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# CHAPTER IV

ECONOMIC ANALYSIS

This chapter presents the economic analysis of the proposed diesel power

plant. Data and calculations are presented below to prove the economic viability

of the proposed diesel power plant.

I. Capital Expenditures

Capital expenditures are those costs invested to acquire the physical

setup of the power plant. The expenditures under this are equipment cost, land

cost, building cost, excavation and foundation costs, and other miscellaneous

fees such as electrical, and instrumentation and control costs.

Equipment Cost

The most principal cost to be considered for a diesel power plant to

be established is the equipment cost. Equipment that will function

on fuel system, lubrication system, cooling system, starting system, and

intake and exhaust system are considered. The proceeding tables present

the detailed calculation of equipment costing. Average rate of exchange

for dollars to peso at the year 2017 is \$1=Php50.16. (Bangko Sentral ng

Pilipinnas, 2017)

102

900 89.150 6.670 11.670 Cooling Water Pump 1 11.000 19.980 Total Php21. Equipment of Price/Unit (\$) Total Cost (\$) Units Diesel Generator 6 68.200.00 Land Cost 103 .000 Condenser 1 12.800 Oil Cooler 1 11.000 30.000 35.000 Air Storage Tank 1 45.980 Surge Tank 1 16.000 Transfer Pump 4 1.150 \$ 432.800.800. TABLE 19 EQUIPMENT COSTS OF DIESEL POWER PLANT No.000 Raw Water Pump 1 6.200 Fuel Pump 10 1.800 7.000 Lube Oil Tank 2 11.400 Pump 1 6.550 Steam Turbine 1 19.430 Heat Exchanger 1 11.667.550 45.000 412.200 Lube Oil Pump 4 1.400 Storage Tank 10 60.200 Air Compressor 1 30.400 12.000 Cooling Tower 1 35.500 15.600 23.000 16.480.927.000 600.200 6.715.000 Day Tank 6 14.200.980 11.430 11.700 6.

15 Excavation∧Foundation Cost =Php22.000. Thus.00 104 .000.000. The power plant will occupy a total land area of 10 hectares of Barangay Calumpang West. 10. Based on the socio-economic survey conducted at the municipality of San Luis.× × 1 ha m2 Land Cost =Php150.000.00 ×0. 2006) Excavation∧FoundationCost =Php150.00. San Luis.00 Excavation and Foundation Cost The excavation and foundation cost is assumed to be 15% of the total land cost. the current land cost per square meter is Php 1500.000 m2 Php1500.000. (Rajput. Batangas.00 Land Cost =10 ha .500. Batangas.

715.268.166.00 x 0.20 Electrical Cost=Php 4. (Rajput. 2006) Electrical Cost=Equipment Cost × 0. Building Cost =Equipment Cost ×0.480.00 105 .33 Building Cost =Php 21.715. Building Cost Potter.00× 0.170.667.496.33 Building Cost =Php 7.00 Electrical Costs Electrical costing is considered as 20% of the total equipment cost.2 Electrical Cost=Php 21.480.667. stated that the building cost is approximately 33% of the equipment cost .133.343. in his “Power Plant Theory and Design”.

2006) Other Miscellaneous Cost =× 0.566.715.00× 0.171.667.10 Other Miscellaneous Cost =Php 21.715.480.343. 2006) Instrumentation∧Control Cost =Equipment Cost ×0.Instrumentation and Control Costs It is assumed that the instrumentation and control cost is roughly 20% of the total equipment cost. (Rajput.10 Other Miscellaneous Cost =Php 2.00 106 .133.496. It is assumed to be 10% of the total equipment cost. (Rajput.2 Instrumentation∧Control Cost =Php 21.20 Instrumentation∧Control Cost =Php 4.748.00 Other Miscellaneous Costs This cost includes other fees such as license fees and other engineering related fees needed for the setup of the plant.480.00 × 0.667.

58 %increase= ÷ 23 ×100 %increase=1. petroleum will cost \$2. maintenance and repairs. Fuel Cost Based on the Energy Outlook of the U. labor cost. It is given by the formula: future value− past value %increase= ÷ number of years ×100 past value \$ 3. The administration has also projected a 2040 petroleum cost of \$3. and total running costs.213346815 \$ 2. Operating Expenditures Operating expenditures are ongoing expenses needed in running a power plant.S. supplies. This cost includes fuel and oil cost. operational taxes.30/gallon. Energy Information Administration.30−\$ 2. Hence. it is important to calculate the percentage increase of fuel cost to determine the annual cost of fuel for plant operation.58/gallon on 2017.58 107 .II.

267.76 liters year Php 1.090.19 1bbl 31.01 kg bbl 158. the cost of fuel is Php2.000 sec Price=2. The following calculations of fuel cost per design option are presented. As of present. This is to recognize that each design options require different fuel consumption in kg/sec.536. 267. The percentage increase in the preceding calculation is utilized to calculate the future fuel costs.969.4467 × × × × sec 1.934 Price= year 108 .19/bbl.01kg/liter. kg mfuel =2. Knowing that the density of diesel is 1. annual cost of fuel consumption can be calculated.4467 sec kg 1 liter Php2.

519.7 unit Average Annual Fuel Cost=Php 1.205.119.605 2023 1.157.209.544 2018 1.105.090.163.192 Total 11.290.055.879.707 2025 1.750.844 2022 1.157.281 2020 1.148.907 Average Annual Fuel Cost total cost for 10 years = unit 10 years Average Annual Fuel Cost Php 11.729.969.134.194.055.552.744 Lubricating Oil Cost 109 .552.570.073.907 = unit 10 years Average Annual Fuel Cost =Php1.178.816.290.7 ×6 gen .456.934 2017 1.527 2019 1.331.570.units Average Annual Fuel Cost=Php 6.233 2021 1.942.225.040 2024 1.152. 2 Year Cost per Annum (Php) 2016 1. TABLE 20 FUEL COST OF DESIGN OPTION NO.

2006) Thus.720.1768 Annual OilCost =0.000 year sec ×no . It has a present cost of Php2.536. The oil to be used of the designed diesel power plant is SAE 40.926 kg bbl 1 bbl sec × ×31. 632. of units Since the density of the oil to be used is 0.000 year sec ×no . Average Annual Fuel+ OilCost Total Running Cost = 0. 2016) Annual OilCost =moil ( kgs ) ×cost ×31. (Rajput. 671.536. Annual OilCost =moil ( kgs ) ×cost ×31.S. therefore.87 Total Running Cost It may be considered that the average fuel and oil cost per annum is 90% of the total running cost.000 ×6 units 158. (Energy Outlook of the U.80 110 . of units kg liter Php 2.76 liters year Annual OilCost =Php69.720. Energy Information Administration.0199 × × s 0.1768/bbl.536.926kg/L and the oil consumption is 0.0199 kg/s.

05 Maintenance∧Repairs=Php 6. 2006) Labor Cost =Total Running Cost × 0.942.80 Total Running Cost =Php8.004.221 Maintenance and Repairs Cost It may be assumed that the maintenance and repairs is roughly 5% of the total equipment cost. (Rajput.2 Labor Cost Labor cost is assumed to be 8% of the total running costs.744 ×0. 671.7 111 .004. 2006) Maintenance∧Repairs=Total Equipment Cost × 0.587.765.221× 0.632.331. 744+ Php 69.337.08 Labor Cost =Php 8.331.765.200. (Rajput. 942.05 Maintenance∧Repairs=Php 347. Php 6.87 Total Running Cost = 0.116.08 Labor Cost =Php701.

(Rajput.550.004. Supplies Cost allotted on supplies per year is assumed to be 5% of the total running costs. 2006) Operation Taxes=Total Running Costs× 0.295.765.5 112 .1 Operation Taxes Operation taxes are assumed to be 7% of the total running costs. 2006) Supplies=Total Running Costs ×0.221 ×0.221× 0.07 Operation Taxes=Php 613.250.211. (Rajput.07 OperationTaxes=Php 8.765.05 Supplies=Php 8.004.05 Supplies=Php 438.

268.III. Summary of Expenditures TABLE 21 SUMMARY OF EXPENDITURES Expenditures Total Cost (Php) Equipment 21.00 Instrumentation and 4.480.171.00 Total 39.00 113 .496.748.170.00 Excavation and 22.000.566.166.490.343.496.133.171.000.00 Electrical 4.00 Control Miscellaneous 2.00 Land 150.667.912.00 Foundation Building 7.133.715.500.343.000.

1 Operation Taxes 613.5 Total 17.2 Repairs Labor 701.295.00 Oil 69.030.877.337. Thus.250.00 Maintenance and 347.632.171.490 × 0. Annual depreciation may be solved by using straight line method.550. It is also stated that the salvage value of the plant within the 15-year useful life is 5% of the total capital expenditures.765.125.7 Supplies 438.004. 912. Based on the Power System Engineering of Rajput. Depreciation Depreciation is decrease of the power plant value through its useful life expressed in n years.95 Annual Depreciation= 15 years 114 .116.87 Total Running 8. 671.200.587. typical useful life of a diesel power plant is 15 years. TABLE 13 SUMMARY OF OPERATING EXPENDITURES Expenditures Total Cost (Php) Fuel 6.331.221.942.744.00 IV. Capital Expenditure−Salvage Value Annual Depreciation= Useful Life Php 39.211.

Php3. rate of investment shall be established. the power generation charge according to the Manila Electric Corporation is Php3. Php 2.770.9238 8760 hrs Annual Revenue= ×(351.094.925)× kW −hr 1 year Annual Revenue=Php 12.9238/kW-hr. The maximum load of the plant is 345MW.00 Annual Depreciation= year V.5% of the plant output. Net Present Worth To evaluate the net present worth of the design. Morse.790 VI.861.5%.527. Thus. 7. Cash Inflows=Revenue p + SalvageValue p CashOutflows=Capital+Operating p 115 .202kW × 0. At present. By utilizing this rate and the cash inflows and outflows.874. in his book Power Plant Engineering cited that the rate of investment of plants is usually 6.791. Net Present Worth=Cash Inflows−Cash Outflows Where. Revenue Revenue shall be computed by multiplying the cost of power generation by the actual plant output considering the deduction of plant consumption.

171.05 ×(1+ 0.322.686.065 Operating p=Php 168.723.065)−15 Salvage Value p=Php 775.490 .00 VII.267.912.945.791.912.945.00+ Php168. It is given by the formula: 116 .00 1−1.858.68 6 .590.200 Net Present Worth=Cash Inflows−Cash Outflows Net Present Worth=Php 93.499.065 Revenue p=Php 12. 70 0 CashOutflows=Php208.546.600 Capital=Php 39.490 .700 CashOutflows=Php39.546.065−15 Operating p=Php 17.322. Payback Period Payback period shall be calculated in order to determine the number of years on when all the cost of investment are recovered.2 Cash Inflows=Php114.030× 0.000 . −15 1−1.790 × 0.490× 0.912.00+ Php 775.000 .092.094.505.723.004.600 .065 Revenue p=Php 113.2 Cash Inflows=Php113.877.171.00 Salvage Value p=Php 39.171.125.092.

490.00−Php 17.682.5% to justify the design option.634.912.877.00 Annual Revenue− Annual CashOutflows Rate of Return= Capital Expenditure Php 36.030.912.402−Php 28.214. Rate of Return Rate of return is another economic indicator that determines the percentage increase over the initial investment cost.171.00 Payback Period= Php 12. Total Capital Investment Payback Period= Annual Revenue Php 39.791.634. The rate that will be obtained shall be greater than the assumed rate.214.100 Rate of Return= Php 39. Annual Revenue− Annual CashOutflows Rate of Return= Capital Expenditure Annual CashOutflows=Depreciation+ Annual Operating Expenditures Annual CashOutflows=Php 28.790 Payback Period =4.78 years VIII.094.125.490.171. 6.187.19=19 117 .00 Rate of Return=0.100.

Cost of Project−SalvageValue Payback Period= Net Annual Cash Inflows Php 39. 5% of the capital expenditures.030 Payback Period=2.912.402−Php17.187.490× 1 Payback Period= Php 36.171.682. An analysis is presented below assuming that the salvage is at minimum or has totally depreciated over the 15 year useful life.179 years 118 . payback period is sensitive to the assumed useful life.IX.877. 15 years and salvage value. Sensitivity Analysis The preceding calculation of the economic indicator.125.