Economics

The figures on this page are the cost of building and running the modelled system for one year, not a retail electricity bill. There is no bidding, no settlement, no market price anywhere in NemSim, and nothing here should be read as what anyone would pay. See Limitations §3 before quoting a dollar figure from a NemSim result.

Annuitisation

A scenario models a single year, but the assets in it last decades: a coal plant, a battery, an interconnector. LevelisedCostCalculator spreads a one-off capital cost across an asset's technical life using the standard capital recovery factor:

r(1 + r)^n / ((1 + r)^n − 1)

for real discount rate r and technical life n years. Multiplying a capital sum by that factor gives the equal annual payment that would repay it, at that rate, over that life. That is how a single modelled year can carry its fair share of an asset that will still be running in year twenty.

The rate is real, not nominal: every cost figure in the model is stated in the scenario's real-dollar year, so applying a nominal rate on top would double-count inflation. At a zero discount rate the annuity formula above is undefined (division by zero), so the calculator falls back to straight-line recovery, 1/n, as the degenerate case.

What is charged for generation

For each generating fleet, the annual cost is:

annualised power capex + one year of fixed opex
    + variable opex on gross generated energy + fuel cost on gross generated energy

Capital cost is annuitised from the fleet's power capacity and technical life. Fixed opex is one year's charge against nameplate capacity. Variable opex and fuel cost are both charged on gross generated energy, before curtailment or storage charging are subtracted out, using the same short-run marginal cost components that set merit order: variable operating cost, and fuel price multiplied by heat rate.

What is charged for storage

For each realised storage fleet, the annual cost is:

annualised (power capex + energy capex) over technical life + one year of fixed power opex

charged against the fleet's total final capacity, including whatever capacity storage sizing introduced and not just what the scenario originally declared. There is no separate charge for the energy storage moves while charging. That is deliberate, not an omission: gross-generation variable operating cost and fuel are already charged on the energy used to charge storage, at the point that energy was generated, and a battery's round-trip loss is already folded into that gross-generation figure because more had to be generated than was later delivered. Charging storage again for its energy throughput would double-count it. For the same reason, the storage figure published here is not a standalone levelised cost of storage (LCoS). It prices only the storage asset itself, against the same served-energy denominator as everything else, rather than the delivered cost of energy that passed through storage.

The denominator

Every levelised figure, for generation, storage, transmission and the total alike, divides by DeliveredToLoad: demand minus unserved energy. It never divides by generation. A regional levelised cost uses only that region's own delivered energy; the system figure uses the system total. Dividing by delivered energy rather than generation is what makes the figures comparable to a genuine cost of supply: energy generated but curtailed, or lost to storage round-trip inefficiency, was never delivered to anyone and so does not appear in the denominator that spreads the system's cost.

Why regional costs do not sum to the system total

Transmission is annuitised once, at system level, from each directed interconnector's own capital and fixed-opex assumptions and its route length. It is never split or attributed back to either endpoint region. Every way of doing that split is arbitrary, whether by rating, by realised flow or evenly, so the model does not attempt one. The consequence is genuine rather than an oversight: summing every region's levelised cost will not reproduce the system levelised cost, because the system figure carries transmission and the regional figures explicitly do not.

Decimal versus double

Money and every cost-rate type (Money, EnergyPrice, GenerationEnergyCost, PowerCapacityCost, and so on) use decimal, because cost arithmetic is base-10 and accumulating it in binary floating-point would introduce artefacts a reader could easily mistake for a modelling error. Measured physical quantities such as power, energy and distance remain double. The two only meet inside typed conversion methods (PowerCapacityCost.For(Power), EnergyPrice.For(Energy), and so on), which validate that the physical value is finite and non-negative before converting it. This is a correctness-of-presentation choice, not a precision upgrade: using decimal prevents base-10 rounding artefacts from being mistaken for a model defect, but it does not make the underlying cost assumptions any more accurate.

Cost-rate types

Type	Unit	Prices
Money	AUD	A monetary amount: a cost, credit, or net adjustment.
EnergyPrice	AUD/MWh delivered to load	The output unit of every levelised cost figure (SLCoE and its regional equivalents).
GenerationEnergyCost	AUD/MWh generated	Variable operating cost and fuel-derived cost on gross generation; also short-run marginal cost.
PowerCapacityCost	AUD/MW	One-off generation or storage power capital cost.
EnergyCapacityCost	AUD/MWh of storage capacity (one-off)	Storage energy capital cost. Not AUD/MWh generated or delivered.
AnnualPowerCapacityCost	AUD/MW/year	Recurring fixed operating cost against installed power capacity.
FuelPrice	AUD/GJ (thermal)	Fuel price; combined with HeatRate to derive the fuel component of GenerationEnergyCost.
HeatRate	GJ/MWh	Thermal energy required per MWh generated.
DistancePowerCost	AUD/km/MW (one-off)	Interconnector capital cost, scaled by route length and directed capacity.
AnnualDistancePowerCost	AUD/km/MW/year	Interconnector fixed operating cost, scaled the same way.

Next

• Storage sizing: how the Battery capacity priced here is arrived at.
• Transmission: the layering that produces the route length DistancePowerCost and AnnualDistancePowerCost are charged against.
• Limitations: what a NemSim AUD/MWh figure is not.