Technology specific tax credits

Technology specific tax credit/policy

Currently, policy parameters are defined in plant_config under policy_parameters. These appear to be 1) not used in the financial modeling and 2) are not technology specific (i.e., electricity_itc and electricity_ptc). I would like technology-specific tax credits to be available for calculations used in ProFastComp. This makes me think that technology-specific tax credits could be output from technology specific cost OR financial models and used as an input to the overall commodity finance calculation (like what is done in ProFastComp).

The problem with implementing this in technology-specific financial models is that it wouldn't be connected to the hybrid plant financial calculations done in ProFastComp, so perhaps this should be part of technology-specific cost models so that these outputs are connected to ProFastComp. However, tax credits intuitively seem more like a financial parameter rather than a cost parameter.

An example use-case is to calculate the LCOH for a plant with technologies of wind, PV, battery, electrolyzer and hydrogen storage. The tax credits that I'd like to be included in the LCOH calc are:

• $0.00275/kWh wind PTC
• 30% PV ITC
• 30% battery ITC
• $3.0/kg hydrogen PTC (based on electrolyzer H2 production)
• 30% H2 storage ITC

Proposed solution

I propose that tax credit be defined in tech_config under each technologies financial model OR cost model, as an ITC or PTC, for example:

technologies:
  wind:
    financial_model:
      ptc: 0.00275 # [$/kWh]
  pv:
    financial_model:
      itc: 0.30 # 30% ITC
  electrolyzer:
    financial_model:
      ptc: 3.0 # $3/kg-H2

For PTC calculations, we could allow the Finance classes to have an input of annual_energy (or annual_production to be more general). For ITC calculations, the Finance class only needs the CapEx input, which already appears in most base Financial classes.

Could we have technology-specific finance calculations (like PTC and ITC) done in their respective finance models and have the outputs from tech-specific finance models be inputs to ProFastComp? This could allow for pretty simple and non-cluttered policy integration in ProFastComp calculations.

In ProFAST Comp, we'd have inputs (defined in setup()):

for tech in tech_config:
   self.add_input(f"itc_adjusted_{tech}", val = 0.0, units = "USD")
   if tech in electricity_producing_tech:
      self.add_input(f"ptc_adjusted_{tech}", val = 0.0, units = "USD/kW*h") # for electricity producing components
   if tech in h2_producing_tech:
      self.add_input(f"ptc_adjusted_{tech}", val = 0.0, units = "USD/kg") # for h2 producing components

Then, in compute() we could have:

itc_cost = 0.0
for tech in tech_config:
   itc_cost += inputs[f'itc_adjusted_{tech}']

pf.set_params("one time cap init", {"value": itc_cost, "depr type": "MACRS", "depr period": 3, "depreciable": False})

for tech in tech_config:
   pf.add_incentive(f"{tech} PTC", {"value": inputs["ptc_adjusted_{tech}", "decay": -1*gen_inflation, "sunset_years": 10, "tax_credit": True})

Additional considerations

There would be some extra considerations for integrating cross-commodity production tax credits (for example: wind PTC in LCOH calculation because it has to be converted from $/kWh to $/kg-H2).

We'd also need to have ITC based on the adjusted capex, which is output from AdjustedCapexOpexComp, although the ITC value may be based on the non-adjusted CapEx if ITC value is calculated in the technology specific cost model.

We may also want to define a discount year for PTC so that it can be adjusted to the cost year (like is what is done with CapEx and OpEx).

Alternatives considered

Additional context

Start by tracing policy_parameters in plant_config, the technology entries in tech_config, and the setup() and compute() paths in ProFastComp. Review the technology-specific Financial classes and AdjustedCapexOpexComp to determine where ITC and PTC values could originate; done means the proposed wind, PV, battery, electrolyzer, and hydrogen-storage credits flow into the hybrid LCOH calculation.