Conversely, a buy-back ratio of less than one implies the institutional
decision that avoided costs were realized during off-peak periods.
Because the buyback price of electricity is tied to the price utilities
charge, it is assumed that this price increases over time at the same
rate as utility electricity prices.
 This component of the model also contains three different time
paths along which the cost of photovoltaic systems may follow. Each
path reflects a differing view as to the rate at which technological
innovation and commercial production techniques will be reflected in
lower system costs. Costs under each scenario have a 1980 base cost of
$10,750 KWP [Litka et al., 1981] and are projected over a twenty year
period beginning in 1980 (Table 1).
 Cost scenario I is obtained by splicing two exponential functions
such that the 1986 system cost is $2026.50/KWP and the year 2000 system
cost is $945.70/KWP (see Appendix B). Scenario II is also obtained by
splicing two exponential functions. Under this regime total system cost
declines to $8062.50/KWP 1986 and to $2026.50/KWP in the year 2000.
The final scenario (III) assumes a simple exponential decline to a total
system cost of $945.70/KWP. The 1986 system cost is $5184.50/KWP.

 Cost Scenario I is extremely optimistic in reference to the fact
that photovoltaic system costs decline substantially by 1986. This
scenario is very similar to Department of Energy (DOE) projections
[Smith, 1981]. There is considerable uncertainty in the rate at which
technological innovation and improved commercial production techniques
will be realized in the form of lower system costs, however. Thus,
scenarios II and III are included to admit several less optimistic array
cost paths over time. The inclusion of such diverse time paths for
photoltaic system costs enables an examination of the sensitivity of
the economic feasibility of these systems to cost behavior over time to
be analyzed.

 Present Valuation Component

 This component of the model assimilates all of the information con-
tained in the program and evaluates an expression similar in form to
equation (9). Thus, assuming the investment in a photovoltaic system