Solutions / Engineering guide
Wind Project NPV & Payback: Make the Assumptions Visible
Net present value and simple payback answer different questions. Both depend on the defined cash flows, timing and comparison case. A turbine rating or supplier price alone cannot establish either result; build the financial record from a justified project assessment.
A financial result belongs to its assumptions.
Separate the calculation method from the evidence supporting energy contribution, avoided costs and future expenses.
01 / Cash-flow boundary
State what is counted and compared.
Identify the project alternative and reference service, analysis period and currency.
Identify the project alternative and reference service, analysis period and currency. Record initial expenditure, later costs and justified revenue or savings separately. Avoid counting both the same avoided electricity cost and a second invented benefit for that identical energy contribution.
NLR’s System Advisor Model documentation describes NPV using discounted cash flows. Its financial-model context is background for the method, not a MARSTON financial forecast. A project assessment needs its actual energy-value basis and cost inputs before a useful result can be calculated.
02 / Discounting
Keep timing and rate conventions explicit.
For a defined simple ledger, write NPV = C0 + C1/(1+r) + C2/(1+r)² + subsequent stated periods.
For a defined simple ledger, write NPV = C0 + C1/(1+r) + C2/(1+r)² + subsequent stated periods. C0 is the initial signed cash flow and r is the assumed rate per matching period. Retain whether later amounts occur at period end or another declared time.
Use a consistent inflation and cash-flow convention; do not mix amounts stated in different purchasing-power bases without a defined treatment. The rate and analysis horizon are project assumptions, not values selected here for investment advice or a preferred outcome.
03 / Arithmetic example
Use invented units to illustrate the method.
Hypothetical calculation only: assume an initial outflow of 100 monetary units and net inflows of 60 units at each of the next two year ends.
Hypothetical calculation only: assume an initial outflow of 100 monetary units and net inflows of 60 units at each of the next two year ends. With an assumed 10% annual discount rate, NPV = −100 + 60/1.10 + 60/1.10², approximately +4.13 units.
Undiscounted cumulative cash is −40 after year one and +20 after year two, so this year-end ledger first recovers the initial amount at year two. These invented cash flows are not turbine prices, energy savings, a warranty period or a MARSTON payback promise.
04 / Metric differences
Do not interpret recovery as complete profitability.
Simple payback identifies recovery of the stated initial amount under a declared method; it does not by itself value later flows or the time value of money.
Simple payback identifies recovery of the stated initial amount under a declared method; it does not by itself value later flows or the time value of money. Specify how within-period recovery is treated rather than assigning a fractional year to a year-end cash-flow ledger.
NPV depends on the horizon and discount rate as well as the same flows. In the illustrative ledger, changing only the assumed rate to 15% gives approximately −2.46 units. The opposite sign demonstrates sensitivity to an assumption, not a recommendation about a suitable discount rate.
05 / Project evidence
Keep energy and replacement assumptions reviewable.
Support any useful energy contribution with resource, applicable performance evidence, timing and operating restrictions.
Support any useful energy contribution with resource, applicable performance evidence, timing and operating restrictions. Translate that contribution into cash only using the project’s valid value basis. A generation total cannot automatically become reduced demand charges or fully valued export revenue.
Identify maintenance, replacement, access and end-of-service amounts when relevant, including when they occur. Unknown costs should appear as uncertainty rather than zero. Use the project-cost guide for the broader input boundary.
06 / Decision sensitivity
Compare alternatives without forcing a positive result.
Show the input changes that materially alter the conclusion: accepted energy value, complete installed scope, later costs or project duration.
Show the input changes that materially alter the conclusion: accepted energy value, complete installed scope, later costs or project duration. Keep the same required service when comparing wind, solar, an existing grid supply or another feasible option.
A weak resource or short project duration can leave wind unattractive under justified assumptions. Keep that conclusion visible. For a MARSTON enquiry, request the equipment and configuration information needed to improve the assessment; no return, payback period or financial recommendation is supplied here.
Continue the review with Cross-Currency Wind Project Budgets: Assumptions & Timing.
Continue the review with Wind Turbine Technical Bids: Compare the Same Supply Scope.
Continue the review with Small Wind Decommissioning: Material & Site Planning.
General background: NLR System Advisor Model: net present value and timed cash-flow definitions. These references explain industry concepts; they are separate from the applicable MARSTON product and project documents.
Prepare the information for this review.
Use the checklist to organise the project information. Mark unavailable items and retain document references.
| Review item | Information to provide | Purpose |
|---|---|---|
| Reference case | Required service, alternative and analysis boundary | Compare consistent options. |
| Timed ledger | Signed flows, dates, currency and source | Make arithmetic inspectable. |
| Rate convention | Period, inflation basis and assumed discount rate | Keep treatment consistent. |
| Energy value | Accepted contribution and project-specific value basis | Avoid invented savings. |
| Sensitivity | Uncertain inputs and changed conclusions | Expose decision dependence. |
Engineering questions.
Can rated power determine payback?
No. Energy contribution, value, complete costs and cash-flow timing are required.
Are the 100 and 60 units actual MARSTON prices?
No. They are invented values for a transparent arithmetic example.
Why do payback and NPV differ?
They treat timing and later cash flows differently under their declared methods.
Can a positive example justify a project?
No. Replace illustrative values with supported project inputs and compare the actual alternatives.
Should an unknown future cost be entered as zero?
Identify uncertainty and test its effect instead of treating missing information as no cost.
Does this guide recommend a discount rate?
No. The rates illustrate sensitivity; the project must establish its own appropriate assumptions.
Technical enquiry
Bring your project information to the discussion.
Net present value and simple payback answer different questions. Share the available information and the equipment scope you want reviewed in a technical quotation.