The document outlines economic analysis concepts related to power plants, including estimation of production costs and performance parameters. It emphasizes the importance of understanding costs associated with generating electricity and factors influencing the choice of power plants. Additionally, it discusses methods to reduce power generation costs and the significance of both fixed and operational costs in electricity production.

1. Program: Diploma (Mechanical)
Class: TY (ME) Semester: V
Course: Power Plant Engineering
Code: 22566
LECTURE 16:
Unit: 6. Economic Analysis of Power Plants

2. 02
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Name of theName of theName of theName of the Trainer : Prof. Rushikesh Deoram SonarTrainer : Prof. Rushikesh Deoram SonarTrainer : Prof. Rushikesh Deoram SonarTrainer : Prof. Rushikesh Deoram Sonar
Years ofYears ofYears ofYears of Experience : 10Experience : 10Experience : 10Experience : 10
DomainDomainDomainDomain Expertise : Mechanical EngineeringExpertise : Mechanical EngineeringExpertise : Mechanical EngineeringExpertise : Mechanical Engineering
Qualification: M.E. (Design Engineering)Qualification: M.E. (Design Engineering)Qualification: M.E. (Design Engineering)Qualification: M.E. (Design Engineering)
Contact Details:Contact Details:Contact Details:Contact Details:
+91 9890481959+91 9890481959+91 9890481959+91 9890481959
rushikesh.sonar@sandippolytechnic.orgrushikesh.sonar@sandippolytechnic.orgrushikesh.sonar@sandippolytechnic.orgrushikesh.sonar@sandippolytechnic.org

3. 03Unit VI: Economic Analysis of Power Plants
TOPICS COVERED IN PREVIOUS LECTURE
5.2 Nuclear Fuels and Nuclear Reactor5.2 Nuclear Fuels and Nuclear Reactor5.2 Nuclear Fuels and Nuclear Reactor5.2 Nuclear Fuels and Nuclear Reactor
5.3 Advantages and Disadvantages5.3 Advantages and Disadvantages5.3 Advantages and Disadvantages5.3 Advantages and Disadvantages
5.4 Intro. to Regulating Agencies5.4 Intro. to Regulating Agencies5.4 Intro. to Regulating Agencies5.4 Intro. to Regulating Agencies
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TOPICS TO BE COVERED IN THIS LECTURE
6.1 Estimation of Production Cost of Electrical Energy6.1 Estimation of Production Cost of Electrical Energy6.1 Estimation of Production Cost of Electrical Energy6.1 Estimation of Production Cost of Electrical Energy
6.2 Estimation of Performance Parameters6.2 Estimation of Performance Parameters6.2 Estimation of Performance Parameters6.2 Estimation of Performance Parameters
6.3 Factors affecting choice of Power Plant.6.3 Factors affecting choice of Power Plant.6.3 Factors affecting choice of Power Plant.6.3 Factors affecting choice of Power Plant.

4. 04Unit VI: Economic Analysis of Power Plants
6.1: Economic Analysis of Power Plants: INTRODUCTION
There are various sources of energy e.g. the energy from conventional fuels, hydro energy, solar energy,
wind energy, atomic energy etc.
However, all types of energies are converted into electrical energy since this energy is by far the most
convenient, clean and easiest to handle for various practical applications.
The economics of generation of electric power is of major concern both to the electric supply company and
as well to the consumer.
An electric supply company will work out the cost of generation before installing a power generating plant.
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It has to assess the following parameters:-
1. Low initial cost and high efficiency of power generation
2. Safety
3. Reliability
4. Ease of maintenance
5. Minimum operating cost
6. Profits

5. 05Unit VI: Economic Analysis of Power Plants
6.1: Economic Analysis of Power Plants: INTRODUCTION
Whereas, a consumer is required to assess its power requirement, availability of energy to him from a public
supply company or generation of its own power by installing a generator.
The consumer will work out the comparative cost of power by various alternatives available to him i.e.
whether to buy the power or generate its own power or buy as well generate its own power.
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Therefore, the economics of power generation is of great importance in designing a power plant.

6. 06Unit VI: Economic Analysis of Power Plants
6.2.1: Estimation of Production Cost of Electrical Energy
The total of electrical energy generated by a power plant can be broadly divided into two parts
as follows :
1. FIXED COST
2. RUNNING OR OPERATIONAL COST
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7. 07Unit VI: Economic Analysis of Power Plants
6.2.1: Cost of Electrical Energy: 1. FIXED COST
21
2. COST OF BUILDING1. COST NEEDED FOR PURCHASE OF
LAND AND EQUIPMENT
The fixed cost is the initial cost incurred in installing a power plant. This cost includes the following :
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4. COST OF DESIGNING AND PLANNING OF POWER STATION.
3. COST OF INSTALLATION
5. TRANSMISSION AND
DISTRIBUTION COST.

8. 08Unit VI: Economic Analysis of Power Plants
6.2.1: Cost of Electrical Energy: 1. FIXED COST
The fixed cost depends on the size or rating of the plant to be installed.
It further includes the interest on capital borrowed, depreciation, insurance premium, taxes of government and
salaries of fixed management and clerical staff.
These charges are called Annual Fixed Charges which are kept aside every year. These are as follows :
21
2. DEPRECIATION1. INTEREST ON CAPITAL
INVESTMENT
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4. INSURANCE PREMIUM
3. TAXES
5. SALARIES OF MANAGEMENT &
CLERICAL STAFF.

9. 09Unit VI: Economic Analysis of Power Plants
6.2.1: Cost of Electrical Energy: 2. RUNNING OR OPERATIONAL COST
21
2. COST OF OIL, WATER &
GREASE
1. COST OF FUEL & LUBRICANTS
These are the charges which are required to be incurred continuously for running the plant.
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4. COST OF GENERAL MAINTENANCE
3. COST OF OPERATING LABOUR5. COST OF SPARES & REPAIRS

10. 10Unit VI: Economic Analysis of Power Plants
6.2.2: Unit Energy Cost
Unit energy cost is calculated as follows :
1. Annual fixed charges are calculated based on the kW rating of the plant.
2. Annual running charges are calculated based on the number of hours the power plant is generating
electrical energy.
Unit energy cost = Annual fixed charges + Annual running charges
kW rating of plant Power generated in kWh
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Unit energy cost = Rs. A/kW + Rs. B/kWh

11. 11Unit VI: Economic Analysis of Power Plants
6.3 : Estimation of Various Performance Parameters
1. Heat Rate (Energy Efficiency)
Overall thermal performance or energy efficiency for a power plant for a period can be defined as ;
φ hr = H / E
Where, φhr = heat rate (Btu/kWh, kJ/kWh)
H = heat supplied to the power plant for a period (Btu, kJ)
E = energy output from the power plant in the period (kWh)
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2. Thermal Efficiency
Thermal efficiency can be expressed as ;
μte = (100) (3412.75 Btu/kWh)
φ
Where, μte = Thermal Efficiency (%)
1kWh = 3412.75 Btu

12. 12Unit VI: Economic Analysis of Power Plants
6.3 : Estimation of Various Performance Parameters
3. Capacity Factor
The capacity factor for a power plant is the ratio between average load and rated load for a period of time
and can be expressed as,
μcf = (100) Pal
Prl
Where, μcf = Capacity Factor (%)
Pal = average load for the power plant for a period (kW)
Prl = rated capacity for the power plant (kW)
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Prl = rated capacity for the power plant (kW)
4. Load Factor
Load factor for a power plant is the ratio between average load and peak load and can be expressed as
μlf = (100) Pal
Ppl
Where, μlf = Load Factor (%)
Pal = average load for the power plant for a period (kW)
Ppl = Peak capacity for the power plant (kW)

13. 13Unit VI: Economic Analysis of Power Plants
6.3 : Estimation of Various Performance Parameters
5. Economic Efficiency
Economic efficiency is the ratio between production costs, including fuel, labor, materials and services,
and energy output from the power plant for a period of time. Economic efficiency can be expressed as,
φee = C / E
Where, φee = economic efficiency (cents/kW, euro/kW, ...)
C= production costs for a period (cents, euro, ..)
E = energy output from the power plant in the period (kWh)
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6. Operational Efficiency
* Operational efficiency is the ratio of the total electricity produced by the plant during a period of time
compared to the total potential electricity that could have been produced if the plant operated
at 100 percent in the period.
* Operational efficiency can be expressed as, μeo = (100) E
E 100%
Where E = energy output from the power plant in the period (kWh)
E100% = potential energy output when operated at 100% in the period (kWh)

14. 14Unit VI: Economic Analysis of Power Plants
6.3 : Estimation of Various Performance Parameters
7. Diversity factor:
Diversity factor = Sum of individual maximum demands
Simultaneous maximum demand
8. Plant capacity factor :
Capacity factor = Average load x t = Peak load x Load factor
Plant capacity x t Plant capacity
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9. Plant use factor :
It is defined as the ratio of energy produced in given time to maximum possible energy that could have
been produced during the actual number of hours of operation.
Plant use factor = Annual energy produced X No. of hours the plant is in operation during the year
Capacity of plant
10. Utilization factor
It is the ratio of the maximum generator demand to the generator capacity.
Utilization factor = Maximum generator demand / Generator capacity.

15. 15Unit VI: Economic Analysis of Power Plants
6.4 : Factors Affecting on Choice of Power Plant
1. Type of fuel available.
2. Fuel transportation cost.
3. Requirement and cost of land and cost of foundation.
4. Cost of equipment for transmission of energy.
5. Availability of cooling water.
6. Type of load.
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6. Type of load.
7. Site of power plant.
8. Generating unit.
9. Number of generating units.
10. Pollution and Noise

16. 16Unit VI: Economic Analysis of Power Plants
6.5 : METHODS TO REDUCE POWER GENERATION COST
1. By using a plant of simple design, which does not need highly skilled personnel/labour.
2. By selecting equipment's of proper capacities.
3. By selecting equipment's having longer life and requiring minimum maintenance cost over the whole life.
4. By carrying out proper maintenance of equipment's to avoid plant breakdowns.
5. By running the power plant/stations at high load factors.
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6. By increasing the efficiency of power plant.
7. By supervising the plant operations carefully, which ensures few breakdowns and extended plant life.

17. 17Unit VI: Economic Analysis of Power Plants
In this lesson, We have learnedIn this lesson, We have learnedIn this lesson, We have learnedIn this lesson, We have learned
6.1 Estimation of Production Cost
6.2 Estimation of Various performance parameters
SUMMARY
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6.2 Estimation of Various performance parameters
6.3 Factors affecting choice of Power Plant

18. 18Unit VI: Economic Analysis of Power Plants
END OF VIDEO LECTURE
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