Hi there!!

You learnt basics of energy economics in detail. Good!

Welcome to the reading part of our course.

Here are very few economical terms to understand the topic well

Some economic terms:

1] Cost of Energy device or plant.

•Capital cost

•Manufacturing or fabrication cost

•Material, labour, management

•Transport cost

•Installation and commissioning cost

•Operating cost

•Energy and materials required

•Marketing and sales

•Maintenance cost

•Cost of disposal

•Environmental costs

•Social costs

2]Capital recovery factor (CRF):

CRF = A / Co

CRF is a function of discount rate and time period!

CRF= A / Co= f (d, n)

= d x (1+d)^n / ((1+d)^(n–1)

where,

d = discount Rate; over the time period = n

Co= (all upfront capital costs)

A = (revenues in that year) –(annual O&M costs)

assuming, A = A1= A2= A3= . . . . . . . . . . . . . . . = An

Eg. CRF= A / Co= f (d, n)

= d x (1+d)^n/ ((1+d)^(n–1)

Hence, for Co= Rs. 1000/-

d = 15% pa and n = 10 years

A = Rs. 199.25 pa

3]Inflation rate: Inflation rate is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time.

4]Discount rate: There are two different meanings of discount rate:

i]The discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal Reserve Bank through the discount window loan process.

ii] the discount rate refers to the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

5]Interest rate:The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.