Clarify DiscountFactor

[willu47]

While the DiscountRateIdv parameter is specified by technology, the DiscountFactor parameters are calculated from DiscountRate and are not indexed by Technology.

DiscountFactor is used in the objective function, but nowhere else in the (short and fast) code. DiscountFactor is used in equation CC2 in the long code. DiscountFactorMid is used in equation E5 (all) and OC4_ (long)

Proposed Solution

1. a. Please confirm the correct implementation.

2. b.DiscountFactor and DiscountFactorMid should be calculated using DiscountRateIdv and indexed by Technology. Objective function and constraints should be updated to include the technology index.

[robertodawid]

Regarding the individual discount rates DiscountRateIdv implementation:

• When DiscountRateIdv is not stated in the data file, the default discount rate is set to DiscountRate or a global discount rate.

• DiscountRateIdv is only used in the calculation of the CRF CapitalRecoveryFactor. The CRF allows the calculation of a series of equal payments, from capital investment or lump sum, spread over the operational life of generation technology (annuity. Here, the assumption is that the operational life is equal to the economic life of a technology. DiscountRateIdv is also used in calcultating the salvage value.

• Using the' DiscountRate' in' PVAnnuity, ' all these payments (annuity) are discounted back to the investment year.

• Section 6.2.1 in here, also gives additional information about the implementation.

• option b) Making the DiscountFactor and DiscountFactorMid indexed by Technology and using the DiscountRateIdv will have a significant impact on the OF when using DiscountRateIdv. This change will cause technologies with lower discount rates to be selected as being the cheapest option, which is not the main point of using individual discount rates, but trying to capture the differences in the perceived risk.