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Mep1623 power plant cost 1


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Mep1623 power plant cost 1

  1. 1. CONTENTCONVENTIONAL & RENEWABLE POWER PLANT Content List i1 Preface ii2 General Description 3 General Description 33 The Cost 3 1. Government incentives 4 2. Capital (investment) cost 4 3. Fuel costs 5 4. Air Emissions Controls for Coal and Gas Plants 74 Equation And Calculation 105 Conclusion 116 References 127 Attachment 13 i 0
  2. 2. CONVENTIONAL & RENEWABLE POWER PLANT PREFACEFirst of all, I would like to express my sincere gratitude and grateful to Allah S.W.T. forgiving me blessing in completing this assignment as scheduled.The purpose of this assignment is to provide a complete course in Electrical for my studyingin Master Electrical Engineering (Power), beside this assignment also improve knowledgeand information about the power plant economic dispatch to me.This paper summarize the factors that determine the cost of electricity from power plants. Thefactors - including construction costs, fuel expense, environmental regulations, and financingcosts - can all be affected by government energy, environmental, and economic policies.Government decisions to influence, or not influence, these factors can largely determine thekind of power plants that are built in the future. For example, government policies aimed atreducing the cost of constructing power plants could especially benefit nuclear plants, whichare costly to build. Policies that reduce the cost of fossil fuels could benefit natural gas plants,which are inexpensive to build but rely on an expensive fuel.Acknowledgement and thanks are due to all those who have assisted in any way in thedevelopment of the work, including those who have indirectly involved. I especially wish torecord my sincere thanks for continued encouragement and support which I received from mylecturer, Dr. Pauzi, Electrical Engineering Faculty, UTM. Acknowledgement is also madeof the many sources; Perpustakaan Sultanah Zanariah UTM, and director of InstituteKemahiran MARA, Johor Bahru.Last but not least, I would like to apologize for any shortcoming in this assignment.Hopefully the best will be from Allah S.W.T and His blessing too.Thank you.Universiti Technologi Malaysia (UTM)Master Electrical Engineering (Power) 1ii
  3. 3. CONVENTIONAL & RENEWABLE POWER PLANT GENERAL DESCRIPTIONRenewable energy is energy which comes from natural resources such as sunlight, wind, rain,tides, and geothermal heat, which are renewable (naturally replenished). About 16% of globalfinal energy consumption comes from renewables, with 10% coming from traditionalbiomass, which is mainly used for heating, and 3.4% from hydroelectricity. New renewablesaccounted for another 3% and are growing very rapidly. The share of renewables inelectricity generation is around 19%, with 16% of global electricity coming fromhydroelectricity and 3% from new renewables[1]. On the other hand the conventional power isdescribed other than that. Coal, fuel, gas, nuclear and oil shale are categorised asconventional while biomass, geothermal, hydro, marine, solar and wind are categorised asrenewable. Hence the types of power plant was named by refering to their energy source. Inthis paper, we will discuss several conventional and renewable power plant which includingthe differences type of power plant, mathematical formula of generation cost for each typeand comparing the generation in term in cost environment impact. THE COSTThe cost of electricity are depending on several factors. These factors - including constructioncosts, fuel expense, environmental regulations, and financing costs - can all be affected bygovernment energy, environmental, and economic policies. Government decisions toinfluence, or not influence, these factors can largely determine the kind of power plants thatare built in the future. For example, government policies aimed at reducing the cost ofconstructing power plants could especially benefit nuclear plants, which are costly to build.Policies that reduce the cost of fossil fuels could benefit natural gas plants, which areinexpensive to build but rely on an expensive fuel.The major factors that determine the costs of building and operating power plants. Thesefactors include:  Government incentives.  Capital (investment) cost, including construction costs and financing.  Fuel costs.  Air emissions controls for coal and natural gas plants. 2
  4. 4. CONVENTIONAL & RENEWABLE POWER PLANTGovernment IncentivesMany government incentives influence the cost of generating electricity. In some cases theincentives have a direct and clear influence on the cost of building or operating a power plant,such as the renewable investment tax credit. Other programs have less direct affects that aredifficult to measure, such as parts of the tax code that influence the cost of producing fossilfuel. [2]Capital and Financing CostsConstruction Cost Components and Trends. Most of the generating technologies discussedin this report are capital intensive; that is, they require a large initial construction investmentrelative to the amount of generating capacity built. Power plant capital costs are oftendiscussed in terms of dollars per kilowatt (kW) of generating capacity. All of the technologiesconsidered in this report have estimated 2008 costs of $2,100 per kW or greater, with theexception of the natural gas combined cycle plant ($1,200 see Appendix B). Nuclear,geothermal, and IGCC plants have estimated costs in excess of $3,000 per kW. Power plantcapital costs have several components. Published information on plant costs often do notclearly distinguish which components are included in an estimate, or different analysts mayuse different definitions. The capital cost components are:  Engineering, Procurement, and Construction (EPC) cost: this is the cost of the primary contract for building the plant. It includes the cost of designing the facility, buying the equipment and materials, and construction.  Owner’s costs: these are any construction costs that the owner handles outside the EPC contract. This could include arranging for the construction of transmission and fuel delivery facilities (such as a natural gas pipeline) to a power plant.  Capitalized financing charges: a plant developer incurs financing charges while a power plant is being built. This includes interest on debt and an imputed cost of equity capital. Until the plant is operating these costs are capitalized; that is, become part of the investment cost of the project for tax, regulatory, and financial analysis purposesConstruction costs for power plants have escalated at an extraordinary rate since thebeginning of this decade. According to one analysis, the cost of building a power plantincreased by 131% between 2000 and 2008 (or by 82% if nuclear plants are excluded fromthe estimate). Costs reportedly increased by 69% just since 2005. The cost increases affected 3
  5. 5. CONVENTIONAL & RENEWABLE POWER PLANTall types of generation. For example, between 2000 and 2008, the cost of wind capacityreportedly increased by 108%, coal increased by 78%, and gas-fired plants by 92%.The costincreases have been attributed to many factors, including:  High prices for raw and semi-finished materials, such as iron ore, steel, and cement.  Strong worldwide demand for generating equipment. China, for example, is reportedly building an average of about one coal-fired generating station a week. [3]  Low value of the dollar.  Rising construction labor costs, and a shortage of skilled and experienced engineering staff.  An atrophied domestic and international industrial and specialized labor base for nuclear plant construction and components.  In the case of wind, competition for the best plant sites and a tight market for wind turbines; in the case of nuclear plants, limited global capacity to produce large and ultra-large forgings for reactor pressure vessels.  Coincident worldwide demand for similar resources from other business sectors, including general construction and the construction of process plants such as refineries. Much of the demand is driven by the rapidly growing economies of Asia.The future trend in construction costs is a critical question for the power industry. Continuedincreases in capital costs would favor building natural gas plants, which have lower capitalcosts than most alternatives. Stable or declining construction costs would improve theeconomics of capital-intensive generating technologies, such as nuclear power and wind. Atleast some long-term moderation in cost escalation is likely, as demand growth slackens andnew supply capacity is added. But when and to what degree cost increases will moderate is asunpredictable as the recent cost escalation was unforeseen.Fuel CostsFuel costs are important to the economics of coal, nuclear, and natural gas plants, andirrelevant to solar, geothermal, and wind power. Recent trends in the delivered cost of coaland natural gas to power plants are illustrated below in Figure 3. The constant dollar pricesof both fuels have increased since the beginning of the decade, but the price escalation hasbeen especially severe for natural gas. Natural gas has also been consistently more expensivethan coal. The comparatively low cost of coal partly compensates for the high cost of 4
  6. 6. CONVENTIONAL & RENEWABLE POWER PLANTbuilding coal plants, while the high cost of natural gas negates part of the capital cost andefficiency advantages of combined cycle technology. Because it takes years to build a power plant, and plants are designed to operate fordecades, generation plans largely pivot on fuel price forecasts. However, fuel prices havebeen notoriously difficult to predict. For example, EIA forecasts of delivered coal prices andnatural gas wellhead prices have been off target by an average of, respectively, 47% and64%. EIA’s analysis illustrates how the confluence of technological, regulatory, resource, anddomestic and international market factors make fuel forecasts so problematic. Fuel priceuncertainty is especially important in evaluating the economics of natural gas-fired combinedcycle plants. For the base assumptions used in this study, fuel constitutes half of the total costof power from a new combined cycle plant, compared to 18% for a coal plant and 6% for anuclear plant. 5
  7. 7. CONVENTIONAL & RENEWABLE POWER PLANTThe price of the uranium used to make nuclear fuel has, like coal and natural gas, increasedsharply and has been volatile (Figure 4). Although prices have recently dropped, they are stillfar above historic levels.69 Over the long term, EIA expects nuclear fuel prices to increase inreal terms from $0.58 per mmbtu in 2007 to $0.77 per mmbtu in 2023, and then slowlydecline. Even prices twice as high would not have a major impact on nuclear planteconomics, which are dominated by the capital cost of building the plant.Air Emissions Controls for Coal and Gas PlantsRegulations that limit air emissions from coal and natural gas plants can impose two types ofcosts: The cost of installing and operating control equipment, and the cost of allowances thatpermit plants to emit pollutants. The following emissions are discussed below:Conventional Emissions. The Environmental Protection Agency (EPA) has establishedNational Ambient Air Quality Standards (NAAQS) for several pollutants, including SO2,NOx, ozone, and particulates. New coal and natural gas plants built in areas in compliancewith a NAAQS standard must install Best Available Control Technology (BACT) pollutioncontrol equipment that will keep emissions sufficiently low that the area will stay incompliance. Plants built in areas not in compliance with a NAAQS (referred to as “non- 6
  8. 8. CONVENTIONAL & RENEWABLE POWER PLANTattainment” areas) must meet a tighter Lowest Achievable Emission Rate (LAER) standard.In practice, air permit emissions are negotiated case-by-case between the developer and stateair authorities. Federal standards set a ceiling; state permits can specify lower emission limits.In addition to technology control costs, new plants that emit SO2 must buy SO2 emissionallowances under the acid rain control program established by Title IV of the Clean Air Act.Depending on the location of a new plant, it may also need to purchase NOx allowances.Base CaseKey Observations.The lowest cost generating technologies in the Base Case are pulverized coal, geothermal,and natural gas combined cycle plants. All have costs around $60 per Mwh (2008 dollars).Based on the assumptions in this report, other technologies are at least a third moreexpensive.Of the three lowest cost technologies, geothermal plants are limited to available sites in theWest that typically support only small plants, and coal plants have become harder to builddue to cost and environmental issues. The gas-fired combined cycle plant is currently atechnology that can be built at a large scale, for cycling or baseload service, throughout theUnited States. 7
  9. 9. CONVENTIONAL & RENEWABLE POWER PLANTThe above projections are based on private (IOU or IPP) funding of power projects. The costper MWh drops precipitously if the developer is assumed to be a POU with low-costfinancing. However, most POUs are small and do not have the financial or managerialresources to build large power projects.Under the Base Case assumptions, the lowest-cost options are pulverized coal, natural gascombined cycle, and geothermal generation, all in the $60 per Mwh (2008 dollars) range(column 10). These results are attributable to the following factors:  Pulverized coal is a mature technology that relies on a relatively low cost fuel.  Natural gas is an expensive fuel, but combined cycle technology is highly efficient and has a low construction cost.  Geothermal energy has no fuel cost and unlike variable renewable technologies, such as wind and solar, can operate at very high utilization rates (high utilization allows the plant to spread fixed operating costs and capital recovery charges over many megawatthours of sales).Although all three technologies have similar power costs, the coal and geothermaltechnologies have limitations and risks that the natural gas combined cycle does not face.Geothermal plants are limited to relatively small facilities (about 50 MW) at western sites. Asdiscussed above, many coal projects have been canceled due to environmental opposition andescalating construction costs. In contrast, the gas-fired combined cycle plant has limitedenvironmental impacts, can be located wherever a gas pipeline with sufficient capacity isavailable, and plants can be built with generating capacities in the hundreds of megawatts.Probably the main risk factor for a combined cycle plant is uncertainty over the long termprice and supply of natural gas. 8
  10. 10. CONVENTIONAL & RENEWABLE POWER PLANTIn the Base Case, wind power, IGCC coal, and nuclear energy have costs in the $80 per Mwhrange. IGCC and nuclear plants are very expensive to build, with estimated overnight capitalcosts of, respectively, $3,359 and $3,682 per kW of capacity (2008 dollars; see Table 18).Because the plants are expensive and take years to construct (an estimated four years for anIGCC plant and six years for a nuclear plant) these technologies also incur large charges forinterest during construction that must be recovered in power costs. Wind has a relatively highcost per Mwh because wind projects have high capital costs ($2,100 per kW of capacity) andare assumed to operate with a capacity factor of only 34%. The low capacity factor meansthat the plant is the equivalent of idle two-thirds of the year. Consequently, the capital costsfor the plant must be recovered over a relatively small number of units of electricityproduction, driving up the cost per Mwh. High capital costs and low rates of utilization alsodrive up the costs of the solar thermal and solar PV plants to, respectively, $100 per Mwh and$255 per Mwh.Another way of viewing the results is to compare each technology’s costs to a benchmarkcost of electricity. The benchmark used is the cost of power from a natural gas combinedcycle plant. [4] 9
  11. 11. EQUATION AND CALCULATIONCONVENTIONAL & RENEWABLE POWER PLANTMathematical formula of the generationThis section is not discussing the actual calculation but it is more on assumption calculationto determine the generation cost in general which neglect the government incentives and airemissions cost.The only financially valid way to compare the costs of different sources of energy productionis to calculate the per kilowatt-hour (kWh) cost. This methodology controls for variablefactors such ascapacity factor and useful life. Construction cost + Production cost + Decommisioning cost = Total cost per kWh per kWh per kWh (nuclear only) per kWhThe main cost components of energy are construction costs and production costs. Total costper kWh can be calculated by taking the per kWh cost of construction plus the per kWh costof production. For nuclear energy you must also add the per kWh decommissioning cost tothe production and construction costs too.Calculating the Per kilowatt-Hour construction cost of a projectMany energy production plants are very expensive to build. In order to understand howexpensive a particular plant is relative to other energy plants, you must calculate the per kWhcost of construction. This can be done using the following equation. TOTAL CONSTRUCTION COST [(MW RATING X 1000) X USEFUL LIFE X (CAPACITY FACTOR X 8,760)Per Kilowatt Hour production costsNormally you will not need to calculate the per kWh production costs for a given type ofenergy source because these estimates are readily available from a wide variety of resources.Each plant is unique and may have a slightly different per kWh production cost. Since theamount of energy produced at any plant is very large, deviations in production cost are notgenerally large enough to change the per kWh production cost for an individual plant beyondthe hundredths or thousandths of a penny. To the right is a list of the per kWh productioncosts used to develop the total cost per kWh. [5] 10
  12. 12. CONVENTIONAL & RENEWABLE POWER PLANT CONCLUTIONTo determine the accurate cost of power plant, four criteria to be considered which aregovernment incentives, capital (investment) cost, fuel costs and air emissions controlsincluding the power plant technology. Nevertheless there are several option method used. Forgeneral case, Influence of Garvoment and Carbon Control cost usually neglected and theassumtion cost is determined. The comparison among power plant technology in term of costis described as figure below. [6] 11
  13. 13. REFERENCECONVENTIONAL & RENEWABLE POWER PLANT[1] Wikipedia, “Power Station---Wikipedia, The Free Encyclopedia,” [Online]. Available: [Accessed Jun 7, 2012][2] EIA, Federal Financial Interventions and Subsidies in Energy Markets 2007, April 2008. [Online]. Available: [Accessed Jun 6, 2012][3] Keith Bradsher and David Barboza, “Pollution From Chinese Coal Casts a Global Shadow,” The New York Times, June 11, 2006. [Online]. Available: pagewanted= all[4] Stan Kaplan, “Power Plants: Characteristics and Costs” [Online]. Available: www.fas.org_sgp_crs_misc_RL34746 [Accessed Jun 6, 2012][5] Jason Morgan, “Comparing Energy Costs Of Nuclear, Coal, Gas, Wind And Solar” [Online]. Available: nuclear-coal-gas-wind-and-solar/ [Accessed Jun 8, 2012][6] Sk.anwar basha, “Waste heat recovery power plant” [Online]. Available: [Accessed Jun 7, 2012] 12