ECONOMICS

Economics drives the selection of an appropriate power generation scheme for the given situation. The need may be one only during high electricity demand hours (peak load) or the new power may be needed 24 hours a day (base load). Base load is that load below which the demand never falls, that is, the base load must be supplied 100% of the time. The peaking load occurs less than about 15% of the time; the intermediate load is between 15% to 100% of the time.

To improve industrial plant cost effectiveness, some companies are implementing cogeneration, which is the production of electricity in-house along with industrial process steam.

In calculating the cost of electricity production (¢/kWe·hr), the energy costs are broken into three categories:

  1. capital: land, equipment, construction, interest
  2. operational and maintenance (O&M): wages, maintenance, some taxes and insurance
  3. fuel costs

Costs are often expressed in mills per kilowatt·hour where 1,000 mills equals $ 1. Since costs are expressed on a per kWe·hr basis, a high capacity factor is desired so the capital cost is spread out. For financial analyses, plants are assumed to have a lifetime of between 30 to 40 years. Operating and maintenance (O&M) costs are generally proportional to the plant output so the related energy cost is constant. The capital and operating (including fuel) costs generally dictate how a plant is used on the grid (hydroelectric units are an exception to the following):

Loading Capital Costs O&M and Fuel Costs Example Plants
Base High Low Coal, Nuclear
Peak Low High Oil, old Nat. Gas

The base load plants can be further differentiated: nuclear plants have high initial fixed (capital) charges and low fuel costs, whereas coal-fired plants have lower fixed charges and higher fuel costs. The plant selection for various load demands can be summarized as

Loading Power Plants Economics Capacity Factor
Base Large coal and nuclear units Large capital outlay ok, but must have reasonable operating & maintenance costs CF > 57%
Intermediate Old coal, oil or gas units with low thermal efficiency and combined cycle plants Have mid range operating & maintenance costs 23% < CF < 57%
Peak Combustion turbines and diesel engines; and hydro Need to minimize capital costs, but fuel costs can be high CF < 23%

The thermal efficiency is the net electricity generated divided by the heat input required to produce that electricity, i.e., Pe/Qth. The capacity factor is the energy produced during some time interval ratioed to the energy that could have been produced at net rated power during the same time interval. Another plant performance terminology is the availability factor, which is the time period that the plant is operable divided by the total period considered (availability factor >= capacity factor). Another term is the load factor, but it is generally applied to power users or consumers whereas the capacity factor is applied to power generating systems.

The load following plants include both the intermediate and the peak load units. The spinning reserve is excess capacity that is running and synchronized with the system, and is equal to the largest unit in the system in case it trips. Another consideration is the reserve capacity (historically maintained at about 20%), which is the difference between the total rated capacity of all the units in the grid and the expected peak demand on the system.

For some electricity generation schemes (e.g., solar and wind), it may be necessary to include some type of energy storage device or mechanism in order to supply power at all times it is required or for peaking power needs. The cost of such energy storage facilities should be included in the overall costs. Alternatively, base-load electric may be employed during off-hours (midnight to early a.m.) to "charge" the energy storage device. Possible energy storage approaches include

  1. pumped water storage (hydro),
  2. compressed air for gas turbine use,
  3. thermal energy storage (solar thermal facility),
  4. battery storage,
  5. flywheels, and
  6. magnetic energy storage (using superconducting materials).


Last updated: July 12, 2006

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