## 4 Economic Feasibility
### Financing Scheme Debt Financing and Analysis for KTD's Hybrid Power System  
NPV is defined as the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of a projected investment. The following is the formula for calculating NPV [31]. \[NPV_{K}=\sum_{i=0}^{n}\frac{a_{i}}{(1+k)i} \tag{10}\]  
where:  
\(a_{i}\) represents the incremental cash flow that is expected at time \(t_{i}\), \(K\) is discount rate, and \(i\) is the number of time periods. The input parameters for the economic analysis were based on similar wind projects in Jordan, Table 4 provides the input data used throughout the analysis [2]. The economic feasibility analysis of a wind park, which requires high initial investments, plays a very important role in the assessment of the project. Debt financial scheme is proposed in this study. \begin{table}
\begin{tabular}{c c} \hline \hline
**Parameter** & **Value** \\ \hline Wind park size & 10 MW \\ Pumping Storage system & 5.2 MW \\ Land Cost (100 decacre) & 0 JD \\ Total Estimated Cost of Wind Park & 10,787,647 JD \\ Pumping storage system estimated Cost & 2,491,000 JD \\ Total Investment for Hybrid system & 13,278,647 JD \\  & Loan \\ Total Investment & 60\% & 40\% \\ System life expectancy & 20 years \\ Energy generation—Hybrid System & 26,663,938 KWh \\ Selling price saving cost NEPCO-IDECO JOD/KWh & 0.08272 JD/kWh \\ Annual inflation in tariff \"estimated\" & 0.5\% \\ Annual Growth rate in OakM cost & 0.6\% \\ Insurance \"estimated\" & 0.1\% \\ Annual Growth rate in Insurance & 0.3\% \\ Electromechanical (EM) components for depreciation & 90\% \\ Depreciation percentage of EM & 5\% \\ Cost of money & \\ Loan Annual Reducing Interest Rate & 6\% \\ Discount Rate Capital & 6\% \\ Loan Period & 10 years \\ Payments per Year & 12 \\ \hline \hline \end{tabular}
\end{table} 
Table 4: Input data for financial analysis for KTD’s hybrid system. \begin{table}
\begin{tabular}{c c} \hline \hline
**Pumping Size 5.20 MW** & **Cost per MW** \\ \hline Electrical Cost JOD & 800,000 & 153,846.15 \\ Mechanical Cost & 700,000 & 134,615.38 \\ Project Management Cost & 40,000 & 7,692.31 \\ Commissioning Cost & 30,000 & 5,769.23 \\ Civil Works: & 600,000 & 115,384.62 \\ Labor Cost & 180,000 & 34,615.38 \\ Development Cost & 141,000 & 27,115.38 \\ Total Cost & 2,491,000 & 479,038.46 \\ \hline \hline \end{tabular}
\end{table} 
Table 3: Estimated cost for pumping system. NEPCO owns full equity in the wind park and the total investment is assumed to be paid through two lines of input; 60% of the total investment through a bank loan and 40% of it through subsidy grant. For assessing the financial feasibility of the above option, some financial metrics were used in this study; namely the NPV and payback period in debt financing. The NPV is equal to the present value of the future cash flows. The acceptance criterion for NPV is quite straightforward; when the NPV is greater than zero, the project will be accepted, otherwise, the project must be rejected. The payback period is the time required to recover the total investments by profit gaining. Finally, another important parameter in this analysis is the energy price which is the price NEPCO will sell to the distribution companies for each kWh throughout the lifetime of the project. For this analysis it is assigned to be equal to 0.0827 JOD/kWh based on NEPCO in 2017. In this scheme, NEPCO owns full equity in the project from the commercial operation date until the system's lifecycle is over. NEPCO pays the total initial investment throughout the project implementation period and it is responsible for the operation and maintenance costs of the system throughout its lifetime. NEPCO is assumed to finance 60% of the project investment through debt as a loan with an interest rate of 6%, which is the suitable interest rate in a local commercial bank. Therefore, a discount rate of 6% is used in the discounted cash flow analysis to determine the present value of future cash flows.