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A ASSINGMENT REPORT ON

“STUDIE OF ECONOMICS OF THERMAL POWER PLANT DURING COURSE OF ACTION OF THERMAL POWER PLANT ENGINEERING (TPP) ”

Submitted in partial fulfillment for Course Work of Thermal Power Plant Engineering RAJASTHAN TECHNICAL UNIVERSITY KOTA SESSION 2010-2011

Guided by : Mr. Dharmendra Hariyani Deptt. of Mechanical Engg. SKIT, Jaipur

Submitted by: Vikram Singh M.Tech. IInd Sem Thermal Engg.

DEPARTMENT OF MECHANICAL ENGINEERING SWAMI KESHVANAND INSTITUTE OF TECNOLOGY MANAGEMENT & GRAMOTHAN JAGATPURA, JAIPUR-302017 PH. 0141 2758253-56

Introduction
With the varied and fast changing global power market, the complexity of turbine system economics has increased dramatically. In the past, power plants were primarily government regulated and base loaded. Dispatch and electricity pricing was relatively predictable. In today’s market, with IPPs, there are endless variations in the way power is produced, provided, regulated, and purchased. OEMs and power producers need to understand methods to quantify and compare parameters, and to understand the drivers and uncertainties to properly evaluate decisions and their potential for profi tability in this constantly changing marketplace.

The Power Market Drivers To understand the power market, one must keep in mind the key differences between this market and others:

Electric power can not be economically stored. Unlike other commodities, electric power cannot be easily or economically stored. For the most part, it must be produced on demand. While there are some efforts to retain energy generated during off peak hours using technologies such as pumped storage, fl ywheels, and/or superconductors, the cost is high and the effi ciency and reliability of these methods is low.

The demand for electric power is constantly fluctuating. The fluctuating demand for electric power is clear. Demand varies during the day, with a morning and evening peak and varies over the year with a winter and summer peak. Some of this fl uctuation can be predicted based on historical information, such as the typical change in consumption over a day, and the typicalseasonal variations, but the fl uctuations can shift signifi cantly from the norm due to uncontrollable events like periods of severe weather.

Utilities have a high capital investment cost.

Base load . This is refl ected in the fact that electric consumption is generally accepted as one of the lead economic indicators. These fi xed costs. distribution. with units operating 30 years or more. Base load plants operate continuously for long periods of time. utilities have very high fi xed costs. spending almost fi ve times the initial investment per dollar than other manufacturing endeavors1. and peakers.Fuel prices are subject to negotiation and electricity prices are constantly varying.0 Turbine System Economics @siemens. Power plants do require signifi cant initial investment. Power plants have a relatively long life cycle. transmission.com These unique features of the power market create a complex situation to evaluate and choose effective strategies for power generation. Power plants operate for decades. and permitting. These plants often do not have the ability to change load quickly and take advantage of spot market peak pricing. These factors impact the ability to compete effectively in the deregulated market. which can be broken into three basic types of operating modes – base loaded plants.There is an unfl inching expectation that required electric power is always and immediately available.These units operate year round and all day with an overall economy. They are typically large plants (> 200MW).The nature of this constantly fluctuating demand for a commodity that must be essentially produced on demand drives a varied supplier base.The initial required investment for a power plant varies based on the type of power plant. which are typically between $475/kW and $1430/kW2. but they compensate with very long life. which are economical and reliable to operate. Typically. which allows them to compete and operate profitably. 5. intermediate loaded plants. Electricity has become a critical and integral part of the economy and there is no tolerance for an inadequate supply no matter what the circumstances. include equipment for generation. even at low demand times.

and act to regulate and maintain the grid frequency. when choosing an OEM (Original Equipment Manufacturer) or AE (Architect Engineer). Rates are negotiated.The US market is currently a hybrid market consisting of regulated market regions and deregulated market regions. A controller ranks the bids and purchases power as needed from the lowest cost supplier on up in price until the demand is met.Intermediate load supplier includes plants that operate to meet normal fluctuating demands in the morning and evening hours and typically operate for 10 to 14 hours per day.Peak load suppliers include plants which can start up quickly and supply power to meet high demands during periods of high or low temperature when the combined base and intermediate load capacity is not adequate. In the deregulated market power prices fluctuate drastically over time. fixed. with suppliers bidding into the market. Electricity supplied during a peak demand is sold at a premium. offering power to the grid. but offer operational flexibility. A network of base load units and expensive peakers is put in place to enable the supply to meet the fluctuating demand for power.The traditional power market is regulated to meet local demand for power.plants provide the core of the power grid. In different areas and different countries. and plant availability and reliability. there are penalties . the cost of electricity is typically locked in by regulation and varies little. making this the most profitable time to generate. fuel costs. Fuel costs far outweigh the other factors and the driver in this case for the OEM industry is efficiency. with each having different economic drivers. the primary economic variables to consider are first time plant cost. and renegotiated allowing for a set return on investment for the power producer. but it is common to have power generators bidding to supply to the grid and in some cases.service costs. The regulated markets have contracts that are cost based. the rules vary. The power market has changed significantly with deregulation and different variables must be considered to appropriately assess the potential from a customer and supplier point of view. In this scenario. These plants are typically more expensive to operate. Profits are based on a cost plus regulated model. The deregulated market is an auction market. For a power producer.

Reliability is used to express and quantify the unplanned maintenance needs of a power plant. Availability. An ideal power plant has an availability that is less than 100%. When power is offered on the spot market and the plant does not start.Maintainability can be used to compare plants that require frequent. Availability considers both scheduled and unscheduled maintenance and compares that to an ideal situation with no maintenance outages at all. RAM looks at how often you can use the equipment and how much it costs to keep it in operating condition. An ideal power plant has a reliability is 100%. higher cost servicing. Reliability is a measure of how often a plant is available in comparison to the total number of hours the plant would be available with no unexpected maintenance. to sustain partial load and to assure delivery of power at a precise time. This includes the cost for parts. with plants that require less frequent. and less advanced. Maintainability is used to express the cost of maintenance. These scenarios drive a need to consider RAM. lower cost servicing. Modern Power Plant Economics . The concept of RAM is used to consider the trade off between higher technology immature technologies. RAM is an acronym for Reliability.Availability is a measure of how often a unit is capable of providing service. RAM and Economics When a power plant is off line for maintenance.for promising power and then not being able to deliver. there is no income stream. bids the operation of units which vary in their ability to come up to full power. This market. The availability can be quantified as the ratio of the total number of hours the unit is actually available in comparison to the total number of hours. there may be penalties. but more reliable operation. Units with less frequent and shorter maintenance intervals have higher availabilities. and the cost of the servicing. which seems as harried and volatile as the stock exchange floor. Combining these considerations.

There have been positive and negative consequences to this change in the industry. these calculations were fairly simple and reliable. For an OEM to have access to the largest market share. The old descriptions of the power industry as stable and constant were traded in for adjectives like competitive. Utilities must understand how to make appropriate purchasing decisions. A discussion of the result in that regard is out of the scope of this paper. This volatile market favors plants that are highly fuel efficient for base load and plants with quick. sound economic decisions were important. or buying a model that is more mature.For deregulated enterprises profitability is what is important. flexible. dynamic – even risky. This demand for more performance results in pushing the technology envelope. and more reliable. Subsequent to deregulation. This need to “have it all” has driven the technology of power plants. Efficiencies have increased and emissions have reduced. sound economic decisions became absolutely critical to survival. As a power producer. Equipment manufacturers are competing to deliver plants with the highest efficiency and the most flexibility. resulting in issues in reliability and availability for less mature engines. and OEMs must understand how these choices are made to . Utilities are businesses. the ideal situation is to be efficient enough to compete in the base loaded market or flexible enough to change load quickly to compete in the peak market. and consequently to reduce utility bills. The driver for the change was to increase competition in the marketplace. Prior to deregulation. The change from regulation to deregulation changed the motivation and strategy of power producers. The introduction of new technologies has increased in volume and scope. but significant secondary consequences occurred which are relevant. this means providing engines that can do both. A power producer must decide between buying the most advanced technology with the highest efficiency. The technology of gas turbines has advanced very quickly in this market. Regulated utilities are mainly concerned with maintaining the lowest life cycle costs for their units. and with regulation. while becoming far more complex. but not as efficient. “push button” starting capability to meet daily peak demands.Throughout the US market exists a hybrid market in which the trend has been to move towards deregulation.

Where. the sensitivity to the assumption can be explored to understand the implication of one choice over another. To do this. 2) projected price of electricity. though most investors will strive to get a hurdle rate that is higher. A common approach is to evaluate net present value (NPV). r. the following parameters are needed: 1) Capital investments. While it may be clear which technical decision advances technology the fastest. The economics and the technology are intimately tied together. There are several accepted methods to examine cost over time. The net present value method looks at the value of the project over time by converting all income and expenditures into equivalent values at the current time and subtracting the initial investment. it is not always as clear which technical decision makes the best business case. All methods account for the cost of a decision over time. . the future interest rate and the rate of inflation must be estimated and expressed as a discount rate. Power plant economics explores the cost of a decision over time.compete effectively. While these estimates are somewhat inaccurate. Basic Power Plant Economics Economic evaluation of a power plant can be explored in a number of ways. To calculate the NPV of a power plant.In: initial investment r: discount rate or weighted average capitol cost for a given company t: time CashFlow: Income – expenses The basic rule of thumb is that the NPV should be greater than zero for an investment.

fuel cost must be converted to annual cost in dollars by multiplying the fuel price times cumulative fuel consumed per annum. This provides incentive to suppliers to develop and maintain a fast start supply. In some markets.The income is calculated per annum. and is income from the electricity sold to the grid. Dispatch payments are fees paid to producers that are capable of providing power to the grid with a very short lead time. the initial investment is the cost of the plant and initial costs for support equipment and hiring staff. and 10) the discount rate (the cost of money). and operating and maintenance costs. For the calculation. These payments are for the assurance of capability and are paid regardless of whether the capability is leveraged.3) size of the plant. In a deregulated market. 7) operating and maintenance costs. 8) start up time and costs. The fuel cost is a variable cost and must be estimated. typically in the range of 10 minutes from demand to supply (spinning and nonspinning reserve). should be evaluated based on historical data and forecasted fuel and electricity prices. 5) dispatch payments 6) projected fuel costs. dispatch payments are another source of income. The operating and maintenance costs include . 9) regulating costs. 4) capacity factors (how many hours the plant will operate in a given year). so the grid can adequately respond to unplanned peak needs. For a power producer. This is the price of electricity ($/MWh)multiplied by number of hours the facility is producing power (MWh) in a typical year.Expenses are determined on a per annum basis and include the cost of fuel. the price of electricity is determined by the market and for calculation.

often resulting in the changing position of a certain facility in the market place. such as OSHA requirements.Regulating costs also include costs for adhering to regulations that are put in place to assure the safety of a facility.000 in incremental costs for one combined cycle start3. Certain fuel sources may be preferred to enhance energy independence or to promote local industry and employment.The frequency of maintenance is influenced by both operating hours and number of starts. A single start for a combined cycle facility can result in a significant incremental increase in maintenance costs. Some of these risks can be hedged by investing in futures to fix the future price of commodities such as fuels. Operating and maintenance costs are impacted directly by the mode of operation of a plant. Power plants have a long life and many changes occur over the life of the plant. and the costs for scheduled and unscheduled maintenance.Expenses may also include regulating costs. or to insure against adverse business conditions. Taxes may be implemented to influence companies to choose preferred technologies or to impact the local job market. such as long periods of mild weather. An example of this kind of influence is environmental regulations where emissions credits are traded. Over time a facility built to meet a certain regulation may become covered by a regulation with a more aggressive limit. Regulations and taxes are dependent on the current political climate and are subject to frequent changes. thus influencing the economics of the power producer. and various qualities of . Regulating costs are government instituted economic consequence to encourage industry to make decisions that have been determined to be for the good of the people. These costs include taxes and the cost of complying with government regulations. Some gas turbines have the capability to operate on alternate fuels. The calculation complexity increases further when looking over the life of the power plant. This may mean that additional operating costs are incurrent to purchase additional emissions credits. Some units are purchased with the flexibility to switch between gas and oil. with one producer estimating $20. Technologies may be politically preferable due to environmental or safety issues as viewed by the regulating government.personnel costs.

However. At the other end of the operating spectrum are peakers that are looking to leverage the high costs of electricity during peak needs. This option requires more capital investment. thereby integrating the need for consistent high quality service with the need for continually competitive technology. the implication is clear that the investment costs and fuel costs pale in the face of this return and the only significant factor is how much the plant can generate. The old robust engine with learned out technology is simply not efficient enough. To understand the drivers for profitability. both in the unit and in the supporting auxiliaries. the price per megawatt-hour of electricity in parts of the Midwest soared briefly from $40 to $70004. In this market the goal is to be ready to run when the prices increase. low margins are compensated by long operating times. a plant with this capability can be more competitive. The variables can be examined in terms of controllable variable and uncontrollable variables. To develop a symbiotic relationship with customers. uninterrupted operating times are supported by reliability and maintainability. the base line efficiency of a competitive unit is constantly increasing. Though the higher end of this scale is the exception and not the norm. Here again RAM is the . Units desire to remain competitive over time by being highly efficient and as a result of this are also driven to increase capital investment over time. and the importance of RAM. Operating Strategies and Options For a base loaded plant. New technology is regularly introduced and can be purchased as upgrades to improve efficiency. Long. but at a price. and most units have reliabilities of greater than 95%.and potentially in licensing and permitting fees. some OEMs offer access to upgrades to customers who purchase long term service agreements.oil can be considered. In June 25 of 1998. As the price for oils and gases fluctuate. the sensitivity of the calculation can be explored to further understand the uncertainty of the calculation. Gas turbine technology has been in service for many decades.

In both scenarios there are economic complexities. easily fitting into the intermediate load market. availability and reliability are extremely important because if an owner pushes the start button and does not get power. . While internal machine efficiencies are quite high. They are extremely flexible. availability. Reliability. and maintainability are all equally important. The base loaded plants must maintain very low costs. and quick to install. which requires them to be available when the need is present. RAM – reliability. availability and maintainability become significant driving factors in the power market. gas turbines are used in combined cycles. Large plants with high availability and low maintenance needs have the advantage in this market.driver since for the most part. a competitor will quickly jump in and take over that share of the market. Operators in the intermediate load business are balancing all of these needs. For intermediate and base load applications. a window of high potential for peak need can be identified. the gas turbine waste heat is used in a heat recovery steam generator to power a bottoming steam cycle. However. Simple cycle gas turbines are installed to meet peak demands. They want to be chosen for operation. relatively low in initial investment cost. Gas turbines operate in all three operating regimes. and capable of competing as a base loaded units. so efficiency is important. The combined efficiency of such power plantsare quite competitive (> 55%). Those who can meet these peaks quickly and reliably can reap the benefit of selling when the market is at its highest. The business cases for load following plants are based on a low volume high profit model. gas turbine simple cycles exhaust at roughly 1000◦F. The business cases are based on low margins and high volume. The economics improve when an unexpected peak in demand occurs. If a plant is inoperable due to unplanned maintenance (low reliability) then the opportunity to compete during this need will not even be possible. wasting a significant amount of energy and resulting in a rather low cycle efficiency. and so owners can schedule planned maintenance outside these windows. and they need to ready to operate. For these reason.and limiting the application to peak markets. In this arrangement.

greatly reducing the likelihood of unexpected failure during a peak need. When symptoms occurs. so fully scaled new technology can be fully instrumented and tested in a controlled environment. and corrective actions can be taken in a controlled manner. In some cases. some OEMs such as Siemens. at a convenient time. risk analysis and management methods are used which allow a quantified assessment of the probability of a particular failure and the consequences. new technologies are introduced to a single customer site with an agreement to test out the technology prior to release to a larger fleet. The result was an improvement in . most of the testing was done with similar technologies in small engines.Controlling RAM While Increasing Technology Level To maintain competitiveness. new technologies are being tested more thoroughly. These approaches are similar. Since deregulation the focus on efficiency so over shadowed other needs that the technical envelope was pushed very hard. In the past. OEMs are aware that new technology must be introduced at a lower risk level. Subsequent to implementation. Results of these analyses are used to mitigate risks by either changing the design. but not the same as the IGT (Industrial Gas Turbine) application. engines can be fitted with improved monitors and sensors. Prior to implementation. prior to implementation. or aircraft engine test beds. have built IGT test beds. During design. where the OEM constantly monitors plant operation. and during operation. very fast. or altering the consequential impact. the owner is informed. To further reduce risk. Monitoring a fleet of engines allows the OEM to develop probabilistic indicators of potential failures. All of these features combine to reduce the risk of increased RAM costs. Steps are taken to control risk during design. For further reaching changes. condition monitoring. an entire test site is constructed through cooperation between an OEM and a power producer to validate a new design. OEMs are now offering producers the option to purchase a monitoring contract. and better controls.

Yearly load curve: -. Load curve of a locality indicates cyclic variation.Load variations during the Year.Load variations during the day (24Hrs). Bonnie Marini LOAD CURVES A load curve is a plot showing the variation of load with respect to time. as human activity in general is cyclic. Using RAM in business models allows appropriate evaluation of the benefit and risk of immature technologies and allows user to apply these technologies intelligently. They help to select size & number of generating units and to create operating schedule of the power plant Load curves used in power stations may be: Daily load curve: -.Load variations during the week at different times of the day plotted against No. of days. Additional actions (further testing) are taken and additional products (such as online monitoring) are being offered to reduce and control RAM. OEMs and operators are both cognizant of the need to make sound economic evaluations of technology options and to consider technology maturity and the resultant RAM into their calculations. Weekend load can be seen to be significantly lower than that during other working days for known reasons. but there was a partnering risk when leveraging immature technologies. may be half-hourly (recorded once in 30 minutes) or hourly. good choices can be made by power producers that will provide for profit for the company and reliable power for the communities served. Today.the efficiency of gas turbines. Weekly load curve: -. This results in load curve of a day does not vary much from the previous day. which is derived from monthly load curves of a particular year. Information obtained from load curves: Area under the load curve = Units generated. Load curves are useful for generation planning and enable station engineers to study the pattern of variation of demand. With these considerations. .

Street Light etc. of days) Yearly average load: Average of loads on a power station in 1 year (8760Hrs). This is usually less than 1. = total number of units / 8760 Hrs Load factor ( LF ): .F = M. Demand Factor ( D. Maximum demand ( MD ): The greatest demand of load on the power station during a given period.L Average load: This is the average of loads on the power station in a given period. D. public. Transport.Highest point of the curve = Maximum Demand (Area under curve) / (by total hours) = Average load Load Curve For a Locality is usually obtained as given below Load is divided into number of categories like private.D / C. Entertainment. The highest peak on the power station load curve. refrigerator. = total number of units (KWHr) / 24 Hrs Monthly average load: Average of loads on a power station in 1 month (24Hrs x No. fan. Daily average load: Average of loads on a power station in 1 day (24Hrs). heater. of days).F ): Ratio of maximum demand to connected load. This is Daily Load Curve for that locality. Hospitals. = Total number of units (KWHrs) / (24Hrs x No. After preparing the load sheet for a locality indicating the total load in each category (each category may have different types of loads such as light. pump etc) load curve is plotted for each category over a day (every hour or every 30 minutes) and then the final load curve for the locality is obtained by summing them. Industrial. Waterworks. Commercial.

Consumer maximum demands donot occur at the same time thus maximum demand on power station will always be less than the sum of individual demands. This section briefly introduces fundamentals of engineering economics. The construction of a new power plant or the upgrading of an old one involves a major financial investment for any energy company. Diversity factor ( DF ): The ratio of the sum of all individual maximum demands on the power station to the Maximum demand on the station. L. and orders are placed for equipment. This indicates the reserve capacity of a plant. This is the measure of the effective use of the power station. detailed design is begun. Plant capacity factor ( PCF ): The ratio of actual energy produced to the maximum possible energy that can be produced on a given period. typical ≈ less than 1.The ratio of average load to maximum demand. Economics The success of any engineering undertaking depends on adequate financial planning to ensure that the proceeds of the activity will exceed the costs. . Cost analysis and fiscal control activities continue throughout the construction project and the operating life of the plant. with a slant toward power plant cost analysis as well as issues of maintenance and equipment replacement. DF = Individual Maximum Demand / Total Station Maximum Demand High DF Low MD Low plant capacity Low investment capital required.F = Average Load / Maximum Demand = Annual Output (in KWHr) / (Installed Capacity X 8760 Hrs) High LF Low cost per unit generated. Financial planning therefore starts long before ground is broken.

for instance. waterworks. On the other hand.The cost to construct a power plant. say. for example. borrow money to finance the capital cost of the plant and then pay the resulting debt over the expected useful life of the plant. These are called operating costs. construction. an important aspect of engineering economics is the time value of money. It is common to discuss the capital cost of building a power plant in terms of dollars per kilowatt of plant power output. The company may. One hundred dollars invested today at 8% annual compound interest will become $215. Operating costs are sometimes related to the amount of electrical energy sold. and administrative and maintenance costs that are not associated with the initial cost of the plant but are the continuing costs of generating and selling power. salary expenses. Usually they are expressed in cents per kilowatt-hour of energy distributed to customers. It is clear that $100 in hand today is not the same as $100 in hand ten years from now. They may be occasional. building site preparation. they may wish to know what present sum would be required to ensure the payment of all future expenses of the enterprise. In addition to the cost of building the plant. The company and its investors may wish to know what annual sum of money is equivalent to both the capital and operating costs. factory.89 in ten years. or they may occur regularly and continue throughout the life of the plant. for instance. or are taken to be periodic for convenience of analysis. 30 or 40 years. One difference is that money can earn interest. A plant may cost $1100 per kilowatt of installed power generation capacity. or other major engineering work is called its capital cost. and the purchase of plant equipment. and (2) recurring operating costs of a periodic or cyclic nature. There are. . dam. there are many additional expenditures required to sustain its operation. Clearly. annual fuel costs. It is frequently desirable to express all costs on a common basis. bridge. Often these costs are periodic. Thus the expenses associated with power generation and other business endeavors may be thought of as two types: (1) initial costs usually associated with the purchase of land.

Betty keeps the interest instead of paying it to Alice annually.1 or (0. The interest for the 161 next year should be paid on the original sum and on the $50 interest earned in the first year. If.1 x $665. is given by . together with the original $500.1 x $550 = $605. however. the deal involves compound interest.1 × $550 = $55.05 Fifth year $732.1)(100) = 10% rate of return. The following table shows the calculation of the annual debt for the five-year loan of $500 at 10% interest: At the End of: The Accumulated Debt is: This Sum First year $500 + 0. Alice will have earned $250 in simple interest and receive a total of $750 in return. then at the end of the fifth year.26 It is evident that the interest earned on the preceding interest accumulation causes the annual indebtedness to grow at a increasing rate. The total sum to be returned to Alice after 5 years is computed as follows: At the end of the first year Alice has earned $50 in interest.05 + 0. It can be shown that the future sum. The interest on this sum for the second year is 0. and eventually pays 10% on both the retained interest and the capital.00 Second year $550 + 0.50 + 0.Compound Interest If Alice lends Betty $500. who agrees to pay $50 each year for five years for the use of the money.1 x $605 = $665. or $550.05 = $805.50 = $732.1 x $732. S.00 Third year $605 + 0.50 Fourth year $665.1 x $500 = $550. The annual interest rate is i = Annual interest / Capital = 50 / 500 = 0.

Thus. consider the following closely related problem. and S = 500(1. EXAMPLE What sum is required now. the inverse of the CAF was used to determine the present worth of a future sum.000. ( PWF): . Now.017.08)25 = $146.6105. i is the interest rate. the present sum is 1. S / P = (1 + i)n is called the compound amount factor. the CAF is (1 + 0. the initial sum invested. CAF.000 = P (1 + 0. at 8% interest compunded annually. to produce one million dollars in 25 years? Solution The future sum is S = P (1 + i)n = 1.6105) = $805. and n is the number of investment periods. The 162 same present sum invested at 8% simple interest for twenty-five years would produce a future sum of less than half a million dollars.1)5 = 1.S = P (1 + i)n where P is the principal. in this case the number of years.26.90.08)25 Solving for P. Here the factor multiplying the principal.000. The inverse of the CAF is called the present-worth factor.000/(1. compound interest brings a return of almost over seven times the original investment here. For our example. _____________________________________________________________________ In the example. The difference between simple and compound interest may not be spectacular for short investment periods but it is very impressive for long periods of time such as the operating life of a power plant.

1 + (1 + i) . The factor multiplying the annual sum R is called the series present-worth factor. Thus the present worth of the five payments is P = R [ (1 + i) . 1]/[i(1 + i)n] Solving for R. Consider a series of five annual payments of R dollars each. 5 ] It may be shown that this expression can be written as P = R [(1 + i)5 . the present sum associated with the first payment is R/(1 + i). 3 + (1 + i) .. 4 + (1 + i) . 2 + (1 + i) .with R as the future sum. and that taking compounding into account can be important. The present sum associated with the second payment is R/(1 + i)2. we obtain an expression for the regular annual payment for n years needed to fund a present expenditure of P dollars at an interest rate i.PWF = P/ S = 1 / (1 + I)n Thus we see that the time value of money is related to the compound interest that can be earned. SPWF. CRF. To recklessly adapt an old adage.A dollar in the hand is worth two (or more) in the future (if invested wisely). 1]/[i(1 + i)5]. when the interest rate is i. . 1] . which for n years is: SPWF = P/ R = [(1 + i)n . The resulting factor is called the capital recovery factor. Capital Recovery Another important aspect of compound interest is the relationship between a present sum of money and a regular series of uniform payments. which is the reciprocal of the series present worth factor: CRF = R / P = i(1 + i) n / [(1 + i) n . What is the present dollar equivalent of these payments? Applying the CAF as in the preceding example.

000 _ 365 _ 24 = 4.12)(1 + 0.1240 .000 / 2000 = 250 tons/hr.000 Btu/lbm. _____________________________________________________________________ A Preliminary Design Analysis of a 500-MW Plant Consider the design of a 500-megawatt steam power plant with a heat rate of 10. 1] = 5×108(0.000 Btu/kW-hr and a water-cooled condenser with a 20°F cooling-water temperature rise produced by heat transfer from the condensing steam. It must be recovered annually by the returns from the sale of power. this requires a heat addition rate of 500. The plant uses coal with a heating value of 10. The reader should verify carefully each of the following calculations.651. A 500-megawatt plant operating at full load produces 500.000 Btu/lbm must therefore be supplied at a rate of 5 × 109 / 104 = 500.000 power plant? Solution Using equation (4.2).EXAMPLE What uniform annual payments are required for forty years at 12% interest to retire the debt associated with the purchase of a $500.000 _ 10.000 lbm/hr or 500.000. 1) = $60.12) 40/(1. Let us estimate the magnitude of some of the parameters that characterize the design of the plant. we get R = Pi (1 + i)/[(1 + i) n .000 Btu/kW-hr.813 This sum may be regarded as part of the annual operating expense of the plant. .000 kW and an annual electrical energy generation of 500.000 = 5 × 109 Btu/hr Coal with an assumed heating value of 10.38 × 109 kW-hr With a heat rate of 10.

If coal costs $30 per ton.5 cars per hour of continuous operation. would be about 10.000 _ 500. the plant will produce 250 _ 0.1 = 25 tons of ash per hour. or annual capacity factor.5 tons per hour is produced for disposal.000.000. If the coal has 10% ash. Hence the plant requires 250 /100 = 2.000 = 7.000 lbm/hr This determines the required capacity of the feedwater pumps and is important in sizing the passages for the water path.000/(500. If it is not marketable. will be 65.and forced-draft fans. it is stabilized and stored in nearby ash ponds until it can be moved to a permanent disposal site.000 The cost of fuel alone per kW-hr.000 Btu/kW-hr corresponds to a thermal efficiency of 3413/10.000 _ 365 _ 24) = $0.015/kW-hr _ 1. This information is important in determining the size of the induced. 2.13%. If we approximate the heat of vaporization of water as 1000 Btu/lbm.700.000 / 1000 = 5.000 = 0. is the ratio of the actual annual generation to the annual generation at 100 % capacity. the throttle steam flow rate. and of the plant. based on 100% annual plant capacity.it may be sold as an industrial chemical. the annual cost of fuel will be 30 _ 250 _ 24 _ 365 = $65. A coal unit train typically has about 100 cars. if 2% of the coal is sulfur and half of it is removed from the combustion products. with no superheat.3413 or 34.A dedicated coal car carries about 100 tons.With an air-fuel ratio of 14. Similarly.5 cents/kW-hr The annual plant factor.s gas path flow passages. an air flow rate of 14 _ 500. The heat rate of 10. The above thermal efficiency implies that about 65% of the energy of the fuel is rejected into the environment.5 _ 24 / 100 = 0. mostly through the .000 lbm/hr is required for combustion.Under some circumstances the ash may be used in the production of cement or other paving materials.700. that of their driving motors or turbines.6 unit trains per day. If the sulfur is of sufficient purity. or a unit train roughly every two days. Then the plant Needs 2. expressed as a decimal fraction .

The minimum cost of producing electricity is then 1.73 cents per kW-hr The cost of coal was determned to be 1.813 _100)/(365 _ 24 _ 0. determine the capital cost per kW of generation capacity and estimate the minimum cost of generation for the plant if it is predicted to have an annual plant factor of 80% and maintenance and administrative costs of $0.5 cents/kW-hr.0 × 20) = 1.007 /kWhr.000) = 1.73 + 1.condenser and the exiting stack-gas energy. EXAMPLE Relating to the above rough design of a 500-MW plant. and assuming the capital cost information of Example 4.5 + 0.0 Btu/lbm-R. cooling towers. These back-of-the-envelope calculations should not be regarded as precise. As an upper limit.3413)(5 × 109) = 3.000.3. Solution The unit cost of the power plant is $500. This gives information relevant to the design sizing of cooling-water lines. The capital cost part of the annual cost of power generation is (60.29 × 109/(1. Thus (1 . this rate of cooling requires a cooling-water flow rate to the condenser of 3.000/(500 _1000) = $1000 per kW-hr of capacity.651. but they are reasonable estimates of the magnitudes of important power plant parameters.8 _500.65 × 108 lbm / hr assuming a water heat capacity of 1. Such estimates are useful in establishing a conceptual framework of the relationships among design factors and of the magnitude of the design problem.7 = 3. and water pump capacities. assume that all of the heat is rejected in the condenser.29 × 109 Btu/hr must be rejected to condenser cooling water. With 20° water temperature rise in the condenser. 0.93 cents per kW-hr _____________________________________________________________________ .