Question

1. Suppose you are hired as a consultant to conduct a cost/benefit analysis of a proposal to power a school with 100% solar power.

a) identify all of the social benefits that you would need to estimate and classify the values (existence, extractive use, etc). Are the private benefits for the school the same as the social benefits?

b) identify all of the social costs that you would need to estimate. Are the private costs for the school the same as the social costs?

c) outline some possible ways that you could estimate the benefits and costs of the proposal

d) suppose you conduct the study and find social benefits are greater than social costs. what could be an obstacle for the school's adoption of the proposal? can you think of a solution to this problem?

Answer 1

Suppose you are hired as a consultant to conduct a cost/benefit analysis of a proposal to power a school with 100% solar power.

a) identify all of the social benefits that you would need to estimate and classify the values (existence, extractive use, etc). Are the private benefits for the school the same as the social benefits?

Theory : Externality occurs when people who were not a part of decision making get affected. Example: Allowing smoing in public place may impact non smokers negatively. Government giving free education may reduce crime rate. Hence externality can be positive or negative.

Social benefits are a sum of private benefits and external benefits. Similarly, Social costs are a sum of private costs and external costs.

In this case solar panels will have more social benefits.

Private benefits: a. Uninturpted power supply to school.

b. No pollution in school premises and self sufficiency for school in terms of electricity.

c. No electricity bills.

External benefits: a. Jobs created for solar panel producers, fitters and after sales service professional.

b. No pollution causes society to be healthy.

c. Money saved on electricity can be used for betterment of premises.

Hence, Private benefits and external benefits are different. Social benefits is a sum of theses two.

b) identify all of the social costs that you would need to estimate. Are the private costs for the school the same as the social costs?

Private costs: a. Cost of fitting and setting up a plant.

b. Maintenance costs.

c. During cloudy days, alternative energy source.

external costs: a. People losing jobs in conventional electricity plants.

Hence private costs and social costs are different.

c) outline some possible ways that you could estimate the benefits and costs of the proposal.

Private cost : a. Measure cost of plant set up

b. Plant service and maintenance cost

c. Alternate energy cost during emergency

External cost:a. Estimate job loss cost averaging salary.

Private benefits : a. Measure average bill saved per month.

b. Students learning solar plant set up.

External benefits :a. Estimate job generated in solar plants set up and maintenance .

b. trees saved benefits per tree and similarly for animals.

d) suppose you conduct the study and find social benefits are greater than social costs. what could be an obstacle for the school's adoption of the proposal? can you think of a solution to this problem?

1. The obstacles may be technical expertise.

2. Consensus among school committee members to solar plant setup.

3. Higher initial costs.

Possible solutions can be: 1. Expert talk on project feasibility.

2. Meeting to reach to consensus siting long term benefits,