Q1.

A manufacturing company purchased a CHP system (combined Heat and Power) based on Gas
Turbine for Rs. 8 billion. The debt equity ratio for financing of the project is 70% If the interest on the
project is 10% and the project is to be financed from the savings. Determine the number of years for
debt repayment. If the annuity is fixed at Rs. 12 billion per year.

Cash Flow Diagram

1.2 billion 1.2 billion 1.2 billion 1.2 billion 1.2 billion

Time

5.6 billion
70
Loan= 70% of 8 billion = 100 × 8 = Rs. 5.6 billion
A= Rs. 1.2 billion/year
n=?
r= 10%= 0.1

Solution

𝐴 𝑟
=𝑟+
𝑃 (1 + 𝑟)𝑛 − 1

1.2 0.1
= 0.1 +
5.6 (1 + 0.1)𝑛 − 1

0.1
0.1142 =
(1.1)𝑛 − 1

(1.1)𝑛 − 1 = 0.8756

(1.1)𝑛 = 1.8756

Taking 𝑙𝑛 both sides

𝑛𝑙𝑛1.1 = 𝑙𝑛1.8756

𝒏 = 𝟔. 𝟔 𝒚𝒆𝒂𝒓𝒔
Q2. How much energy KWh/year will be generated by 50 MW wind farm to be located in Jhimpir. The
measured capacity factor is 32% and Cost is 13 billion.

Solution

𝐸 = 𝐶𝐹 × 𝑃𝑟 × 8760

32
𝐸= × 50 × 103 × 8760
100

𝐸 = 140.16 × 106 𝐾𝑤ℎ/𝑦𝑟

Tariff of Rs. 12/KWh is considered then earnings are 12 × 140.16 × 106= Rs. 1.68 billion/year.

Payback period

𝑐𝑜𝑠𝑡
𝑛=
𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠/𝑦𝑟

13
𝑛=
1.68

𝑷𝒂𝒚𝒃𝒂𝒄𝒌 = 𝒏 = 𝟕. 𝟕 𝒚𝒆𝒂𝒓𝒔

Q3. As energy engineer you have to select the lowest cost project among the three alternatives (i) Solar
Thermal Power Plant (ii) Biogas (iii) Wind. All above systems have equal life of 10 years. Revenue from all
three systems is expected to be same. If MARR is 10%. Determine the best project using PW analysis.

Solar Thermal Wind Farm Bio gas

Capital cost Rs. 5.0 billion 4.9 billion 6.25 billion
O and M Rs./year 30 million 25 million 275 million
Salvage 125 million 100 million 450 million
Solution

(1+𝑟)𝑛 −1 1
𝑃=𝐴 𝑟(1+𝑟)𝑛
𝑃 = 𝐹 (1+𝑟)𝑛

PW of Solar Thermal

Cash Flow Diagram

Rs.125 m

Rs. 30milion/yr
 Rs. 5000m

𝑃 𝑃
𝑃𝑊 = −5000 − 30 ( , 𝑟, 𝑛) + 125( , 𝑟, 𝑛)
𝐴 𝐹
(1 + 𝑟)𝑛 − 1 1
𝑃𝑊 = −5000 − 30 [ ] + 125 [ ]
𝑟(1 + 𝑟)𝑛 (1 + 𝑟)𝑛

(1 + 0.1)10 − 1 1
𝑃𝑊 = −5000 − 30 [ 10
] + 125 [ ]
0.1(1 + 0.1) (1 + 0.1)10

𝑃𝑊 = −5000 − 30[6.1455] + 125[0.3855]

𝑃𝑊 = −𝑅𝑠. 5136𝑚

PW of Wind Farm

Cash Flow Diagram

Rs. 100m

Rs. 25m/year

Rs. 4900m

𝑃 𝑃
𝑃𝑊 = −4900 − 25 ( , 𝑟, 𝑛) + 100( , 𝑟, 𝑛)
𝐴 𝐹
(1 + 𝑟)𝑛 − 1 1
𝑃𝑊 = −4900 − 25 [ 𝑛 ] + 100 [ ]
𝑟(1 + 𝑟) (1 + 𝑟)𝑛

(1 + 0.1)10 − 1 1
𝑃𝑊 = −4900 − 25 [ 10
] + 100 [ ]
0.1(1 + 0.1) (1 + 0.1)10

𝑃𝑊 = −4900 − 25[6.1455] + 100[0.3855]

𝑃𝑊 = −𝑅𝑠. 5015𝑚

PW of Biogas Rs.450m

Cash Flow Diagram

Rs. 6250m Rs.275m/yr

 𝑃 𝑃
𝑃𝑊 = −6250 − 275 ( , 𝑟, 𝑛) + 450( , 𝑟, 𝑛)
𝐴 𝐹
(1 + 𝑟)𝑛 − 1 1
𝑃𝑊 = −6250 − 275 [ 𝑛 ] + 450 [ ]
𝑟(1 + 𝑟) (1 + 𝑟)𝑛

(1 + 0.1)10 − 1 1
𝑃𝑊 = −6250 − 275 [ 10
] + 450 [ ]
0.1(1 + 0.1) (1 + 0.1)10

𝑃𝑊 = −6250 − 275[6.1455] + 450[0.3855]

𝑃𝑊 = −𝑅𝑠. 7766𝑚

The expenses on wind farm are the lowest therefore this power plant should be selected.

Q4. A remote town plans to install a PV based power system to meet the power demands. If the
complete PV system + storage system cost $ 1.9 per watt and the power system is of 1000 KW.
Determine its feasibility using PW analysis. The energy system will save $ 40000 in the bills of first four
years and $60000/year for the remaining three years if the discount rate for this project is 15% per year.
Project life is 7 years.

Solution

CFD

$40000 $60000

$1900000

𝐶𝑜𝑠𝑡 = $ 1.9 × 1000 × 103 = $1900000

𝑃 𝑃 𝑝
𝑃𝑊 = −1900000 + 40000 ( , 𝑟, 4) + 60000 ( , 𝑟, 3) ( , 𝑟, 4)
𝐴 𝐴 𝐹
(1 + 𝑟)𝑛 − 1 (1 + 𝑟)𝑛 − 1 1
𝑃𝑊 = −1900000 + 40000 [ ] + 60000 [ ] [ ]
𝑟(1 + 𝑟)𝑛 𝑟(1 + 𝑟)𝑛 (1 + 𝑟)𝑛

(1 + 0.15)4 − 1 (1 + 0.15)3 − 1 1
𝑃𝑊 = −1900000 + 40000 [ 4
] + 60000 [ ][ ]
0.15(1 + 0.15) 0.15(1 + 0.15) (1 + 0.15)4
3

𝑃𝑊 = −1900000 + 40000(2.855) + 60000[2.28](0.571)

𝑃𝑊 = −$1707584

Project is not feasible

Q5. Two proposals are under consideration for the installation of Power Plant of 3 MW each, one
power plant is based on hydro power and the other is based on coal. The finances for the
implementation of the project will be arranged from borrowed money available at 8% interest rate for
the period of 7 years. The initial cost for each plant and substitute annual savings are provided in the
table below. Perform PW analysis to choose the best alternative.

Plant 0 1 2 3 4 5 6 7
Hydro 9000m 6000 6000 6000 6000 6000 6000 6000
Coal 14500m 6000 6000 8000 8000 8000 8000 8000
Solution

Hydro Power Plant

CFD Rs. 6000m

Rs. 9000m

𝑃
𝑃𝑊 = −9000 + 6000 ( , 𝑟, 4)
𝐴
(1 + 𝑟)𝑛 − 1
𝑃𝑊 = −9000 + 6000 [ ]
𝑟(1 + 𝑟)𝑛

(1 + 0.08)7 − 1
𝑃𝑊 = −9000 + 6000 [ ]
0.08(1 + 0.08)7

𝑃𝑊 = −9000 + 6000(5.206)

𝑃𝑊 = 𝑅𝑠. 22238

Coal Power Plant Rs. 8000

Rs.6000

Rs. 14500

𝑃 𝑃 𝑝
𝑃𝑊 = −14500 + 6000 ( , 𝑟, 2) + 8000 ( , 𝑟, 5) ( , 𝑟, 2)
𝐴 𝐴 𝐹
 (1 + 𝑟)𝑛 − 1 (1 + 𝑟)𝑛 − 1 1
𝑃𝑊 = −14500 + 6000 [ 𝑛 ] + 8000 [ 𝑛 ][ ]
𝑟(1 + 𝑟) 𝑟(1 + 𝑟) (1 + 𝑟)𝑛

(1 + 0.08)2 − 1 (1 + 0.08)5 − 1 1
𝑃𝑊 = −14500 + 6000 [ 2
] + 8000 [ ][ ]
0.08(1 + 0.08) 0.08(1 + 0.08) (1 + 0.08)2
5

𝑃𝑊 = −14500 + 6000(1.783) + 8000(3.992)(0.857)

𝑃𝑊 = 𝑅𝑠. 23567

Both coal and hydro power plants have nearly equal values of present value of earning. Under such
conditions when the costs of the two power plants are equal, the life time costing is to be considered. A
hydro Power Plant once it has repaid its borrowed money, the cost of generation of electricity from it
will be equal to the operation and maintenance cost while the cost of generation of electricity from coal
fired Power plant will always depend on the cost of fuel i.e. coal thus its electricity will always be
expensive. If the life cycle costing is performed then Hydro power plant becomes more competitive and
should be chosen.

Q6. An office building located in Muzaffarabad uses electric resistance heater 8 hours a day. The
management decided to reduce the operation cost of the heating and want to use a heat pump of same
capacity. The office room has to be maintained 21 degree centigrade constantly. The price of heat pump
is Rs. 850000/- paid by bank loan of 12% interest and 7 years term. Electricity rates are Rs. 12/KWh.
Perform PW analysis and show the feasibility of the project.

Solution

Room Atmosphere Energy lost Electric

Temp 𝑇𝐻 Temp 𝑇𝐿 from building heater load
November 21𝑜 𝐶 8𝑜 𝐶 125000 KJ/h 34.7 KW
December 21𝑜 𝐶 5𝑜 𝐶 135000 KJ/h 37.5 KW
January 21𝑜 𝐶 3𝑜 𝐶 142000 KJ/h 39.4 KJ/h
February 21𝑜 𝐶 6𝑜 𝐶 130000 KJ/h 36.1KJ/h
If heat pump

𝐶𝑂𝑃𝐻𝑃 = 25% 𝑒𝑓𝑓

𝑒𝑓𝑓
𝐶𝑂𝑃𝐻𝑃 =
4

For November

1
𝑒𝑓𝑓 =
1 − 𝑇𝐿 /𝑇𝐻

1
𝑒𝑓𝑓 =
1 − (8 + 273)/(21 + 273)
 𝑒𝑓𝑓 = 22.6

𝐶𝑂𝑃 = 5.65

𝐶𝑂𝑃 = 𝑄𝐻 /𝑊

𝑄𝐻 34.7
𝑊= = = 6.13 𝐾𝑊
𝐶𝑂𝑃 5.65

For December

1
𝑒𝑓𝑓 =
1 − (5 + 273)/(21 + 273)

𝑒𝑓𝑓 = 18.375

𝐶𝑂𝑃 = 4.593

𝐶𝑂𝑃 = 𝑄𝐻 /𝑊

𝑄𝐻 37.5
𝑊= = = 8.16 𝐾𝑊
𝐶𝑂𝑃 4.593

For January

1
𝑒𝑓𝑓 =
1 − (3 + 273)/(21 + 273)

𝑒𝑓𝑓 = 16.33

𝐶𝑂𝑃 = 4.08

𝐶𝑂𝑃 = 𝑄𝐻 /𝑊

𝑄𝐻 39.4
𝑊= = = 9.64 𝐾𝑊
𝐶𝑂𝑃 4.08

For February

1
𝑒𝑓𝑓 =
1 − (6 + 273)/(21 + 273)

𝑒𝑓𝑓 = 19.6

𝐶𝑂𝑃 = 4.9

𝐶𝑂𝑃 = 𝑄𝐻 /𝑊

𝑄𝐻 36.1
𝑊= = = 7.36 𝐾𝑊
𝐶𝑂𝑃 4.9
Total cost saved in one year is 27947 𝐾𝑊ℎ × 12⁄𝐾𝑊ℎ = 𝑅𝑠. 335364

Cash Flow Diagram

335364

850000

𝑃
𝑃𝑊 = −850000 + 335364 ( , 𝑟, 𝑛) +
𝐴
(1 + 𝑟)𝑛 − 1
𝑃𝑊 = −850000 + 335364 [ ]
𝑟(1 + 𝑟)𝑛

(1 + 0.12)7 − 1
𝑃𝑊 = −850000 + 335364 [ ]
0.12(1 + 0.12)7

𝑃𝑊 = −850000 + 335364(4.563)

𝑃𝑊 = 𝑅𝑠. 680519

Project is feasible.

Q7. Compare the energy use and the money expenses of two type of air condition each of 1.5 tons
capacity 1st AC has a SEER value of 8 and the other on SEER value is 10 both type of AC will operate for
heating season of 4000 hr in a year

Capacity of 1st AC=1.5 tons

SEER value of 1st AC=8
SEER value of 2nd AC=10
Operating hour =4000hr/year
Solution
We know that
1 𝑡𝑜𝑛𝑠 = 12000 𝐵𝑡𝑢/ℎ𝑟

Total heat removed

𝑄𝐶 = 12000 × 1.5 × 4000
𝑄𝐶 = 72 × 106 𝐵𝑡𝑢/𝑦𝑒𝑎𝑟

Electricity consumption rate in 4000 hr

For 1st AC
Q
E=
SEER
72 × 106
E=
8
6
E = 9 × 10 𝑊ℎ /𝑦𝑒𝑎𝑟
For 2nd AC
Q
E=
SEER
72 × 106
E=
10
6
E = 7.2 × 10 𝑊ℎ /𝑦𝑒𝑎𝑟
Energy saved
𝑆 = 𝐸8 − 𝐸10
𝑆 = 9 × 106 − 7.2 × 106
𝑆 = 1.8 × 106 𝑊ℎ /𝑦𝑒𝑎𝑟
𝑆 = 1800 KWh/ year
Money saved if tariff is Rs. 18/KWh
𝑀𝑆 = 1800 × 18
𝑀𝑆 = 𝑅𝑠. 32400/ 𝑦𝑒𝑎𝑟

Q.8.A consumer wants to buy a new refrigerator for a store there are two model available having SEER 8 & SEER 6
the price difference is 4600 the fridge will operate 6000 hr per year. Determine the savings in the bill if SEER 8 is
purchased the capacity of fridge 500w and the COP is 3. Determine the payback period.

Solution

𝑄 = 500𝑊
3.51 𝐾𝑊 = 1200 𝐵𝑇𝑈 /ℎ𝑟
500𝑊 = 170.9 𝐵𝑇𝑈 /ℎ𝑟

Energy conserve in 6000 hr/yr For SEER 6

Q
E=
SEER
170.9 × 6000
E=
6
E = 170900Wh /year
Energy conserve in 8000 hr/yr For SEER 8
170.9 × 6000
E=
8
E = 128200Wh /year
Energy saved
𝑆 = 𝐸6 − 𝐸8
𝐸 = 170900 − 128200
𝐸 = 42700 𝑊ℎ /𝑦𝑒𝑎𝑟
𝐸 = 42.7 𝐾𝑊ℎ /𝑦𝑒𝑎𝑟
Money saved
𝐾𝑊ℎ
𝑀𝑠 = 42.7 × 18/𝐾𝑊ℎ
𝑦𝑒𝑎𝑟
𝑀𝑠 = 𝑅𝑠. 786.6/𝑦𝑒𝑎𝑟
Payback = 4600/786.6
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 = 5.87 𝑦𝑒𝑎𝑟𝑠

Q9. An energy engineer wants to replace an existing 10 tons AC of SEER value of 6 with an equal size of AC with
SEER value of 8. The AC will operate for 6000 hours/year. The implementation cost of new AC is Rs. 350000/- How
much less electricity will this unit consume. If the loan was used to finance the project. What would be the cost of
conserved energy? The loan was obtained at 10% interest rate for 10 years period. The electricity tariff is Rs.
18/KWh.

Solution

𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 = 10 𝑡𝑜𝑛𝑠 = 10 × 1200

𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 = 1200 𝐵𝑇𝑈⁄ℎ𝑟

𝑄𝐶 = 12000 × 6000 = 72 × 107 𝐵𝑇𝑈⁄ℎ𝑟

SEER 6

𝑄𝐶
E=
SEER
7
72 × 10
𝐸6 =
6
7
𝐸6 = 12 × 10 𝑊ℎ/𝑦𝑒𝑎𝑟
3
𝐸6 = 120 × 10 𝐾𝑊ℎ/𝑦𝑒𝑎𝑟
SEER 8

𝑄𝐶
E=
SEER
7
72 × 10
𝐸6 =
8
7
𝐸6 = 9 × 10 𝑊ℎ/𝑦𝑒𝑎𝑟
3
𝐸6 = 90 × 10 𝐾𝑊ℎ/𝑦𝑒𝑎𝑟
Energy saved
 𝑆 = 𝐸6 − 𝐸8
𝐸 = 120000 − 90000
𝐸 = 30000 𝐾𝑊ℎ /𝑦𝑒𝑎𝑟
Money saved
𝐾𝑊ℎ
𝑀𝑠 = 30000 × 18/𝐾𝑊ℎ
𝑦𝑒𝑎𝑟
𝑀𝑠 = 𝑅𝑠. 540000/𝑦𝑒𝑎𝑟
(1 + 𝑟)𝑛 − 1
𝐶𝑅𝐹 = [ ]
𝑟(1 + 𝑟)𝑛
(1 + 0.1)10 − 1
𝐶𝑅𝐹 = [ ]
0.1(1 + 0.1)10
𝐶𝑅𝐹 = 0.1627
𝐴𝑛𝑛𝑢𝑎𝑙𝑖𝑧𝑒𝑑 𝑐𝑜𝑠𝑡 × 𝐶𝑅𝐹
𝐶𝐶𝐸 =
𝑁𝑜. 𝑜𝑓 𝐾𝑊ℎ 𝑠𝑎𝑣𝑒𝑑
350000 × 0.1627
𝐶𝐶𝐸 =
30000
𝐶𝐶𝐸 = 𝑅𝑠. 1.9/𝐾𝑊ℎ
CCE is less than tariff then project is feasible

Q.10.To saves electricity in an office building following energy efficiency measures are to be adopted.
The CCE analysis is to be used to compare the feasibility of the project. The table given blow list the
project their cost and the save electricity. If the office building is open for 12 hr/day 5 days a week for 6
months of summer and what is the cost of energy for each EEM. Draw a conserve energy supply curve
for this project life is 25 year the discount rate of 12%/year, the tariff is 18 cent/KWh

Energy efficiency energy saved

Cost $
measure KWh/year
Roof 1000 3200
Light 600 1800
Wall 1500 3500
Energy efficiency
2000 1100
window

Solution
To conserve energy supply curve
find out CCE for each EEM
For Roof
𝐴𝑅 = 𝐼 × 𝐶𝑅𝐹

(1 + 𝑟)𝑛 − 1
𝐴𝑅 = 𝐼 [ ]
𝑟(1 + 𝑟)𝑛
 (1 + 0.12)25 − 1
𝐴𝑅 = 1000 [ ]
0.12(1 + 0.12)25

𝐴𝑅 = 1000 × 0.1274

𝐴𝑅 = $127.4 /𝑦𝑟

𝐴𝑛𝑛𝑢𝑎𝑙𝑖𝑧𝑒𝑑 𝑐𝑜𝑠𝑡
𝐶𝐶𝐸 =
𝐴𝑛𝑛𝑢𝑎𝑙 𝑒𝑛𝑒𝑟𝑔𝑦 𝑠𝑎𝑣𝑖𝑛𝑔𝑠

127.4
𝐶𝐶𝐸 =
3200

𝐶𝐶𝐸 = $0.0398 /𝐾𝑊ℎ

𝐶𝐶𝐸 = 𝑐 3.98 /𝐾𝑊ℎ

For Wall

(1 + 0.12)25 − 1
𝐴𝑅 = 1500 [ ]
0.12(1 + 0.12)25

𝐴𝑅 = 1500 × 0.1274

𝐴𝑅 = $191.1 /𝑦𝑟

191.1
𝐶𝐶𝐸 =
3500

𝐶𝐶𝐸 = $0.0546 /𝐾𝑊ℎ

𝐶𝐶𝐸 = 𝑐 5.46 /𝐾𝑊ℎ

EE Windows

(1 + 0.12)25 − 1
𝐴𝑅 = 2000 [ ]
0.12(1 + 0.12)25

𝐴𝑅 = 2000 × 0.1274

𝐴𝑅 = $254.8 /𝑦𝑟

254.8
𝐶𝐶𝐸 =
1100

𝐶𝐶𝐸 = $0.231 /𝐾𝑊ℎ

𝐶𝐶𝐸 = 𝑐 2.31 /𝐾𝑊ℎ

Light Exterior color

 (1 + 0.12)25 − 1
𝐴𝑅 = 600 [ ]
0.12(1 + 0.12)25

𝐴𝑅 = 600 × 0.1274

𝐴𝑅 = $76.44/𝑦𝑟

76.44
𝐶𝐶𝐸 =
1800

𝐶𝐶𝐸 = $0.0424 /𝐾𝑊ℎ

𝐶𝐶𝐸 = 𝑐 4.24 /𝐾𝑊ℎ

energy saved CCE

Energy efficiency measure cumulative energy saved KWh
KWh/year ¢/KWh
Roof 3200 3.98 3200
Light 1800 4.24 5000
Wall 3500 5.46 8500
Energy efficiency window 1100 23.13 9600
y-axis x-axis

Q.11. Calculate the HDD for 7th January in Lahore:

When,

𝑇𝑚𝑖𝑛 = 00 𝐶,
 𝑇max = 800 𝐶

0+8
𝑇= =4
2

𝐻𝐷𝐷 = 𝑇𝑏𝑎𝑠𝑒 − 𝑇𝑎 = 18 − 4 = 140 𝐶

Q12. A hospital building located in a cold region has following data for the space heating of the building
use the data to find out the relation between the heating degree days and natural gas consumption.

Table:
X Y X2 Y2
72 482 5184 34704
88 520 7744 45760
95 634 9025 60230
106 570 11236 60420
169 671 28561 113399
204 860 41616 175440
244 903 59536 220332
265 940 70225 249100
290 1007 84100 292030
298 1210 88804 360580
332 1020 110224 338640
345 1131 119025 390195
Solution

Two equations:

𝐶𝑛 + 𝑚𝛴𝑥 = 𝛴𝑦……………..eq (i)

𝐶𝛴𝑥 + 𝑚𝛴𝑥² = 𝛴𝑥𝑦………….eq (ii

Where n is number of data points

Substituting the values in equation I :

12𝐶 + 2508𝑚 = 9948……..(i)

2508 + 635280 = 2340830….(ii)

From equation 1

𝐶 = 9948 − 2508𝑚12.

Substituting above in equation 2we get:

 2508(9948 − 2508𝑚12) + 635280 = 2340830.

Solving above two equations we get:

𝑚 = 2.355

𝑐 = 336.73

General straight line equation is

𝑦 = 𝑚𝑥 + 𝑏.

Putting C & m

𝑦 = 336.73 + 2.355𝑥

Q13. A renewable energy project cost at $ 10.3 million. The earnings from the project is estimated to be
$ 3.3 million/year. The project has an economic life of 5 years. The project was financed from a 10%
interest rate loan. The salvage value of the project is $ 2million. Determine the feasibility of the project
using PW method.

Solution

Cash Flow Diagram

2 million

3.3 million

10.3 million

𝑃 𝑝
𝑃𝑊 = −10.3 + 3.3 ( , 𝑟, 4) + 2( , 𝑟, 4)
𝐴 𝐹
(1 + 𝑟)𝑛 − 1 1
𝑃𝑊 = −10.3 + 3.3 [ 𝑛 ]+ 2[ ]
𝑟(1 + 𝑟) (1 + 𝑟)𝑛

(1 + 0.10)5 − 1 1
𝑃𝑊 = −10.3 + 3.3 [ ] + 2[ ]
0.105 (1 + 0.10)5

𝑃𝑊 = −1.3 + 3.3(3.79) + 2(0.6209)

𝑃𝑊 = $ 3.48

Project is feasible.
Q14. Repeat Q13 with inflation rate of 5%

Solution

𝑟𝑖 = (𝑟 + 𝑖𝑟) + 𝑟. 𝑖𝑟

𝑟𝑖 = (0.1 + 0.05) + 0.1 × 0.05

𝑟𝑖 = 0.155 = 15.5%

𝑃 𝑝
𝑃𝑊 = −10.3 + 3.3 ( , 𝑟, 4) + 2( , 𝑟, 4)
𝐴 𝐹
(1 + 𝑟𝑖 )𝑛 − 1 1
𝑃𝑊 = −10.3 + 3.3 [ ] + 2 [ ]
𝑟𝑖 (1 + 𝑟𝑖 )𝑛 (1 + 𝑟𝑖 )𝑛

(1 + 0.155)5 − 1 1
𝑃𝑊 = −10.3 + 3.3 [ 5
] + 2[ ]
0.155(1 + 0.155) (1 + 0.155)5

𝑃𝑊 = −1.3 + 3.3(3.31) + 2(0.486)

𝑃𝑊 = $ 1.595 𝑚

𝑃𝑊 > 0

Since the PW has dropped from $ 3.48m to $ 1.595 therefore the savings has dropped by 54%. This
shows the negative impact of inflation for the feasibility of energy project.

Q15. Installing energy efficient windows on a small office building is estimated to cost $ 10000. The
estimated economic life of the windows is 6 years and they have no salvage value at that time. The
energy savings from the windows are expected to be $ 2525 per year for the first three years and $ 3840
for the remaining three years. If internal rate of return measures of worth is to be used is this an
attractive investment. The MARR for this project is 15% per year.

Solution

Cash Flow Diagram

$2525 $3840

$10000

Cash flow series

 𝑃 𝑃 𝑝
𝑁𝑃𝑉 = −10000 + 2525 ( , 𝑟, 3) + 3840 ( , 𝑟, 3) ( , 𝑟, 3)
𝐴 𝐴 𝐹
(1 + 𝑟)𝑛 − 1 (1 + 𝑟)𝑛 − 1 1
𝑁𝑃𝑉 = −10000 + 2525 [ 𝑛 ] + 3840 [ 𝑛 ][ ]
𝑟(1 + 𝑟) 𝑟(1 + 𝑟) (1 + 𝑟)𝑛

Let r=10%

𝑁𝑃𝑉 = $ 3453.9

Let r= 15%

𝑁𝑃𝑉 = $ 1529.9

Let r= 18%

𝑁𝑃𝑉 = $ 571.6

Let r =19%

𝑁𝑃𝑉 = $ 279.9

Let r =20%

𝑁𝑃𝑉 = −$0.06

So IRR is approximately 20% which is greater than MARR so the project is feasible.

Q16. The cost of a natural gas power plant is $ 100 million. The annual earnings from the project will be
from selling electricity to local utility company which is $12 million per year. The O & M cost on the
project are going to be $ 1.6 million per year. At the end of six years the project will be sold at a price of
$ 45 million. The company has estimated that MARR of 14% per year. Performed an IRR analysis to
determine the economic feasibility of the project.

Solution

Cash Flow Diagram

$ 45m

$12m

$100m $1.6 m
Modified Cash Flow Diagram

$45m

$10.4 m

$100m

Cash flow series

𝑃 𝑝
𝑁𝑃𝑉 = −100 + 10.4 ( , 𝑟, 3) + 45( , 𝑟, 3)
𝐴 𝐹
(1 + 𝑟)𝑛 − 1 1
𝑁𝑃𝑉 = −100 + 10.4 [ 𝑛 ] + 45 [ ]
𝑟(1 + 𝑟) (1 + 𝑟)𝑛

Let r=10%

𝑁𝑃𝑉 = −$29.3

Let r=8%

𝑁𝑃𝑉 = −$23.56

Let r =2%

𝑁𝑃𝑉 = −$1.786

Let r=1.5%

𝑁𝑃𝑉 = $0.405

IRR is approximately equal to 1.5% and is less than MARR hence the project is not feasible.

Q17. A company wants to install a PV farm near Karachi of 10 MW A.C. capacity. The project is going to
cost $12 million. The capacity factor of project is estimated to be 25%. Determine the amount of
electricity produced per year if the electricity export rate to K.E. is 10 cents per KWh. Estimate the
earnings per year. If the company wants to run plant for 7 years and then sell it to K.E. at $ 6 million.
Estimate the IRR for this project.

Solution

𝐸 = 𝑃𝑅 × 𝐶𝐹 × 8760

25
𝐸 = 10000 × × 8760
100
 𝐸 = 21.9 × 106 𝐾𝑊ℎ/𝑦𝑒𝑎𝑟

Earnings from the plant

10
𝐶 = 𝐸 × 𝑃𝑟𝑖𝑐𝑒 = 21.9 × 106 ×
100

𝐶 = $2.19 × 106 = 2.19 𝑚𝑖𝑖𝑙𝑖𝑜𝑛 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟

Cash Flow Diagram $6m

$2.19 m

$ 12 million

𝑃 𝑝
𝑁𝑃𝑉 = −12 + 2.19 ( , 𝑟, 𝑛) + 6( , 𝑟, 𝑛)
𝐴 𝐹
(1 + 𝑟)𝑛 − 1 1
𝑁𝑃𝑉 = −12 + 2.19 [ 𝑛 ]+ 6[ ]
𝑟(1 + 𝑟) (1 + 𝑟)𝑛

For IRR, NPV=0

(1 + 𝑟)7 − 1 1
0 = −12 + 2.19 [ ] + 6[ ]
𝑟(1 + 𝑟)7 (1 + 𝑟)7

Let r = 10%

𝑁𝑃𝑉 = $1.74

Let r = 15%

𝑁𝑃𝑉 = −$0.63

Let r = 13.5%

𝑁𝑃𝑉 = $0.0098

At r=13.5% NPV is approximately equal to zero hence IRR=13.5%

Q18. A 5 KW PV grid connected system is to be installed near Karachi. The array will face due south and
has a slope equal to latitude of Karachi (24.9®). The slope is fixed and no tracking. The project is to be
financed from a bank loan of 14% interest and 7 years turn. Calculate the power output of PV system. If
the electricity is to be exported in bulk to the grid at a rate of Rs. 12 /KWh and the system cost is Rs.
100/W (𝑃𝑅 @ STC). What is the feasibility of this project? Use PW analyses to asses this project. The
annual average temperature of Karachi is 26® C. NOCT is 47®C 𝐶𝑇 =0.4%/® C.

Solution

𝑁𝑂𝐶𝑇 − 20
𝑇𝑐𝑒𝑙𝑙 = 𝑇𝑎 + ( ) × 1000
800
47 − 20
𝑇𝑐𝑒𝑙𝑙 = 26 + ( ) × 1000
800

𝑇𝑐𝑒𝑙𝑙 = 59.75 𝑜 𝐶

We can now estimate the temperature adjusted D.C. power output of 5 𝐾𝑊𝑃 arrays.

𝑃𝑑𝑐 = 𝑃𝑅 [1 − 𝐶𝑇 (𝑇𝑐𝑒𝑙𝑙 − 𝑇𝑎 )]

0.4
𝑃𝑑𝑐 = 5[1 − (59.75 − 26 ) ]
100

𝑃𝑑𝑐 = 4.325 𝐾𝑊

𝜂𝑐𝑜𝑛𝑣 = 𝜂𝑚𝑚 . 𝜂𝑑𝑖𝑟𝑡 . 𝜂𝑖𝑛𝑣

𝜂𝑐𝑜𝑛𝑣 = 0.98 × 0.97 × 0.95

𝜂𝑐𝑜𝑛𝑣 = 0.90

𝑃𝑎𝑐 = 𝑃𝑑𝑐 . 𝜂𝑐𝑜𝑛𝑣

𝑃𝑎𝑐 = 3.89 𝐾𝑊

Energy generated by 5 𝐾𝑊𝑝 arrays is

𝐸 = 𝐶𝐹. 𝑃𝑎𝑐 . 8760

𝐸 = 0.239 × 3.89 × 8760

𝐸 = 8144.2 𝐾𝑊ℎ/𝑦𝑒𝑎𝑟

Annual amount earn by exporting electricity is

𝐾𝑊ℎ
𝐴 = 8144.2 × 12 /𝐾𝑊ℎ
𝑦𝑒𝑎𝑟

𝐴 = 𝑅𝑠. 97730.4 /𝑦𝑒𝑎𝑟

The initial cost of the project is Rs. 100/W x 5000= Rs. 500000/-

Cash Flow Diagram

 97730

500000

𝑃
𝑃𝑊 = −500000 + 97730 ( , 𝑟, 𝑛)
𝐴
(1 + 𝑟)𝑛 − 1
𝑃𝑊 = −500000 + 97730 [ ]
𝑟(1 + 𝑟)𝑛

(1 + 0.14)7 − 1
𝑃𝑊 = −500000 + 97730 [ ]
0.14(1 + 0.14)7

𝑃𝑊 = −500000 + 97730(4.2883)

𝑃𝑊 = −𝑅𝑠. 80902

Project is not feasible.