Nominal discount rates, LCOE and PBP calculations

[Gavin M]

I'd like to suggest improvements to PVSyst's financial documentation in three areas:

1. Discount Rate: Real vs Nominal

The discount rate is nominal (applied to inflated cash flows), but this isn't stated in the documentation. A client recently asked whether this figure was real or nominal - I had to reverse-engineer the model to answer them.

Suggestion: Explicitly state that PVSyst requires a nominal discount rate.

2. LCOE Calculation

PVSyst's LCOE differs from the standard definition - it calculates from the equity perspective rather than using WACC and total investment. It also assumes a fixed price tariff rather than one that rises with inflation. This answers a different question (minimum fixed tariff for equity break-even vs. levelized cost per kWh) and could confuse users familiar with standard LCOE. The documentation should clarify this distinction.

Suggestion: Either rename this metric (e.g., "Minimum Required Tariff" or "Equity Levelized Cost") or document clearly that it differs from other approaches to LCOE and that care should be taken when comparing the result to other sources.

3. Payback Period (% Amortisation)

The formula combines debt principal (undiscounted) with profits (discounted) - this isn't documented and is highly unusual in financial analysis. More problematically, this incentivizes overleveraging: increasing debt improves the apparent payback even though it increases project risk. The metric also changes character abruptly when debt is repaid, making the metric inconsistent across the project lifecycle.

Suggestion: Document the current formula clearly, but consider switching to a standard discounted payback calculation where all cash flows are treated consistently.