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Economics of Power Generation : Theory Page 3

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Economics of Power Generation

Economics of Power Generation (Continued): Some of the methods are given below to meet with peak load demand: 1. Peak Load Plants : Such plants arc operated only during peak load periods. These plants must be capable of quickly starting from cold conditions. Diesel engine plants, gas turbine plants, pumped storage plants and sometimes steam power plants and hydroelectric plants are used as peak load plants. Efficiency of such plants is of secondary importance as these plants operate for limited period only. 2. Use of accumulators : Although electrical energy cannot be stored, however steam can be stored in steam accumulators, which can be used to generate additional power during peak load period. 3. Purchasing power : When a power plant cannot generate sufficient power to meet with the demand, it may purchase power from neighboring plants if facilities exist. 4. Load Shedding : When there is no alternative available the supply to some consumers is cut off temporarily. Which is known as load shedding. Sometimes load shedding is done by switching off feeders by rotation or by reducing system voltage or by reducing frequency. SELECTION OF TYPE OF GENERATION It is done on the basis of 1. Capacity of power plant 2. Probable load factor 3. Space 4. Cost of fuel and transpiration facilities 5. Availability of water 6. Interest and depreciation 7. Reliability Cost of Electrical Energy : Capital cost of a power plant is due to 1. Cost of land and buildings 2. Cost of generating equipment and accessories 3. Cost of transmission and distribution network 4. Cost of designing and planning the power station In general following plants are preferred for base load operations : 1. Nuclear power plant 2. Hydro electric plant 3. Steam power plant Following points are preferred for peak load operations : 1. Diesel engine power plant.

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2. Gas turbine power plant 3. Pumped storage plant. Cost of generation :

Economics of Power Generation : Theory Page 3

The cost of generating electricity in a power plant can be conveniently split into two parts: fixed costs and variable costs. (A) Fixed Cost : Fixed costs are to be borne by the plants irrespective of the load. These costs consist (i) Interest on capital : Capital cost of a plant includes the cost of land, buildings, of equipment including installation, designing, engineering etc. Since the capital cost of a plant is fixed therefore interest on the amount is considered as fixed cost. (ii) Taxes : A power generating and distributing company has to pay taxes to the Government This amount is more or less fixed. (iii) Cost of Transmission and Distribution : Power transmission and. distribution network involves huge capital expenditure. This involves cost of transmission lines, transformers, substations and associated equipment. Interest on the capital involved is considered as a fixed cost. (iv) Depreciation: It is decrease in value caused by the wear due to constant use of an equipment Under the income tax laws there is provision for setting aside a fixed proportion of the capital employed, towards the depreciation fund. (v) Insurance : The plant and also life of some of workers working in dangerous areas, has to be insured against various risks involved. For this purpose a fixed sum is payable as premium for the insurance cover. (vi) Salary for Managerial Staff : Irrespective of whether the plant works or not certain managerial staff has to be retained by the organization. The salary liability of such staff is a part of the fixed cost.
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