Economics of Power Generation

Economics of Power Generation:

Cost of Electrical Energy : The total Cost of Electrical Energy generated can be divided into three parts, namely ; Fixed cost ; Semi-fixed cost ; Running or operating cost. (i) Fixed cost: It is the cost which is independent of maximum demand and units generated. The fixed cost is due to the annual cost of central organisation, interest on capital cost of land and salaries of high officials. The annual expenditure on the central organisation and salaries of high officials is fixed since it has to be met whether the plant has high Or low maximum demand or it generates less or more units. Further, …


Introduction to Economics of Power Generation : A power station is required to deliver power to a large number of consumers to meet their requirements. While designing and building a power station, efforts should be made to achieve overall economy so that the per unit cost of production is as low as possible. This will enable the electric supply company tb sell electrical energy at a profit and ensure reliable service. The problem of determining the cost of production of electrical energy is highly complex and poses a challenge to power engineers. There are several factors which influence the production cost such …


Methods of Determining Depreciation : There is reduction in the value of the equipment and other property of the plant every year due to depreciation. Therefore, a suitable amount (known as depreciation charge) must be set aside annually so that by the time the life span of the plant is over, the collected amount equals the cost of replacement of the plant. The following are the commonly used methods for determining the annual depreciation charge: Straight line method ; Diminishing value method ; Sinking fund method. (i) Straight line method. In this method, a constant depreciation charge is made every year on the basis of total depreciation