HOMER Knowledge Base
Salvage Value
To be really useful to us, we would need a way to put salvage value = 0, as this is how all our customers make their business cases.
Is this possible or planned?
There is no way to set the salvage value of a component to zero in HOMER.
I think the simplest solution to your problem is to set the lifetime of each component you are modeling to be a whole divisor of the Project lifetime. You may have to pro-rate the replacement cost accordingly. If your project lifetime is 30 years and all of your components have lifetimes of: 1, 2, 3, 5, 6, 10, 15 or 30 years, then there will never be any "unused" lifetime left in a component when the project lifetime has been reached, and therefore no salvage value.
Project lifetime is found in the Economic Inputs window.
Another solution would be to make the project lifetime extremely long. This won't affect the optimization. HOMER assumes that you will want to continue
to replace equipment until the end of the project lifetime. Salvage value is just its way of settling up at the end of the project life, so a system isn't penalized if it just replaced something right before then. In most cases the project life is arbitrary anyway.
Also, for situations where the customer has a very high hurdle rate (requires a fast payback) is to set the interest rate very high, making it equal to their hurdle IRR rate. For a 3-5 year payback, that could be 15-25%. We call it an interest rate in HOMER, but its role is more of a discount rate.