INTRODUCTION:

Techno-economic analysis is the area of engineering where engineering judgement and experience
are utilised in the application of scientific principles and techniques to problems of project cost
control profitability analysis, planning, scheduling and optimisation of operational research etc. This
study covers a wide range of topics such m time value of money, maintenance, organisational
structures, integrated Projects control, quality and resource management, life cycle and risk analysis
etc.

Cost estimation becomes crucial and critical with the advancement of technology and society to
remain computative.an estimate based on over design may be too high to Sustain whereas that
based on under design may be successful for a while but again it is not possible to sustain An
effective economic analysis can be made by the knowledge of cost analysis, which can be done by
the aid of cash flow diagrams and some other methods. The subsequent sections deal with their
study.

The value of a solar thermal application must ultimately be judged on the basis of its economy. In
this chapter, we define some economic quantities and describe some of the methods used for
making economic evaluations. As is evident by now, solar thermal devices and systems are
characterised by high initial costs. However they bring long term benefits in the form of lower
annual operating costs. An economic evaluation of a solar system has to consider both these aspects

COST ANALYSIS:

CAPITAL RECOVERY COST:

Let P be the present amount invested at zero time at an interest rate I, per year and Sn be the future
value at the end of n years.
At the end of one year time value of P will be

S1=P+iP

At the end of Second year time value of P will be,

S2=S1+iS1 =P(1+i)2

At the end of n’th year time value of P will be’

Sn=P(1+i)n

Future value =(PRESENT VALUE)*(Compound interest factor)

2 UNIFORM ANNUAL COST:

In solving engineering economic problems it is convenient to diagram expenditures and receipts as

vertical lines positioned along a horizontal line representing time. Expenditures and receipts can
point in opposite directions. By using this concept of uniform annual amount will be discussed.

Consider a uniform end-of-year annual amount R for a period of n years. The diagram for this is as
shown,

Where R is unacost.

Let P be the single present value at initial time

Present value =(unacost)*(unacost present value factor)

Unacost=(Present value)*(capital recovery factor)

3.SINKING FUND FACTOR:

The future value S, at the end of n years can also be converted into uniform end-of year annual
amount R as shown below

CASH FLOW DIAGRAMS:

It is the graphical representation of of cash flows drawn on a time scale.

Net cash flow =Receipts-disbursements

In the above cash flow diagram a uniform end of year annual amount (R) will be considered at the
end of each year of time scale.

BENEFITS OF COST ANALYSIS:

Benefit-cast ratio (B/C ratio) is a tool to select the right project based on advantage versus
disadvantage analysis. A project is considered to be attractive when the benefits derived from its
execution exceed its associated costs.
Benefit-cast ratio (B/C ratio) 1s a tool to select the right project based on advantage versus
disadvantage analysis: A project is considered to be attractive when the benefits derived from its
execution exceed its associated costs.

The conventional B/C ratio is calculated as

B/C =(Benefits -Disbenefits)/Cost = (B- D)/ C

The modified B / C ratio, which is gaining support includes operation and maintenance (O & M) costs
in the numerator and treats them in a manner similar to disbenefits, and is given by,

The salvage value can also be considered in the denominator.

The B/C ratio influences the decision on the project approval.

If , B/C > 1. accept the project

B/C < 1. Reject the project.

Thus, in case of mutually exclusive projects, B/C ratio gives a method to compare them against each,
other.

Some definitions are given below.

Benefits (B): Benefits are the advantages to the owner.

Disbenefits(Q): When the project under consideration involves disadvantages to the owner.

Costs: anticipated expenditures for construction, operation, maintenance etc.

Owner:Public: One who incurs the costs as the government