The economic analysis of solar energy systems is carried out in order to determine the least cost of meeting the energy needs, considering both solar and non-solar alternatives. The method employed for the economic analysis is called the life savings analysis. This method takes into account the time value of money and allows detailed consideration of the complete range of costs. Solar processes are generally characterised by high initial cost and low operating costs. Thus, the basic economic problem is of comparing an initial known investment with estimated future operating costs.
Life cycle cost (LCC) is the sum of all the costs associated with an energy delivery system over its lifetime in today’s money, and takes into account the time value of money. The life cycle savings (LCS), for a solar plus auxiliary system, is defined as the difference between the LCC of a conventional fuel-only system and the LCC of the solar plus auxiliary system. This is equivalent to the total present worth (PW) of the gains from the solar system compared to the fuel-only system.
All software programs described in previous section have routines for the economic analysis of the modelled systems. The economic analysis of solar systems can also be performed with a spreadsheet program. Spreadsheet programs are especially suitable for economic analyses as their general format is a table with cells which can contain values or formulae and they incorporate many built-in functions. The economic analysis is carried out for every year for which various economic parameters are calculated in different columns. A detailed description of the method of economic analysis of solar systems using spreadsheets is given in Ref. .