECTED LIFE OF WIND MACHINE ( YEARS )
LIFE=IFIX(X<1) )
C COST OF INSTALLATION INCLUDING MACHINE COSTS MINUS
C TRANSMISSION LINE COSTS<*>
COSTIN=X(2)
COST OF TRANSMISSION LINES FROM MACHINE TO UTILITY
C LINES(*)
TRANSC=X(3)
C MARGINAL TAX RATE- INCLUDING STATE AND FEDERAL (X)
MTAX=X(4)
C
C NOMINAL BEFORE TAX DISCOUNT RATE (H)
NOMDIS=X(5)
C
C STATE INVESTMENT CREDIT (X)
STATCR=X
C
C INSTALLATION COSTS (*)
ICOST=X(10>
C DOLLARS PER KILOWATT HOUR UTILITY PAYS FOR GENERATED
C ELECTRICITY (*/KWH)
ELEPAY=X(11 )
C AVERAGE KILOWATT HOURS OF ELECTRICITY PRODUCED BY WIND
C MACHINE PER YEAR (KWH/YR)
POWER=XU2)
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C COST OF MACHINE INCLUDING TOWER AND METERS
MHCOST=X(13)
C
C FEDERAL INVESTMENT CREDIT
C
C COMPUTE BEFORE TAX DISCOUNT RATE INCLUDING UTILITY
C ESCALATION RATE USED IN ANNUITY DISCOUNT FACTOR
C APPLIED IN PRESENT VALUE CALULATIONS OF REVENUE
C
DIS1=< (1.0+NOMDIS)/(1.0+ESCR) )-1.0
C
C COMPUTE BEFORE TAX DISCOUNT RATE INCLUDING INFLATION
C RATE USED IN ANNUITY DISCOUNT FACTOR APPLIED TO
C WIND COSTS
C
DIS2=< <1 .0+NOMDIS)/(1.0+INF) )-1.0
C
C BEFORE TAX ADF FOR PRESENT VALUE REVENUE
C
PVBT1=(1.0-(1.0+DIS1)**<-LIFE) )/DISl
C
C BEFORE TAX ADF FOR REVENUE CALCULATIONS
C
PVBT2=U . 0-(1.0+DIS2)**(-LIFE) )/DIS2
C
C COMPUTE AFTER TAX DISCOUNT RATE INCLUDING UTILITY
C ESCALATION RATE USED IN ANNUITY DISCOUNT
C FACTOR APPLIED TO PRESENT VALUE REVENUE
C
TDIS= ( ( 1 . 0+NOMDISA ( 1 . 0-MTAX ) ) / ( 1 . 0+ESCR ) ) -1 .
C
C COMPUTE AFTER TAX DISCOUNT RATE INCLUDING EXPECTED
C INFLATION RATE USED IN ANNUITY DISCOUNT FACTOR
C APPLIED TO WIND COSTS
C
TDIS2=( [1 . 0+NOMDISA (1. 0-MTAX) ) / < 1 . O+INF ) ) -1 .
C
C AFTER TAX ANNUITY DISCOUNT FACTOR (ADF) FOR REVENUE
ADF=(1.0-(1.0+TDIS>**<-LIFE) )/TDIS
C
C AFTER TAX ANNUITY DISCOUNT FACTOR (ADF) FOR WIND COSTS
ADFR=(1.0-(i.0+TDIS2)AA(-LIFE> /TDIS2
C
C
WRITE(6,900) (X(J) , J=l ,14)
900 F0RMAT(1X,5F12.5)
C
C
C CALCULATE OPERATION AND MAINTENANCE COSTS PER YEAR
CALL OMCOST ( OMC , MHCOST , ADFR , PVOMC , MTAX , C , PVC , PVBT2 )
r
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C CALCULATE DEPRECIATION USING ACRS METHOD ON FIVE YEAR PROPERTY
CALL DEP ( D , FEDCR , COSTIN , I NVCR , SPVD , NOMDI S , MTAX , PVD )
C
C DETERMINE GENERATED ELECTRICITY REVENUE EACH YEAR
CALL REV ( R , POWER , ELEPAY , ADF , PVREV , RR , INF , ESCR , MTAX , PVR , PVBT1 )
C
C DETERMINE CASH FLOW, BEFORE AND AFTER TAX AND NET PRESENT VALUE
CALL CAFLOW < CF , R , SPVD , FEDCR , STATCR , INVCR , COSTIN , NPVT
A , NPV , PVREV , PVOMC , D , OMC , NOMDI S , FC , IC , SC , TC , RR , RCFT , MTAX
A, C, PVC, PVR)
C
C
C OUTPUT RESULTS
CALL OUT ( COSTI N , TRANSC , STATCR , FEDCR ,
A INF , ELEPAY , POWER , MHCOST , INVCR , ESCR , OMC , D , R ,
A CF , NPVT , NPV , MTAX , NOMDI S , ADFR , ADF , PVOMC , PVREV ,
A SPVD , FC , IC , SC , TC , RR , ICOST , RCFT , PVC , PVBT1 , PVBT2 , C , PVR >
C
STOP
END
C
C
C CALCULATE O&M COSTS PER YEAR
C
SUBROUTI NE OMCOST ( OMC , MHCOST , ADFR , PVOMC , MTAX , C , PVC , PVBT2 )
IMPLICIT REAL(A-Z)
DIMENSION OMC (30) ,C<30)
INTEGER LIFE, I, J
COMMON LIFE
DO 10 1=1, LIFE
OMC (I ) = 0.05AMHCOSTA(1.0-MTAX)
C(I)=0.05AMHCOST
10 CONTINUE
C
C PRESENT VALUE OF O&M COSTS
PVOMC=ADFRAOMC(l)
PVC=PVBT2AC(1 )
RETURN
END
C
C
C CALCULATE DEPRECIATION
C
SUBROUTINE DEP ( D , r"~DCR , COSTIN , INVCR , SPVD , NOMDI S , MTAX , PVD )
IMPLICIT REAL(A-Z)
DIMENSION D<30) ,PVD(30)
INTEGER LIFE, I, J
COMMON LIFE
DEPMC=COSTIN-0. 5A(INVCRACOSTIN+FEDCRACOSTIN )
D(1)=0.15ADEPMC
D(2)=0.22ADEPMC
D(3)=0.21ADEPMC
D<4)=0.21ADEPMC
D(5)=0.21ADEPMC
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C PRESENT VALUE OF DEPRECIATION FOR EACH YEAR
PVDU)=D<1 )/AA2
PVD<3)=D(3)/ (1 .0+NOMDISAU. 0-MTAX) )AA3
PVD(4)=D(4 ) / (1 . + NOMDISAU .0-MTAX) )AA4
PVD ( 5 ) =D ( 5 ) / < 1 . 0+NOMDISA < 1 . 0-MTAX ) ) A*5
C
C TOTAL OF PRESENT VALUE DEPRECIATION BENEFITS
SPVD= ( PVD ( 1 ) +PVD ( 2 ) +PVD ( 3 ) +PVD ( 4 ) +PVD ( 5 ) ) AMTAX
DO 10 I=E,LIFE
D(I)=0.0
10
CONTINUE
RETURN
END
c
c
c
DETERMINE REVENUE GENERATED
c
c
EACH YEAR
SUBROUTINE REV ( R , POWER , ELEPAY , ADF , PVREV , RR , INF , ESCR ,MTAX ,
AFVR,PVBT1)
IMPLICIT REAL(A-Z)
DIMENSION R(30),RR<30>
INTEGER LIFE, I, J
COMMON LIFE
DO 10 1=1 ,LIFE
R ( I ) = ( POWERAELEPAY A < 1 . + ESCR ) AAI ) / (1 . 0+ I NF ) AAI
RR ( I > = ( ( POWERAELEPAYA ( 1 . 0+ESCR ) AAI ) / ( 1 . 0+INF ) AAI ) A U . 0-
AMTAX)
10 CONTINUE
PRESENT VALUE OF REVENUE
PVREV=ADFARR ( 1 ) A ( 1 . 0+INF ) / ( 1 . 0+ESCR )
PVR=PVBT1 AR ( 1 ) A ( 1 . 0+INF ) / < 1 . 0+ESCR )
RETURN
END
BEFORE AND AFTER TAX CASH FLOW
CAFLOW ( CF , R , SPVD , FEDCR , STATCR , I NVCR , COSTI N , NPVT ,
ANPV , PVREV , PVOMC , D , OMC , NOMDIE" , FC , IC , SC , TC , RR , RCFT , MTAX
AC,PVC,PVR)
IMPLICIT REAL(A-Z)
DIMENSION CF(30) ,R(30) ,D(30) , OMC (30) ,RR(30) ,
ARCFTOO) ,C(30)
INTEGER LIFE, I ,J
COMMON LIFE
C
C CF IS THE CASH FLOW BEFORE TAX
CF(0)=-COSTIN
C RCFT IS THE CASH FLOW AFTER TAX
RCFT<0)=-COSTIN
c
DETERMINE 1
c
SUBROUTINE
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C DETERMINE AMOUNTS OF THE VARIOUS TAX CREDITS
FC=FEDCR*COSTIN
IC=INVCR*COSTIN
SC=STATCR*/ d.0+NOMDIS*(1.0-MTAX) )
C
C NET PRESENT VALUE AFTER TAX CASH FLOW
NPVT= < -COSTIN ) +PVREV-PVOMC+TC+SPVD
C
C NET PRESENT VALUE BEFORE TAX CASH FLOW
NPV= < -COSTIN ) +PVR-PVC
RETURN
END
C
C
C PRINT RESULTS
C
SUBROUTI NE OUT < COSTIN , TRANSC , STATCR ,
*FEDCR , INF , ELEPAY , POWER ,MHCOST , INVCR , ESCR , OMC ,
AD , R , CF , NPVT , NPV , MTAX , NOMDIS , ADFR , ADF , PVOMC , PVREV ,
ASPVD , FC , IC , SC , TC , RR , ICOST , RCFT , PVC , PVBT1 , PVBT2 , C , PVR )
IMPLICIT REAL(A-Z)
DIMENSION OMC (30) , D( 30 ) , R < 30 > , CF ( 30 ) , RR ( 30 ) , C ( 30 )
*, RCFT (30)
INTEGER LIFE, I , J
COMMON LIFE
WRITE(6,100)
100 FORMATdX, ' INITIAL VARIABLES ' )
WRITE(G,101)LIFE
101 FORMATdX, 'YEARS OF SWECS LIFE=',I2)
WRITE(6,1C2)MHC0ST
102 FORMAT ( 1M . 'COST OF MACKINE=* ' , Fl 2 . 2 )
WRITE(S,1G3)TRANSC
103 FORMATdX, 'TRANSMISSION LINE COSTS=* ' , Fl 2 . 2 >
WRITE(6,104)ICOST
104 FORMATdX, 'INSTALLATION COSTS = * ' , Fl 2 . 2 )
WRITE(6,320)COSTIN
320 FORMATdX, 'TOTAL COSTS OF WIND MACHINE INVESTMENTS ' , Fl 2 . 2 )
WRITE(6,105) MTAX
105 FORMATdX, 'MARGINAL TAX RATE ON ADDITIONAL INCOME=t ' , Fl 2 . 3 )
WRITE< 6.106) NOMDIS
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106 FORMATUX, 'NOMINAL BEFORE TAX DISCOUNT RATE=* ' , Fl 2 . 3 )
WRITE<6,109) STATCR
109 FORMAT (IX, 'STATE INVESTMENT TAX CREDIT= ' , Fl 2 . 3 )
WRITE(6,110) FEDCR
110 FORMATUX, 'FEDERAL ENERGY TAX CREDIT= ' , F12 . 3 )
WRITE<6,111) INVCR
111 FORMATUX, 'FEDERAL INVESTMENT CREDIT= ' , F12 . 3 )
WRITE<6,113> INF
113 FORMATUX, 'EXPECTED INFLATION RATE= ' , F12 . 3 )
WRITE<6,121) POWER
121 FORMATUX, 'ENERGY GENERATED BY MACHINE (KWH/YEAR) =*',F12.2)
WRITE(6,122) ELEPAY
122 FORMATUX, 'PAYMENT BY UTILITY FOR GENERATED ELEC < KWH ) =* ' , Fl 2 . 4 )
WRITE(6,124) ESCR
124 FORMATUX, 'ESCALATION RATE FOR PRICE PAID BY UTILITY= ' , Fl 2 . 4 >
WRITE (6,200) SALVAL
200 FORMATUX, 'SALVAGE VALUE OF MACHINE=* ' , F12 . 2 )
WRITE (6, 125)
125 F0RMAT(///,T18, 'ECONOMIC ANALYSIS')
WRITE(6,U4)
114 FORMAT(T13, 'IN CURRENTU984) ♦')
WRITE(6,300)
300 FORMATUX, ' ' , / )
WRITE(6,126)
126 FORMAT(///,T2, 'YEAR' ,T12, 'O&M COSTS' ,T26, 'DEPRECIATION' ,T42,
A 'REVENUE' ,/)
DO 10 1=1, LIFE
WRITE(6,127) I,OMC(I) ,D(I) ,RR(I)
127 FORMAT(T3,I2,T12,F8.2,T28,F8.2,T41,F6.2)
10 CONTINUE
WRITE(6,130)
130 FORMAT (///,T25, 'CASH FLOW')
WRITE(6,U5)
115 FORMAT(T20, 'IN CURRENT < 1984 > *')
WRITE(6,300)
WRITE<6,131)
131 FORMAT(/,T2, 'YEAR' ,TU , 'BEFORE TAX ', T27 ,' AFTER TAX',/)
DO 30 1=0, LIFE
WRITE(6,132)I,CF(I) ,RCFT(I )
132 FORMAT(T2,I2,T12,F9.2,T27,F9.2)
30 CONTINUE
WRITE(6,400) PVBT1
400 FORMAT (//,' ',' BEFORE TAX ADF FOR REVENUE ( % )=', F9 . 4 )
WRITE(6,410) PVBT2
410 FORMAT(/,' ', 'BEFORE TAX ADF FOR WIND O&M COSTS ( % ) = ' , F9 . 4 )
WRITE(6,150) ADF
150 FORMAT(/,' ', 'AFTER TAX ADF APPLIED TO REVENUE ( \ )=', F9 . 4 )
WRITE(6,151)ADFR
151 FORMAT(/,' ', 'AFTER TAX ADF APPLIED TO O&M COSTS ( H ) = ' , F9 . 4 )
WRITE(6,440) PVC
440 FORMAT(/,' ',' BEFORE TAX PRESENT VALUE COSTS=* ' , Fl 2 . 2 )
WRITE(6,450) PVR
450 FORMAT PVOMC
153 FORMAT (/,' ',' AFTER TAX PRESENT VALUE O&M COSTS=* ' , Fl 2 . 2 )
WRITE<6,154) SPVD
154 FORMAT FC
155 FORMAT (/,' ', 'FEDERAL ENERGY TAX CREDIT RECEIVED=* ' , F9 . 2 )
WRITE<5,15S) IC
156 FORMAT(/,' ', 'FEDERAL INVESTMENT TAX CREDIT RECEIVED=$ ' , F9 . 2 )
WRITE(6,157) 3C
157 FORMAT*/, ' ', 'STATE INVESTMENT TAX CREDIT RECEIVED=* ' , F9 . 2 )
WRITE(6,158) TC
158 FORMAT(/,' ', 'PRESENT VALUE OF TOTAL INVESTMENT CREDIT=* ' , F9 . 2 )
WRITE<6,136)NPV
136 FORMAT (//,' ','NET PRESENT VALUE BEFORE TAX=* ' , Fl 2 . 2 >
NRITE<6,137) NPVT
137 FORMAT
APPENDIX B
Sample run of
FOPTRAN
Program
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20.00000 25500.00000 .00000
.05000 .15000 .07000
.06500 17500.00000 22500.00000
INITIAL VARIABLES-
YEARS OF SWECS LIFE=20
COST OF MACHINES 22500.00
TRANSMISSION LINE COSTSS .00
INSTALLATION COSTSS .00
TOTAL COSTS OF WIND MACHINE INVESTMENTS
MARGINAL TAX RATE ON ADDITIONAL INCOMES
NOMINAL BEFORE TAX DISCOUNT RATES
STATE INVESTMENT TAX CREDIT= .050
FEDERAL ENERGY TAX CREDIT= .150
FEDERAL INVESTMENT CREDIT= .100
EXPECTED INFLATION RATE= .070
ENERGY GENERATED BY MACHINE (KWH/YEAR) S
PAYMENT BY UTILITY FOR GENERATED ELEC= 12.8152
AFTER TAX ADF APPLIED TO REVENUES)* 20.5982
AFTER TAX ADF APPLIED TO O&M COSTSU)* 19.6133
BEFORE TAX PRESENT VALUE COSTS** 14417.13
BEFORE TAX PRESENT VALUE REVENUE** 15207.41
AFTER TAX PRESENT VALUE OF REVENUE=* 14058.24
AFTER TAX PRESENT VALUE O&M COSTS=* 13238.95
PRESENT VALUE OF TOTAL DEPRECIATION** 7221.95
FEDERAL ENERGY TAX CREDIT RECEIVED** 3825.00
FEDERAL INVESTMENT TAX CREDIT RECEIVED** 2550.00
>
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STATE INVESTMENT TAX CREDIT RECEIVED=* 318.75
PRESENT VALUE OF TOTAL INVESTMENT CREDIT=S 6244.17
NET PRESENT VALUE BEFORE TAX=* -24709.71
NET PRESENT VALUE AFTER TAX=* -11214.60
BEFORE TAX BREAK EVEN PRICE=* .1706
AFTER TAX BREAK EVEN PRICE=* .0701
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