STEM help / Calculation framework

10.3.6 Cost Indices and Production Functions

Changes in the unit capital costs of Resources are driven by their Cost Structure, and the Cost Trends of the Cost Indices that make up that structure. For example, the cost of a particular Resource may be broken down into the costs of electronics, software and civil works. The relative proportions of each define the Cost Structure. The Resource Unit Capital Cost is therefore defined in the input data by:

  • its Capital Cost in the Calibration Period
  • a list of its Cost Indices, and
  • the proportion of the Resource’s total cost contributed by each index in the Calibration Period, for example:

These proportions should sum to one or zero, the latter being a special case representing constant capital cost.

Each Cost Index has a Cost Trend, a time series which represents the relative price of that Cost Index. Cost Trends are often specified as a Floor and Multiplier – see 10.3.33 Time-series inputs.

 

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