Technological improvements and reduced equipment costs have made converting solar energy directly into electricity far more cost-efficient in the last decade. However, the threshold of economic viability for solar power (that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more economical than new oil-fired power plants) is unchanged at thirty-five dollars.
Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power has not decreased its threshold of economic viability?
(A) The cost of oil has fallen dramatically.
(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs for that equipment.
(C) Technological changes have increased the efficiency of oil-fired power plants.
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-tired, power plants.
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically viable.
OA is C
I was tempted to choose C too. But, just then I read the sentence in brackets. It says that the "price per barrel to which....oil fired power plants".
I would deal with such kind of a problem in the following way- For solar power plants to be more viable, their price of generation of power per mega-watt-hour should be lower than the price of oil per mega-watt-hour of power generated by an oil-fired plant. That would prove efficiency as a result of technological changes that C talks about. However, I repeat the stimulus says 'price of oil per barrel'.
Let me take hypothetical figures to explain my rationale. Suppose price per unit of power from a solar plant is 1USD. Price of oil is 5USD a barrel and it requires 0.2 barrels for one unit of power . Therefore the price of power from an oil-fired station would also be 1USD. An investor would be indifferent in either case. Tomorrow oil price increases to 10USD/barrel. Of course, the oil-fired plants will become less viable. Technology has not changed. Only the price of oil has changed.
I repeat again, I would have gone with C had the stimulus mentioned price of oil per mega-watt-hour of power.
Please guide.
Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power has not decreased its threshold of economic viability?
(A) The cost of oil has fallen dramatically.
(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs for that equipment.
(C) Technological changes have increased the efficiency of oil-fired power plants.
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-tired, power plants.
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically viable.
OA is C
I was tempted to choose C too. But, just then I read the sentence in brackets. It says that the "price per barrel to which....oil fired power plants".
I would deal with such kind of a problem in the following way- For solar power plants to be more viable, their price of generation of power per mega-watt-hour should be lower than the price of oil per mega-watt-hour of power generated by an oil-fired plant. That would prove efficiency as a result of technological changes that C talks about. However, I repeat the stimulus says 'price of oil per barrel'.
Let me take hypothetical figures to explain my rationale. Suppose price per unit of power from a solar plant is 1USD. Price of oil is 5USD a barrel and it requires 0.2 barrels for one unit of power . Therefore the price of power from an oil-fired station would also be 1USD. An investor would be indifferent in either case. Tomorrow oil price increases to 10USD/barrel. Of course, the oil-fired plants will become less viable. Technology has not changed. Only the price of oil has changed.
I repeat again, I would have gone with C had the stimulus mentioned price of oil per mega-watt-hour of power.
Please guide.
Thanks,
Bharat.
Bharat.
