Consider the following figure. ii. 0.4 0.35 iii. 0.3 0.25 0.2 0.15 0.1 0.05 0 II Solar PV (b) Figure 1 The Levelized Cos

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Consider The Following Figure Ii 0 4 0 35 Iii 0 3 0 25 0 2 0 15 0 1 0 05 0 Ii Solar Pv B Figure 1 The Levelized Cos 1 (124.14 KiB) Viewed 10 times

Consider the following figure. ii. 0.4 0.35 iii. 0.3 0.25 0.2 0.15 0.1 0.05 0 II Solar PV (b) Figure 1 The Levelized Cost of Electricity Generation In figure 1, a private considers two options for electricity generation. Suppose the levelized private (or direct) cost (in S) for one KWh of electricity from solar PV is $0.35, in comparison to the levelized private cost (in $) for one KWh of electricity from a combined- cycle-gas-fired electricity plant is $0.08. Combined-cycle gas-fired External cost Private cost The social cost = the private cost + the external cost !! Consideration is also given to the following: (a) the gas-fired electricity generation produces Carbon dioxide emissions which contributes to global warming. LCOE= The levelized cost estimates are based on discounting. The levelized cost of electricity LCOE are defined as: 1-Ĺ4 yxa+Σa 1¹ ×(1-0)-ST T η Σχαι Based on the scenario, answer the following questions: i. The factor y represents the time-value of money [y = 1/(1+r)], r is the discount rate. a is the corporate tax rate, n is the energy production, and T is the life-cycle of the project. From the prima facie scenario, which option appears to be more costly and hence less efficient / attractive? Consider that the rate of discount used in figure 1 is 3%. What will happen to the private cost of solar PV if the rate of discount is lower to 1% and 3% respectively. Based on your findings how crucial is the discount rate in LCOE?