Sensitivity Analysis in Aire
Sensitivity analysis identifies which assumptions matter most to your project. Vary inputs one at a time across realistic ranges while holding others constant. The result: a clear ranking of variables by their impact on NPV, IRR, LCOE, or any output you track. If electricity price changes by 20%, how much does NPV move? If construction costs vary by ±15%, what happens to IRR? Sensitivity analysis quantifies these relationships and shows where to focus your attention.What You Learn
Sensitivity analysis answers critical questions about your project:- Which single input has the greatest impact on project returns?
- How much does project economics change if interest rates rise 2%?
- What happens to LCOE if equipment costs vary by ±20%?
- Where should I focus during commercial negotiations?
- Which variables determine whether the project meets hurdle rates?
Key Components
Base Scenario: A complete project model with all terms, calculations, and blocks defined—this is your starting point Input Variables: The terms you test—each with a base value, lower bound, and upper bound representing realistic variation Output Metrics: The KPIs you monitor—typically NPV, IRR, payback period, LCOE, or other calculated financial termsHow It Works
Aire executes your full project model repeatedly with different input values. Each run recalculates every term, cascades through blocks, and produces complete financial outputs. The analysis varies one input at a time while holding others constant—this isolates each variable’s individual impact. Tornado Analysis: Test each input at its lower and upper bounds. Calculate the range of output variation. Rank inputs by impact. This produces the data for tornado charts showing which variables matter most. Stepped Analysis: Divide each input’s range into multiple steps (typically 6 points from lower to upper bound). Run the model at each step. Record output values. This produces line charts revealing the full relationship between inputs and outputs, including non-linearities and thresholds. Every calculation is a complete model run—no approximations, no interpolations. Changes cascade through all dependencies with 64-decimal precision. Parallel execution keeps it fast.Reading the Results
Sensitivity analysis produces three types of outputs: Tornado Charts: Horizontal bars show the output range caused by each input. Bar width = impact magnitude. Inputs ranked by importance—widest bars at top. If interest rate produces the widest bar on an NPV tornado chart, interest rate matters more than other tested variables. Line Charts: Plot output values against input values across the full range. Straight lines mean linear relationships. Curved lines reveal non-linearities—regions where small input changes create disproportionate output swings. Inflection points indicate thresholds where project viability shifts. Data Tables: Exact values for every input-output combination at each step. Use these to find specific threshold values where viability changes, export precise numbers for reports, or identify target input values that achieve desired outputs.Selecting Inputs
Test inputs that are:- Uncertain: Variables where the true value isn’t known precisely (commodity prices, interest rates, degradation curves)
- Controllable: Parameters you can influence through design or negotiation (system capacity, financing structure)
- Material: Values that plausibly affect the outputs you care about
- Correlated inputs together (their combined effect will be overstated)
- Unrealistic ranges that would never occur in practice
- Inputs with negligible effect on key outputs
Selecting Outputs
Focus on outputs that define project success:- Financial metrics: NPV, IRR, equity returns, payback period
- Economic metrics: LCOE, unit production cost, revenue per unit
- Risk metrics: Debt service coverage ratio, cash-on-cash return