Question

A small city is improving a municipal building and would like to include installation of a 100 kW photovoltaic array (net AC output), with an initial cost of $250,000. The facility will produce 130,000 kWh of usable energy each year, which will save the city $10,000 annually by reducing the amount of electricity purchased from the local utility. The city is also planning to install several energy efficiency upgrades at City Hall. The efficiency upgrades will cost $1,000,000 up front (capital) and will save $180,000 annually. Determine the net annual savings of both the solar PV and energy efficiency upgrades combined. Account for the annual cost of financing the combined capital cost by issuing a bond at 3% per year. Neglect repayment of the capital (or loan value) cost. $190,000/yr $1.250.000 $152,500/y $227.500/

Answer 1

Outflow
Capital Cost:	$
Solar PV	250000
Energy Upgrade	1000000
Total (A)	1250000
Financing cost (B)	3%
Annual Cost (AxB)	37500
Inflow( Savings)
Saving From Solar	10000
Saving from upgrade	180000
Total Saving	190000
Net Saving	Total Saving less Annual Cost
Net Annual Saving	152500