Power Plant Economics
Power Plant Engineering
Cost of Electrical Energy
The cost of electrical energy generated by a power
station can be sub-divided as follows:
1. Fixed Cost
2. Operating cost/ Energy Cost
3. The consumer element
4. Investor profit
1. Fixed element
The fixed cost is the capital invested in the installation of
complete plant. The includes the costs
(i) Capital cost of the power plant
(a) Real estate
(b) Building and equipment
(c) Cost of installation
(d) Engineering fee’s
(ii) Capital cost of primary distribution system
(a) Cost of right of way
(b) Cost of line
(c) Cost of substations
(iii) Interest, taxation and insurances rate
(iv) The rate at which capital cost is written off to depreciation
and obsolescence salvage values.
(v) Management cost
(vi) The amount of general maintenance which would be
required whether or not the plant were in operated
2. Operating cost/ Energy Cost
The operating cost of the electrical power generation
includes the cost of fuel, cost of lubricating oil, grease,
cooling water and number of consumable articles required.
The wage required for supplying the above material are also
included in the operating cost of power plant,
The component of the energy cost are:
(i) Cost of fuel
(ii) Cost of labor
(iii) Cost of water for
(a) Boiler feed
(b) Condensers
(c) cooling and house service
(iv) Oil, waste and supplies
(v) Maintenance
3. Customer elements
It is proportional to the number of customer
(i) Cost of secondary distribution system
(a) depreciation, interest, taxes and insurance
upon the capital cost
(b) Line and transformer maintenance and inspection
(ii) Labor cost of collecting revenue
(a) Meter Reading
(b) Records
(c) Billing, collecting and accountings
(iii) Cost of franchise (Nominal value), amortized over its life.
(iv) Publicity
(a) Public relations
(b) Advertising
4. Investors profit
The investor expect a satisfactory return on the
capital investment. The rate of profit varies according
to the business conditions prevailing in different
localities.
Depreciation
The decrease in the value of the power plant equipment
and building due to constant use is known as
depreciation.
If the power station equipment were to last for ever, then
interest on the capital investment would have been the only
charge to be made. However, in actual practice, every power
station has a useful life ranging from fifty to 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 every year is known as annual
depreciation.
Due to depreciation, the plant has to be replaced by the new
one after its useful life. Therefore, suitable amount must be
set aside every year so that by the time the plant retires, the
collected amount by way of depreciation equals the cost of
replacement.
Factors Influence the depreciation
of capital equipment
1. Life of the enterprise
2. Life of the equipment
3. Inadequacy of equipment
4. Obsolescence of the equipment
5. Requirement of public authority
Methods of determining depreciation
The depreciation charge, that is the amount which
must be aside from the income each year and placed
in the depreciation reserve.
Three methods are used for finding out the
depreciation cost of the power plant.
1. Straight line method
2. Sinking fund method
3. Diminishing value method
1. Straight line method
In this method, a constant depreciation charge is made every year
on the basis of total depreciation and the useful life of the
property. Obviously, annual depreciation charge will be equal to
the total depreciation divided by the useful life of the property.
2. Sinking fund method
In this method, a fixed depreciation charge is made every
year and interest compounded on it annually. The constant
depreciation charge is such that total of annual instalments
plus the interest accumulations equal to the cost of
replacement of equipment after its useful life.
3. Diminishing value method:
In this method, depreciation charge is made every year at a fixed
rate on the diminished value of the equipment. In other words,
depreciation charge is first applied to the initial cost of equipment
and then to its diminished value.
Problem:
The equipment in a power station costs Tk 15,60,000 and has a
salvage value of Tk 60,000 at the end of 25 years. Determine the
depreciated value of the equipment at the end of 20 years on the
following methods :
(i) Straight line method ;
(ii) Diminishing value method ;
(iii) Sinking fund method at 5% compound interest annually
Energy rate/Meter Rate/ Tariff
Meter rates are the different methods of charging the consumers
for the consumption of electricity. It is desirable to charge the
consumer according to his maximum demand (kW) and the
energy consumed (kWh). The tariff chosen should recover the
fixed cost, operating cost and profit etc. incurred in generating
the electrical energy.
Objectives of tariff:
Like other commodities, electrical energy is also sold at such a rate
so that it not only returns the cost but also earns reasonable profit.
Therefore, a tariff should include the following items :
Recovery of cost on the capital investment in transmission and
distribution systems.
Recovery of cost of operation , supply and maintenance of the
power station.
Recovery of cost of metering equipment, billing and collection
cost.
A suitable profit on the capital investment.
REQUIREMENTS OF A TARIFF
Tariff should satisfy the following requirements:
(1) It should be easier to understand.
(2) It should provide low rates for high consumption.
(3) It should encourage the consumers having high
load factors.
(4) It should take into account maximum demand
charges and energy charges.
(5) It should provide less charges for power
connections than for lighting.
(6) It should avoid the complication of separate wiring
and metering connections.
• TYPES OF TARIFFS
The various types of tariffs are as follows,
(1) Flat demand rate
(2) Straight line meter rate
(3) Step meter rate
(4) Block rate tariff
(5) Two part tariff
(6) Three part tariff.
The various types of tariffs can be derived from the
following general equation:
Y = DX + EZ + C
7. Modified Step Meter Rate
Tariffs in Bangladesh
CATEGORY - A : RESIDENTIAL LIGHT & POWER
Applicable to the electricity service through a single watt hour
meter for lighting and appliances used in a dwelling place
including related grounds and buildings, having sanctioned load
up to 50 KW.
CATEGORY - B : AGRICULTURAL PUMPING
Applicable to the electricity service through a single watt hour
meter for irrigation and drainage of the land for the purpose of
cultivation, having sanctioned load up to 50 KW.
CATEGORY - C : SMALL INDUSTRIAL
Category-C is applicable to the electricity service through a
single watt hour meter for small industry, where articles or
substances are produced, adopted, manufactured, altered,
repaired, ornamented, finished, packaged or treated from raw
materials with a view to their use, sale, transport, delivery and
disposal having a sanctioned load up to 50 KW.
CATEGORY - D : NON-RESIDENTIAL LIGHT & POWER
Applicable to the electricity service through a single watt hour meter for
hospitals, educational institutions, religious & charitable establishments
and all classes of consumers other than those specified under category
A, B, C, E & J having sanctioned load up to 50 KW.
CATEGORY - E : LT COMMERCIAL
Applicable to the electricity service through a single watt hour meter for
offices, trading and commercial enterprises such as shops, businesses,
hotels & cinema halls, having sanctioned load up to 50 KW.
CATEGORY - F : MEDIUM VOLTAGE GENERAL PURPOSE (11 KV)
Applicable to the electricity service through energy and demand meters
for all classes consumers having sanctioned load up to 5 MW, where the
consumer provides his own sub-station, including transformer, high
tension control, protection and power factor correction equipment.
CATEGORY - G-1 : EXTRA HIGH VOLTAGE DESA (132 KV)
Applicable to the electricity service through energy and demand
meter for Dhaka Electric Supply Authority (DESA) receiving power at
132 KV.
CATEGORY - G-2 : EXTRA HIGH VOLTAGE GENERAL (132 KV)
Applicable to the electricity service through energy and demand
meter for all classes of consumer receiving power at 132 KV having
sanctioned load above 15 MW upto150 MW, where the consumer
provides his own sub-station including transformer, high tension
control, protective and power factor correction equipment.
CATEGORY - H : HIGH VOLTAGE GENERAL PURPOSE (33 KV)
Applicable to the electricity service through energy and demand
meter for all classes of consumers other than REB/PBS receiving
power at 33 KV, having contracted load up to 15 MW other than
REB/PBS where the consumer provides his own sub-station,
including transformer and high tension control, protective and
power factor correction equipment.
CATEGORY - I : HIGH VOLTAGE BULK SUPPLY FOR RURAL
ELECTRIFICATION OF BOARD/ PALLI BIDDYUT SAMITI
Applicable to the electricity service through energy and
demand meter for REB/PBS receiving power at 33 KV,
having contracted load up to 15 MW, where the consumer
provides his own transformer, high tension control,
protective and power factor correction equipment.
CATEGORY - J : STREET LIGHT AND WATER PUMPS.
Applicable to the electricity service through a single watt-
hour meter for Municipality, WASA and Public Health for
the purpose of street lighting and drinking water pumping
stations having sanctioned load up to 50 KW.
