Power Plant Economics and Variable Load Problem

Proceedings of the 1st AGM and Conference of the Nigerian Institution of Mechanical Engineers.
Minna, held
at Chemical Engineering Lecture Theatre, Federal University of Technology, Minna – Nigeria,
September 9th & 10th, 2016
POWER PLANT ECONOMICS AND VARIABLE LOAD PROBLEM
Edeh J., Nasir A., Bako A.K.E., Joseph J.J*
Department of Mechanical Engineering, Federal University of Technology, Minna
*Corresponding author email: jerrysuku@gmail.com
ABSTRACT
This work looked at the economy of power generation and distribution with the view to
generated and supply electricity at the lowest possible cost that is affordable by the consumers
and ensuring that the power plant is not run at a loss. In doing so, the cost of production,
generation and distribution have to be put into consideration as this determine the final cost of
supply of electricity. It is therefore desirable that the right equipment are selected for
construction for effective performance. Proper distribution of load among generating units is also
very essential. If the load is not properly distributed, it will result in a decrease of thermal
efficiency. Further to cope with variable load operation it is necessary for the power station to
keep reserve plant ready to maintain reliability and continuity of power supply at all times. To
supply variable load combined working of power stations is also economical. For example to
supply a load the base load may be supplied by a steam power plant and peak load may be
supplied by a hydropower plant or diesel power plant. The size and number of generating units
should be so chosen that each will operate on about full load or the load at which it gives
maximum efficiency.
Keywords: power, load, cost, efficiency, energy, economics
1. INTRODUCTION
The whole world is in the grip of electricity crisis and the pollution manifesting itself in the
spiraling cost of energy and uncomforted due to increase in pollution as well the depletion of the
conventional energy resources and increasing curve of pollution elements. To meet the
challenges one way is to check the growing energy demand but that would slow down the
economic growth as a first step and to develop non polluting energy conversion system as second
step. It is commonly accepted that the standard of living increases with increasing energy
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Proceedings of the 1st AGM and Conference of the Nigerian Institution of Mechanical Engineers. Minna, held
consumption per capita. Any consideration of energy requirement and supply has to take into
account the increase conservation measures. On the industrial front, emphasis must be placed on
the increased with constant effort to reduce energy consumption. Fundamental changes in
process, production and services can affect considerable saving without affecting the overall
economy [1]. Electricity is the only form of energy which is easy to produce, transport, use and
control. So, it is mostly the terminal form of energy for transmission and distribution. Electricity
consumption per capita is the index of the living standard of people in any country. It is found
that the demand for electricity bears a linear relationship with the gross national product (GNP)
of a country. Projection of a future demand of electricity is thus tied to the estimate of economic
growth of the concerned region or country. With the increase in economic growth, the
consumption of electricity also increases. Electricity in bulk quantity is produced in power
plants, which may be conventional or non conventional. Thermal power plants generate more
than 80% of the total electricity in the world [2].
The basis of the function of power generating plant is demand for electricity and market prices.
The market prices will in turn be determined largely by local competition between power
generators rather than through national or international regulation [3]. In the electricity power
market, generation scheduling problems such as unit commitment, minimizing costs while
meeting all demand. The unit commitment problem is defined as scheduling generating units to
be in service to minimize total production cost while meeting any constraints such as power
demand, minimum up and down time, etc [4]. In the power market, the costs of electricity and
fuel are stochastic in nature. Yet they still show daily, seasonal and long term trends. For
example, considering the time line in daily level, the cost of electricity is usually lower between
midnight and early morning than during the day, because people use less electricity. It is also
reasonable to assume that the cost of electricity in the summer is higher than in the spring fall. In
a market based operating environment, cost of electricity and fuel are major driving factors for
power plant operational planning [5].
2.0 POWER PLANT ECONOMICS
Economy is the main principle of design of a power plant. Power plant economics is important
in controlling the total power costs to the consumer. A power plant should provide a reliable
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supply of electricity at minimum cost to the consumers. The cost per KWhnet is determined by:
Fixed cost, operation and maintenance cost, fuel cost and KWnet of electricity sent out per year
[1]. In order to calculate the electric power cost to a consumer, in addition to the production
cost, the transmission cost, distribution cost, administrative expenses, and return or profit on the
investment have to be taken into consideration. The total cost in in a power plant can be
expressed as:
Ct = + ( W + R + M) + Cf ……………………. 2.0
Where :
I = Interest (%), T = Taxes and insurances (%), D = Depreciation (%)
Cc = Construction cost, W = Wages and salary, R = Repair and Maintenance
M = Miscellaneous, Cf = Fuel cost.
The annual amount of electricity sent out by a power plant (KWhnet ) is given by:
KWhnet = KWhinst × 8760× ( ) × n………………………………2.1
Where KWhinst = rated (installed) output of the generator

Laux = power consumption by auxiliaries
n = plant capacity factor
8760= 24 × 365 hours per day
A measure for the reliability of a power plant is the forced outage rate defined by the annual ratio
of
…………………………………2.2
As forced outages raised operation and maintenance costs, proven reliability of equipment and
regular preventive maintenance work are essential, not only to guarantee electricity supply but
also for the overall economy of the power plant. The costs however have a continuous upward
trend due to monetary inflation, rising fuel prices and increased demand for measures a
protecting the environment [1].
2.1 Construction Cost
The construction costs of a plant consist of expenses for:
i. Planning and design
ii. Land and preparation of site, including road (and rail) connections.
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iii. Building and machinery foundations.

iv. Erection and testing of equipment.
v. Interest during construction (for payments made before commissioning of the plant) and
vi. Administrative work.
In all types of power plants there is an economy of scale, i.e the construction cost per KW
decrease with size. This effect varies with the type of equipment, the economy of scale of
construction cost Cc of two parts of equipment of the same type can be expressed as
…………………………………………..2.3
Where
Cc1 and Cc2 are for parts with rated outputs of R1 and R2, respectively, K<1. Average values of K
for convectional steam generators and for steam turbo – generators and centrifugal pumps are
0.8, whereas K=0.6 for nuclear steam supply systems and K= 0.9 for condensers and feed water
heaters [2]
2.2 Fixed Costs and Depreciation
Fixed costs consist of annual cost for interest, depreciation, insurance and taxes on property and
estimated income calculated as a percentage of the capital investment. Inerest rates depend on
general financial conditions at the time of construction and on the soured of funding
international, national, public, private or bound issues. Depreciation rates are determined by the
life expectancy of the equipment and the method used for calculating the depreciation. There are
two methods of accumulation the money for depreciation fund:
i. Straight line method
ii. Sinking – fund method
The straight line method is based on the assumption that depreciation occurs uniformly every
year according to a straight line law. The money saved neglects any interest if “A” is the capital
cost of the equipment and G is its salvage value affects N useful years, then the depreciation
charge per year is
D= (A-G)/ N………………………………………….2.4
In the sinking fund method, a sum of money is set aside every year for N years and invested to
earn compound interest. Suppose P is the annual deposit and I is the interest compounded
annually when the deposit is invested. The amount that should be set aside annually is given by
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P= ………………………………………….2.5
Where P = annual deposit or payment to sinking fund

I = annual rate of compound interest
N = number of years over which the total amount of depreciation is to be saved
A1= capital costs (A) – salvage cost (G) [4]
2.3 Fuel Cost
The fuel consumption depends on the amount of electrical energy produced. As the load on the
prime movers increases, the fuel consumption increases and so does the cost. The efficiency of
the prime mover is the highest at the rated load. At lower load, the efficiency decreases and so
the fuel consumption increases. Therefore, the cost of electricity generation is minimum at the
rated load and it increases as load decreases. The cost of fuel also depends on the calorific
values, unit price and transportation charges [3].
2.4 Present worth Concept
In the evaluation of power plant development plans or alternate payment scheme (cash flow) for
financing a power plant project, the influence of interest on the value of funds to be spent at a
later date leads to the present worth concept. The present worth is the value of a sum of money at
the present time that, with compound interest with have a specified value at a certain time in the
future [5].
Compound interest payment at the interest rate i will increase the value of a fund by
Within N years. The present worth (PW) of a payment S to be made after N years is
therefore …………………………………………….2.6
On many occasions, equal amount of annual expenses are required. Then the present worth of a
uniform annual series of payment P after N year is calculated from equation 2.5 and 2.6
PW= ×
PW = [( ]………………………………………2.7
2.5 Economics of Scheduling Principle

A utility system has always more than one generating unit. Proper distribution of load among
generating units is a problem frequently encountered by engineers. If the load is not properly
122
distributed, it will result in a decrease of thermal efficiency as a whole. In any utility system with
many units, to maintain continuity of service, the generating capacity in operation must be
greater than the system load. To minimize the total system fuel cost, the principle of equal
incremental heat rate is to be observed in distributing the system load among the operating units.
According to the economic scheduling principle, the load is so distributed that at any moment all
generating unit will have the same incremental heat rates. As the system load increases, the
incremental heat rate of each unit will increase [6].
2.6 Economics in Plant Selection
The capacity of a power plant depends upon the power demand. The capacity of a power plant
should be more than predicted maximum demand [7]. It is desirable that the number of
generating units should be two or more than two. The number of generating units should be so
chosen that the plant capacity is used efficiently. Generating cost for large size units running at
high load factor is substantially low. However, the unit has to be operated near its point of
maximum economy for most of the time through a proper load sharing programme. Too many
stand bys increase the capital investment and raise the overall cost of generation. The thermal
efficiency and operating cost of a steam power plant depend upon the steam conditions such as
throttle pressure and temperature [8]. Power can be produced at low cost from a hydropower
plant provided water is available in large quantities. The capital cost per unit installed is higher if
the quantity of water available is small. While installing a hydropower plant cost of land, cost of
water rights, and civil engineering works cost should be properly considered as they involve
large capital expenditure. The other factor, which influences the choice of hydropower plant, is
the cost of power transmission lines and the loss of energy in transmission. The planning, design
and construction of a hydro plant is difficult and takes sufficient time.
The nuclear power plant should be installed in an area having limited conventional power
resources [9]. Further a nuclear power plant should be located in a remote or unpopulated area to
avoid damage due to radioactive leakage during an accident and also the disposal of radioactive
waste should be easy and a large quantity of water should be available at the site selected.
Nuclear power becomes competitive with conventional coal fired steam power plant above the
unit size of 500 MW. The capital cost of a nuclear power plant is more than a steam power plant
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of comparable size. Nuclear power plants require less space as compared to any other plant of
equivalent size. The cost of maintenance of the plant is high. The diesel power plant can be
easily located at the load centre. The choice of the diesel power plant depends upon
thermodynamic considerations. The engine efficiency improves with compression ratio but
higher pressure necessitates heavier construction of equipment with increased cost. Diesel power
plants are quite suitable for smaller outputs.
The gas turbine power plant is also suitable for smaller outputs. The cost of a gas turbine plant is
relatively low. The cost of gas turbine increases as the sample plant is modified by the inclusion
of equipment like regenerator, re-heater, and intercooler although there is an improvement in
efficiency of the plant by the above equipment. This plant is quite useful for regions where
gaseous fuel is available in large quantities.
Diesel and hydropower plants are quick to respond to load variation as the control supply is only
for the prime mover. In a steam power plant control is required for the boilers as well as turbine.
Boiler control may be manual or automatic for feeding air, feed water fuel etc. Boiler control
takes time to act and therefore, steam powers plants cannot take up the variable load quickly.
Further to cope with variable load operation it is necessary for the power station to keep reserve
plant ready to maintain reliability and continuity of power supply at all times. To supply variable
load combined working of power stations is also economical. For example to supply a load the
base load may be supplied by a steam power plant and peak load may be supplied by a
hydropower plant or diesel power plant. The size and number of generating units should be so
chosen that each will operate on about full load or the load at which it gives maximum
efficiency. The reserve required would only be one unit of the largest size. In a power station
neither there should be only one generating unit nor should there be a large number of small sets
of different sizes [1].
2.7 Economic of Power Generation
Power should be supplied to the consumer at the lowest possible cost per kWh. The total cost of
power generation is made up of fixed cost and operating cost. Fixed cost consists of interest on
capital, taxes, insurance and management cost. Operating cost consists of cost of fuel labour,
repairs, stores and supervision. The cost of power generation can be reduced by,
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(i) Selecting equipment of longer life and proper capacities.
(ii) Running the power station at high load factor.
(iii) Increasing the efficiency of the power plant.
(iv) Carrying out proper maintenance of power plant equipment to avoid plant breakdowns.
(v) Keeping proper supervision as a good supervision is reflected in lesser breakdowns and
extended plant life.
(vi) Using a plant of simple design that does not need highly skilled personnel.
Power plant selection depends upon the fixed cost and operating cost. The fuel costs are
relatively low and fixed cost and operation and maintenance charges are quite high in a case of a
nuclear power plant. The fuel cost is quite high in a diesel power plant and for hydro power plant
the fixed charges are high of the order of 70 to 80% of the cost of generation.
The power generating units should be run at about full load or the load at which they can give
maximum efficiency. The way of deciding the size and number of generating units in the power
station is to choose the number of sets to fit the load curve as closely as possible. It is necessary
for a power station to maintain reliability and continuity of power supply at all times. In an
electric power plant the capital cost of the generating equipment’s increases with an increase in
efficiency. The benefit of such increase in the capital investment will be realized in lower fuel
costs as the consumption of fuel decreases with an increase in cycle efficiency [1].
3.0 EFFECT OF LOAD FACTOR ON COST PER KWH
The fixed costs are proportional to the MW capacity of a plant, while the operating costs are
proportional to the total energy produced by the station annually. The fixed costs remain the
same whether the station is running or idle. The fuel consumption and operating costs will,
however, vary with the load. At 100% load factor the installed capacity is utilized to the best
possible extent and the maximum possible amount of energy is generated during the year. The
cost per KWh is thus a minimum in this case. When the load factor is lower than 100%, less
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energy is produced giving a higher cost per KWh, since the non-varying fixed cost and lower
operating costs are distributed over fewer KWh generated [4].
4.0 EFFECT OF VARIABLE LOAD ON POWER PLANT DESIGN
The characteristics and method of use of power plant equipment is largely influenced by the
extent of variable load on the plant. Variable load affects power design and operation as well as
the cost of generation. The base load plant should be run at high load factor. Peak load plant
should be of smaller capacity to reduce the cost of generation. If the whole of the load is to be
supplied by the same power plant, then the prime mover and the generator should act quickly and
take up or shed load without variation of the voltage or frequency of the system. The capacity of
the generator should be so chosen as to suit and fit into the portions of the predicted load. If the
load condition differs too much from this capacity, the cost of energy increases.
Variable load results in fluctuating steam demand. Due to this it become, very difficult to secure
good combustion since efficient combustion requires the co-ordination of so many various
services. Efficient combustion is readily attained under steady steaming conditions.
The variable load requirements also modify the operating characteristics built into equipment.
Due to non-steady load on the plant, the equipment cannot operate at the designed load points.
Regarding the plant units, if their number and sizes have been selected to fit a known or a
correctly predicted load curve, then, it may be possible to operate them at or near the point of
maximum efficiency. However, to follow the variable load curve very closely, the total plant
capacity has usually to be sub-divided into several power units of different sizes. Sometimes, the
total plant capacity would more nearly coincide with the variable load curve, if more units of
smaller unit size are employed than a few units of bigger unit size. Also, it will be possible to
load the smaller units somewhere near their most efficient operating points. However, it must be
kept in mind that as the unit size decreases, the initial cost per kW of capacity increases [3].
4.1 Effect of Variable Load on Power Plant Operation
In addition to the effect of variable load on power plant design, the variable load conditions
impose operation problems also, when the power plant is commissioned. Even though the
availability for service of the modern central power plants is very high, usually more than 95%,
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the public utility plants commonly remain on the “readiness-to-service” bases. Due to this, they
must keep certain of their reserve capacity in “readiness-to-service”. This capacity is called
“spinning reserve” and represents the equipment standby at normal operating conditions of
pressure, speed etc. Normally, the spinning reserve should be at least equal to the least unit
actively carrying load. This will increase the cost of electric generation per unit (kWh).
As the load on electrical supply systems grow, a number of power plants are interconnected to
meet the load. The load is divided among various power plants to achieve the utmost economy in
the whole system. When the system consists of one base load plant and one or more peak load
plants, the load in excess of base load plant capacity is dispatched to the best peak system, all of
which are nearly equally efficient, the best load distribution needs thorough study and full
knowledge of the system [6].
5.0 CONCLUSION
The power plant should provide a reliable supply of electricity at minimum cost to the
consumers. The cost per KWhnet is determined by the fixed cost, operation and maintenance cost,
fuel cost and amount of electricity sent out per year. The capacity of power plant depends upon
the power demand. The capacity of a power plant should be more than the predicted maximum
demand. The number of generating units should be chosen so that the plant capacity should be
used more efficiently. The characteristics and method of power plant equipment is largely
influenced by the extent of variable load on the plant. As the load on electrical supply system
grows, a number of power plants are interconnected to meet the load. The load is divided among
various power plants to achieve the utmost economy in whole system.
REFERENCES
[1] Nag P.K. (2008), Power plant Engineering, Tata Mc-Graw Hill Publishing Company
Limited, New Delhi
[2] Raja A.K. (2006). Power plant engineering, New Age International P(Ltd) Publisher,
New Delhi.
127
[3] Coxe, R. and Llic, M. (1998) system planning under competition”, power system
restructuring Engineering and Economics, Edited by Marija Llic, Francisco Galiana, and
lester Fink, Kluwer Academic Publisher
[4] Attaviriyanupap P, Kita H, Tanaka E, Hasegawa J. (2002), “A New profit-based unit
commitment considering power and reserve generation”, power Engineering Society
Winter meeting, 2002, IEEE, Vol. 2, Pp. 27-31
[5] W.Mohamed, V.Sethi, P.Plidis, A.Abu, A.Nasir, Osama Lotfi (2013), Evaluation of
Electricity Cost in a Growing Market. Proceedings of ASME Turbo Expo 2013. School
of Engineering, Cranfield University UK
[6] Aschner F.S. (1976) Planning Fundamental of Thermal Power Plants. John Wiley,
London.
[7] Li K.W and Priddy, A.P. (1985) Power Plant System Design, John Wiley, New York
[8] Deshpande M.V,(1966) Elements of Electrical power station Design, Pitman, London,
[9] Weisman J et al, (1985), Modern powder plant Engineering, Prentice-Hall of India, New
Delhi.
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Proceedings of the 1st AGM and Conference of the Nigerian Institution of Mechanical Engineers.

September 9th & 10th, 2016