Volume 39: Energy Transitions toward Carbon Neutrality: Part II

Technology-Specific Hurdle Rates for Energy System Optimization Models Silvia Laera, Gianvito Colucci, Valeria Di Cosmo, Daniele Lerede, Matteo Nicoli, Laura Savoldi

Abstract

This work presents a methodology to evaluate technology-specific hurdle rates for energy system optimization models. Hurdle rates are usually assumed through educated guesses by energy system modellers, while they are estimated here by adopting the weighted average cost of capital methodology where possible and collecting data from the available literature in the other cases. The methodology is applied to the TEMOA-Italy open-source model: first, the updated hurdle rates are compared to the original model values; then, the effects of such an update are deepened in a base scenario. The results suggest that hurdle rates do not significantly affect the optimal system configuration (and the competition between the alternative technologies), while they vary the computed discounted costs of the technologies selected by the model.

Keywords Discount rates, Hurdle rates, Energy system optimisation models, TEMOA-Italy, EU Taxonomy