Fixed Internal Rate versus Discount Rate

[NicholasFry]

Hi all,
I want to point out that the standardized cost model is using two different inputs for discount rate. This could mislead the user, such as myself, into thinking that the discount rate is being used in the NPV formula, as is the norm. Instead, under the economics.py script, discountrate and FixedInternalRate are defined separately. At present the discount rate is only used in discount vector, which separately tabulates the LCOE, LCOH, LCOC. Unless there is an objective reason that exceeds my understanding of project economics, discountrate should be equal to FixedInternalRate.

[softwareengineerprogrammer]

Relevant code for reference:

Fixed Internal Rate:

GEOPHIRES-X/src/geophires_x/Economics.py

Lines 1382 to 1392 in 95c37b7

	self.FixedInternalRate = self.ParameterDict[self.FixedInternalRate.Name] = floatParameter(
	"Fixed Internal Rate",
	DefaultValue=6.25,
	Min=0.0,
	Max=100.0,
	UnitType=Units.PERCENT,
	PreferredUnits=PercentUnit.PERCENT,
	CurrentUnits=PercentUnit.PERCENT,
	ErrMessage="assume default for fixed internal rate (6.25%)",
	ToolTipText="Fixed Internal Rate (used in NPV calculation)"
	)

Discount Rate:

GEOPHIRES-X/src/geophires_x/Economics.py

Lines 840 to 850 in 95c37b7

	self.discountrate = self.ParameterDict[self.discountrate.Name] = floatParameter(
	"Discount Rate",
	DefaultValue=0.07,
	Min=0.0,
	Max=1.0,
	UnitType=Units.PERCENT,
	PreferredUnits=PercentUnit.TENTH,
	CurrentUnits=PercentUnit.TENTH,
	ErrMessage="assume default discount rate (0.07)",
	ToolTipText="Discount rate used in the Standard Levelized Cost Model"
	)

[softwareengineerprogrammer]

@NicholasFry Can you confirm that the highlighted diff in this commit to set Discount Rate and Fixed Internal Rate to the same default value is aligned with the issue as you're describing it? softwareengineerprogrammer@14bc59d#diff-372dea2554a92733824c98709c9bdb5720c183c31762c3795bd3990f069a2f24R841-L1392

(Assuming it is, I will start putting together a PR with it + changes to synchronize DR & FIR iff exactly one is provided, and otherwise warn the user that providing differing values is probably incorrect/inconsistent)

[softwareengineerprogrammer]

@kfbeckers Can you confirm that the premise of this issue is correct in that Discount Rate and Fixed Internal Rate should, conceptually, always be the same value?

[NicholasFry]

This looks correct, yes. It also looks like you fixed the units (% versus decimal) for each as well. These were the changes I was suggesting make sense to me. Thank you.

[softwareengineerprogrammer]

Implementation steps:

1. Step 1: Set DR/FIR to same default value of 6.25%: Set fixed internal rate default value to same as discount rate softwareengineerprogrammer/GEOPHIRES-X#37
2. Step 2: Synchronize DR/FIR if one (and only one) is provided; emit corresponding logs to inform user: Synchronize discount rate and fixed internal rate automatically #304 (Synchronize discount rate and fixed internal rate automatically softwareengineerprogrammer/GEOPHIRES-X#39)
3. Confirm default value of 7% is correct/appropriate: NREL 2024 ATB lists 7% for geothermal https://atb.nrel.gov/electricity/2024/financial_cases_&_methods:
   

[softwareengineerprogrammer]

Steps to resolve are now complete with merge of #301. Thanks for bringing this to our attention @NicholasFry!