Working with Investments With any investment, you pay something now to get something else later. We assume that a dollar in your pocket today is more valuable to you than a dollar tomorrow. The reason why we say that, is that you could invest that dollar somewhere or put it into a bank account and earn interest on it. To tell the difference between today's and tomorrow's dollars, we therefore use the interest rate . To deal with that we shall simply only work with dollars which have the same purchasing power as a dollar does today.
Economists call that working with real values, instead of nominal ones.
This is important, because if you expect some general inflation of prices during the next 20 years, you may expect electricity prices to follow the same trend. Likewise, we would expect operation and maintenance costs to follow roughly the same price trend as electricity. In other words, when we work with real values, we work with money which represent a fixed amount of purchasing power. Typical real rates of interest for calculation purposes these days are in the vicinity of 5 per cent per annum or so. You may say that in countries like Western Europe you could even go down to 3 per cent.