### Does HOMER account for inflation?

Last Updated: Jul 19, 2016 03:04PM MDT

Yes, but it assumes that all prices escalate at the same rate. With that assumption, inflation can be factored out of the analysis simply by using using the annual real interest rate rather than the nominal interest rate. All costs are therefore in constant dollars.

Since HOMER assumes all prices escalate at the same rate, it not possible to model a situation where the fuel price (or any other cost) escalates at a different rate. It is possible, however, to explore the effects of an escalating fuel price by doing a sensitivity analysis on the fuel price.

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