2-1. A power plant operator is considering an investment in increased efficiency of their plant that costs $1.2 million and The investment has no salvage value. The plant has an lasts for 10 years, during which time it will save MARR of 13%. Is the investment viable? vese year. Tea 2-2. A municipality is considering an investment in a renewable energy power plant with the following parameters. The cost is $360,000, and the output averages 50 kW year-round. The price paid for electricity at the plant gate is $0.039/kWh. The investment is to be evaluated over a 25-year time horizon, and the expected salvage value at the end of the project is $20,000. The MARR is 6%.

Elements Of Electromagnetics
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2-1. A power plant operator is considering an investment in increased efficiency of their plant that costs $1.2 million and
lasts for 10 years, during which time it will save $250,000/year. The investment has no salvage value. The plant has an
MARR of 13%. Is the investment viable?
2-2. A municipality is considering an investment in a small renewable energy power plant with the following parameters.
The cost is $360,000, and the output averages 50 kW year-round. The price paid for electricity at the plant gate is
$0.039/kWh. The investment is to be evaluated over a 25-year time horizon, and the expected salvage value at the end of the
project is $20,000. The MARR is 6%.
Transcribed Image Text:2-1. A power plant operator is considering an investment in increased efficiency of their plant that costs $1.2 million and lasts for 10 years, during which time it will save $250,000/year. The investment has no salvage value. The plant has an MARR of 13%. Is the investment viable? 2-2. A municipality is considering an investment in a small renewable energy power plant with the following parameters. The cost is $360,000, and the output averages 50 kW year-round. The price paid for electricity at the plant gate is $0.039/kWh. The investment is to be evaluated over a 25-year time horizon, and the expected salvage value at the end of the project is $20,000. The MARR is 6%.
2-7. A wind farm costs $32 million to install in Year 0 and produces 50 million kWh per year. It has a 20-year investment
lifetime and is discounted at a 5% rate. All-inclusive operating cost amounts to $0.01/kWh. Electricity produced from
natural gas in the same region costs $0.0464/kWh to produce.
a. What is the levelized cost of electricity from the wind farmi in $/kWh?
b. What production tax credit in $/kWh must be given for the wind farm to break even with the $0.0464/kWh price?
c. Suppose instead of a production tax credit the wind
nd farm receives a one-time initial grant to reduce the capital cost.
How large must the grant be in millions of dollars to break even?
d. Suppose instead the project receives an interest rate buydown to lower the levelized cost. By what percent must the
interest rate be reduced from 5% to break even?
e. Suppose that instead of reducing the levelized cost of wind energy, a carbon tax is applied to electricity from natural
gas to increase its levelized cost to the point where gas and wind break even. Using an average emissions rate of
0.325 kg CO₂ per kWh for gas, what must the carbon tax be in charge per metric tonne of CO₂?
Transcribed Image Text:2-7. A wind farm costs $32 million to install in Year 0 and produces 50 million kWh per year. It has a 20-year investment lifetime and is discounted at a 5% rate. All-inclusive operating cost amounts to $0.01/kWh. Electricity produced from natural gas in the same region costs $0.0464/kWh to produce. a. What is the levelized cost of electricity from the wind farmi in $/kWh? b. What production tax credit in $/kWh must be given for the wind farm to break even with the $0.0464/kWh price? c. Suppose instead of a production tax credit the wind nd farm receives a one-time initial grant to reduce the capital cost. How large must the grant be in millions of dollars to break even? d. Suppose instead the project receives an interest rate buydown to lower the levelized cost. By what percent must the interest rate be reduced from 5% to break even? e. Suppose that instead of reducing the levelized cost of wind energy, a carbon tax is applied to electricity from natural gas to increase its levelized cost to the point where gas and wind break even. Using an average emissions rate of 0.325 kg CO₂ per kWh for gas, what must the carbon tax be in charge per metric tonne of CO₂?
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