# Econ

Econ
This paper is worth up to 15 percent of your final score for the class. Evaluate the economics of installing PV solar panels using your family’s electricity profile. Please use a 10 percent discount rate. Please assume a 25 year time horizon and that your family installs solar panels to produce enough electricity to meet 100 percent of its average electricity demand. For simplicity, assume that the real price of electricity does not change over the next 25 years.
In your analysis, please use the solar power calculator at the following URL: https://www.solar- estimate.org/?page=rightforme (please copy this URL)
A valid U.S. or Canadian Zip code is needed to use this calculator. Students without a valid U.S. or Canadian Zip code should use CUA’s Zip code which is 20064 and also assume a monthly electricity bill of \$200 per month.
The paper must be typed and clearly written. It should include a table of your data inputs (including your Zip code) such that a reader could replicate your analysis. It should also have a table that clearly reports your results.
Data items needed from the solar calculator: Installed Gross Cost of a PV System Average Annual Utility Savings
Greenhouse Gas (CO2) Saved over 25 years
Data item needed from your family: Average monthly electricity bill
So as to focus on fundamentals, please ignore all subsidies and tax credits.
a) What is “payback period” for this investment? Explain.
b) What is the Net Present Value (NPV) of this investment assuming a 10 percent discount rate? Please show all your work. What does the value of the NPV suggest? What does the value of the NPV suggest about the concept of the payback period?
c) What is the internal rate of return (IRR) on this investment? Please calculate this using EXCEL (see https://office.microsoft.com/en-us/excel-help/irr-function-HP010342631.aspx ) What does the value of the IRR suggest? For information about IRR, please see the following URL: https://en.wikipedia.org/wiki/Internal_rate_of_return
d) Professor Paul Krugman, a recipient of the Nobel Prize in Economics and the author of your textbook, has noted that, “ If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal. “ (https://www.nytimes.com/2011/11/07/opinion/krugman-here- comes-solar-energy.html?_r=0 ) Does your analysis support this view?
e) What is the cost per metric ton of carbon of using PV solar to reduce carbon emissions? In answering this question, use the reduction in CO2 emissions for your family by the website.
Please use the following formula to calculate the cost per metric ton:
Cost per metric ton = (-1)*NPV ÷ (reduction in CO2 over 25 years in metric tons)
What does this number suggest given that there are numerous ways to reduce carbon emissions at less than \$50 per ton?
f) What does your analysis suggest about the subsidies paid out by the government to purchasers of solar panels?
-use the zip code and the families monthly electricity expense is 350 dollars.
General outline for questions A-F
a) Calculation and explanations
b) Net present value and explanation
c)Calculations and explanations
d) analysis supported by A,B,C
e) calculation and analysis of calculations
f) analysis of A,B,C,D,E,F
the key is analyzing everything
relate answers from A,B,C TO D,E,F