See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/3213589

Estimating Unit Cost in a Cogeneration Plant Using Least Squares

Article in IEEE Power Engineering Review · May 2002

DOI: 10.1109/MPER.2002.4312146 · Source: IEEE Xplore

CITATIONS READS
0 1,493

1 author:

Robert L. Mcmasters
Virginia Military Institute
82 PUBLICATIONS 474 CITATIONS

SEE PROFILE

All content following this page was uploaded by Robert L. Mcmasters on 08 August 2014.

The user has requested enhancement of the downloaded file.

 Estimating Unit Costs in a Co-generation
Plant using Least Squares
Robert L. McMasters, Department of Mechanical Engineering, Michigan State University
Abstract - A method for establishing unit costs of delivered
steam and electrical energy is presented. This method
employs the use of least squares, based on a linear model of
electrical energy generation and delivered steam as functions
of generated boiler steam. The model is based on a plant
design that allows steam to be extracted from between stages
of the generating turbines at a reduced pressure to be used to
serve heating loads. Alternatively, the steam can be run
through lower pressure stages in the turbine to generate
additional electrical power, and be exhausted at a vacuum,
as dictated by external steam and electrical demand. A
discussion of the accuracy of the method is presented as well
as an example of the use of the method using two years of
actual plant production.
I. Introduction
Co-generation plants are extremely beneficial and cost
effective for large institutions which require both heating
and electrical power. This is particularly so when heating
and electrical demands are well balanced and the demand for
extracted steam and electrical power complement one
another closely.
The symbiotic nature of the simultaneous generation of
steam and electricity carries with it the inherently elusive
problem of assigning unit costs to each of the two types of
utilities delivered. In one way of thinking, the steam can be
viewed as a by-product of electrical generation and therefore
be considered essentially a “free” utility. Equally valid, or
invalid, is the view that the electricity is just “skimmed off
the top” of the steam delivery process, and is therefore of
negligible cost.
Whenever a plant has the optional capability of
discharging steam from the turbines either at service
pressure or at a vacuum, however, there is a definite unit
value which can be assigned to both the electrical energy
generated and the service steam delivered. A mathematical
model can be developed for cost as a function of both steam
and electricity delivered, and the model can be fit to data
from the boiler logs by the method of least squares. This
provides a systematic method by which unit costs can be
accurately calculated. The accurate calculation of unit costs
for utilities generated from a plant are very important
whenever consumption is metered and billed to differing
1
accounts within an organization or between organizations.
II. Michigan State University (MSU) Plant Specifics
The T.B. Simon Power Plant at Michigan State University
delivers steam for heating, humidification and absorption
cooling of the facilities on the Campus. The plant consists
of four boiler/turbine units each capable of providing 90 psi
exhaust steam to the campus steam distribution system. The
capacity of each unit is as shown in Table 1. The overall
peak electrical demand produced by the plant in the
1997/1998 season was 51.5 MW and the peak steam demand
was 535,000 pounds per hour.
Units 1,2 and 4 are each capable of exhausting steam at
the 90 psi extraction pressure to serve the campus heating
system, exhausting steam at a vacuum in order to maximize
electrical generation per pound of steam, or a combination of
these two modes. Unit 3 is capable of exhausting steam at
the 90 psi extraction pressure only. In an ideally balanced
situation, the amount of steam sent to the condensers is an
absolute minimum and virtually all of the exhaust steam is
sent to the campus heating distribution system. This type of
an operating mode is the exception rather than the rule,
however, as the steam and electrical loads are determined by
campus demand.
Table 1: Boiler/Turbine Capacities
Unit Number Electrical 90 psi Extraction
Capacity (MW) Steam Capacity
(1,000 lb/hr)
Unit 1 12.5 250
Unit 2 12.5 250
Unit 3 15 350
Unit 4 21 3500
Total 61 1,200
There exists a tradeoff in determining the unit cost of
each utility in that sending exhaust steam to the condensers,
so as to generate more electricity, means forfeiting the value
of the extraction steam which could have been sent to the
campus distribution system. Likewise, the dispensation of
steam to the campus distribution system means forfeiting
electrical energy which could have been generated, had that
steam been sent through the remaining stages of the turbine
and been exhausted at a vacuum. The key in assigning the
proper unit costs to these two utilities lies in equating their
production to the common denominator of steam generated
by the boilers, which we refer to as boiler steam.
All steam generated in the plant is eventually condensed
and returned to the boilers as feed water. This excludes
leakage, of course, and a very small amount of steam used
for such non-conservative loads as humidifiers and
autoclaves. Makeup water must be provided for these
losses, as in any plant. Table 2 shows the monthly values of
steam delivered to the campus as well as the overall
production of boiler steam. The value given for boiler steam
includes the steam used in the production of electricity that
is condensed at a vacuum, as well as the steam discharged at
90 psi and sent to the campus distribution system. For
example, during the first month of January shown in Table
2, 361785 Klb of boiler steam was generated and 220517
Klb of that steam was extracted from the steam turbines and
delivered to the campus at 90 psi for heating purposes. The
remainder was condensed at a vacuum, used exclusively in
the electrical generation process. On an annual averaged
basis, approximately 53 percent of boiler steam is extracted
from the turbines at 90 psi and sent to the campus
distribution system. This leaves 47 percent which is used in
the conventional generation of electricity only.
As can be seen from the percentages given above, the
demand associated with the MSU campus is heavily
weighted toward the electrical side of the spectrum.
Occasionally, additional electrical power must be purchased
from Consumer’s Energy, the local utility, to meet peak
electrical demand. This is particularly true when one of the
boilers may be out of service for maintenance. At no time is
additional steam required to be purchased or generated to
meet steam demand beyond that which is available by
extraction from the electrical generation process. Steam
demand is therefore handled automatically by making
extraction steam available to the main distribution header at
a constant pressure of 90 psi and sending the remainder of
the steam through the low pressure stages of the turbines to
be used in electrical generation.
Once the send-out steam leaves the plant, and enters the
campus distribution system, there is very little measurement
made of the steam or condensate since most university
facilities are funded from the same account. Condensate is
measured in many of the residence halls, which are funded
from a separate account, by recording the amount of time
condensate pumps run per month. Other sources of
condensate are not measured, including that which
condenses on the distribution lines and is periodically
removed by traps placed at regular intervals along the
distribution piping. The rate of heat loss, or condensate
2
generation, therefore, is not measured or calculated for the
system. This topic, however, could possibly be examined in
another study, using various heat loss estimation techniques
and possibly even some representative measurements taken
in sample locations.
III. Modeling the Plant Output
In order to establish unit costs for the electrical and steam
utilities, a mathematical model must be developed which
accounts for the fuel consumed in terms of the utilities
delivered. We know that there is a certain cost associated
with operating the plant even if no utilities are generated
whatsoever. The cost of salaries for the staff to operate and
maintain the plant, the cost of service contracts for
specialized maintenance, and any amortization costs
associated with the original construction of the plant are
incurred by the University administration whether or not the
plant is even on line. These can all be lumped into a
category considered as “fixed costs”.
The cost of the fuel for the plant is the largest single cost
associated with plant operation, and a certain amount of this
cost can also be attributed to the fixed cost category. A
certain amount of fuel is consumed and “lost” in terms of
heat losses from piping and equipment, power for lighting
the plant, etc. These costs can be lumped into the fixed cost
category since they also are incurred regardless of the level
of plant output.
Even though the fixed costs cannot be easily converted to
unit costs for electrical and steam energy delivered, it is
desirable to recoup these costs by charging customers unit
costs for the utilities received. These costs can be easily
absorbed in a unit cost for boiler steam generated and then
attributed to electrical and steam unit costs from there. The
overall boiler steam unit cost can be calculated by the sum of
the overall plant costs per year divided by the total number of
pounds of boiler steam generated. Expressed in equation
form:
Amaint%Aop%Afuel%...%Acont
Cbs' (1)
Sa
where:
Cbs =Unit Cost of Boiler Steam ($/1000 lb)
Amaint = Annual Cost of Plant Maintenance Staff
Aop = Annual Cost of Plant Operating Staff
Afue l = Annual Cost of Fuel Consumed by the Plant
Acon t = Annual Cost of Contracted Supplies and
Services
Sa = Annual Amount of Boiler Steam Generated
(1000 lb)
With a unit cost for boiler steam obtained, the unit costs of
delivered steam and delivered electrical energy can then be output as a function on boiler steam, the data can now be
calculated. In order to do this, the amount of boiler steam fitted to the model by least squares. For the Michigan State
attributable to each of the two delivered utilities must be University plant, data from 24 months of plant operation
calculated. The mathematical model for making this were used in arriving at the actual estimated parameters. A
conversion is as follows: typical 24 month period is shown in Table 2. Substituting
the data from Table 2 into the mathematical model, Equation
Sb = I + XsSd + XeE (2) (2), leaves an over-defined set of equations, with the desired
parameters as unknowns. In this example, we have 24
where: equations and 3 unknowns. This set of equations is partially
shown in expanded form as
Sb = Boiler Steam Required (1000 lb)
I = Internal Steam Usage (1000 lb) 361785 = I + 220517 Xs + 19584 Xe
Xs = Delivered Steam Ratio (lb boiler steam per lb delivered 338720 = I + 216566 Xs + 18168 Xe
steam) 332196 = I + 203342 Xs + 18648 Xe (3)
Sd = Delivered Steam (1000 lb) 279985 = I + 147034 Xs + 17040 Xe
Xe = Electrical Steam Ratio (lb boiler steam per KWH : : : :
delivered electricity) 344927 = I + 197626 Xs + 21072 Xe
E = Delivered Electricity in MWH
Table 2: Typical 24-Month Plant Output
Month Delivered Steam Electrical Boiler Steam
(1000 lb) Energy (1000 lb)
(MWH)

January 220517 19584 361785

February 216566 18168 338720

March 203342 18648 332196

April 147034 17040 279985

May 118384 19224 286422

June 142052 18312 291783

July 170273 16896 287527

Fig. 1 - Graphical representation of plant performance model.
August 162038 21336 340535
The known factors in this equation are Sb, Sd, and E. These
September 140468 20184 296051
are all obtainable from the monthly boiler logs. The time
intervals typically used for this equation are of one month October 152206 21216 326868
duration, since this provides a diverse range of operating
November 176210 20112 331705
conditions to average out any errors or anomalies in the
records. These type of irregularities tend to have a more December 199742 20184 350670
imbalanced effect when measured over shorter periods.
Regardless of the time period used, it is important to be January 270359 22080 402159
consistent in using the February 233287 19896 359106
same time period for each term in the equation. The reason
for this is that the parameter I, internal steam usage, varies March 200758 19824 345032
depending on the time period used; the others do not. April 146173 19512 306099
The model above expressed graphically can be
represented as a plane in three-dimensional space. The two May 133234 19512 302319
axes in the x-y plane are Sd and E and the z axis is Sb. Fig. 1
June 148862 21120 312789
illustrates this relationship.
July 153431 23256 344057
IV. Fitting the Data
August 148245 23112 331096

With the mathematical model developed for the plant September 137128 20472 311740

3
 October 144794 21768 315770
November 151721 22632 325949
December 197626 21072 344927
This set of equations can also be more conveniently
expressed in matrix form as
Sb = D P
where Sb is the vector of monthly boiler steam readings.
The dimensions of the Sb matrix in this example are [24 x 1].
The D matrix represents the other data collected from the
boiler logs arranged as where the first column is the
coefficient if the internal steam usage parameter I. The
dimensions of this matrix are [24 x 3]. Finally, the
parameter vector P carries dimensions [3 x 1].
The objective of this procedure is to find values for the
parameters I, Xs and Xe such that, when substituted into
equation (4) above, the calculated values for boiler steam
most closely match the measured values. Specifically, we
desire to minimize the sum of squares of the errors between
S'j (Sb(measured)&Sb(calculated))2
n
(5)
i'1
calculated and measured values of boiler steam, Sb. This
sum of squares can be computed as follows
In order to find the values for the parameters I, Xs and Xe
such that S is minimized, we simply pre-multiply each side
of equation (4) by the D matrix which results in
DT Sb = DT D P
Since the dimensions of the DT D matrix are [3 x 3], both
sides of this equation are of dimensions [3 x 1] so that the
equations are no longer overdefined. Moreover, the only
unknown in the equation, the P vector, contains the three
desired parameters, I, Xs and Xe such that S is minimized.
Equation 9 and its development are given in both references
[1] and [2].
V. Method Results
Employing the least squares method on the sample data
given in Table 2, the resulting parameters are
I = 44,800 (thousand lb boiler steam per month)
Xs = 0.646 (lb boiler steam per lb sendout steam)
Xe = 8.43 (lb boiler steam per kilowatt-hour)
When using these constants in the model given by
equation 4, the results can be checked by looking at the error,
month by month, between calculated boiler steam production
and actual boiler steam production. Fig. 2 shows a graphical
representation of the percent error in boiler steam comparing
the calculated against the measured data, month by month.
The errors appear to be well balanced on both sides of the
axis with no characteristic signature, suggesting a good fit of
the mathematical model.
(4)
10
8
6
4
2
0
-2
-4
-6
-8
-10
0 4 8 12 16 20 24
N um ber ofM onths
Fig. 2 - The “residuals” from two years’ worth of data. This is the percent
difference between measured boiler steam and calculated boiler steam,
month by month. The errors appear to be well balanced on both sides of
the axis with no characteristic signature, suggesting a good fit of the
mathematical model.
The standard deviation of these errors is 1.87 percent
which is very good considering the number of variables
which come in to power plant operation. By comparison, a
trial and error procedure was used by the University prior to
the utilization of the method of least squares. The standard
(6) deviation of the errors using this method was 2.63 percent.
The method of least squares clearly provides a more accurate
solution for the parameters which allows the mathematical
model to more closely conform to the physical
measurements.
The actual plant costs can now be applied to the
coefficients computed by the least squares method. The
value for Cbs, the unit cost for boiler steam as given by
Equation (2) , using plant data for the years shown in Table
2, is $6.01 per thousand pounds of boiler steam. This gives
unit costs for steam and electrical demand as CbsXs = $3.88
per 1000 lb send-out steam and
CbsXe = $50.66 per Megawatt Hour of electrical energy.
VI. Conclusions
Without a systematic method for evaluating the unit costs
of steam and electricity delivered from a co-generation
power plant, these figures can be very difficult to obtain.
4
 The issue is sometimes even made controversial since some
people view the low pressure steam delivered as a by-
product of electrical generation and therefore consider it to
be a “free” utility. Likewise, some consider the electricity to
be a by-product of the steam delivery process. When a
mathematical model is developed and fitted to data taken
from the boiler logs, the unit costs of each utility can be
accurately computed. The method of least squares allows
the errors to be minimized between calculated and measured
boiler steam delivery rates. The accuracy of this comparison
gives assurance that the model is appropriate and that the
unit costs have been arrived at correctly.

VII. Acknowledgments

The author would like to thank Robert Ellerhorst, P.E. and

Douglas MacDonald, P.E., of the T.B. Simon Power Plant at
Michigan State University for their assistance in compiling
data used for this work.

VIII. References

[1] J. Beck and K. Arnold, Parameter Estimation, Wiley,

New York, (1977).
[2] S. Conte and C. de Boor, Elementary Numerical
Analysis, McGraw-Hill, New York, (1980).

IX. Biography

Robert L. McMasters was born

in Ferndale, Michigan, 8 July
1956. He graduated from the
U.S. Naval Academy, Annapolis
MD, in June 1978 and
completed Naval Nuclear
Propulsion Training in August
1979. He subsequently served
as a division officer on the USS
Will Rogers (SSBN 659) until 1982. Following a 2 year
tour as an instructor at the S1W prototype of the Nautilus,
the worlds first nuclear powered ship, he resigned his
commission as a Naval Officer and began working as a
design engineer at K.I. Sawyer Air Force Base near
Marquette Michigan and at Michigan State University in
East Lansing Michigan. He completed the Ph.D. at
Michigan State University in 1997 and currently serves there
as a Visiting Assistant Professor.

View publication stats