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Cost comparison of energy projects: Discounted cash flow and revenue requirement methods

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  • Phung, Doan L.

Abstract

Both the discounted cash flow (DCF) and revenue requirement (RR) methods are frequently used in the cost analysis of energy projects. Each is especially well suited in special circumstances. For most forward looking ventures, the RR method appears to be more useful. This paper provides simple formulations for the two methods and some special cases of interest for costing practices. Both formulations are applicable to either free or regulated enterprises and also under constant-dollars or inflationary conditions. 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.

Suggested Citation

  • Phung, Doan L., 1980. "Cost comparison of energy projects: Discounted cash flow and revenue requirement methods," Energy, Elsevier, vol. 5(10), pages 1053-1072.
    • Handle: RePEc:eee:energy:v:5:y:1980:i:10:p:1053-1072
    DOI: 10.1016/0360-5442(80)90029-8
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    Cited by:

    1. Panno, Domenico & Messineo, Antonio & Dispenza, Antonella, 2007. "Cogeneration plant in a pasta factory: Energy saving and environmental benefit," Energy, Elsevier, vol. 32(5), pages 746-754.
    2. Messineo, Antonio & Volpe, Roberto & Marvuglia, Antonino, 2012. "Ligno-cellulosic biomass exploitation for power generation: A case study in sicily," Energy, Elsevier, vol. 45(1), pages 613-625.
    3. Hyongmook Cheong & Boyoung Kim & Ivan Ureta Vaquero, 2023. "A Data Valuation Model to Estimate the Investment Value of Platform Companies: Based on Discounted Cash Flow," JRFM, MDPI, vol. 16(6), pages 1-17, June.
    4. La Rocca, Vincenzo, 2011. "Cold recovery during regasification of LNG part two: Applications in an Agro Food Industry and a Hypermarket," Energy, Elsevier, vol. 36(8), pages 4897-4908.

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