The Microeconomics of Solar Energy

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Book Chapter

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The purpose of this chapter is to explain and illustrate how the techniques of microeconomic analysis can be used in the design sizing, and evaluation of solar energy systems. For the purpose of exposition, the focus is on solar hot-water and spaceheating systems for residential and commercial buildings. However, the basic concepts and procedures will generally apply to the analysis of solar energy in diverse applications, e.g., industrial process heat systems, power production, and total energy systems. The first part of this chapter presents basic concepts and methods of economic analysis, and illustrates their use in sample problems. An overview is given of the basic steps in life-cycle cost analysis, discounting cash flows, considerations important to making assumptions, and methods of dealing with uncertainty and inflation. The second part describes the major components of costs and savings associated with solar energy systems, including various types of systems costs, energy costs and savings, taxes, and government incentives. The third part describes a methodology for optimizing a solar energy system for maximum net savings. The basic concepts of optimization are set forth, and an example optimization problem is solved.


Chapter 28

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