Chabot 2010 Price-Setting Workshops Advanced Preparation

By Paul Gipe


One of the purposes of the workshops is to learn a technique for calculating the tariffs needed to cover the “cost of generation plus a reasonable profit” that is a hallmark of successful feed-in tariff programs.

An equally important objective is to actually calculate some sample tariffs. For this, participants must come prepared with their own estimates of

  • Installed cost,
  • Annual reoccurring costs,
  • Cost of debt, and
  • And the rate of return required on equity invested.

This workshop will only examine tariffs for wind and solar PV.

We would like to have participants come prepared with some idea of the average values of the above for the following tariff classes.


  • Wind onshore
    • small clusters
    • wind farms
  • Wind offshore
  • Small wind <65 kW

Rooftop Solar PV

  • ~10 kW (residential)
  • ~250 kW
  • ~500 kW
  • ~1 MW

Groundmounted Solar PV

  • ~10 MW

While we may not have time to calculate the tariffs needed for all categories, we will try to do several.


Installed cost

This is the full cost after a project has been put into operation. It is not “future costs” found in media hype. It is the real cost of projects actually completed and in operation. Real costs are sometimes quite different from the costs reported in press releases.

Examples of real costs were that prepared for the Ontario Power Authority for their calculations of Ontario’s tariffs.

Note that the Ontario process used a Discounted Cash Flow Model after tax. The Chabot PI method is before tax and is much simpler to use than the DCF model.


Annual Reoccurring Costs

These costs are more encompassing than simple “Operation & Maintenance”. See Annual Reoccurring Expenses for typical values of Solar PV in Germany. For comparable estimates for wind see Costs of Operation & Maintenance Summary. These values for both solar PV and wind are typically much higher than mentioned in the North American media.


Background on Bernard Chabot

This web site contains a wealth of material on Bernard Chabot and his Profitability Index Method (PIM) for calculating “fair and equitable” tariffs for renewable energy. Chabot was the principal economic consultant to the Ontario Sustainable Energy Association in its campaign for Advanced Renewable Tariffs in Ontario.