Question

1/ A retrofit project is estimated to cost $150,000. The energy savings are expected to last 25 years, but will need a minor upgrade of $10,000 at year 15. The retrofit is expected to save 100 MWh per year. Assuming a discount rate of 6%, and an electricity cost of $0.12/kWh:

a/ What is the net-present value of the system ?

b/ What is the equivalent cost of the saved energy?

Answer 1

Given

Initial cost = $150000

Annual Savings = 100 Mwh = 100000 Kwh * 0.12 per Kwh = $12000

Minor upgrade @ year 15 = $10000

I = 6% per year

N = 25 years

a.

Net Present value = Present worth of benefits – Present worth of costs

Net Present value = 12000(P/A,6,25) – [150000 + 10000(P/F,6,15)]

Using DCIF Tables

Net Present value = 12000(12.783) – (150000 + 10000(0.4173))

Net Present value = -$777

b.

Equivalent cost of saved energy = 12000(P/A,6,25)

Using DCIF Tables

Equivalent cost of saved energy = 12000(12.783)

Equivalent cost of saved energy = $153396

answered by: anonymous