In this paper the effect of axial heat conduction in a non-adiabatic counter flow microchannel heat exchanger is analyzed. The non-adiabatic nature of the heat exchanger causes fluids to exchange heat with the ambient which is at a constant temperature. There are three governing energy equations, one for each fluid and one for the wall separating the fluids. Two of the boundary conditions are the inlet temperature of the fluids. Insulated boundary conditions are used for the wall separating the fluids. The temperature of the fluids and the wall at several points between the inlets and outlets of the MCHXCF are obtained by solving the governing equations using finite difference method. Second order difference schemes are used for discretizing the governing equations. The effectiveness of the fluids depends on the NTU, axial heat conduction parameter, the ambient temperature and the ratio of the thermal resistance between the fluids to that between the ambient and the individual fluids. There is a decrease in the effectiveness of the fluids due to axial heat conduction alone. In the presence of just external heat transfer, increase in ambient temperature reduces the effectiveness of the hot fluid while increasing that of the cold fluid and the opposite trends occur if the ambient temperature is decreased. The combined effect of these two phenomena on the effectiveness of the fluids will depend on the net heat gained/lost by them.

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