UNIT-V

Capital costs
• Capital costs are fixed, one-time expenses
incurred on the purchase of land, buildings,
construction, and equipment used in the
production of goods or in the rendering of
services. In other words, it is the
total cost needed to bring a project to a
commercially operable status.
 Capital Investment and Operational
Costs
• Cost = anything that reduces your business
objective

• Benefit = anything that contributes to it

• Two types of costs: investment (capital costs)

and operational (on-going)
•
 fixed cost

• The necessity of fixed cost

– The ability to obtain resources and generate
revenues require initial fixed investment
• Examples
– Parental investment
– Education
– Project investment
 Upside of high fixed cost systems
• low variable costs
• Capable of produce high value products
• Large production capacity
• High profit when output level is high
 Duration of production
• A project lasts for some time. How to choose
duration of production?
• Benefit of long duration
– Initial investment can be utilized for a long time
• Cost of long duration
– Increase the maintenance cost and the variable cost
in production
 Fixed cost and discount rate

• A company has a choice to select one of the two

projects. The first project requires an initial
spending of 10 million dollars. The project will
generate 2 million dollar profit each year. The
second project requires an initial spending of 20
million dollars. The project will generate 3.5
million dollar profit each year. Both projects last
for 10 years. If the discount rate is 5% per year,
which project you will choose? If the discount
rate is 12% per year, which project you will
choose? The criterion of selection is NPV of a
project.
 Fixed cost and duration of project

• A company has a choice to select one of the two

projects. The first project requires an initial
spending of 10 million dollars. The project will
generate 3 million dollar profit each year. The
second project requires an initial spending of 20
million dollars. The project will generate 5 million
dollar profit each year. The discount rate is 5%
per year. If two projects last for 5 years, which
project you will choose? If two projects last for 10
years, which project you will choose? The
criterion of selection is NPV of a project.
 Load profile

• Load profile chart- Load curve

• In electrical engineering, a load profile is a graph of
the variation in the electrical load versus time. A load
profile will vary according to customer type (typical
examples include residential, commercial and
industrial), temperature and holiday seasons.
 Power generation

• In the electricity generation sector, a load

curve is a chart showing the amount of
electricity customers use over a period of
time.
• Generation companies use this information to
plan how much power they will need to
generate at any given time.
 Load curve
•

Load
in KW

Time in Hrs ( clock Hrs)

 Daily load curve
•

700

200
Load 150
in KW

Time Hrs
 Load curve
•
Max demand,
peak load
Avarage
Load

Load
in KW

00 18 24
08
Time Hrs
 Load Factor
• The ratio of the average load supplied during a
designated period to the peak load occurring
in that period, in kilowatts.
• Simply, the load factor is the actual amount of
kilowatt-hours delivered on a system in a
designated period of time as opposed to the
total possible kilowatt-hours that could be
delivered on a system in a designated period
of time.
• Utilities are generally interested in increasing
load factors on their systems.
• OPT
 Load Factor
• A high load factor indicates high usage of the
system’s equipment and is a measure of
efficiency. High load factor customers are
normally very desirable from a utility’s point
of view.
• Using a year as the designated period, the
load factor is calculated by dividing the
kilowatt-hours delivered during the year by
the peak load for the year times the total
number or hours during the year.
 Load Duration Curve LDC)

• The LDC is an arrangement of all load levels in

a descending order of magnitude.
• 2) The area under the LDC represents the
energy demanded by the system (consumed).
• 3) Can be used in economic dispatching,
system planning and reliability evaluation.
• 4) it is more convenient to deal with it than
the load curve
 Load Factor

• Load Factor ( LF ): The LF is measured as the

degree of variation of load [L(t)] over a period
of time, and can be defined as the ratio of the
average load (L a v) over the maximum load (L
max) :
 Demand Factor ( DF ):
• Demand Factor ( DF ):
• Each device (equipment, appliance, apparatus)
has maximum power absorption. If all devices are
run up to their fullest extent simultaneously, the
maximum demand of the consumer will reach his
connected load that has been prescribed (assessed,
evaluated) by the electric company. So, the DF
can be defined as:
 Group Diversity Factor ( GDF )
• Experience shows that it is highly unlikely that
maximum load of individual consumer in the
same group occur in the same time, but spread
over the time. Therefore, the GDF measure the
extent of diversification within the consumers
of the similar group and can be defined as:
• Sum of individual max load within the group
---------------------------------------------------
Maximum load of the system
 Peak Diversity Factor ( PDF )

• The peak load (maximum demand) of the electric

power system (electric company) is made up of
the individual demands. It is seldom (rarely) that
the different group (residential, commercial,
industrial, etc) will occur at the same time. The
PDF is defined as:
 Electric Load Estimating
• Customers provide the utility company with connected load based
on the National Electric Code requirements.

• This means everything is turned on and running at instantaneous

peak loading. The code may even require them to add safety
factors that increase the load over 100%.

• The electric utility company will determine the diversified demand

load based on the customer’s total connected load information.
The utility company does not have to use the NEC requirements for
sizing its facilities.

• The customer, electrician and engineer will try to get you to match
their connected load for sizing transformers and services, but don’t
let them. Demand load will typically range from 25% to 75% of
their total connected load.
 Demand Meters
• For all commercial and industrial customers
the demand is metered to be the highest
average demand in any 15 minute period
during each billing cycle month.
• Average is the key word here. It is not the
maximum KW during the 15 minute period.
• The meters reset the demand to zero every 15
minutes, keeping only the highest.
 Air Conditioning Load
• Air conditioning - to properly determine air conditioning connected
kW the Energy Efficiency Rating [EER] of the air conditioning unit
and the rated tonnage of the unit must be known.
• Equation connected kW = tons X 12
EER

• This equation is derived from the fact that:

EER is in units of BTUH/watt
kW = watts
1000
1 ton=12,000 BTUH
• This equation calculates connected load. Then, a demand factor is
utilized to reduce it to the demand load