this is question 3 which is ONE question with 2 parts each question is worth 12 marks please answer each question entirely in a capacity that is worth 12 marks each. Thank you.

3. Consider the following figure. 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 Solar PV Figure 1 The Levelized Cost of Electricity Generation Combined-cycle gas-fired External cost Private cost The social cost the private cost + the external cost !! In figure 1, a private considers two options for electricity generation. Suppose the levelized private (or direct) cost (in $) for one KWh of electricity from solar PV is $0.35, in comparison to the levelized private cost (in S) for one KWh of electricity from a combined- cycle-gas-fired electricity plant is $0.08. Consideration is also given to the following: (a) the gas-fired electricity generation produces Carbon dioxide emissions which contributes to global warming. II. (b) The levelized cost estimates are based on discounting. The levelized cost of electricity LCDE are defined as: LCOE= 1-47x0+ 9(1-0 12 1-1 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. Based on the following scenario, answer the following questions: I. From the prima facie scenario, which option appears to be more costly and hence less efficient / attractive? 12 marks Consider that the rate of discount used in figure 1 is 3%. What happen to the private cost of solar PV if the rate of discount is lower to 1% and if the rate of discount is raise to 7% respectively. on your findings how crucial is the discount rate in LCOE? 12 Base marks URNER f-1 T 27 " (1-a)-ST FACE