Ls ‘of Engineering at Shoubra Introduction The engineering projects are accomplished considering both technical and economic aspects. 1. Technical aspects concems with the conditions of the provided services. (for Power station, it is required to deliver power to a large number of consumers to meet their requirements) 2. Economic aspects concerns with the profit that can be accomplished from the project. (for Power station, it is, required to achieve overall economy so that the per unit cost of production is as low as possible) Therefore, the study of any project has to ensure a satisfactory ‘operation a reasonable costs, SESSION FOUR POWER PLANT ECONOMICS Repeats oi instilling prewer pens Introduction There are several factors which influence the production ‘cost such as > Cost of land > Cost of Equipment > Cost of Fuels > Depreciation of equipment > Interest on capital investment ete, ‘Therefore, a careful study has to be made to calculate the cost of production. In this chapter, we shall focus our attention on the various aspects of economics of power generation.Terms used in the economics of power generation 1- Interest : The cost of use of money is known as interest, While calculating the cost of production of electrical energy, the interest rate on the capital investment must be included. The rate of interest depends upon market position and other factors, and may vary from 4% to 8% per annum, Cost of Electrical Energy The cost of the electrical energy generated (Cost of production) can be classified into three parts, namely; (i). Fixed cost; (i) Semi-fixed cost; (ii) Rumning or operating cost 29 Ni 7 ee) Terms used in the economics of power generation 2- Depreciation ‘The dectease in the value of the power plant’ equipment and building due to constant use is known as depreciation, ranging from fifty to Every power station has a useful i sixty years, From the time the power station is installed, its equipment steadily deteriorates due to wear and tear so that there is a ‘gradual reduction in the value of the plant. ‘This reduction in the value of plant eve annual depreciation. white determining the cost af production eam eS =e Sat wear is known as Cost of Electrical Energy 1- Fixed Cost It is the cost which is independent of maximum demand and units generated. It represents a constant annual cost for the power plant. It includes the cost of land, buildings, equipments, transmission and distribution lines with all infrastructures, and the cost of planning and designing the plant.Cost of Electrical Energy 2- Semi Fixed Cost Its the cost which depends upon maximum demand but itis, independent of units generated (output energy). It is almost directly proportional to the maximum demand on power station. It takes into account the annual interest and depreciation on capital investment of building and equipment, taxes. The maximum _demand_on the power station determines its size and cost_of installation, Therefore the greater the ‘maximum demand, the greater the size and cost of installation, Cost of Electrical Energy Total annual cost of Production= Fixed cost + Semi-fixed cost + Running cost Total annual cost of Energy generated = Constant + Proportional to max. Demand + Proportional to kWh generated Total annual cost of Energy generated = (a+ b kW +c kWh) Cate @ © Where ‘> annual fixed cot independent of maximum denen and energy output 'b= conan which when multiplied by maximum kW mand onthe station gives the annual semtited cos. {e= constant which when multiplied by kWh output per ‘num gives the annual ning cos Cost of Electrical Energy 3+ Running or Operating Cost It is the cost which depends only upon the number of units generated and the number of operating hours of the power plant and thus, on the output energy. It is almost directly proportional to the number of units generated the output energy by the station. It includes the annual_cost_of fuel, lubricating oil, ‘maintenance, repaits and salaries of operating staf. Cost of Electrical Energy Total annual cost of Energy generated = (a+ b kW + ¢ kWh) Cost Per unit generated = (a+b kW +e kWh) / kWh = Total cost / No. of Units Generated Where a> anal fixed co independent of maximum demand fd enerry output. =eBase Load and Peak Load on Power Station ‘The load on the power station can be considered in two parts, amely > Base load. The unvarying load which occurs almost the whole day ‘on the station is known as base Toad. Itis supplied by the station at all times of day and night ie. throughout 24 hours. > Peak load. The various peak demands of load over and above the ‘base load of the station is known as peak load. These peak ‘demands of the station generally form a small part of the total load, ‘and may occur throughout the day. ELECTRIC ENERGY ECONOMICS ‘Economies Means The selection of an appropriate power generation scheme forthe given situation/load. ‘The need may be one only during high electricity demand hows (peak load) or the new power may be needed 24 hours a day (base load. Base load is that load below which the demand never fale, that is, the bese load must be supplied 100% of the time. The peaking load occurs less than about 15% ofthe time; the intermediate load transpires between 15% t0 100% of Pog load ELECTRIC ENERGY ECONOMICS ‘The cost to the consumer for electric energy can be roughly| distributed according to: > Generation — 60% > Transmission — 10% > Distribution — 20% > Administrative/Profit - 10% ‘The cost structure for transmission and distribution is different than for power generation, since there is basically no fuel cost involved with ‘operating transmission and distribution wires. ‘At the margin, the cost of loading a given transmission line with additional electricity is basically zero (unless the line is operating at its rated capacity limit). Capital cost thus dominates the economics of ‘ansmission and distibution, ELECTRIC ENERGY ECONOMICS ‘The capital and operating costs generally dictate how a plant is| used on the grid (hydroelectric units are an exception to the! following): Toe ‘OAM Furl Coss Fogle Pas Be High ‘Low ‘Coal Nave Tak Li ish ‘iL Od weal ge ‘The plant selection for various load demands can be summarized as: Tange pT cet em ae Bee Laeculeataceeans | osrie tment | cp sry seni —_| msi en ‘Conus ts ad [ee one pa Po fest ees fou hr ie es ae bam oy aaSolved Examples ale A nrg station as min deman of 000A: Cala ‘erat generated ing cs Cota at = B85 1 Aol ad far = 485 Anna at tao = Bs 9x10 Tats ges ass ere and dren ~ 1235 Satan: ‘Uns geeraeamun = Nx. da Hous na ear ~ 4000 0-4 (860 HW = 1752 10 HN rx Anal fo hares ‘Anal ineestand pect = 12% of ep cost © R012 95x10" «Re MAse Anal Ring Charges “Tlingit ~ Af is Tl 4 Ta agit. = Re (010 15x10) = ReI6S3IF Toa cages = Rs (el 10+ 165 x00) = R279 10° Cortper unt = Rs 2782107 =e 16 = 16 pe Wx Solved Examples Solved Examples Tarp A erating ston hasan male apoyo 5.00 § Wand vss 20% 1 spam te are chars a 160 Wind capac and ran ‘hares are pepe IN arth ot por nt ger Sotaion "Annual charges — 160% Plant api = Rs 160 50,000 = Rs 801 10° Annual running changes = Rs O04 220.10" «Rea x 10° “Total annual charges - Rs (80% 10" + 88 x 10°) ~ Rs 168 x 10° Cost permit = Solved Examples ame inn te erty tp Revere om gent ono] hein a Plant capacity = 30 MW An ond face = 085 Capital est = 12 eros: sume ot of wages eto te: = Rs 4 is» ot fd team malmeaace a 10 pate geerated. ee psn, dgrecaon Per ann oft aoe, cael: Tmnmun neces my amma py ‘mat cares Tecan «Reno 5-8 SZ geandiaton = Re eta cages = RA CF2 108 309 RANT 1F ee orien ~ Lata (he 1 a) (TEEN KO = taxi atc tone. = Ret TS8 nO «Re “einmges = ReIPEX IDs IESE =e T2 IP 000-2 pie ample Agee nn os tity dt Irae cacy = SMW; Capac itr = 5s Ams fd ft ~ 65 Aaa ft ce. = RS 9 10 cap ces = Rs 1s ames a dei n= 105 Cae (tava reserve capo te in ad hte cos rh ev alo 0 cman ca = Aemaemme _y endian LR = Ate yy Drang. we wt TE © stat pact o lox demand = Inst capciy SE: 3005 08 = M k pcty x CE = 200% 0:8 = 250 MW 50-250 - 5am Reserve apstySolved Examples ‘Beam A gonrais Son os twig dos Irate capacity ~ 90 NE: Copy tor = 5%: Ana Ta ar ~ 6s Anal east afte = Rs 910"; eapat ces = Rs 1 asl eres and apc te = 1085 Clete (ch nae eapciy ob ton athe cst per th evra = (25010) x (06) 8760 AWh = 131410 xn] = RsO1 x 10= Red Annalrunningchages = Rs 9210" Total ana charges = Re 10" 910% = Re19s 10? (0 Vos generate Con pernin = n 1810, ReOM = 14 pre Importance of High Load Factor ‘The load factor plays vital role in determining the cost of energy. Some important advantages of high load factor are listed below 1- Reduces cost per unit generated: A high load factor reduces the overall cost per unit generated, ‘The higher the load factor, the lower is the generation cost (cost per unit generated). ( Higher load factor means that fora given maximum ‘demand, the number of units generated is more. This reduces the cost per unit generated) 2. Reduces variable load problems: A high load factor reduces the variable load problems on the power station. (Iligher load factor means less variations in the load demands at various times. This avoids the frequent use of regulating devices installed to meet the variable load on the station) Solved Examples Bogle Ageing plat as 2 mci apa o 0H an co Bs 000 Tesi ied chase cast oS es. chat a 6 es. Pd the fred changes er KW the load factor sf) 1008 ane (i) S08, Sen Masiman demand = 1003 amma fixed charges ~ RS 121.6000 - Rs 13200 Weve 108 Chas practi = Nex eons Lia mayen 2 My reo 7600 wh Froteith ~ Rs 382.00 -219 phe 0 Wreta er 58 Chnsgrretanmm = 1050587048000 ed hgsith = Re 12RD 8 pae lesieeing ona ay ean bent an 10K mA ee gs shine ee oie tne iy high ee Solved Examples ample Thecapal ota depo siatioa o SO MW exact Rs 100 er ‘oe al eet haa 1 afte ales. A realy ae per AW or oar ad| [R601 pr sth generated sw be pa for wg ters Water x gaan o pone. Da ‘mains danand on be powe sao 10 Madan afi 65%. Amul ot | ‘Str matory ergot Rs P0000 2 oft expen sc hag | ‘ages enue he gern at va por fr “Total annual cost of nergy -(A KW B RWB) Solaton ‘Unis geoeratetannum = 40> 10) x (06) 8700 ~ 21021 1F KW Cepia eotof pant ~ R02 10" 1000 Rs 0108 Annual xed caroes Depreciation = RsO-1 x 50% 10% Rs 5 x 10° Salaies, malenance ete, = Rs 02% 7,0,000 = Rs 1-4 10° Total anal fixed charges = Rs (5% 10" 14 510°) = Rs 51-4 10° (ost per kW» Cas per KW ik chang Royalty = Re STADE spe netens eRe =Rs1288 6 ocean iitSolved Examples Paample The caput ofa yo poe tation of 50 capac 1.0 pe ‘ee arn eettion cages ar 10 fect ease. rosy af Re | per Vr ear an [Re001 pr sgt 0b pl wg the wat fr geen of poner ‘manu demand ote per Sativa 40MM an ane oad fcr is OR Atul eos ‘Stars mame charges As £0000, 12st hx ee ako cars as ed ages eee te omer stn ope Al running charges Salarles, maintonance otc. = Rs 08 x 7,00,000 » Rs 5.6 x 10° Cost per Wh = Cos/Wh do to runing charges + Royalty + Reo. 10° = Rs 58H! ~ F802 = ReG.0027 + ReGOl « Re GO127 ~ Total generation cost in two pat form i given by Rs (120: 5 se KW + 0.0127 KWH) Solved Examples Solved Examples aml Compare te anal ot of spang cto foad arango maxon ‘nant of MW ata tr of 08 aera ee eh mn pa sa ai sap (Prat ee gett ett ct = Be 2 10, Cot of pram mts = Re 005 pr ih grea (Cost = R100 er 100 ners al ees = 1 pra ‘Faleonsmgtan = OSM genre apes = Be 50.000 prs (ay Patsy cmp: Salton Unis generatelannan = (100) x (05) x 8760 ~ 48104 (© Peat i engine generating plant ‘Atal fue consumpon = 08% 188 x10 131410" ag ‘Annu costof fuel = Rs 1314 10°x 1600/1000 = Rs 2.02400, ‘Ane cost of estan mantenae = Rs O08 438108» Rs 21,900 Anan waaes = Rs 0.000 Ata inure aid dspecatin = RSOb1 x 12 10° Rs 1.20000 “Total annual changes = Rs (21,0240 + 2,000 50600 + 120,000) = Re 229,300 Solved Examples ample Compare be anna can of upvc Tad ing mata de na of MW a dav 58 ae anh pe pa a abt sap (Prat egie generating et Crp cots B10 «Cot pt ad mame Bs 0805 por HM gate (Coa et = Rs 100 100g ee dre = 1085 pe ane Pal eomampian = Oke IM erred Wager S00 pr (ay Pate spe cay {Be 130 pera maine domi ples 15 pose por Pate supply ‘Anna fied charges ~ Rs 150% 1000 ~ Re {50900 Anmateuoming charges = Rs 15 x 48 x 108 Rs 657.000, Total ama charger ~ Re (1.50000 + 6,57,000) = Re 87.00 Private ot engine generating plant — Re 22,94,200 (2) abit supply = Rs .07,000 Tape ar ang man a fT MW has a a 308 tobe saps an a aon son (am an cn th cesta etc pig 1 1 a pares mete eect la er sean copie a sping oe whe od Compare the onal ot pe gees, eng te eg da Sia Hho (4 Capa cs AW stats 1250 Reasoo (0) Tit nd dopo cpt et ne low (el Opt ent 2D Spoke 15 pte (a Tratstnct 21 maligite 02 pase Seaton nisgemtnnnum = Mx dnd LF Hoa ayer = 16010 (0 (80) = 262810", (0 Ste san conto ih ye sat ‘nies oon = 131° Uns sale sen stn = (528 ~ 106) 10° 16283108 Sethe msi cpt yest A MN balan 10040 = DAW te sis seam anSolved Examples Sean Fare 9 Cpe cont -A mated eras ‘keas00 (©) iat and dopcmcia mms ie. fo {9 Gperaingcose-Ait Shane 15 mise (0 Trommiaon ce ‘eshte 02 pce (a Seam Siton open Cont = Re 101250 Re TSF Anna arama pectin — Re 12753 10°— e810 peat Cont = REGOH EDR P= Re BLE IO® emendencet (ther snae Reve niaiy itomernaey Comat — Re 2500 405108 e001 An ners dgreciation — Re 1 100% 108 Re 1° ‘Opeingcont ~ ReOO1Sxe100% 1G Re 10 “Tommisancnt = R002 1D IP R02 1" Toalenatcot — RS(QD 1 «B2} 0% Re Tsu Tot anne ag fr bt sean aay tins Re (TH+ 1D x10 Re 288t Overcot/nh = Re BABI 01007» 1047 pie oe ae Solved Examples In @ particular area both steam and hydro stations are equally possible. It has been estimated that capital costs and running costs of these two types will be as under: Plant Capital cost/kW Running costkWh Interest Tiydro Rs 3000 3 paise 5% Steam Rs 2000 10 paise 5% If the expected average load factor is 40%, which is economical to operate, steam or hydro? Solved Examples sam Fro 9 Copa cont AW tated snevasoeasvo {2 mcr adoro eptel tse re” tow {9 Gporar conn Srame 13 mt (8 Pomme 0% cine 02 pte Seam satan Am stcetalSetton Rs 1260 1005 19 = Ra 125 10? ReOIze 128s Rels xi Press A8h = Ro Eg ROT 57 pn Tenanison cosh — gig ‘vealcon/AWh = S71 51071 pe Ui) Hyde station Capt cont Annual ees ana cepetatien = RS 01% 250% 1? = ReO.0S1 = 951 pase 7. a Re 2500. 100 10" ~ Rs 280 10" 25 x10 re 25x10 Fo2-be Ang he operating ost“ sn iansmlsson cost paral weg, ‘Overs cont/RWh ~ 951 +15 + D2 102 pase xe anges 40h = Solved Examples ‘Along mata lof TSU ce pp er Ba lor staanor sen po pT co a a ao Plat Copan per tated Onc per BN drat ts Pe e300 eon te Clee erin fad tar above white tele pat lbe mre on Solution : Maximumclemand = 150 MW ~ 150% 10" RW Let the total number of units generated per annum be x. Steam plant Capa cost = Rs 1600% 1503 107 = Re 240.108 Annual itrest = Rs G07 240% 10? = Rs 168 10" py 0 Fe 006 aren) , (B00, Fixe cost/anit Running cose/amtt * Total cose/untt = Rs 008)Solved Examples sade 7" AU ig a a 150 MW ab gd ke: lore stan crea pone pT co lows Plat Capa cpr tind Operating tere tet yes Pt e300 eons i Hydro pla ‘Captal cost = Rs 3000 180 x 10° = Rs 4850%108 Animal interest. = 0072 450% 10° = Rs 31.5 10° Bixedcost anit = Re 31-5210 Running cost /unit = Re 08 (ven) tattcoa/imie ~ Rs (3210 0.05) oy Methods of Determining Depreciation Solved Examples action ann Sb iter be Plant Capac ger tle Ort per Bnet ts Pe e300 eon ES The overall cox pr unto team plan wil be equal ero plat ap. exp a 1, reat asx @— twaxi0*- oop = a1sx10- oars = Heit! _ go eich = HH oro otis tr, th eas generat pe ann are mee hn 8030 he yo et whe nese Landstar = 99210" sop are tax10) a7 ‘These annua ar stove wht opi lb enamel 7.9% Methods of Determining Depreciation ‘There is reduction in the value of the equipment and other property of the plant every year due to depreciation. Therefore, a suitable amount (known as depreciation charge) must be set aside annually so that by the time the life span of the plant is over, the collected amount equals the cost of replacement of the plant. To calculate the depreciation cost, much > information is required. oepistion The required data include: ‘The commonly used methods for determining the annual depreciation charge are as follows: (i) Straight line method; (ii) Diminishing value method; (ii) Sinking fund method,Methods of Determining Depreciation 1- Straight line method This method is the simplest approach to determine the depreciation cost of the power plant. It is svitable for fast calculations for small projects. However, it does not take into account the amount of interest cared by the set-aside money. Therefore itis not accurate. In this method, a fixed annual amount is set aside each year. The set aside money is calculated by dividing the difference between initial investment value and the salvage value of the equipment by the life time, Solved Examples Example A iranrme cong B 80.00 hs ase fe of 20 ears. Doric the nlc he sng tight ine met Assn the sae ale a he pea tobe Rs 100. sot Intact ansomer, P= Rs e000 tet e oa ae Sage, 3 Rs too00 Uhlan mtd Al deci hg 0010000 «apg Methods of Determining Depreciation 1- Straight line method he Pe hie ‘Thus, if the initial cost of equipment is Rs 1,00,000 and its serap value ies is Rs 10,000 after a useful life of 20 years, then, Amn dice = ™ iu _10000-100D eens TENT Methods of Determining Depreciation 2 b Sinking fund method 2akeing Fund shod ‘3 Ceract method) In thin rrethed a sum of monty CO) is invested in bont each year no that ob the end of, the payeck the total. sum af meney should rhe deprecislion: Dow 2 ot sat —_. nly? Duo Rs4sihMethods of Determining Depreciation Solved Examples 2- Sinking fund method La P nal value of equipment Useful ife of equipment in years cap value after useful fe Annual rato interest expresses a decimal Cost of replacement Sinking Fue, ¢ = (P 8 Sen ‘The value of q gives the uniform annual depreciation chi oer ‘Sinking fund factor Methods of Determining Depreciation [Example Arion antonio ous Re 20 000 ands no i of Dyan It ‘tose ae 1.00 and rato aa capex inet, cae ie amon ‘ed analy Br rplacomet ah ransom athe of 20 ras by ining fe ti Solution Initial cost of wansformer, Salvage value of transformer, Useful ite, a Asma iteres rat, r Annual payment fr sinking fun Methods of Determining Depreciation 1- Straight line method l = Arash Line meted qo they CSE -D(E)- Ses = tte SI eccacuties _ Venue op pest oe - DY D (Elgar) S (ey ~ value of project oter fe years Slee S- kD 2+ Sinking fund method | D = Depreciation Rate s- Accumulated value of Project Salvage Value after n Years is Interest rate Life Time‘The PF penalty According to Tariff Structures in Egypt “The PF penaly i » mukiplier applied wo the normal Klowat-hour consumption charges, The penalty je Baed on an anna average PF, ealeulted frm kilowat| ‘hours (kWh) and kvarh meter readings 8 follows awh Average sna P= o VW earl THEEND | === Bonus due to Overcorrected PF According to TariffStructuresimEgYpt Solved Examples According to the Egyptian tariff structure, a bonus is offered] For an industrial user, if the electricity consumption is| to customers when they maintain an average annual PF| 35,000,000 kWh per year and the total cost for consumption| higher than 92% and up to a maximum of 95%. This can be] __is LE 3,994,750/year. What is the amount of the power factor| calculated by the following: penalty if the power factor is 0.55 and 0.75? What is the PF 0.2 bonus if this user correct PF to 0.95? Bonus kWh charges. Solution ‘The average cost per kWh= 3,994,750/35,000,000 = 0.1141 L.E/AWh, > Fora 0.55 power factor, the penalty is computed as: Penalty = 2«(0.9~ PF) kWh charges 2*(0.9-0.55)* 0.1141* 35000000 = 2795450 LE/Year ‘The power factor penalty at 0.55 PF is LE 2795450 per yearSolved Examples For an industrial user, if the electricity consumption is 35,000,000 kWh per year and the total cost for consumption is LE 3,994,750/year. What is the amount of the power factor penalty if the power factor is 0.55 and 0.75? What is the bonus if this user correct PF to 0.95? Solution The average cost per kWh= 3,994,750/35,000,000 = 0.1141 L.E‘kWh. > Fora 0.75 power factor, the penalty is computed as: Penalty (09~PE) kWh charges. (0.9-0.75)* 0.1141* 35000000 599025 LE/Year ‘The power factor penalty at 0.75 PF is LE 599025 per year Solved Examples For an industrial user, if the electricity consumption is 35,000,000 kWh per year and the total cost for consumption is LE 3,994,750/year. What is the amount of the power factor penalty if the power factor is 0.55 and 0.75? What is the bonus ifthis user correct PF to 0.95? Solution The average cost per kWh 3,994,750/35,000,000~ 0.1141. L.E/KWh, > Fora 0.95 power factor, the bonus is computed as Bons = PE= 08 yh cares [10.95-0.92V2}* 0.1141* 35000000 59902.5 LE/Year ‘The power factor bonus at 0.95 PF is LE 599025 per year