The simulator takes a series of time steps, each of “step_seconds” duration. At each step, it calculates how the house’s energy state changes, until it reaches the longest project duration “max_project_duration_years”.
The smaller the step, the greater the accuracy but the larger the amount of calculation required.
"time": {
"step_seconds": 216,
"max_project_duration_years": 25,
"discount_rate_pa": 0.04
},
The simulator needs an assumption for the annual discount rate “discount_rate_pa” in order to calculate NPV (net present value). There is no universal “one-size-fits-all” value. An optimum value for you depends on:
- whether you use real or nominal accounting to value future cashflow: either is OK provided you are consistent;
- attitude to how risky the project will be: if you think there is something above averagely risky about it, it may be reasonable to increase the value;
- expected post tax return from alternative investments.
I prefer the real accounting approach and set “discount_rate_pa” to the post tax historic inflation adjusted S&P500 growth index rate.
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