ESSAY 5

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 Essay #5 (LEAP) Energy Cost

Energy Modelling and Simulation of Energy Systems

Course instructor: Prof. Wulf Boie

Submitted by: Carlos David Yáñez de León

Matriculation number: 556566

Europa Universität Flensburg

Meng. Energy and Environmental Management

January 21th, 2021

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Only the most productive types of power plants in Mexico where chosen to be shown in this
essay because more than 70% of the private, public investment and energy supply derive
from these sources and have the most impact to the electric grid and economy of the country
nowadays.
The selected power plants are hydroelectric, combined cycle gas turbines and conventional
single cycle thermoelectric power plants.

The investment cost of power plants in Mexico start with one initial forecast to determine if
the project is feasible for the state or the private investor but countless times the final
allocated money is more than the estimated due to several variable factors without having a
standard deviation measurement.

Type of power plant Average Cost of investment in Million USD

Hydroelectric $548 (BNAmericas, 2018)
Combined cycle $413 (Iberdrola, 2021)
Conventional thermoelectric $910 (Sistema Electrico Nacional, 2020)
Figure 1 – Average cost of investment per type of power plant

The operation and mantainance cost of power plants are considered to be directly related to
the amount of investment according to the size and capacity of the power plant. These costs
include not only the expenditure on machinery and alike but also the salaries of the operators
and management staff necessary to keep the power plant running.

Type of power plant Average Cost of operation and mantainance in

Million USD/year
Hydroelectric $11
Combined cycle $8
Conventional thermoelectric $27
Figure 2 – Average yearly cost of operation and mantainance (Sistema Electrico Nacional,
2020)

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Cost of fuels used in Mexico according to the energy balance
Type of fuel Cost of fuel in USD/mWh
Oil $ 39
Gas $ 15
Hardcoal $6
Figue 3 – Cost of different fuels in 2020. (Gutierrez, Rosellon, & Sarmiento, 2021)

Electricity generation costs are almost static in a year cycle. In the following table it is
presented as a yearly average.
Type of power plant Average cost of electricity generation in cents
of USD/kWh
Hydroelectric $0.5
Combined cycle $0.6
Conventional thermoelectric $0.7
Figure 4 - (Enriquez, Ramirez, & Rosellon, 2019)

Mexico has a heavily subsidized electricity tariff so that the public in general can afford to
pay and not destabilize the system’s financial income with the lack of payments.
Type of consumer Electricity tariffs in cents of USD/kWh
To the public, domestic $3.2 - $15
To businesses in general $1.9 – $17
Figure 5 – Electricity tariff in Mexico (Selectra, 2022)