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EconomicsofPowerGeneration
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EconomicsofPowerGeneration
Inallnewengineeringenterprisesofthisera,thequestionofcostisofutmostimportance.Itistheroleplayedbyanengineertoachievethe
desiredtechnicalresult,withminimumcostthatdistinguisheshimfromanonengineerwhocanalsopossiblyattainthesameresult,butatwhat
cost?Inapowergenerationindustryweareusuallyconfrontedwithasituationwherewehavetomakeachoicebetweenequipmentofhighcost
withhighefficiencyandtheirlowcostcounterpartwithlowerefficiency.Inthefirstcase,thechargesduetointerestanddepreciationwillbehigher
withlowerenergybillascomparedtothecorrespondingfiguresinthesecondcase.HeretheroleoftheElectricalEngineercomesintoplay,where
hehastobalancethesituationinsuchawaythatthetotalexpenditureoftheplantisminimum,andthusthestudyofeconomics of power
generationisofprimeimportance,takingallpracticalpurposesintoconsideration.

To deduce the power generation economics effectively we should know the structure of annual expenditure of the plant and the factors
affectingthem.Thetotalannualexpenditureoftheplantcanbeclassifiedintoseveralsubheadingsnamely,

1.FixedCharges
2.SemifixedCharges
3.RunningCharges

TheseareallimportantparameterspertainingtotheEconomicsofpowergeneration.andareconsideredindetailsbelow.

FixedChargesofPowerGeneration
Fixedcharges,asthenamesuggestdoesnotvaryeitherwiththecapacityoftheplantorwithplantoperation.Thesecostsremainfixedunderall
circumstances. These mainly include the salaries of higher officials of the central organization and the rent of the land reserved for future
expansion.

SemiFixedChargesofPowerGeneration
Thesechargesmainlydependontheinstalledcapacityoftheplantandareindependentoftheelectricalenergyoutputoftheplant.Thesecharges
includethefollowing:

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1.Interest and depreciation on the capital cost of the generating plant, transmission and distribution network, buildings and other civil
engineeringworksetc.Capitalcostoftheplantalsoincludestheinterestpaidduringtheconstructionoftheplant,salariesofengineersand
otheremployees,developmentandconstructionofthepowerstation.Italsoincludescostincurredonaccountoftransportation,laboretc.to
bringtheequipmentonsiteandinstallingthesame,allofwhichareinvolvedfortheoveralleconomicsofpowergeneration.
Itisparticularlynoteworthy,thatinnuclearstationsthecapitalcostofthestationalsoincludesthecostofinitialchargesofthenuclearfuel
minusthesalvagevaluepaidattheendofitsusefullife.
2.Italsoincludesalltypesoftaxes,insurancepremiumspainonpoliciestocovertheriskofaccidentalbreakdown.
3.Rentpaidforthelandbeingactuallyusedfortheconstructionpurpose.
4.Thecostduetostartingandshuttingdownofplantsarealsoincludedinthiscategory,whenthepowerplantoperatesononeortwoshift
basis.

RunningChargesofPowerGeneration
Therunningchargesorrunningcostofapowerplant,isprobablyoneofthemostimportantparameterswhileconsideringtheeconomicsofpower
generationasitdependsuponthenumberofhourstheplantisoperatedoruponthenumberofunitsofelectricalenergygenerated.Itessentially
comprisesofthefollowingcostsincurredmentionedbelow.
1.Costofthefueldeliveredcoupledwiththefuelhandlingcostintheplant.Coalisthefuelusedinathermalpowerplant,anddieseloilincase
ofadieselstation.Incaseofahydroelectricplantthereisnofuelcostaswateristhefreegiftofnature.Butahydroplantrequireshigher
installationcostandtheirmegaWattoutputofpowergenerationisalsolowercomparedtothethermalpowerplants.
2.Wastageoftheoperationalandmaintenancestuffandsalariesofsupervisorstaffsengagedinrunningtheplant.
3.Incaseofathermalpowerplant,powergenerationeconomicsincludesthecostoffeedwaterfortheboiler,likethecostofwatertreatment
andconditioning.
4.Astheamountofwearandtearoftheequipmentdependsontheextenttowhichtheplantisbeingused,sothelubricatingoilcostandrepair
andmaintenancechargesoftheequipmentarealsoincludedintherunningcharges.

So,wecanconcludesaying,thatthetotalannualchargesincurredinthepowergeneration,andtheoverallpowergenerationeconomicscanbe
representedbytheequation,

1.Wherearepresentsthetotalfixedcostoftheplant,andhasnorelationwiththetotaloutputoftheplantorthenumberofhoursforwhich
theplantisrunning.
2.brepresentsthesemifixedcost,whichmainlydependsonthetotaloutputoftheplantandnotonthenumberofhoursforwhichtheplantis
beingoperated.TheunitforbisthusideallychosentobeinkWatt.
3.c essentially represents the running cost of the plant, and depends on the number of hours for which the plant is running to generate a
certainmegawattofpower.ItsunitisgiveninKWattHr.

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