MET401

Power Plant Engineering

Economics of Power
Generation
Engr. Chandraknt Shitole

Ref: Power Plant Engineering 4th edition, P.K. Nag, TATA McGRAW-Hill, June 2007

Introduction
Why do we need Economic analysis?
The main purpose of design and operation of a power

plant is to bring the cost of energy produced to

minimum.
Thermal efficiency of a plant is one of the important

factors in determining energy cost.

The most thermally efficient plant is not the most

economics.
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Types of power plants

Thermal

fossil fuels, coal, fuel oil & natural gas.

80% of world electricity.

Nuclear

Similar in cycle
Similar in structure
Use steam as a working
fluid

Geothermal

Hydraulic
Multipurpose plants (generating power, flood control, etc..)
Gas turbine plants
They run for a short time to meet the peak load demand
They are used in the combined steam power plant.
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Electricity generation in KSA

Production rate
Electricity production, E
Annual fractional increase

rate, i (%)
Eo=electricity production

at year t0
To find time required for

electricity production to be
doubled, we define tD as
doubling time
5

dE
Ei
dt
E
ln
i(t to )
Eo
E Eoei(t to )
tD t2 t1
E2
2
E1
ln 2 itD
0.693
tD
i

Planning a new power plant

When planning a new power plant, there are two

factors to be considered.

Total power output to be installed (kWinst)

First demand (kWmax).

Growth of demand.
Reserve capacity required.

Size of generating units

500MW plant

Load variation during 24hr

Total capacity of units connected to grid
Minimum start up and shut down periods
Maintenance program
Plant efficiency
Unit 1 Unit 2 Unit 3
Price and space per kW vs. unit

Power plants location

For thermal power plant
Availability of cooling water
Availability of fuel
Distance from center of load demand
Land cost and characteristics
Wind direction & water stream
Disposal of fuel waste and ashes
Staff accommodations
Rail and road connections
Security
For hydraulic power plant
Availability of water and water head
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Load-duration curves
Peak loads

kW electricity

Winter Average
Summer Average

Electricity supply industry factors used

Load factor (m):

Capacity factor / plant factor (n):

Reserve factor (r):

Demand factor (dem):

averageloadovera timeinterval kWhavein a year

peakloadduringthesameinterval kWmaxx 8760

"oneyear 24*365 8760"

kWhrgen
kWhrgen
averageload

ratedcapacityof plant kWinst x 24x 365 kWinst x 8760

kWinst m loadfactor

kWmax n capacityfactor

dem

actualmaximumdemandorpeakload kWmax

totalconnected
demand
kWconnected

Diversity factor (div)

div

sumof invidualconsumer
groups a b c

actualpeakloadof system
d
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Plant Use Factor (u)

10

kWhgen
kWinst x operatinghours

Example 1
A steam power plant have a peak load of 65 MW. Connected to it are five loads
having maximum demands of 20 MW, 15 MW, 10 MW, 10 MW and 5 MW each.
Plant capacity is 90MW and annual load factor is 0.60. Determine,
a) the average load on the power plant
b) the energy supplied annually
c) the demand factor
d) the diversity factor
e) the use factor if plant only operate 8000 hrs per year
f) What do you think about this plant economically?
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Power plant economics

The cost per kWhnet is determined by
Fixed cost (FC)

Interest (I)
Depreciation (D)
Taxes and insurance (T)

Depend on capital invest

(construction cost)

Operation and Maintenance (O&M) covering

Salaries and wages

Overhauling of equipment
Repairs including spare parts, water, lubricants, miscellaneous, etc..

Fuel cost
Depends on amount of electricity generated.

kWhrnet of electricity sent out per year

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Power plant economics

I D T
Total annual cost
Ct
Cc (W R M) Cf
100
Cc construction cost
W wages
R repairs and maintenance
M miscellaneous.
Cf fuel cost

Annual amount of electricity sent out

L
kWhnet kWinst x 8760x 1 aux x n
100
Laux = power consumption by auxiliaries in %
n = plant capacity factor
Reliability of a power plant

Reliabilit
y

Forcedoutagehour
Servicehour forcedoutagehour
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Cost reduction
The costs have a continuous upward mainly due to monetary inflation,

rising fuel prices. It can be reduced by applying the following:

Select equipment with longer life and proper capacity

Run at high load factor

Increase power plant efficiency

Proper maintenance to reduce breakdown

Keep a proper supervision

Simple design (less dependent on highly skilled worker)

Construction cost
Fixed cost and depreciation
Fuel cost
Present worth concept
Incremental heat rate
Economic scheduling principle
Effect of load factor on cost per kWhr

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Problem 2.
A generating unit of 10MW capacity supplies the following loads:
a. Domestic consumer with maximum demand of 6MW at a load factor of 20%
b. Small industrial load with a maximum demand of 3.6MW at a load factor of 50%
c. Street light with a maximum demand of 400kW at a load factor of 30%.
Find overall cost of energy per kWh for each type of consumer using the following data:
Capital cost of the plant = SR 1000 per kW
Total running cost = SR 360000 per year
Annual rate of interest and depreciation on capital cost = 10%

Problem 3.
A thermal power plant of 210MW capacity has the maximum load of 160MW. Its annual
load factor is 0.6. The fuel consumption is 1.2 kg per kWh of energy generated and the cost
of fuel is SR 30.0 per tonne.
Calculate
(a) the annual capital earned if energy is sold at SR 0.06 per kWh and
(b) the capacity factor of the plant.

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Problem 4.

Problem 5.
A new housing development is to be added to the lines of a public electrical network
There are 2500 apartments each having a connected load of 6 kW, with the
commercial load shown. The demand factor of
Connected
Demand
Store or service
the apartments is 55%. The group diversity
load (kW)
factor (d) %
1- laundry
25
0.66
factor of the residential load is 2.5, and the
12 each
0.58
peak diversity factor is 1.5, and the commercial 3-mosques
1-resturant
60
0.50
load group diversity factor is 1.6 and the peak
1-bookstore
8
0.68
diversity factor is 1.1.
2-drugsstores
10 each
0.77
Find the maximum demand of each group and
2-grocery stores
5 each
0.75
1-shoe store
2
0.69
the system peak demand.
1-cloting store
1-theater

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6
95

0.56
0.45

a.

Avg.Load
PeakLoad
Avg.Load 30MW

Loadfactor

0.5

Avg.Load
60

b. Energy suppliedper year Avg.Load*noofhrs 30*8760

c.

Demandfactor

d. DiversityFactor

Max.demand
60

ConnectedLoad 30 201014

Sumof individualmax.Demand 30 201014

Max.Demand
60

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