EEE 5401

Power Plant Engineering

Power Plant
Economic & Administrative
Md. Minarul Islam, Lecturer
Department of Electrical & Electronic Engineering
University of Dhaka
Dhaka-1000, Bangladesh
 introductory
 In all fields of industry, economics plays an important role.

 In power plant engineering, economics of power system use certain

well established techniques for choosing the most suitable system,
where the power plant design must be made on the basis of most
economical conditions and not on the most efficient conditions., as
the profit is the main basis in the design of the plant and its
effectiveness is measured financially.

 The main purpose of design and operation of the plant is to bring the
cost of energy produced to minimum.

 Among many factors, the efficiency of the plant is one of the factors
that determines the energy cost.
Plant Design Considerations

Before concentrating on the economic factors, lets look onto the

principles of power plant design consideration:

1. Properly selected location

2. Simplicity of design.

3. Low capital cost

4. Low cost of energy generated
5. High efficiency

6. Low maintenance cost

7. Low operating cost

8. Reliability of supplying power

9. Reserve capacity to meet future power demand
Plant Design Considerations
All these tasks are almost impossible to fulfill because

Consumers demand is not constant, as it varies

during the days, the month, the seasons,

The load demand depends on consumers types,

such as residential, commercial, and industrial

Optimum efficiency cannot be obtained due to

various losses in the system, which is
unavoidable and thus causes additional costs
Purpose of Building Power Plant

Owner /
Generating Stake Holder
electricity
Well trained –experienced –educated
technical and administrative staff
Well established modern technology

Fulfilling consumer Retaining

demand for electrical profitable
power. revenue.
For fulfilling the three tasks, we need to look into the following
sections:

Variable load on Power Stations

Power Plant Economics

Energy Tariff
Variable Load on Power Station

The load on a power station varies from time to time due to

uncertain demands of the consumers and is known as variable
load on the station.

Effects of variable load.

The variable load on a power station introduces many perplexities

in its operation. Some of the important effects of variable load on a
power station are :

Need of additional equipment.

Increase in production cost.

Variation in Demand or load Profile
 Load Curves
The curve showing the variation of load on the power station with respect to (w.r.t)
time is known as a load curve.

Types:
Daily load curve
Monthly Load curve
Yearly load curve
 Load Curves
Importance.

 The daily load curve shows the variations of load on the power station
during different hours of the day.

 The area under the daily load curve gives the number of units generated in
the day. Units generated/day = Area (in kWh) under daily load curve.

 The highest point on the daily load curve represents the maximum demand
on the station on that day.

 The area under the daily load curve divided by the total number of hours
gives the average load on the station in the day.

 The ratio of the area under the load curve to the total area of rectangle in
which it is contained gives the load factor.

 The load curve helps in selecting the size and number of generating units.

 The load curve helps in preparing the operation schedule of the station.
Factors related to plant performance & demand variation

Connected load.
It is the sum of continuous ratings of all the equipments connected to supply system.

Maximum demand
It is the greatest demand of load on the power station during a given period.
Demand factor

demand factor is vital in determining the capacity of the plant equipment.

Average load
The average of loads occurring on the power station in a given period (day or
month or year) is known as average load or average demand.
Factors related to plant performance & demand variation

Load factor.

 The load factor plays key role in determining the overall cost per unit generated.

 Higher the load factor of the power station, lesser will be the cost per unit
generated.

Diversity factor

 diversity factor will always be greater than 1.

 The greater the diversity factor, the lesser‡ is the cost of generation of power.
Factors related to plant performance & demand variation

Plant capacity factor

 The plant capacity factor is an indication of the reserve capacity of the plant.
Reserve capacity
 A power station is so designed that it has some reserve capacity for
meeting the increased load demand in future.

 Therefore, the installed capacity of the plant is always somewhat greater

than the maximum demand on the plant.

Reserve capacity = Plant capacity − Max. demand

 Factors related to plant performance & demand variation

Plant use factor.

Units Generated per Annum

So
 Load Duration Curve
When the load elements of a load curve are arranged in the order of descending
magnitudes, the curve thus obtained is called a load duration curve.
Load Duration Curve
The following points may be noted about load duration curve :

 The load duration curve gives the data in a more presentable form. In
other words, it readily shows the number of hours during which the
given load has prevailed.

 The area under the load duration curve is equal to that of the
corresponding load curve. Obviously, area under daily load duration
curve (in kWh) will give the units generated on that day.

 The load duration curve can be extended to include any period of time.
By laying out the abscissa from 0 hour to 8760 hours, the variation and
distribution of demand for an entire year can be summarized in one
curve. The curve thus obtained is called the annual load duration curve.
Types of Loads

 Domestic load

 Commercial load

 Industrial load

 Municipal load

 Irrigation load

 Traction load
From this table, it is clear that total load on power station is 100 kW for 0—6 hours, 150
kW for 6—8 hours, 350 kW for 8—10 hours, 300 kW for 10—18 hours and 100 kW for 18—
24 hours.
Plotting the load on power station versus time, we get the daily load curve as shown in Fig.
3.7. It is clear from the curve that maximum demand on the station is 350 kW and occurs
from 8 A.M. to 10 A. M. i.e.,
 Selection of Units
I. The number and sizes of the units should be so selected that they
approximately fit the annual load curve of the station.

II. The units should be preferably of different capacities to meet the load
requirements. Although use of identical units (i.e., having same capacity)
ensures saving* in cost, they often do not meet the load requirement.

III. The capacity of the plant should be made 15% to 20% more than the
maximum demand to meet the future load requirements.

IV. There should be a spare generating unit so that repairs and overhauling of
the working units can be carried out.

V. The tendency to select a large number of units of smaller capacity in order to

fit the load curve very accurately should be avoided. It is because the
investment cost per kW of capacity increases as the size of the units decreases.
Selection of number and sizes of units :

Assuming power factor of the machines to be 0·8, the

output of the generating units available will be 8, 16, 20
and 24 MW. There can be several possibilities. However,
while selecting the size and number of units, it has to be
borne in mind that

(i) one set of highest capacity should be kept as standby unit

(ii) the units should meet the maximum demand (70 MW in this case) on the station
(iii) there should be overall economy. Keeping in view the above facts, 4 sets of 24 MW
each may be chosen. Three sets will meet the maximum demand of 70 MW and one unit
will serve as a standby unit.

Operational schedule:

Referring to the load curve shown above, the operational schedule will be as under :
(i) Set No. 1 will run for 24 hours.
(ii) Set No. 2 will run from 8.00 hours to midnight.
(iii) Set No. 3 will run from 11.00 hours to 16 hours and again from 19 hours to 22 hours.
Base Load and Peak Load on Power Station
 Power Plant Economics
Electric power generation cost
 This is the cost of new power plant to be constructed, where
such costs are divided into three categories :

1.Capital cost

2.Operating & maintenance cost

3.Fuel cost

 These costs are often expressed in unit currency per kWh of

power produced
 charging costs
 The cost to the consumer for electric energy charge can be roughly
approximated according to :
 Generation –60%

 Transmission –10%

 Distribution –20%

 Administrative/Profit –10%
 As far as our concern as power plant engineering, the generation cost is only
considered, because it is directly related to power generating system,
therefore knowing such costs can help the engineers to asses the economy of
their plant, and therefore works to improve the plant efficiency and
performance to maintain good income rate to the investors, and at the same
time to maintain and lower the charge cost to consumers again , referring to :

1. Capital cost, 2.Operating & maintenance cost (O & M), 3.Fuel cost

Can be used for cost estimation whether for new built plant, or the running cost
of an existing plant
Electric power produced (EPP)
 To simplify cost estimation, a new term “electric power produced” will
be presented which is usually expressed per one year.
 Therefore EPP for one year
EPP = Prt. CF . t (kWh)

Prt–nominal power plant rating (kW)

CF –plant capacity factor
t -hrs/yr = 8760 hrs/yr

 The EPP is very useful term, as cost of power generation is related to it, and so
the overall power generation cost (OPGC) is generally expressed as:
Ex. –consider a (100)MW plant having
(CF = 35%), find EPP
solution

EPP = Prt. CF . t
= (100MW x 1000kW/MW) (0.35) (8760 hr/yr)
= 3.066 x 10^8 kWh
Capital cost
 This is the most difficult to compute due to the large expenditure and time
period involved. However, for simplification, capital cost can be divided into two
main categories :

A-initial costs
1.Land
2.Buildings
3.Equipment
4.Installation
5.Overall charges : ‘transportation –stores -keeping –interest …etc’

B -economic charges
1.Interest rate
2.Depreciation :physical → wear & tear –corrosion –aging …functional
→ change of process –technical advancement….
3.Taxes
4. insurance
 Fuel cost
 The annual thermal heat required to produce a given amount of electricity can
be determined as :

 The annual fuel cost is determined from the amount of fuel used and it’s cost
per unit of such amount, i.e:

 From above the fuel cost of electricity production can be expressed as :

Where E –power produced (kWh/yr), HHV –fuel heating value (kJ/kg)

ṁf–fuel annual consumption rate (ton/yr), ηth–plant thermal efficiency
cost –cost of unit mass of fuel ($/ton)
O & M cost

 Labor costs (wages & salaries)

These will depend on the manning levels and degree of automation of
the plant, as well as the living standard .

 Maintenance charges
Maintenance costs as an average over the plant life (based on previous
experience and guidance) should be sought from the manufacturer
Economic Charge----Depreciation
 Depreciation. The decrease in the value of the power plant equipment
and building due to constant use is known as depreciation.

 There is reduction in the value of the equipment and other property of the
plant every year due to depreciation.

 Therefore, a suitable amount (known as depreciation charge) must be set

aside annually so that by the time the life span of the plant is over, the
collected amount equals the cost of replacement of the plant.

Methods of Determining Depreciation

 The following are the commonly used methods for determining the annual
depreciation charge :

(i) Straight line method ;

(ii) Diminishing value method ;
(iii) Sinking fund method.
Straight line method
 In this method, a constant depreciation charge is made every year on the basis
of total depreciation and the useful life of the property.

However, this method suffers from two defects.

 Firstly, the assumption of constant depreciation

charge every year is not correct.

 Secondly, it does not account for the interest

which may be drawn during accumulation.
Diminishing value method.
 In this method, depreciation charge is made every year at a fixed rate on the
diminished value of the equipment.

 In other words, depreciation charge is first applied to the initial cost of

equipment and then to its diminished value.

Mathematical treatment
Let P = Capital cost of equipment
n = Useful life of equipment in years
S = Scrap value after useful life

Suppose the annual unit depreciation is x. It is desired to find the value

of x in terms of P, n and S.

Value of equipment after one year = P − Px = P (1 − x)

Diminishing value method.
Diminishing value method.
Similarly, annual depreciation charge for the subsequent years can be calculated.

 This method is more rational than the straight

line method.

 It is clear from the curve that depreciation

charges are heavy in the early years but decrease
to a low value in the later years.

This method has two drawbacks.

 Firstly, low depreciation charges are made in the

late years when the maintenance and repair
charges are quite heavy.
 Secondly, the depreciation charge is independent
of the rate of interest which it may draw during
accumulation. Such interest moneys, if earned,
are to be treated as income.
Sinking fund method
 In this method, a fixed depreciation charge is made every year and interest
compounded on it annually.
 The constant depreciation charge is such that total of annual instalments plus
the interest accumulations equal to the cost of replacement of equipment after
its useful life.

Let P = Initial value of equipment, n = Useful life of equipment in years

S = Scrap value after useful life, r = Annual rate of interest expressed as a decimal,
Cost of replacement = P − S
Sinking fund method
Sinking fund method
Importance of High Load Factor

The load factor plays a vital role in determining the cost of energy.

Some important advantages of high load factor are listed below :

Reduces cost per unit generated :

A high load factor reduces the overall cost per unit generated. The higher
the load factor, the lower is the generation cost. It is because higher load
factor means that for a given maximum demand, the Number of units
generated is more. This reduces the cost of generation.

Reduces variable load problems :

A high load factor reduces the variable load problems on the power
station. A higher load factor means comparatively less variations in the
load demands at various times. This avoids the frequent use of regulating
devices installed to meet the variable load on the station.