A rooftop solar hot water heater with collector areas of 8 m2 and storage of 640 L is installed in Phoenix, Arizona, on a house that uses 160 L/day of hot water at 60°C. Seventy percent of the total energy required is supplied by solar energy (this is often referred to as a solar fraction of 70%) and 30% is supplemented with an electric heater. The solar system costs $3000 for installation, whereas an electric water heater and tank for the same supply costs $800 for installation. The temperature of the water in the main is to be heated from 10°C to 70°C. The life of the installation is 20 years.
1. Assuming that the electricity cost is $0.10/kWh and does not change over time, estimate the simple payback time for the solar hot water heater.
2. Repeat the above problem, but assume that the cost of installation is to be repaid at 7% discount over 15 years and that the electricity costs escalate at 10% per year. You will solve this by preparing a spreadsheet showing the NPV for each year.
3. What is the Rate of Return (ROR)?
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