INTRODUCTION 

 Energy consumption of a country is one of the indicators of its socio economic development. Per capita electricity consumption of India is one of the lowest in the world. Also, India will exhaust its oil reserves in 22 years, its gas reserves in 30 years and its coal reserves in 80 years [1]. More alarming, the coal reserves might disappear in less than 40 years if  India continues to grow at 8% a year [1]. 

 Solar PV Systems are one of the most promising future sources of energy. A group of solar cells connected in series, packed with ethyl vinyl acetate (EVC) (transparent adhesive) and insulated from the back side is known as a PV Module. 

The top surface of the cells is coated with an antireflective transparent coating. PV modules, connected in series, parallel or combination of both are known as PV array.  In India the cost of electricity generated by Solar PV cells comes to USD 0.154/KWh (Rs 6.8/kWh), globally and the capital cost of installing a Solar PV system comes to USD 6187–8937/kWp [2] and USD 8172/kWp [3]. Prakash et al. [4] have estimated that solar photovoltaic power cost is expected to decrease by 50 per cent in the next 15-20 years. 

Both the capital cost as well as the cost of electricity generated is likely to go down substantially with 

a). Economy of scale 

b). Advancement in technology and 

c). Carbon credits earned by such PV plants (as per Kyoto Protocol) are taken into account.

Secondly stand alone PV systems are well suited for Indian conditions. These systems do not require sophisticated grid synchronization equipments and systems. The electrical energy generated is directly used in running the electrical loads and the balance is stored in battery banks. These batteries along with an inverter (a device to convert direct current into AC) are used to run the electrical loads during night/ off sun shine period. 

 Carbon Credit Trading (Emission Trading) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. The development of a carbon project that provides a reduction in Greenhouse Gas emissions is a way by which participating entities may generate tradable carbon credits. Carbon credits are a tradable permit scheme. A credit gives the owner the right to emit one ton of carbon dioxide. International treaties such as the Kyoto Protocol set quotas on the amount of greenhouse gases which a country can produce. Countries, in turn, set quotas on the emissions of businesses. Businesses that are over their quotas must buy carbon credits for their excess emissions, while businesses that are below their quota can sell their remaining credits. The sale and purchase of credits empowers a business for which reduction of emissions would be expensive or prohibitive to pay another business to continue operations. This minimizes the quota\'s impact on individual business, while still meeting the quota on national scale. Credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price. There are currently two exchanges for carbon credits: the Chicago Climate Exchange and the European Climate Exchange. In the year 2005, 375 million tons of carbon dioxide equivalents (tCO2e) were transacted at a value of USD 4.55 billion with average price of USD 14.52 (1 credit = 1 tCO2e). In the first three months of 2006, average reported price of carbon dioxide equivalent was USD 22.99 per ton. European and Japanese Companies were the major buyers and China was the major seller of the carbon credits in 2005-06. Demand of carbon credits continued to soar in 2006-07 resulting in increase in the traded rate of carbon credits. Present market rate is fluctuating at  
20-22 (USD 27.5-30.25) in the European Climate Exchange [5]. 

 In this paper, the life cycle cost analysis of a stand alone solar photovoltaic system has been also carried out, considering the effect of CO2 credit earned.