Financing Sustainable Energy - the Annualisation Method

Evaluating investment decisions in sustainable energy typically requires a comparison between initial capital cost with annual revenues. This is normally done through the Net Present Value method, a best practice in engineering-economic analysis.

This minute lecture proposes an alternative but equivalent method of annualising the initial capital investment and comparing it with annual revene streams, either from production of renewable energy, or from cost reductions through energy savings.

The result is a highly intuitive approach comparing annual revenues and costs in engineering-economic rather than accounting terms.