NumPy Financial NPV Finance Model

NumPy Financial NPV Finance Model#

The NumpyFinancialNPV component calculates the Net Present Value (NPV) of a commodity-producing plant or technology over its operational lifetime using the NumPy Financial npv method. It is implemented as an OpenMDAO ExplicitComponent and integrates with system-level technoeconomic optimization workflows.

The component evaluates profitability by discounting future cash flows — including capital expenditures (CAPEX), operating expenses (OPEX), refurbishments, and revenues — based on user-defined financial parameters.

Future cash flows are discounted using a nominal, pre-tax weighted average cost of capital (WACC) that blends the cost of equity and the cost of debt according to the plant's capital structure. Because the WACC is pre-tax and the cash flows are not tax-adjusted (no income tax, depreciation, or interest tax shield is modeled), the discount rate and cash flows are kept internally consistent. If a fully after-tax analysis is required, use the ProFAST-based finance model instead.

By convention:

Investments and costs (CAPEX, OPEX, refurbishments) are negative cash flows.
Revenues (commodity sales) are positive cash flows.

Model Inputs#

`NumpyFinancialNPVFinanceConfig`#

Description Configuration class defining financial parameters for the NPV calculation. Implements validation and default handling using the attrs library.

Attribute	Type	Description	Default
`plant_life`	`int`	Operating life of the plant in years. Must be ≥ 0.	—
`real_discount_rate`	`float`	Real equity rate / cost of equity (0-1). Can be either a real or nominal rate depending on how `inflation_rate` is specified. A pre-computed WACC can be supplied here directly by leaving `debt_equity_ratio` and `inflation_rate` at 0.	-
`debt_rate`	`float`	Real debt rate / cost of debt (0-1). Converted to nominal via the Fisher equation when `inflation_rate` is provided.	`0.0`
`debt_equity_ratio`	`float`	Ratio of debt to equity (`D/E`, ≥ 0) used to weight the debt and equity contributions to the WACC. When 0, the WACC reduces to the equity rate.	`0.0`
`inflation_rate`	`float`	Inflation rate (0-1). Combined with the real equity and debt rates via the Fisher equation `(1 + nominal) = (1 + real) * (1 + inflation_rate)` before they are weighted into the WACC. Set to 0 if the rates are already nominal. This matches how ProFAST combines its real rates and `general_inflation` inputs.	`0.0`
`commodity_sell_price`	`int` or `float`	Sale price of the commodity (USD/unit).	`0.0`
`commodity_sell_price_units`	`str`	OpenMDAO unit string for `commodity_sell_price` (e.g. `"USD/(kW*h)"` for electricity or `"USD/kg"` for hydrogen).	—
`save_cost_breakdown`	`bool`	Whether to save annual cost breakdowns to CSV.	`False`
`save_npv_breakdown`	`bool`	Whether to save per-technology NPV breakdowns to CSV.	`False`
`cost_breakdown_file_description`	`str`	Descriptor appended to output filenames.	`'default'`

An example of what to include in the plant_config to use the NPVFinance model. This is included in ["finance_parameters"]["finance_groups"], where npv is the specific finance_group name.

npv:
  finance_model: "NumpyFinancialNPV"
  model_inputs:
    real_discount_rate: 0.09 # real equity rate (cost of equity); also the discount rate when no debt is specified
    debt_rate: 0.05 # optional, defaults to 0; real cost of debt
    debt_equity_ratio: 1.0 # optional, defaults to 0; D/E used to weight the pre-tax WACC
    inflation_rate: 0.0 # optional, defaults to 0; provide e.g. 0.025 if the rates above are real
    commodity_sell_price: 0.078 # if commodity is electricity $/kwh
    commodity_sell_price_units: "USD/(kW*h)" # OpenMDAO unit string for the sell price
    save_cost_breakdown: True
    save_npv_breakdown: True

Note

plant_life is included in the plant section of the plant_config yaml.

Model Outputs#

Name	Units	Description
`NPV_<commodity>_<optional_description>`	`USD`	Total discounted Net Present Value for the system.

Output Files (if enabled)#

File	Description
`*_cost_breakdown.csv`	Annual time series of costs and revenues per technology.
`*_NPV_breakdown.csv`	Discounted NPV summary by cost/revenue category.

Calculation Methodology#

Assemble Cash Flows
- CAPEX (negative) at year 0
- OPEX (negative) and revenue (positive) for years 1–plant_life
Refurbishments
- Technologies with replacement_cost_percent and a refurbishment period incur periodic capital costs.
Discounting
- Each series of cash flows is discounted using NumPy Financial’s npf.npv(effective_rate, values), where effective_rate is the nominal, pre-tax WACC computed by _compute_wacc.
- The real equity rate (real_discount_rate) and real debt rate (debt_rate) are first converted to nominal rates via the Fisher equation (1 + nominal) = (1 + real) * (1 + inflation_rate) (see _real_to_nominal_rate). When inflation_rate is left at its default of 0, this conversion is a no-op and the supplied rates are used directly (i.e., treated as nominal).
- The nominal rates are then blended by capital structure:
```
equity_weight = 1 / (1 + debt_equity_ratio)
debt_weight   = debt_equity_ratio / (1 + debt_equity_ratio)
WACC          = equity_weight * equity_rate + debt_weight * debt_rate
```
  No interest tax shield is applied to the debt leg, so the WACC is pre-tax, consistent with the pre-tax cash flows. When debt_equity_ratio is 0, the WACC reduces to the (nominal) equity rate, and a pre-computed WACC can be supplied directly through real_discount_rate. The multiplicative (Fisher) form matches the way ProFAST combines its real rates and general_inflation inputs.
Summation
- Total NPV = sum of all discounted cash flows.
Optional Output Files
- *_cost_breakdown.csv: Annual cash flow time series
- *_NPV_breakdown.csv: Discounted NPV breakdown per item