Thus, the unit cost of electricity is given by:equation(14)COE=CICRF+CO&MEpwhere CRF is the capital recovery factor, assuming a discount rate of 5% and a power plant lifetime of 30 years.
In addition to the unit cost of electricity, the profitability of the investment was assessed by means of two common indices , the discounted payback Doxorubicin (DPP) and the profitability index (PI):equation(15)PI=NPV+CICI
These parameters were evaluated assuming that small-hydro power plants will benefit from the Italian incentives program, which was radically redefined by the Ministerial Decree of 6 July 2012 . According to this decree, the incentive for small hydro power plants with a rated capacity of less than 1 MW is a “base tariff” defined according to the size and guaranteed for the conventional plant lifetime. In this case, the incentive is configured as an all-inclusive tariff, comprising both the incentive and the remuneration of the energy production.
Furthermore, in the present study it is assumed that for these small-hydro power plants, where the effective lifetime is greater than the conventional one, the energy production at the end of the incentive period benefits from the simplified purchase/resale arrangements. The simplified purchase/resale arrangements provide that the energy supplied to the grid is sold at a guaranteed minimum price, depending on the type of renewable energy source and the amount of energy supplied to the grid.