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    Presenters

    Bijay Raj Adhikari 504

    Roshan Gautam 511Santosh Sharma 515

    Tulsi narayan maharjan 520

    December 5, 2010

    FINANCIALANALYSIS FOR DOMESTIC WATER HEATING SYSTEM

    ( )COURSE PROJECT )Economics of Energy Projects EG854ES

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    Outline of presentation

    Introduction Problem Statement Objective

    Methodology Assumptions Financial Analysis Risk Sensitivity Analysis Conclusions Limitations

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    introduction

    Hot water is required for domestic andindustrial uses such as houses, hotels,hospitals, and mass-production andservice industries.

    But renewable energy technologies cannotexpect to replace fossil fuels on goodwill.

    They will have to become pricecompetitive.

    Most studies on the economics ofrenewable energy systems fail toconsider one of the most powerful trendsin their favour:

    Continuous supply of electricity orfuel

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    Introduction contd

    qOptions available in Nepali market for hotwater applications.

    Gas geysers

    Electric geysersSolar hot water systems.

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    Introduction Gas geysersfeatures

    Low initial cost.

    Simple technology.

    Easy to use.

    Dependency on fossil fuels.

    Cost of fossil fuels.

    High running costs. Danger

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    Introduction Electric geysersfeatures

    Most efficient.

    Easy to use.

    Low initial cost.

    Dependency on electricity.

    High electricity bills.

    Power cuts. High running costs.

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    Introduction Solar water heater features

    Green system.

    Passive systems.

    Low running cost.

    High initial cost.

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    Problem statement

    Problem Statements

    To purchase a domestic hot watersystem and studying the optionsavailable.

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    objective

    To carry out the financial comparison ofthe solar water heating system, gasgeyser and electric geyser for heating

    water below 100 oC

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    Methodology

    Study the different types of waterheating system

    Estimate the cash flow diagram of solar

    water heating system, gas geyser andelectric geyser.

    Compare the water heating systems

    with financial aspect. Risk analysis.

    Select one of the water heating system.

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    Assumptions

    Number of family member is 5. Each person needs 40 litres of hot water per day. Average Ambient air temperature is 20 C.Temperature of hot water required is 60 C. Efficiency of each geyser is 100 %. Life span of each system is 10 years. Each system are maintenance free during their

    service period.

    Salvage value of each system is equal to 10 % ofinitial cost. Discounting rate is equal to 8 %. Price of electricity and LPG will not increase during

    the service period.

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    Financial

    Analysis

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    Findings

    Daily hot waterrequirement:

    200 litres Annual hot water

    requirement:

    73000 Temperature difference : 40C Energy required per day: 33440 KJ

    Energy required per month: 1003.2 MJ Energy required per month: 278.6667 units(KWH) Energy required per year: 12.2056 GJ

    For Electric Geyser Initial investment: Rs.

    9000

    Monthly bill of electricity: Rs.2090 Annual bill of electricity: Rs.

    25080

    For Gas Geyser Initial Investment: Rs.

    8000 Heating value of LPG: 46000

    KJ/Kg

    Mass of gas required per year : 265.3391 Kg

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    Cash flowsyears solar water heater Electric Geyser Gas Geyser

    0 -40000 -8000 -9000

    1 0 -24513 - .23357 31782

    2 0 -24513 - .23357 31782

    3 0-24513

    - .23357 31782

    4 0 -24513 - .23357 31782

    5 0 -24513 - .23357 31782

    6 0 -24513 - .23357 31782

    7 0 -24513 - .23357 317828 0 -24513 - .23357 31782

    9 0 -24513 - .23357 31782

    10 4000 -23713 - .23357 31782

    * .Project life cycle is taken as 10 years

    2 09 0

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    Cash Flow Diagram

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    NPV Analysis

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    NFV Analysis

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    Incremental IRRsolar - Electricity Solar - Gasgas - Electricity

    -32000 -31000 -1000

    24513 23357 1156

    24513 23357 1156

    24513 23357 1156

    24513 23357 115624513 23357 1156

    24513 23357 1156

    24513 23357 1156

    24513 23357 1156

    24513 23357 1156

    27713 26457 1256

    IR

    R

    76% 75% 116%

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    Annualized Life Cycle Cost

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    Cost of Hot Water per Liter(Rs.)

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    Deprecation Analysis of Solar Water Heating system

    book value depreciationfactor

    depreciation

    0 40000 0.181818182 6545.454545

    1 33454.54545 0.163636364 5890.909091

    2 27563.63636 0.145454545 5236.363636

    3 22327.27273 0.127272727 4581.818182

    4 17745.45455 0.109090909 3927.272727

    5 13818.18182 0.090909091 3272.727273

    6 10545.45455 0.072727273 2618.181818

    7 7927.272727 0.054545455 1963.636364

    8 5963.636364 0.036363636 1309.090909

    9 4654.545455 0.018181818 654.5454545

    10 4000 0 0

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    Sensitivity

    Analysis

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    LPgcylinder cost Vs NPV Gas Gasyer

    NPV

    CYLINDER PRICE

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    electricity cost Vs NPV electric Gasyer

    NPV

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    Discount rate vs NPV

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    Risk analysis using crystalball

    The certainty ofNPV of ElectricGeyser to liebetween

    -270,000 to 235,000 is 97.5%

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    risk analysis using crystalball

    The certainty ofNPV of GasGeyser to lie

    between-270,000 to

    235,000 is85.12%

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    risk analysis using crystalball

    The certainty ofNPV of ElectricGeyser to lie

    between-40,000 to 32,000

    is 97.4%

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    Conclusions andLimitations

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    Conclusions

    The sensitivity analysis curves shows that theNPV of other options are quite sensitive tothe change in electricity and gas prices.

    Also the NPV Vs Discount rate graph shows thatthe two geysers are highly sensitive thansolar water heater.

    olar watereater

    lectricGeyser

    as GeyserNPV - .81 47 226 05 - .721 13 670 5 - .6 531 0 4 971ALCC - .68 3 936 681 - .564 4 9 369 1 - .4 631 26 407C st of 1

    iter ofot water

    .08 .35 .34

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    Conclusions cont

    When alternative water heating technologies(standard electric water heating, gas geyser andsolar hot water system) were compared, the solarhot water systems were found to be the mostefficient for heating water below 100 oC

    Utilization of renewable energy for water heatingcan reduce electricity bill and use of fossil fuels,and electricity which are not abundant in Nepal.

    Reduction of GNGs (CO2, CO, nitrogen oxide,sulphur oxide, particulate matter ) and volatile

    organic compounds during power generation. For household applications for heating water below

    100 oC solar water heater is the best option.

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    limitations

    Economic analysis could not be done. Payback period couldnt be calculated

    because this is not a revenue generating

    project. More parameters/variables on sensitivitiesanalysis could not be defined because ofnon revenue generating project.

    Different assumptions were made whichwere not that practical. This may havedeviated the results. (no maintenancecost included, efficiency assumed 100%)

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    Thanks