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SYNTHETIC ECONOMIC INDICATORS
In order to perform a more intuitive viability analysis for the “CHP retrofit + DH network
installation” scenarios identified as most promising solutions, for each island the following
synthetic economic indicators were derived:
- The Net Present Value (NPV), defined as shown in Eq. (10):

n life Net Re venue
NPV  C total    j j (10)
1
j 1   i def

In. Eq. 10 the term “idef” (here assumed equal to 5%) represents the “real” discount rate (which
neutralizes the effects of inflation on the nominal value of future net revenues) needed to adopt
the “constant currency” approach, while the Net Revenue represents the annual income from
energy selling.
- Discounted Payback Time (DPT), evaluated as following Eq. (11):

 κ Net Re venue 
DPT  min | κ  C total   j   0 (11)
  j 1   i def  j  
1

- Profitability Index, a dimensionless indicator calculated as shown in following Eq. (12):

NPV
PI  (12)
C total
Due to the low linear heat density and the consequently high investment costs presented in Table
5, it can be easily predicted that the designed configurations will result scarcely or moderately
attractive from an economic viewpoint. However, the results are made even worse by the
decision to extend the DH network also with some “Not Economically Viable” main and branch
pipes, in order to fulfil the public interests to have (i) a higher share of the heat/cooling loads
covered by “free” energy recovered from diesel engines’ operation and (ii) the possibility to
reduce the production cost of electricity in islands, thus being possible to reduce the incentives
currently assigned with the subsidized feed-in tariff “UC4” (see Section 2). As a consequence, it
is worthwhile deriving the above synthetic indicators for two reference conditions:
1. Absence of incentives or support mechanisms. The viability of the examined configurations
are assessed basing on the results (in terms of capital investment and net annual revenues)
obtained in the previous section;
2. Presence of currently available incentives and further “ad hoc” support mechanisms. In
particular, two simultaneous financial supports will be considered:
 Coverage of 30% of the total capital investment for the projects (i.e. Ctotal) by public
subsidies
 Additional annual revenues deriving from the sell of the specific amount of White
Certificates that each project is expected to attain, based on the energy savings it
achieves. The number of White Certificates [35] assigned may be calculated by Eq. (13):

 E H 
N WC  .0860  K    CHP  CHP  F CHP  (13)

  e ref  t ref 

where: K is fixed equal to 1.3 for CHP plants with capacity between 1 MWe and 10
ref
ref
MWe, ηe and ηt respectively represents the reference efficiency for separate power
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