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What Are Above-Market Costs?

How does Energy Trust determine the above-market costs?

Under Oregon law, Energy Trust may pay the "above-market cost" of renewable energy projects.

Above-market costs are the difference between what the power produced by a project is worth at standard rates and what it actually costs to produce the power from the project. If the power from the project is cheaper than the price it can be sold at, then there are no above-market costs.

Energy Trust's board has developed an above-market cost policy that guides our staff's analysis. In brief:

  • After technical review of a project proposal, staff performs a financial analysis comparing project costs to customary and usual costs and returns for the same or comparable technology and installation circumstances.
  • Staff use a series of spreadsheets to analyze the project's costs and revenues. Costs typically include capital costs, yearly expenses such as operations and maintenance, interest on debt, permitting, and other upfront and yearly expenses. Revenues typically include, but are not limited to, revenue from power sales (or reduced power purchases), tax credits and benefits, sales of secondary products, and grants. The analysis is performed for multiple years, based on the typical operating life of the technology or application.
  • Staff determine an incentive offer after considering the net present value of all acceptable project costs and revenues and a range of appropriate returns on investment for the project developer. This is done on an individual basis for custom incentives or for a class of projects for standard incentives.