Box B.3 Truncation of investment cost data for transmission and storage assets Transmission and storage assets have long economic lifetimes that are likely to continue beyond the 40 year simulation period. In such cases it is inappropriate to attribute all of the investment cost to the simulation period being modelled. Ideally, the full costs and benefits of all investments would be contained in the simulation period. However, a longer simulation period involves computational costs and, for assets with multiple period lifetimes that are commissioned toward the end of any finite modelling timeframe, some use will occur beyond the simulation period. Any formula truncating investment costs must make assumptions about the allocation of the investment costs between the simulation period of the model and beyond the simulation period. In the model, this truncation is done on a pro rata basis: the share of the economic life that is beyond the asset’s simulation period is subtracted from the total investment cost. This presupposes that the cost of investment is evenly amortised over time. An example of how transmission and storage investment costs are truncated in the model is shown in the table below. Source: Based on PC (2011).
Box B.3 Truncation of investment cost data for transmission and storage assets Transmission and storage assets have long economic lifetimes that are likely to continue beyond the 40 year simulation period. In such cases it is inappropriate to attribute all of the investment cost to the simulation period being modelled. Ideally, the full costs and benefits of all investments would be contained in the simulation period. However, a longer simulation period involves computational costs and, for assets with multiple period lifetimes that are commissioned toward the end of any finite modelling timeframe, some use will occur beyond the simulation period. Any formula truncating investment costs must make assumptions about the allocation of the investment costs between the simulation period of the model and beyond the simulation period. In the model, this truncation is done on a pro rata basis: the share of the asset’s economic life that is beyond the simulation period is subtracted from the total investment cost. This presupposes that the cost of investment is evenly amortised over time. An example of how transmission and storage investment costs are truncated in the model is shown in the table below. Source: Based on PC (2011).