NB Power wants to assess the potential for a photovoltaic system to produce elec
ID: 1149436 • Letter: N
Question
NB Power wants to assess the potential for a photovoltaic system to produce electricity from solar energy at a lower cost than electricity production from a thermal plant (such as coal). Unit cost of electricity, currently produced by the thermal power plant, is $0.07 per kilowatt-hour. The photovoltaic system is characterized by the following:
Item
Value
Equipment and tools:
solar cell
batteries
wiring
power control
$3,000
$1,000
$800
$100
Operating costs
$100/year
Batteries must be replaced every 5 years while power control - every 10 years. Assuming service life of 20 years, annual interest rate of 10%, capacity of the photovoltaic system of 35 kilowatt-hours per day and ignoring the installation cost, should NB Power implement the system?
Item
Value
Equipment and tools:
solar cell
batteries
wiring
power control
$3,000
$1,000
$800
$100
Operating costs
$100/year
Explanation / Answer
Working notes:
(1) Annual saving = $0.07 x 35 x 365** = $894.25
(2) Net annual benefit, NAB ($) = Annual saving - Annual cost
(3) Annual cost, year 5 and year 15 = $(100 + 1,000) = $1,100 (replacement of battery)
(4) Annual cost, year 10 and year 20 = $(100 + 1,000 + 100) = $1,200 (replacement of battery & power control)
(3) First cost ($) = 3,000 + 1,000 + 800 + 100 = 4,900
Present Worth (PW) of NAB is computed as follows.
Since PW > 0, NB should implement the system.
Year Saving ($) Cost ($) NAB ($) PV Factor @10% Discounted NAB ($) (A) (B) (C)=(A)-(B) (D) (C)x(D) 0 4,900 -4,900.00 1.0000 -4,900.00 1 894.25 100 794.25 0.9091 722.05 2 894.25 100 794.25 0.8264 656.40 3 894.25 100 794.25 0.7513 596.73 4 894.25 100 794.25 0.6830 542.48 5 894.25 1,100 -205.75 0.6209 -127.75 6 894.25 100 794.25 0.5645 448.33 7 894.25 100 794.25 0.5132 407.58 8 894.25 100 794.25 0.4665 370.52 9 894.25 100 794.25 0.4241 336.84 10 894.25 1,200 -305.75 0.3855 -117.88 11 894.25 100 794.25 0.3505 278.38 12 894.25 100 794.25 0.3186 253.07 13 894.25 100 794.25 0.2897 230.07 14 894.25 100 794.25 0.2633 209.15 15 894.25 1,100 -205.75 0.2394 -49.25 16 894.25 100 794.25 0.2176 172.85 17 894.25 100 794.25 0.1978 157.14 18 894.25 100 794.25 0.1799 142.85 19 894.25 100 794.25 0.1635 129.87 20 894.25 1,200 -305.75 0.1486 -45.45 PW of NAB ($) = 413.98Related Questions
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