Project Economics

Coverage Ratio

A type of accounting ratio that helps measure a company's ability to meet its obligations satisfactorily. A coverage ratio encompasses many different types of financial ratios. Typically, these kinds of ratios involve a comparison of assets and liabilities. The better the assets "cover" the liabilities, the better off the company is.

Business Metrics

A system of parameters or other quantitative assessments of a business that can be measured periodically and systematically. Business metrics are often used to keep track of how well a business is meeting its objectives.

Avoided Cost

The rate that utilities are required to pay independent power producers according to the Public Utilities Regulatory Policy Act (PURPA). Avoided cost is the simply the cost that the utility would have incurred for producing the same amount of power. This is not a favorable rate to recieve as an independent power producer.

Alternative Minimum Tax (AMT)

AMT can be thought of as a different tax system with different rules and deductions; taxpayers must compute their taxes under both the regular tax and AMT rules and then pay the greater of the two. The purpose of the AMT is to prenvet those in the higher tax bracket from getting by from year to year tax free. A consequence is that many unsuspecting taxpayers who make less than $100,000 a year with certain kinds of investments and deductions end up having to pay the AMT. Investing in certain types of businesses can trigger the AMT.

Economics

One of the main benefits of wind energy is economic gain, both for individuals and for communities. Individuals can save money on their energy bills, and even make money by generating wind power. Communities can diversify their economies and enjoy greater reliance on local resources when their members invest in wind.

Of course, a wind project will provide these advantages only if the economics have been thought through in advance. Like any investment, wind energy projects require some research and a basic understanding of the risks, costs, and benefits involved.

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