Economics of power Generation &

power factor correction

Faculty: Nipunlal T
 Economics of Power Generation

 The art of determining the per unit (i.e. one kWh) cost of production of electrical energy is
known as economics of power generation.
 A consumer will use electric power only if it is supplied at reasonable rate.
 Therefore, power engineers have to find convenient methods to produce electric power as
cheap as possible.
Interest :
 A power station is constructed by investing a huge capital.
 This money is generally borrowed from financial institutions and the supply company
has to pay the annual interest on this amount.
 Therefore, while calculating the cost of production of electrical energy, the interest
payable on the capital investment must be included.

Depreciation:
 The decrease in the value of the power plant equipment and building due to
constant use is known as depreciation.
 It becomes obvious that while determining the cost of production, annual depreciation
charges must be included.
Methods of determining depreciation

 Following are commonly used methods for determining annual depreciation charge
1. Straight line method
2. Diminishing value method
3. Sinking fund method
 Cost of Electrical Energy

 The total cost of electrical energy generated can be divided into three parts, namely ;
1. Fixed cost
2. Semi-fixed cost
3. Running or operating cost
Fixed cost
 It is the cost which is independent of maximum demand and units generated.
 The fixed cost is due to interest on capital cost of land , salaries of high officials,
etc..
 salaries of high officials is fixed since it has to be met whether the plant has high or
low maximum demand or it generates less or more units.
 capital investment on the land is fixed and hence the amount of interest is also fixed.
Semi-fixed cost

 It is the cost which depends upon maximum demand but is independent of units
generated.
 Annual interest and depreciation on capital investment of building and equipment,
taxes, salaries of management and clerical staff.
 The greater the maximum demand on a power station, the greater is its size and cost of
installation.
 Further, the taxes and clerical staff depend upon the size of the plant and hence upon
maximum demand.
Running or operating cost

 It is the cost which depends only upon the number of units generated.
 The running cost is on account of annual cost of fuel, lubricating oil, maintenance,
repairs and salaries of operating staff.
 Since these charges depend upon the energy output, the running cost is directly
proportional to the number of units generated by the station
Expressions for Cost of Electrical Energy

 The overall annual cost of electrical energy generated by a power station can be
expressed in two forms
1. three part form
2. two part form
Three part form

 In this method, the overall annual cost of electrical energy generated is divided into three
parts
Total annual cost of energy = Fixed cost + Semi-fixed cost + Running cost
= Constant + Proportional to max. demand + Proportional to
kWh generated
= Rs (a + b kW + c kWh)

 where a = annual fixed cost independent of maximum demand and energy output.
 b = constant which when multiplied by maximum kW demand on the station gives the
annual semi-fixed cost.
 c = a constant which when multiplied by kWh output per annum gives the annual running
cost
Two part form

 In this case, the annual cost of energy is divided into two parts viz., a fixed sum per
kW of maximum demand plus a running charge per unit of energy.

Total annual cost of energy = Rs. (A kW + B kWh)

 where A = a constant which when multiplied by maximum kW demand on the station

gives the annual cost of the first part.
 B = a constant which when multiplied by the annual kWh generated gives the annual
running cost.
TARIFF

 The rate at which electrical energy is supplied to a consumer is known as tariff.

 Electrical energy is sold at such a rate so that it not only returns the cost but also
earns reasonable profit

 Objectives of tariff :
1. Recovery of cost of producing electrical energy at the power station.
2. Recovery of cost on the capital investment in transmission and distribution systems.
3. Recovery of cost of operation and maintenance of supply of electrical energy
4. A suitable profit on the capital investment.
Desirable Characteristics of a Tariff:

1. Proper return

2. Fairness

3. Simplicity

4. Reasonable profit

5. Attractive
Types of Tariff

There are several types of tariff

1. Simple Tariff
2. Flat rate Tariff
3. Block rate Tariff
4. Two part Tariff
5. Maximum demand tariff
6. Power Factor Tariff
7. Three part Tariff
Simple tariff

 When there is a fixed rate per unit of energy consumed, it is called a simple tariff or
uniform rate tariff.
 This is the simplest of all tariffs and is easily understood by the consumers
 Every consumer has to pay equally for the fixed charges irrespective of load variation.
 It does not encourage the use of electricity.
Flat rate tariff

 When different types of consumers are charged at different uniform per unit rates, it
is called a flat rate tariff.
 In this type of tariff, the consumers are grouped into different classes and each class
of consumers is charged at a different uniform rate.
 For example, flat rate per kWh for lighting load may be 60 paisa, where it may be 55
paisa per kWh for power load.
Block rate tariff

 When a given block of energy is charged at a specified rate and the succeeding blocks of
energy are charged at progressively reduced rates, it is called a block rate tariff.
 The energy consumption is divided into blocks and the price per unit is fixed in each block.
 The price per unit in the first block is the highest and it is progressively reduced for the
succeeding blocks of energy.
 For example, the first 30 units may be charged at the rate of 60 paise per unit; the next 25
units at the rate of 55 paise per unit and the remaining additional units may be charged at
the rate of 30 paise per unit.
 This type of tariff is being used for majority of residential and small commercial consumers.
Two-part tariff

 When the rate of electrical energy is charged on the basis of maximum demand of
the consumer and the units consumed, it is called a two-part tariff.
 In two-part tariff, the total charge to be made from the consumer is split into two
components , fixed charges and running charges.
 The fixed charges depend upon the maximum demand of the consumer while the
running charges depend upon the number of units consumed by the consumer.
 Thus, the consumer is charged at a certain amount per kW of maximum demand
plus a certain amount per kWh of energy consumed i.e.

Total charges = Rs (b × kW + c × kWh)

 where, b = charge per kW of maximum demand

 c = charge per kWh of energy consumed
 This type of tariff is mostly applicable to industrial consumers who have appreciable
maximum demand.
Maximum demand tariff

 It is similar to two-part tariff with the only difference that the maximum demand is
actually measured by installing maximum demand meter in the premises of the
consumer.
 This type of tariff is mostly applied to big consumers
Power factor tariff

 The tariff in which power factor of the consumer load is taken into consideration is
known as power factor tariff.
 A low power factor increases the rating of station equipment and line losses.
 A consumer having low power factor must be penalized.
 The following are the important types of power factor tariff:
1. kVA maximum demand tariff
2. Sliding scale tariff
3. kW and kVAR tariff
kVA maximum demand tariff :

 It is a modified form of two-part tariff.

 In this case, the fixed charges are made on the basis of maximum demand in kVA
and not in kW.
 As kVA is inversely proportional to power factor, the consumer having low power
factor has to contribute more towards the fixed charges.
Sliding scale tariff :

 This is also known as average power factor tariff.

 In this case, an average power factor, say 0·8 lagging, is taken as the reference.
 If the power factor of the consumer falls below this factor, suitable additional
charges are made.
 If the power factor is above the reference, a discount is allowed to the consumer.
kW and kVAR tariff :

 In this type, both active power (kW) and reactive power (kVAR) supplied are
charged separately.
 A consumer having low power factor will draw more reactive power and hence shall
have to pay more charges.
Three-part tariff

 When the total charge to be made from the consumer is split into three parts ,fixed
charge, semi-fixed charge and running charge, it is known as a three-part tariff.
Total charge = Rs (a + b × kW + c × kWh)
 Where, a = fixed charge made during each billing period.
 b = charge per kW of maximum demand,
 c = charge per kWh of energy consumed.
 It may be seen that by adding fixed charge to two-part tariff, it becomes three-part
tariff.
01. Which of the following in thermal power plant is not
a fixed cost

A fuel cost B interest on capital

C depreciation D insurance charges

02. Which of following is correct statement about
Simple tariff:

A . Has no discrimination of B Charges more to

consumers commercial users

C Encourages use of D Is most commonly used tariff

electricity method
03. The tariff in which power factor is taken as
reference:

A kVA maximum demand B Sliding scale tariff

tariff

C kW and kVAR tariff D all of the above

Power Factor Improvement

 Most of the loads (e.g. induction motors, arc lamps) are inductive in nature and hence
have low lagging power factor.
 The low power factor is highly undesirable as it causes an increase in current
resulting in additional losses
 To ensure most favorable conditions for a supply system from engineering and
economical standpoint, it is important to have power factor as close to unity as
possible.
Disadvantages of Low Power Factor

 It is clear from above that for fixed power and voltage, the load current is inversely
proportional to the power factor.
 Lower the power factor, higher is the load current and vice-versa.
 Low power factor results in the following disadvantages :

1. Large kVA rating of equipment:

● The electrical machinery (e.g., alternators, transformers switchgear) is always rated in

kVA.

● at low power factor, the kVA rating of the equipment has to be made more, making
the equipment larger and expensive
2. Greater conductor size:

● To transmit or distribute a fixed amount of power at constant voltage, the conductor

will have to carry more current at low power factor.
● So the conductor size should be large.

3. Large copper losses:

● The large current at low power factor causes more I2R losses in all the elements of
the supply system.
● This results in poor efficiency
4. Poor voltage regulation:

● The large current at low lagging power factor causes greater voltage drops in
alternators, transformers, transmission lines and distributors.
● This results in the decreased voltage available at the receiving end.
● In order to keep the receiving end voltage within permissible limits, extra equipment
(i.e., voltage regulators) is required.
4. Reduced handling capacity of system:

● The lagging power factor reduces the handling capacity of all the elements of the
system.
● It is because the reactive component of current prevents the full utilization of
installed capacity.
Power Factor Improvement

● In order to improve the power factor, some device taking leading power should be
connected in parallel with the load.
● The capacitor draws a leading current and partly or completely neutralizes the
lagging reactive component of load current.
● This raises the power factor of the load.
Power Factor Improvement Equipment

 Normally, the power factor of the whole load on a large generating station is in the
region of 0·8 to0·9.
 However, sometimes it is lower and in such cases it is generally desirable to take
special steps to improve the power factor.
 This can be achieved by the following equipment :
1. Static capacitors.
2. Synchronous condenser.
3. Phase advancers.
Static capacitors

 The power factor can be improved by connecting capacitors in parallel with the
equipment operating at lagging power factor
 For three-phase loads, the capacitors can be connected in delta or star as shown in
Fig.
Synchronous condenser

 synchronous motor takes a leading current when over-excited and, therefore,

behaves as a capacitor.
 An over-excited synchronous motor running on no load is known as synchronous
condenser.
 When such a machine is connected in parallel , it takes a leading current which
partly neutralizes the lagging reactive component of the load
 By varying the field excitation, the magnitude of current drawn by the motor can be
changed by any amount.
 This helps in achieving stepless control of power factor.
 The p.f. improvement with capacitors can only be done in steps by switching on the
capacitors in various groupings.
Phase advancers

 Phase advancers are used to improve the power factor of induction motors
 phase advancer which is simply an a.c. exciter.
 The phase advancer is mounted on the same shaft as the main motor and is
connected in the rotor circuit of the motor.
 It provides exciting ampere turns to the rotor.
 04. which of the following is the disadvantage due
to low power factor?

B increased transmission
A poor voltage regulation
losses

C high cost of equipment D all of the above

 05. A synchronous condenser is virtually which of
the following?

B Under excited synchronous

A Induction motor
motor

C Over excited synchronous

D D.C. generator
motor
06. Low power factor is usually not due to

A Arc lamps B Induction motors

C Fluorescent tubes D Incandescent lamp

07. Static capacitors are rated in terms of

A kW B kWh

C kVAR D none of these