After tax savings for simple payback #477

Bill-Becker · 2025-02-13T17:44:32Z

While the current REopt payback period output metric (Financial.simple_payback_years) is considered the most accurate, and it is consistent with NREL's SAM tool's payback calculation, there was a request for a simple X/Y payback where the user can understand and access X (the numerator capital cost) and Y (denominator total yearly cost savings) in the results and confirm the payback calculation. The savings should be after-tax, and the capital costs should include non-discounted incentives, especially for MACRS, to be consistent with Financial.simple_payback_years. This update to REopt.jl will mainly be used to update the results table spreadsheet in the REopt_API, to add after-tax cost/savings and the alternative X/Y payback in the "playground" section.

To achieve what is described above, this PR:

Added after-tax cost metrics to culminate in a year_one_total_cost_savings_after_tax metric which can be used for a simple X/Y payback period calculation which closely (but not exactly) aligns with Financial.simple_payback_years metric but does not require an array for year-over-year escalation/inflation.
Added capital_costs_after_non_discounted_incentives for the numerator of the simple X/Y payback period calculation
Added tests to confirm scenarios where this alternative X/Y payback period aligns exactly with the Financial.simple_payback_years, as it should.

In the process of achieving above, a few related issues were caught and fixed in this PR:

The Financial.lifecycle_capital_costs did not include OffgridOtherCapexAfterDepr, AvoidedCapexByGHP, AvoidedCapexByASHP, and ResidualGHXCapCost
The Financial.initial_capital_costs did not include p.s.financial.offgrid_other_capital_costs
CHP standby charge costs were not included in the proforma metric cash flows and Financial.simple_payback_years calculation

Unrelated, this PR fixes a couple of bugs related to CoolingLoad:

src/core/scenario.jl: Added type conversion for array inputs from Vector{Any} to Vector{Float64} in the CoolingLoad dictionary.
src/core/simulated_load.jl: Removed unnecessary validation check for doe_reference_name when it is not required.

(For reference, this is what GitHub Copilot autogenerated for the PR)

This pull request includes several changes across multiple files to improve type consistency, add new financial calculations, and enhance documentation. The most important changes are grouped by theme below.

Type Consistency Improvements:

src/core/scenario.jl: Added type conversion for array inputs from Vector{Any} to Vector{Float64} in the CoolingLoad dictionary.

Financial Calculations:

src/results/financial.jl: Added calculations for year_one_chp_standby_cost_after_tax, year_one_chp_standby_cost_before_tax, and adjusted lifecycle capital costs to include new factors like OffgridOtherCapexAfterDepr and AvoidedCapexByASHP. [1] [2] [3] [4]
src/results/boiler.jl, src/results/chp.jl, src/results/electric_tariff.jl, src/results/existing_boiler.jl, src/results/generator.jl: Added year_one_fuel_cost_after_tax calculations. [1] [2] [3] [4] [5]

Documentation Enhancements:

src/results/boiler.jl, src/results/chp.jl, src/results/existing_boiler.jl, src/results/financial.jl, src/results/generator.jl, src/results/ghp.jl: Updated documentation to include new financial metrics and improved descriptions for existing metrics. [1] [2] [3] [4] [5] [6]

Error Handling and Validation:

src/core/simulated_load.jl: Removed unnecessary validation check for doe_reference_name when it is not required.

These changes collectively enhance the robustness, clarity, and functionality of the codebase.

…nd other relevant capex metrics

…ecause it is combined across both

…d_load()

…for CoolingLoad

…e BESS replacement, consistent with other

…ayback calc

Bill-Becker · 2025-03-03T17:47:59Z

@adfarth Here's the after-tax savings PR - I'm not sure if this gets us much close to a "host/off-taker" payback period, if that's what you were looking for. I'm not clear on the meaning of the payback period for the host/off-taker, as they don't typically pay anything/much up front, right? I'm going to wait on making CHANGELOG updates until after the review, and I'll mostly leverage what's in the PR description along with any edits in the review process.

adfarth · 2025-03-10T14:23:58Z

src/results/financial.jl

@@ -183,8 +200,10 @@ function initial_capex(m::JuMP.AbstractModel, p::REoptInputs; _n="")

            if option[2].heat_pump_configuration == "WSHP"
                initial_capex += option[2].installed_cost_per_kw[2]*option[2].heatpump_capacity_ton*value(m[Symbol("binGHP"*_n)][option[1]])
+                initial_capex -= value(m[:AvoidedCapexByGHP])


This could be included just once outside of the if statements because it defaults to 0, right?

adfarth · 2025-03-10T14:30:31Z

src/results/financial.jl

@@ -16,10 +16,12 @@
 - `lifecycle_om_costs_before_tax` Present value of all O&M costs, before tax.
 - `year_one_om_costs_before_tax` Year one O&M costs, before tax.
 - `year_one_om_costs_after_tax` Year one O&M costs, after tax.
- `lifecycle_capital_costs_plus_om_after_tax` Capital cost for all technologies plus present value of operations and maintenance over anlaysis period. This value does not include offgrid_other_capital_costs.
- `lifecycle_capital_costs` Net capital costs for all technologies, in present value, including replacement costs and incentives. This value does not include offgrid_other_capital_costs.
- `initial_capital_costs` Up-front capital costs for all technologies, in present value, excluding replacement costs and incentives. This value does not include offgrid_other_capital_costs.


@Bill-Becker I removed "This value does not include offgrid_other_capital_costs." to align with your changes

adfarth · 2025-03-10T14:44:43Z

src/results/proforma.jl

@@ -33,7 +33,8 @@ return Dict(
    "offtaker_discounted_annual_free_cashflows" => Float64[],
    "offtaker_discounted_annual_free_cashflows_bau" => Float64[],
    "developer_annual_free_cashflows" => Float64[],
-    "initial_capital_costs_after_incentives_without_macrs" => 0.0 # Initial capital costs after ibi, cbi, and ITC incentives


Just confirming this was deemed to be not useful for users, or incorrect?

adfarth · 2025-03-10T14:49:38Z

src/results/proforma.jl

@@ -250,7 +255,9 @@ function proforma_results(p::REoptInputs, d::Dict)
    total_cash_incentives = m.total_pbi * (1 - tax_rate_fraction)
    free_cashflow_without_year_zero = m.total_depreciation * tax_rate_fraction + total_cash_incentives + operating_expenses_after_tax
    free_cashflow_without_year_zero[1] += m.federal_itc
-    r["initial_capital_costs_after_incentives_without_macrs"] = d["Financial"]["initial_capital_costs"] - m.total_ibi_and_cbi - m.federal_itc
+    battery_replacement_net_present_cost = -1*battery_replacement_cost * (1 - tax_rate_fraction) / (1 + p.s.financial.offtaker_discount_rate_fraction) ^ battery_replacement_year  # battery_replacement_cost is negative, from above


@Bill-Becker should the discount rate used here depend on whether the analysis is third party, similar to the tax rate? This would also align with the "effective_cost" function

adfarth · 2025-03-10T15:04:42Z

src/results/proforma.jl

@@ -250,7 +255,9 @@ function proforma_results(p::REoptInputs, d::Dict)
    total_cash_incentives = m.total_pbi * (1 - tax_rate_fraction)
    free_cashflow_without_year_zero = m.total_depreciation * tax_rate_fraction + total_cash_incentives + operating_expenses_after_tax
    free_cashflow_without_year_zero[1] += m.federal_itc
-    r["initial_capital_costs_after_incentives_without_macrs"] = d["Financial"]["initial_capital_costs"] - m.total_ibi_and_cbi - m.federal_itc
+    battery_replacement_net_present_cost = -1*battery_replacement_cost * (1 - tax_rate_fraction) / (1 + p.s.financial.offtaker_discount_rate_fraction) ^ battery_replacement_year  # battery_replacement_cost is negative, from above
+    r["capital_costs_after_incentives_without_macrs"] = d["Financial"]["initial_capital_costs"] - m.total_ibi_and_cbi - m.federal_itc + battery_replacement_net_present_cost


Generator can also have a replacement cost, which I don't think is accounted for here

adfarth · 2025-03-10T15:24:24Z

src/results/results.jl

@@ -111,6 +111,18 @@ function reopt_results(m::JuMP.AbstractModel, p::REoptInputs; _n="")
    if "ASHPWaterHeater" in p.techs.ashp_wh
        add_ashp_wh_results(m, p, d; _n)
    end
+


Should all of these results fields be added to the results/financial.jl markdown text?

adfarth · 2025-03-10T15:27:03Z

src/results/results.jl

+        end
+    end
+
+    d["Financial"]["year_one_total_cost_before_tax"] = d["ElectricTariff"]["year_one_bill_before_tax"] - d["ElectricTariff"]["year_one_export_benefit_before_tax"] + d["Financial"]["year_one_chp_standby_cost_before_tax"] + d["Financial"]["year_one_fuel_cost_before_tax"] + d["Financial"]["year_one_om_costs_before_tax"]


Especially since this is being added to the financial results outputs, it could be helpful to change the name of year_one_total_cost_before_tax and year_one_total_cost_after_tax to indicate they do not include CAPEX

adfarth · 2025-03-10T15:28:29Z

src/results/results.jl

@@ -247,6 +268,9 @@ function combine_results(p::REoptInputs, bau::Dict, opt::Dict, bau_scenario::BAU
        end
    end

+    opt["Financial"]["year_one_total_cost_savings_before_tax"] = bau["Financial"]["year_one_total_cost_before_tax"] - opt["Financial"]["year_one_total_cost_before_tax"]


should these be added to the results/financial.jl help text too?

adfarth · 2025-03-10T15:54:33Z

test/runtests.jl

+            Check alignment between REopt simple_payback_years and a simple X/Y payback metric with
+            after-tax savings and a capital cost metric with non-discounted incentives to get simple X/Y payback 
+            The REopt simple_payback_years output metric is after-tax, with no discounting, but it uses escalated and 
+            inflated cashflows and it includes out-year, non-discounted battery replacement cost which is only included 


noting here too that Generator can also be replaced

adfarth · 2025-03-10T15:58:39Z

test/runtests.jl

+            m2 = Model(optimizer_with_attributes(HiGHS.Optimizer, "mip_rel_gap" => 0.01, "output_flag" => false, "log_to_console" => false))
+            results = run_reopt([m1,m2], inputs)
+            payback = results["Financial"]["capital_costs_after_non_discounted_incentives"] / results["Financial"]["year_one_total_cost_savings_after_tax"]
+            @test round(results["Financial"]["simple_payback_years"], digits=2) ≈ round(payback, digits=2)


These metrics also differ in that simple_payback_years includes O&M costs, but the new "payback" calculation does not, right? This is a very light suggestion, but could consider adding a test with PV in which O&M costs are zeroed out to check that these are the same then? Maybe not necessary.

adfarth

Just a few minor comments! Also noting to add CHANGELOG entry, and it would be great to list in there the new outputs available.

Bill-Becker and others added 26 commits November 21, 2024 08:56

Add after-tax year one fuel and elec savings

6bcc7d9

Add avoided_capex output for ASHP

86c7556

Add avoided capex output for GHP

5ba33e8

Add TODO to include GHP residual value in lifecycle_capital_costs

d051281

Add after-tax BAU outputs

1127d0e

Add non-discounted initial capital costs

f90c464

Fix depreciation calc with ITC for ElectricStorage

7b2b780

Account for AvoidedCapEx for GHP and ASHP for initial cost

bb112d5

Fix capitalization on JuMP model value call

c229bde

Change name for non-discounted incentives

560200b

Merge branch 'develop' into after-tax-savings

fd2a0da

Merge branch 'develop' into after-tax-savings

d34191e

Fix incomplete lifecycle capital cost result metric

d07dfd6

Fix tests after adding CapEx expressions to lifecycle_capital_costs a…

40a1b07

…nd other relevant capex metrics

Change where assigning zero to model objects not in multi-node

d63e488

Remove combined AvoidedCost for ASHPSpaceHeater and ASHPWaterHeater b…

cb626a8

…ecause it is combined across both

Add financial year_one fuel cost before and after tax

38164c9

Remove duplicative subtraction of avoided costs

d66746a

Fix CoolingLoad monthly_fractions input

789bee7

Remove extra/unneeded check for cooling load doe ref name in simulate…

7c98191

…d_load()

Avoid converting intentional Vector{String} types to Vector{Float64} …

d0e1d95

…for CoolingLoad

Update new capital_costs.._without_macrs to also include present-valu…

682149e

…e BESS replacement, consistent with other

Add standby charges to proforma metrics calcs

bcd8880

Add year_one_total_cost and savings metrics to Financial results

c0362eb

Add test for after-tax savings and new capital cost metrics for alt p…

795668c

…ayback calc

Add new after-tax cost outputs to doc strings

516fe7c

Bill-Becker marked this pull request as ready for review March 3, 2025 17:40

Bill-Becker requested a review from adfarth March 3, 2025 17:45

Merge branch 'develop' into after-tax-savings

44ff7f1

Merge branch 'develop' into after-tax-savings

aadc8a8

adfarth reviewed Mar 10, 2025

View reviewed changes

rm outdated statements

f8a9fed

adfarth reviewed Mar 10, 2025

View reviewed changes

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After tax savings for simple payback #477

After tax savings for simple payback #477

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Bill-Becker commented Feb 13, 2025 • edited Loading

(For reference, this is what GitHub Copilot autogenerated for the PR)

Type Consistency Improvements:

Financial Calculations:

Documentation Enhancements:

Error Handling and Validation:

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