1
ME 417
Design of Alternative Energy Systems
Thermal/Economics Practice Problems
1.
A company has decided to air condition their manufacturing facility. They
are trying to decide between an absorption refrigeration system and a vapor
compression refrigeration system. The following economic data is available:
Absorption System
Vapor Compression System
Capital Cost
$125,000
$85,000
Annual Operating
Cost
$15,000
$20,000
The life of both systems is estimated to be 15 years and the interest rate for
the company is 13%. Using a present value analysis determine which system
should be purchased. What would be the annual operating cost of the vapor
compression system needed to make the two systems equivalent in terms of
cost?
Solution:
Our present value for either system will be calculated from
N)
(i,
A
P
A
+
P
=
PV
op
cap
⋅
where our P/A function is given by
(
)
(
)
(
)
(
)
6.4624
=
0.13
+
1
13
.
0
1
0.13
+
1
=
i
+
1
i
1
i
+
1
=
A
P
15
15
N
N


Then
(
)
PV
= 125,000 + 15,000
6
$221,936
A
⋅
=
.4624
and
(
)
$214,248
4624
.
6
20,000
+
85,000
=
PV
V
=
⋅
So the vapor compression system has the lower cost and should be purchased.
Since electricity prices have a tendency to increase over time, it might be of
interest to determine an operating cost for the vapor compression system that
would make its cost equivalent to that of the absorption system. Hence we
want
(
)
(
)
$221,936
=
PV
=
PV
A
V
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ME 417 Design of Alternative Energy Systems
2
so that
(
)
(
)
(
)
$21,890
=
6.4624
85,000

221,936
N)
(i,
A
P
P

PV
=
A
V
cap
A
V
op
=
or a 6% increase.
2.
A homeowner is considering replacing their current gas fuel heating system
with a solar heating system. Both systems are to last 20 years and the
homeowner’s interest rate is 8%. The initial cost for the furnaces is $1200
and the annual fuel cost $600. Determine the capital cost of the solar system
that will make it competitive with the gas fueled system.
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 Spring '07
 SOMERTON
 Heat, Heat engine, Heat Pump, Alternative Energy Systems, temperature heat reservoir

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