Tutorial 6 Economic Analysis

1. If the initial extra cost of a solar system is $5,000, what is the annual payment
if the interest rate is 8% and the mortgage term is 15 years? ($584 /year)

2. What is the present value of a $1,000 payment received in Year 2020 if we are
now in Year 2013 and the discount rate is 7%? ($ 622.75)

3. What is the present value in constant dollars of the $1,000 payment per year
from Year 2013 to Year 2020 in No.2 if the inflation rate is 4% per year and
discount rate is 7%? ($6257.82)

4. (a) An owner of a double storey house considers a retrofit

installation of a solar photovoltaic system on the roof with the total
expenses of RM 18,000.00. Under the existing climatic conditions, the
photovoltaic system can supply 11 kWh of electricity per day for 25
years. Assume that the photovoltaic system performance does not
degrade over the lifespan.

(i) If the tariff of electricity is RM 0.30 per kWh, calculate the

annual saving from the installation of the photovoltaic system.
(RM 1204.5)

(ii) Determine the number of years to repay the loan by using the
yearly saving from the electricity bill provided that the interest
rate is 6 % and the fuel inflation rate is 4 %. (17.8
years)

(iii) Justify whether the above system could reach grid parity.
(The system has reached grid parity as the return of all the investment is less
than the lifetime of the PV system. It means from year 17.8 to 25, the further
saving of electricity is the bonus or sales from the system.)

5. (a) A residential house located at Alor Setar is considering a

retrofit installation of a solar water heater with total collective area of 3
m2. Under the existing climatic conditions, the annual average solar
irradiance is 650 Wm–2 for 5 hours per day throughout 365 days per
year.

(i) If the solar water heater can achieve thermal efficiency of 95

%, calculate annual saving in the present value of RM provided
that the electricity cost is RM 0.30 per kWh. (RM
1014.24)

(ii) If the owner can make a loan for the solar water heater at a rate
of 5% per year and he wants his investment to be paid back
within 8 years, what is the allowable maximum investment for
 the solar water heater? Assume that the expected increase of
electricity price is 3 % per year.
(The owner can pay RM 7448.40 or less for the retrofit installation)