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Key assumptions for capital cost estimation:
Bank interest rate (percent)
8
Percent equity
25
Percent internal rate of return
15
Years of construction
4
Years of operation
25
Depreciation, years
10
Maintenance, percent initial capital
1
Working capital, percent revenue
10
Working capital, percent liquid
50
Owner's cost, percent initial
capital, first-year operation
5
Federal income tax rate, percent
34
General inflation, percent
3
Raw material price escalation,
percent (same as general inflation)
3
State tax
0
General inflation of 3 percent per year was applied to all costs and selling prices. As mentioned above, an assumed rate of inflation was included in the investment required by investors.
ECONOMIC CONVENTIONS
Throughout this report, all costs, prices, and so forth, are given in constant 1992 dollars unless otherwise specified. A Gross Domestic Product Implicit Price Deflator2 has been used to adjust current dollars to 1992 dollar figures. An exception is DOE budget data, which are quoted in current dollars.
THERMAL EFFICIENCY
Throughout this report all thermal efficiency figures are based on the higher heating value (HHV) of fuel, which is the convention most widely used in the United States for coal-based systems. HHV credits the fuel with the heat of vaporization of water formed in the combustion reaction; that is, water is assumed to exist in the liquid phase after combustion. This is consistent with the standard thermodynamic conditions of 25 °C (77 °F) and 1 atmospheric pressure used to calculate the heat of formation or reaction of any chemical compound (recall that "heating value" is simply the name commonly used for the heat of reaction of a hydrocarbon used as fuel).
2
EIA, 1994, Annual Energy Review 1993, Energy Information Administration, U.S. Department of Energy, DOE/EIA-0384(93), DOE, Washington, D.C.
