Discounting Approaches in Multi-Year Investment Modelling for Energy Systems

Abstract

This paper reviews discounting approaches for modeling multi-year energy investments, focusing on total versus annualised cost formulations. We discuss how time value of money is handled, and how salvage value and milestone-year weighting can address mismatches between asset lifetimes and model horizons. These methods are implemented in the open-source TulipaEnergyModel to support transparent and tractable long-term energy system planning.