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Published online by Cambridge University Press: 19 December 2024
In this chapter, we illustrate how to perform an economic analysis of energy investments from a private as well as a social point of view. In the first part of the chapter, we present the most important investment criteria that can be applied in the evaluation of private investments, i.e., the net present value and the internal rate of return. Because of their importance in the energy sector, we also discuss the computation of the levelised cost of energy (LCoE) and the concept of the learning curve. In the last part of the chapter, we introduce social cost–benefit analysis, highlighting the differences between this approach oriented to choose projects which maximize society’s welfare, with respect to private cost–benefit analysis. At the end of the chapter, we discuss issues in developing countries related to the topics discussed in the chapter.
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