1. Generation Costs

2. Fuel InputProcess (Generating station) Electrical Energy output Cost of Electrical energy = Cost of fuel + processing cost

3. Payment on Capital Cost Operation & Maintenance cost Processing cost

4. Capital cost Cost of : Preliminary survey Cost of land Cost of civil work Cost of Equipments Cost of erection & commissioning Other overheads

5. Operation & maintenance cost Fuel cost Salaries of staff & workers Expenditure on maintenance & repair of the equipments Expenditure on other consumables like lubricating oil, water etc. Part of the operation & maintenance cost is independent of energy generated and therefore considered as fixed cost.

6. Cost Factors Capital cost depends on the size (also called as the Installed capacity in kW or MW). Varies with the type of station ( diesel, steam, Hydro, Nuclear etc) Capital cost is Proportional to size i.e. kW rating of the plant Typical approximate values ( Rs/kW) are: –3000 –35000 for diesel, steam,gas plants –4000--60000 for Hydro –15000– 60000 for Nuclear

7. Cost of Energy produced Calculated on a Yearly Basis In addition to the cost of fuel burnt the expenditure like; salaries of workers, maintenance and repair of equipments, yearly payment of Interest on the capital borrowed, Insurances of staff and equipment, Depreciation fund reserve, Taxes, etc

8. Annual Generation cost components Annual Gen cost Two components –Fixed cost: independent of Energy produced –Variable : that depends on the amount of the energy produced Annual Plant cost = Fixed cost + variable cost

9. Some Examples A 200 MW of oil based plant has : 1. Capital cost Rs 12000 per kW 2. Fixed Charges 20% of capital cost 3. Fuel rate 0.4 kg/kwh 4. cost of oil 5000 Rs per 1000 kg 5. OM cost 15% of fuel cost 6. Plant capacity factor 0.8 Calculate minimum sailing price with a profit margin of 20%

10. Capital cost = 12000x200x10 3 Rs =24 x 10 8 ****** Annual fixed cost = 0.20 x 24 x 10 8 = 480 x 10 6 Rs Variable cost proportional to energy generated Annual energy generated = 8760 x plant capacity x plant capacity factor = 8760 x 200x10 3 x 0.8 = 1401.6x10 6 kWh Annual cost of fuel burnt = cost of fuel per kWh x annual energy gen = 0.4 x 5000/1000 x 1401.6 x 10 6 = 2803.2x10 6 annual operational & maintenance cost = 0.15 x 2803.2 x 10 6 = 420.48x10 6 Annual Total variable cost = 2803.2x10 6 + 420.48x10 6 = 3223.68 x10 6 Annual plant cost = Annual fixed cost + annual variable cost = 480 x 10 6 Rs + 3223.68 x10 6 = 3703.68 x 10 6 Cost of generation per kWh = Annual Plant cost / Annual energy gen =3703.68 x 10 6 / 1401.6x10 6 = 2.642 Rs / kWh

11. Effect of Load factor on Unit energy cost 0 20 40 60 80 100 % Generation cost Rs/kWh Load factor At low LF the fixed costs are shared by comparatively less number of units resulting in high cost per unit Fixed cost remains constant irrespective of load factor. Unit cost decreases as the plant load factor increases

12. Fixed & variable costs Steam plants Annual fixed cost –Interest on capital cost –Depreciation –Insurance –Taxes –Fixed managerial and general maintenance cost

13. Operating cost of steam plant Variable cost (Operating cost) –Cost of coal (including coal and ash handling) –Repair and maintenance –Salaries and wages of the operating staff –Cost of consumables like water, oil etc.