CALCULATION OF PHOTOVOLTAIC SYSTEM COSTS AND ELECTRIC PRICES

 Photovoltaic system cost is calculated for a 20 year time period.
Cost is expressed in terms of $1980 per peak Kilowatt (KWP). The pro-
gram contains three distinct cost scenarios representing different rates
and magnitudes of array cost declines. All scenarios have a 1980 base
cost of $10,750/KWP.
 The "pessimistic" cost scenario assumes that cost decreases will
come about very slowly, with costs declining less than 25 percent by
1986. Under this scenario, array cost is estimated by using a spliced
exponential function

 CKWPT(t) = d* 10750*EXP(-0.0479*(t-1)) + (1-d)*8062.5*EXP(-0.069

 *(t-1)) (Bl)

where

 CKWP(t) = estimated photovoltaic systems cost ($/KWP) in year t

and d is a Kronecker Delta equal to 1 for t < 7 and 0 for t > 7. Thus,
the splice occurs in 1986 (t=7).
 The "optimistic" cost scenario is also estimated by using a spliced
exponential function. This scenario assumes a rapid and significant de-
cline in photovoltaic system costs. By 1986, system cost is assumed to
decline by more than 75 percent. The estimated equation for this scenario
is given by

 CKWP(t) = d*10750*EXP(-0.2781*(t-l)) + (1-d)*2026.5*EXP(-0.0381*
 (t-1)) (B2)
where all terms are defined as above.
 The third cost scenario is characterized by a moderate decline in
the cost of photovoltaic systems. This scenario is moderate in that it
is approximately mid-way between the above two rather extreme cost pro-
jections. The moderate photovoltaic system cost decline is approximated
by the exponential function

 CKWP(t) = 10750*EXP(-0.1215(t-1)) (B3)

where all terms retain their previous definitions. For all cost scenarios
the total system cost is estimated by multiplying the estimated cost per