Biomass Feasibility Project Final Report - Xcel Energy

General Economic Inflation Rate
The general economic inflation rate represents the rate of degradation of the purchasing power
of the dollar. In 2005 the rate was 3.4%. Rates have been rising generally since January of 2002.
Inflation rates are difficult to predict, however they can have a significant influence on
investment decisions and outcomes. Current and historical inflation data is available at the U.S.
Department of Labor Bureau of Labor Statistics (www.bls.gov).
Fuel Escalation Rate
Enter the nominal rate at which fuel costs are expected to increase. This figure should include
any increase due to inflation: if real fuel costs are expected to increase at 1% and inflation is
2.1%, then the Fuel Escalation Rate should be 3.1%. If fuel costs are expected to decrease over
time, subtract the real change in price from the inflation rate.
Production Tax Credit Escalation Rate
The Federal Production Tax Credit (see below) is indexed to inflation and re-calculated each
year. Thus, the most appropriate value for this field would be the same as the General
Economic Inflation Rate. Other values can be entered if changes to federal policy are
anticipated.
Escalation Rate - Other (Non-Fuel)
This represents the Non-fuel escalation rate. This accounts for the escalation of costs not
associated with general inflation, fuel costs, or the escalation of available Production Tax
Credits.
Federal Tax Rate
The default federal tax rate is 34%. If another federal tax rate is relevant it can be user defined.
State Tax Rate
The default state tax rate is 9.6%. If another state tax rate is relevant it can be user defined.
Participation in Minnesota’s JOBZ program could significantly change a facility’s state tax
burden through 2015.
Production Tax Credit
There is a federal tax credit for 10 years for projects installed by January 1, 2008. As of 2005, this
credit is worth $0.009/kWh; the credit is increased annually to keep pace with inflation. There is a
state payment of $0.015/kWh for ten years for generation from on-farm anaerobic manure
digester systems.
Save This Power Plant
Each Power Plant Scenario must be saved in the Power Plant Log. Once all data has been
entered, click “Save This Power Plant” to save the power scenario. The new power plant
scenario is then available for comparison with other scenarios. The data for the scenario can be
reviewed, edited, copied, and deleted by selecting “Power Plant” under “Logs” in the
Identifying Effective Biomass Strategies: Page A-15
Quantifying Minnesota’s Resources and Evaluating Future Opportunities