Economics of power generation

introduction
In all field of industries ,economics plays an important
role. The main purpose of design and operation of power
plant is to bring the cost of energy produced to
minimum. Among many factors the efficiency of the
plant is one factor that determines the energy cost.
Terminology used in power plant
1. Connected load- A connected load on any system or part of
a system, is the combined continuous rating of all the
receiving apparatus on consumers premises, which is
connected to the system or part of the system under
consideration.
2. Demand- Demand of an installations or system is the load
that is drawn from source of supply at the receiving
terminals averaged over a suitable and specified interval of
time. Demand is expressed in KW,KVA and Amperes.


3.Maximum demand or peak load- The maximum
demand of an installation or system is the greatest of all the demands that have
occurred during a given period. It is determined by measurement, according to
specifications, over a specified interval of time.
4.Demand Factor- It is the ratio of maximum demand of a system
or part of a system to the total connected load of the system or part of
the system.
Demand factor= Maximum demand/connected load.
5.Load Factor- Load factor is the ratio of average power to maximum
demand. In each case ,the interval of maximum load and the period over
which the average is taken should be definitely specified, such as half hour
monthly load factor.
Load factor = Average load / Maximum Demand
6.Diversity factor
Diversity factor of any system or part of system ,is the ratio of maximum
power demand of the subdivisions of the system or part of system ,to the
maximum demand of whole system.

Diversity factor= Sum of individual maximum demands/Maximum demand of
entire group.



Types of load
1. Residential Load
2. Commercial Load
3. Industrial Load
4. Municipal Load
5. Irrigation Load
6. Traction Load


7.Utilization Factor-Utilization factor is the
ratio of maximum generation demand to capacity of
generator.
8. Plant capacity factor- It is defined as ratio of actual energy
produced in (kwh) to the maximum possible energy that could have been produced
during the same period.
Plant capacity factor= E/C*t
E = Energy produced in a given period
C= Capacity of the plant in KW
t = Total numbers of hours in the given period


9.Plant Use factor- It is the ratio of energy produced in a given
time to the maximum possible energy that could have been produced during the
actual number of hours the plant was in operation.
Plant Use factor = E/C*t
t = Actual number of hours the plant has been in operation.


Cost analysis
The cost of power plant depends upon :
1. New power plant is to be set up.
2. An existing system has to be replaced 3. An extension has
to be provided to the existing system.

Power plant includes mainly two types of cost:
Capital Cost or Fixed cost
1. Initial Cost
2. Interest 3. Depreciation cost 5. Insurance



Operational Cost- It includes the
following-
1. Fuel cost
2.Operating Labour cost
3. Supervision cost
4.Maintenance cost
5.Supplies
6.Operating taxes

Depreciation
Depreciation is the decrease in the value of an
equipment due to corrosion, weathering and
wear & tear. Its also cover decrease in the
value of equipment due to obsolescence.

Methods for calculation for depreciation
There are four methods to calculate depreciation-
1. Straight line method
2.Percentage method
3.Sinking fund method
4. Unit method
Straight line method- It is the simplest and commonly used method. The
life of the equipment or enterprise is first assessed as also the residual or
salvage value of the same after the estimated life span. The salvage value is
deducted from the initial capital cost and the balance is divided by the life
as assessed in the years. Rate of depreciation remains constant throughout
the life of equipment.
Percentage method- In this method deterioration in value of equipment
from year to year is taken into account and the amount of depreciation
calculated upon actual residual value.
Sinking Fund Method-
Unit method- In this method some factor is taken as a standard and
depreciation is measured by that standard. In place of number of years,nos
hours is taken into consideration.This total no. of hours is divided by the
capital cost of the equipment. This factor is multiplied by actual no of
running hrs. of the equipment per year to calculate value of depreciation.
Economics in plant selection
Few characteristic of different types of plant are as below-

Factors affecting economics of generation and distribution of power
The economics of power plant operation is greatly influenced by:
1. Load Factor
2. Demand Factor
3. Utilization Factor
S. No. Characteristics Hydro
Plant
Steam Plant Diesel Plant
1. Planning and construction. Difficult
and takes
long time
Easier than
hydro plant
Easiest
2. Civil works cost. Highest Lower than
hydro plant.
Lowest
3. Running and maintenance
cost.
1/10 1/7 1/6
4. Overall generation cost. Lowest Lower than for
diesel plants.
Highest
5. Reliability. Good Good Excellent
Load Factor- 1.Hydro-electric power station should be run at its maximum load continuously on all units.
2. Steam power station should be run in such a way that all its running units are economically loaded.
3.Diesel power station should be worked for fluctuating loads or as a stand by.
Demand and utilization factor- If a highly efficient station, works at low utilization factor, may produce at high unit
cost.
The endeavour should be to load the most efficient and cheapest power producing stations to the greatest extent
possible. Such stations are called base load stations and carry full load over 24 hours.
How to reduce power generation cost
The cost of power generation can be reduced by:
1.Using a plant of simple design that does not need highly skilled personnel.
2. Selecting equipment of longer life and higher capacities.
3.Carrying out proper maintenance of power plant equipment to avoid plant
breakdown.
4.Running the power plant at high load factors.
5. Increasing the efficiency of the power plant.
6. Keeping proper supervision ,which ensures less breakdowns and extended
plant life.
Power Plant -Useful life
Useful life of the some of the power plant is given below
Conventional thermal power plant 20-25 years.
Nuclear Power Plant 15-20 years
Diesel Power Plant- About 15 years