Question
Cam is considering the purchase of a $15,000 solar electric system to reduce the amount of electricity he purchases from the grid. The system has
Cam is considering the purchase of a $15,000 solar electric system to reduce the amount of electricity he purchases from the grid. The system has an area of 25 m2. The average solar flux at Cams house is 200 (averaged over 24-hours and over an entire year). Cam pays $0.11 per kW-h for electricity from the grid. The solar system is 15% efficient. Assume that all these numbers are constant for the entire life of the system (i.e., we are modeling this in real terms). Further, assume that Cam will use all the power he produces. The solar will reduce how much he needs to purchase from the grid. So, every 1 kW-h of solar energy will save him $0.11. a. Assuming Cam will live in his house for 10 years, and using a real MARR of 7% per year compounded yearly, should he purchase the system? Assume that when he sells his house the system will have no value and no impact on the price of his home. b. Now, assume that Cam is worried about his carbon footprint. He views the emission of carbon dioxide (CO2) as imposing a cost on society and he wishes to account for this in his purchase decision. His avoiding this cost is a benefit of purchasing the system. This cost is measured in dollars per metric ton (MT) of CO2. Cam knows that the carbon intensity of the electricity he buys from the grid is 1400 kW-h per MT of CO2. Again, assume Cam will live in his house for 10 years. has a real MARR of 7% per year compounded yearly, and that when he sells his house the system will have no value and no impact on the price of his home. He only wants to count the price of carbon while he is in the home. He places no value of reducing the carbon footprint of the future owner. This means you should only look at the problem for the first 10 years. What is the breakeven cost of CO2 emissions in dollars per MT of CO2, such that Cam is just indifferent to purchasing the solar system?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started