A ASSINGMENT REPORT ON

STUDIE OF ECONOMICS OF THERMAL POWER PLANT DURING COURSE OF ACTION OF THERMAL POWER PLANT ENGINEERING (TPP)

Submitted in partial fulfillment for Course Work of Thermal Power Plant Engineering RAJASTHAN TECHNICAL UNIVERSITY KOTA SESSION 2010-2011

Guided by : Mr. Dharmendra Hariyani Deptt. of Mechanical Engg. SKIT, Jaipur

Submitted by: Vikram Singh M.Tech. IInd Sem Thermal Engg.

DEPARTMENT OF MECHANICAL ENGINEERING SWAMI KESHVANAND INSTITUTE OF TECNOLOGY MANAGEMENT & GRAMOTHAN JAGATPURA, JAIPUR-302017 PH. 0141 2758253-56

Introduction
With the varied and fast changing global power market, the complexity of turbine system economics has increased dramatically. In the past, power plants were primarily government regulated and base loaded. Dispatch and electricity pricing was relatively predictable. In todays market, with IPPs, there are endless variations in the way power is produced, provided, regulated, and purchased. OEMs and power producers need to understand methods to quantify and compare parameters, and to understand the drivers and uncertainties to properly evaluate decisions and their potential for profi tability in this constantly changing marketplace.

The Power Market Drivers To understand the power market, one must keep in mind the key differences between this market and others:

Electric power can not be economically stored. Unlike other commodities, electric power cannot be easily or economically stored. For the most part, it must be produced on demand. While there are some efforts to retain energy generated during off peak hours using technologies such as pumped storage, fl ywheels, and/or superconductors, the cost is high and the effi ciency and reliability of these methods is low.

The demand for electric power is constantly fluctuating. The fluctuating demand for electric power is clear. Demand varies during the day, with a morning and evening peak and varies over the year with a winter and summer peak. Some of this fl uctuation can be predicted based on historical information, such as the typical change in consumption over a day, and the typicalseasonal variations, but the fl uctuations can shift signifi cantly from the norm due to uncontrollable events like periods of severe weather.

Utilities have a high capital investment cost.

The initial required investment for a power plant varies based on the type of power plant. Typically, utilities have very high fi xed costs, spending almost fi ve times the initial investment per dollar than other manufacturing endeavors1. These fi xed costs, which are typically between $475/kW and $1430/kW2, include equipment for generation, transmission, distribution, and permitting. Power plants have a relatively long life cycle. Power plants do require signifi cant initial investment, but they compensate with very long life. Power plants operate for decades, with units operating 30 years or more.Fuel prices are subject to negotiation and electricity prices are constantly varying. These factors impact the ability to compete effectively in the deregulated market.There is an unfl inching expectation that required electric power is always and immediately available.

Electricity has become a critical and integral part of the economy and there is no tolerance for an inadequate supply no matter what the circumstances. This is refl ected in the fact that electric consumption is generally accepted as one of the lead economic indicators. 5.0 Turbine System Economics @siemens.com These unique features of the power market create a complex situation to evaluate and choose effective strategies for power generation.The nature of this constantly fluctuating demand for a commodity that must be essentially produced on demand drives a varied supplier base, which can be broken into three basic types of operating modes base loaded plants, intermediate loaded plants, and peakers. Base load plants operate continuously for long periods of time. They are typically large plants (> 200MW), which are economical and reliable to operate. These plants often do not have the ability to change load quickly and take advantage of spot market peak pricing.These units operate year round and all day with an overall economy, which allows them to compete and operate profitably, even at low demand times. Base load

plants provide the core of the power grid, and act to regulate and maintain the grid frequency.Intermediate load supplier includes plants that operate to meet normal fluctuating demands in the morning and evening hours and typically operate for 10 to 14 hours per day.Peak load suppliers include plants which can start up quickly and supply power to meet high demands during periods of high or low temperature when the combined base and intermediate load capacity is not adequate. These plants are typically more expensive to operate, but offer operational flexibility. Electricity supplied during a peak demand is sold at a premium, making this the most profitable time to generate.The US market is currently a hybrid market consisting of regulated market regions and deregulated market regions, with each having different economic drivers. The regulated markets have contracts that are cost based. Rates are negotiated, fixed, and renegotiated allowing for a set return on investment for the power producer. The deregulated market is an auction market, with suppliers bidding into the market, offering power to the grid. A controller ranks the bids and purchases power as needed from the lowest cost supplier on up in price until the demand is met.The traditional power market is regulated to meet local demand for power. In this scenario, the cost of electricity is typically locked in by regulation and varies little. A network of base load units and expensive peakers is put in place to enable the supply to meet the fluctuating demand for power. Profits are based on a cost plus regulated model. For a power producer, when choosing an OEM (Original Equipment Manufacturer) or AE (Architect Engineer), the primary economic variables to consider are first time plant cost,service costs, fuel costs, and plant availability and reliability. Fuel costs far outweigh the other factors and the driver in this case for the OEM industry is efficiency. The power market has changed significantly with deregulation and different variables must be considered to appropriately assess the potential from a customer and supplier point of view. In the deregulated market power prices fluctuate drastically over time. In different areas and different countries, the rules vary, but it is common to have power generators bidding to supply to the grid and in some cases, there are penalties

for promising power and then not being able to deliver. This market, which seems as harried and volatile as the stock exchange floor, bids the operation of units which vary in their ability to come up to full power, to sustain partial load and to assure delivery of power at a precise time.

RAM and Economics When a power plant is off line for maintenance, there is no income stream. When power is offered on the spot market and the plant does not start, there may be penalties. These scenarios drive a need to consider RAM. RAM is an acronym for Reliability, Availability. Reliability is used to express and quantify the unplanned maintenance needs of a power plant. Reliability is a measure of how often a plant is available in comparison to the total number of hours the plant would be available with no unexpected maintenance. An ideal power plant has a reliability is 100%.Availability is a measure of how often a unit is capable of providing service. The availability can be quantified as the ratio of the total number of hours the unit is actually available in comparison to the total number of hours. Availability considers both scheduled and unscheduled maintenance and compares that to an ideal situation with no maintenance outages at all. An ideal power plant has an availability that is less than 100%. Units with less frequent and shorter maintenance intervals have higher availabilities. Maintainability is used to express the cost of maintenance. This includes the cost for parts, and the cost of the servicing.Maintainability can be used to compare plants that require frequent, lower cost servicing, with plants that require less frequent, higher cost servicing. Combining these considerations, RAM looks at how often you can use the equipment and how much it costs to keep it in operating condition. The concept of RAM is used to consider the trade off between higher technology immature technologies, and less advanced, but more reliable operation.

Modern Power Plant Economics

Throughout the US market exists a hybrid market in which the trend has been to move towards deregulation. The change from regulation to deregulation changed the motivation and strategy of power producers. The old descriptions of the power industry as stable and constant were traded in for adjectives like competitive, flexible, dynamic even risky. This volatile market favors plants that are highly fuel efficient for base load and plants with quick, push button starting capability to meet daily peak demands. As a power producer, the ideal situation is to be efficient enough to compete in the base loaded market or flexible enough to change load quickly to compete in the peak market. For an OEM to have access to the largest market share, this means providing engines that can do both. This need to have it all has driven the technology of power plants. Equipment manufacturers are competing to deliver plants with the highest efficiency and the most flexibility. This demand for more performance results in pushing the technology envelope.There have been positive and negative consequences to this change in the industry. The driver for the change was to increase competition in the marketplace, and consequently to reduce utility bills. A discussion of the result in that regard is out of the scope of this paper, but significant secondary consequences occurred which are relevant. The technology of gas turbines has advanced very quickly in this market. Efficiencies have increased and emissions have reduced. The introduction of new technologies has increased in volume and scope, resulting in issues in reliability and availability for less mature engines. A power producer must decide between buying the most advanced technology with the highest efficiency, or buying a model that is more mature, and more reliable, but not as efficient. Utilities are businesses. Regulated utilities are mainly concerned with maintaining the lowest life cycle costs for their units.For deregulated enterprises profitability is what is important. Prior to deregulation, sound economic decisions were important, and with regulation, these calculations were fairly simple and reliable. Subsequent to deregulation, sound economic decisions became absolutely critical to survival, while becoming far more complex. Utilities must understand how to make appropriate purchasing decisions, and OEMs must understand how these choices are made to

compete effectively. The economics and the technology are intimately tied together. While it may be clear which technical decision advances technology the fastest, it is not always as clear which technical decision makes the best business case. Power plant economics explores the cost of a decision over time.

Basic Power Plant Economics Economic evaluation of a power plant can be explored in a number of ways. All methods account for the cost of a decision over time. There are several accepted methods to examine cost over time. A common approach is to evaluate net present value (NPV).

The net present value method looks at the value of the project over time by converting all income and expenditures into equivalent values at the current time and subtracting the initial investment. To do this, the future interest rate and the rate of inflation must be estimated and expressed as a discount rate, r. While these estimates are somewhat inaccurate, the sensitivity to the assumption can be explored to understand the implication of one choice over another.Where;In: initial investment

r: discount rate or weighted average capitol cost for a given company t: time CashFlow: Income expenses

The basic rule of thumb is that the NPV should be greater than zero for an investment, though most investors will strive to get a hurdle rate that is higher.

To calculate the NPV of a power plant, the following parameters are needed:

1) Capital investments, 2) projected price of electricity,

3) size of the plant, 4) capacity factors (how many hours the plant will operate in a given year), 5) dispatch payments 6) projected fuel costs, 7) operating and maintenance costs, 8) start up time and costs, 9) regulating costs, and 10) the discount rate (the cost of money).

For a power producer, the initial investment is the cost of the plant and initial costs for support equipment and hiring staff.The income is calculated per annum, and is income from the electricity sold to the grid. This is the price of electricity ($/MWh)multiplied by number of hours the facility is producing power (MWh) in a typical year. In a deregulated market, the price of electricity is determined by the market and for calculation, should be evaluated based on historical data and forecasted fuel and electricity prices. In some markets, dispatch payments are another source of income. Dispatch payments are fees paid to producers that are capable of providing power to the grid with a very short lead time, typically in the range of 10 minutes from demand to supply (spinning and nonspinning reserve). These payments are for the assurance of capability and are paid regardless of whether the capability is leveraged. This provides incentive to suppliers to develop and maintain a fast start supply, so the grid can adequately respond to unplanned peak needs.Expenses are determined on a per annum basis and include the cost of fuel, and operating and maintenance costs. The fuel cost is a variable cost and must be estimated. For the calculation, fuel cost must be converted to annual cost in dollars by multiplying the fuel price times cumulative fuel consumed per annum. The operating and maintenance costs include

personnel costs, and the costs for scheduled and unscheduled maintenance. Operating and maintenance costs are impacted directly by the mode of operation of a plant.The frequency of maintenance is influenced by both operating hours and number of starts. A single start for a combined cycle facility can result in a significant incremental increase in maintenance costs, with one producer estimating $20,000 in incremental costs for one combined cycle start3.Expenses may also include regulating costs. Regulating costs are government instituted economic consequence to encourage industry to make decisions that have been determined to be for the good of the people. These costs include taxes and the cost of complying with government regulations. Taxes may be implemented to influence companies to choose preferred technologies or to impact the local job market. Technologies may be politically preferable due to environmental or safety issues as viewed by the regulating government. Certain fuel sources may be preferred to enhance energy independence or to promote local industry and employment.Regulating costs also include costs for adhering to regulations that are put in place to assure the safety of a facility, such as OSHA requirements. Regulations and taxes are dependent on the current political climate and are subject to frequent changes, often resulting in the changing position of a certain facility in the market place. An example of this kind of influence is environmental regulations where emissions credits are traded. Over time a facility built to meet a certain regulation may become covered by a regulation with a more aggressive limit. This may mean that additional operating costs are incurrent to purchase additional emissions credits, thus influencing the economics of the power producer. The calculation complexity increases further when looking over the life of the power plant. Power plants have a long life and many changes occur over the life of the plant. Some of these risks can be hedged by investing in futures to fix the future price of commodities such as fuels, or to insure against adverse business conditions, such as long periods of mild weather. Some gas turbines have the capability to operate on alternate fuels. Some units are purchased with the flexibility to switch between gas and oil, and various qualities of

oil can be considered. As the price for oils and gases fluctuate, a plant with this capability can be more competitive, but at a price. This option requires more capital investment, both in the unit and in the supporting auxiliaries,and potentially in licensing and permitting fees. Units desire to remain competitive over time by being highly efficient and as a result of this are also driven to increase capital investment over time. New technology is regularly introduced and can be purchased as upgrades to improve efficiency. To develop a symbiotic relationship with customers, some OEMs offer access to upgrades to customers who purchase long term service agreements, thereby integrating the need for consistent high quality service with the need for continually competitive technology. To understand the drivers for profitability, and the importance of RAM, the sensitivity of the calculation can be explored to further understand the uncertainty of the calculation. The variables can be examined in terms of controllable variable and uncontrollable variables.

Operating Strategies and Options For a base loaded plant, low margins are compensated by long operating times. Long, uninterrupted operating times are supported by reliability and maintainability. Gas turbine technology has been in service for many decades, and most units have reliabilities of greater than 95%. However, the base line efficiency of a competitive unit is constantly increasing. The old robust engine with learned out technology is simply not efficient enough. At the other end of the operating spectrum are peakers that are looking to leverage the high costs of electricity during peak needs. In June 25 of 1998, the price per megawatt-hour of electricity in parts of the Midwest soared briefly from $40 to $70004. Though the higher end of this scale is the exception and not the norm, the implication is clear that the investment costs and fuel costs pale in the face of this return and the only significant factor is how much the plant can generate. In this market the goal is to be ready to run when the prices increase. Here again RAM is the

driver since for the most part, a window of high potential for peak need can be identified, and so owners can schedule planned maintenance outside these windows. However, availability and reliability are extremely important because if an owner pushes the start button and does not get power, a competitor will quickly jump in and take over that share of the market. If a plant is inoperable due to unplanned maintenance (low reliability) then the opportunity to compete during this need will not even be possible. Operators in the intermediate load business are balancing all of these needs. They want to be chosen for operation, so efficiency is important, and they need to ready to operate. Reliability, availability, and maintainability are all equally important.

Gas turbines operate in all three operating regimes. Simple cycle gas turbines are installed to meet peak demands. They are extremely flexible, relatively low in initial investment cost, and quick to install. While internal machine efficiencies are quite high, gas turbine simple cycles exhaust at roughly 1000F, wasting a significant amount of energy and resulting in a rather low cycle efficiency,and limiting the application to peak markets. For intermediate and base load applications, gas turbines are used in combined cycles. In this arrangement, the gas turbine waste heat is used in a heat recovery steam generator to power a bottoming steam cycle. The combined efficiency of such power plantsare quite competitive (> 55%), easily fitting into the intermediate load market, and capable of competing as a base loaded units. In both scenarios there are economic complexities. The base loaded plants must maintain very low costs. The business cases are based on low margins and high volume. Large plants with high availability and low maintenance needs have the advantage in this market. The business cases for load following plants are based on a low volume high profit model, which requires them to be available when the need is present. The economics improve when an unexpected peak in demand occurs. Those who can meet these peaks quickly and reliably can reap the benefit of selling when the market is at its highest. For these reason, RAM reliability, availability and maintainability become significant driving factors in the power market.

Controlling RAM While Increasing Technology Level To maintain competitiveness, OEMs are aware that new technology must be introduced at a lower risk level. Steps are taken to control risk during design, prior to implementation, and during operation. During design, risk analysis and management methods are used which allow a quantified assessment of the probability of a particular failure and the consequences. Results of these analyses are used to mitigate risks by either changing the design, or altering the consequential impact. Prior to implementation, new technologies are being tested more thoroughly. In the past, most of the testing was done with similar technologies in small engines, or aircraft engine test beds. These approaches are similar, but not the same as the IGT (Industrial Gas Turbine) application. To further reduce risk, some OEMs such as Siemens, have built IGT test beds, so fully scaled new technology can be fully instrumented and tested in a controlled environment. For further reaching changes, an entire test site is constructed through cooperation between an OEM and a power producer to validate a new design. In some cases, new technologies are introduced to a single customer site with an agreement to test out the technology prior to release to a larger fleet. Subsequent to implementation, engines can be fitted with improved monitors and sensors, condition monitoring, and better controls. OEMs are now offering producers the option to purchase a monitoring contract, where the OEM constantly monitors plant operation. Monitoring a fleet of engines allows the OEM to develop probabilistic indicators of potential failures. When symptoms occurs, the owner is informed, and corrective actions can be taken in a controlled manner, at a convenient time, greatly reducing the likelihood of unexpected failure during a peak need. All of these features combine to reduce the risk of increased RAM costs.

Since deregulation the focus on efficiency so over shadowed other needs that the technical envelope was pushed very hard, very fast. The result was an improvement in

the efficiency of gas turbines, but there was a partnering risk when leveraging immature technologies. Using RAM in business models allows appropriate evaluation of the benefit and risk of immature technologies and allows user to apply these technologies intelligently. Today, OEMs and operators are both cognizant of the need to make sound economic evaluations of technology options and to consider technology maturity and the resultant RAM into their calculations. Additional actions (further testing) are taken and additional products (such as online monitoring) are being offered to reduce and control RAM. With these considerations, good choices can be made by power producers that will provide for profit for the company and reliable power for the communities served. Bonnie Marini

LOAD CURVES A load curve is a plot showing the variation of load with respect to time. Load curve of a locality indicates cyclic variation, as human activity in general is cyclic. This results in load curve of a day does not vary much from the previous day. Load curves are useful for generation planning and enable station engineers to study the pattern of variation of demand. They help to select size & number of generating units and to create operating schedule of the power plant Load curves used in power stations may be: Daily load curve: -- Load variations during the day (24Hrs), may be half-hourly (recorded once in 30 minutes) or hourly. Weekly load curve: -- Load variations during the week at different times of the day plotted against No. of days. Weekend load can be seen to be significantly lower than that during other working days for known reasons. Yearly load curve: -- Load variations during the Year, which is derived from monthly load curves of a particular year. Information obtained from load curves: Area under the load curve = Units generated,

Highest point of the curve = Maximum Demand (Area under curve) / (by total hours) = Average load Load Curve For a Locality is usually obtained as given below Load is divided into number of categories like private, public, Commercial, Entertainment, Hospitals, Transport, Industrial, Waterworks, Street Light etc. After preparing the load sheet for a locality indicating the total load in each category (each category may have different types of loads such as light, fan, refrigerator, heater, pump etc) load curve is plotted for each category over a day (every hour or every 30 minutes) and then the final load curve for the locality is obtained by summing them. This is Daily Load Curve for that locality. Maximum demand ( MD ): The greatest demand of load on the power station during a given period. The highest peak on the power station load curve. Demand Factor ( D.F ): Ratio of maximum demand to connected load. This is usually less than 1. D.F = M.D / C.L Average load: This is the average of loads on the power station in a given period. Daily average load: Average of loads on a power station in 1 day (24Hrs). = total number of units (KWHr) / 24 Hrs Monthly average load: Average of loads on a power station in 1 month (24Hrs x No. of days). = Total number of units (KWHrs) / (24Hrs x No. of days) Yearly average load: Average of loads on a power station in 1 year (8760Hrs). = total number of units / 8760 Hrs Load factor ( LF ):

The ratio of average load to maximum demand. typical less than 1. This is the measure of the effective use of the power station. L.F = Average Load / Maximum Demand = Annual Output (in KWHr) / (Installed Capacity X 8760 Hrs) High LF Low cost per unit generated. Diversity factor ( DF ): The ratio of the sum of all individual maximum demands on the power station to the Maximum demand on the station. Consumer maximum demands donot occur at the same time thus maximum demand on power station will always be less than the sum of individual demands. DF = Individual Maximum Demand / Total Station Maximum Demand High DF Low MD Low plant capacity Low investment capital required. Plant capacity factor ( PCF ): The ratio of actual energy produced to the maximum possible energy that can be produced on a given period. This indicates the reserve capacity of a plant.

Economics
The success of any engineering undertaking depends on adequate financial planning to ensure that the proceeds of the activity will exceed the costs. The construction of a new power plant or the upgrading of an old one involves a major financial investment for any energy company. Financial planning therefore starts long before ground is broken, detailed design is begun, and orders are placed for equipment. Cost analysis and fiscal control activities continue throughout the construction project and the operating life of the plant. This section briefly introduces fundamentals of engineering economics, with a slant toward power plant cost analysis as well as issues of maintenance and equipment replacement.

The cost to construct a power plant, waterworks, dam, bridge, factory, or other major engineering work is called its capital cost. It is common to discuss the capital cost of building a power plant in terms of dollars per kilowatt of plant power output. A plant may cost $1100 per kilowatt of installed power generation capacity, for instance. In addition to the cost of building the plant, there are many additional expenditures required to sustain its operation. These are called operating costs. They may be occasional, or they may occur regularly and continue throughout the life of the plant. Often these costs are periodic, or are taken to be periodic for convenience of analysis. There are, for instance, annual fuel costs, salary expenses, and administrative and maintenance costs that are not associated with the initial cost of the plant but are the continuing costs of generating and selling power. Operating costs are sometimes related to the amount of electrical energy sold. Usually they are expressed in cents per kilowatt-hour of energy distributed to customers.

Thus the expenses associated with power generation and other business endeavors may be thought of as two types: (1) initial costs usually associated with the purchase of land, building site preparation, construction, and the purchase of plant equipment; and (2) recurring operating costs of a periodic or cyclic nature.

It is frequently desirable to express all costs on a common basis. The company and its investors may wish to know what annual sum of money is equivalent to both the capital and operating costs. The company may, for example, borrow money to finance the capital cost of the plant and then pay the resulting debt over the expected useful life of the plant, say, 30 or 40 years. On the other hand, they may wish to know what present sum would be required to ensure the payment of all future expenses of the enterprise. It is clear that $100 in hand today is not the same as $100 in hand ten years from now. One difference is that money can earn interest. One hundred dollars invested today at 8% annual compound interest will become $215.89 in ten years. Clearly, an important aspect of engineering economics is the time value of money.

Compound Interest

If Alice lends Betty $500, who agrees to pay $50 each year for five years for the use of the money, together with the original $500, then at the end of the fifth year, Alice will have earned $250 in simple interest and receive a total of $750 in return. The annual interest rate is

i = Annual interest / Capital = 50 / 500 = 0.1 or (0.1)(100) = 10% rate of return.

If, however, Betty keeps the interest instead of paying it to Alice annually, and eventually pays 10% on both the retained interest and the capital, the deal involves compound interest. The total sum to be returned to Alice after 5 years is computed as follows: At the end of the first year Alice has earned $50 in interest. The interest for the 161 next year should be paid on the original sum and on the $50 interest earned in the first year, or $550. The interest on this sum for the second year is 0.1 $550 = $55. The following table shows the calculation of the annual debt for the five-year loan of $500 at 10% interest: At the End of: The Accumulated Debt is: This Sum

First year $500 + 0.1 x $500 = $550.00 Second year $550 + 0.1 x $550 = $605.00 Third year $605 + 0.1 x $605 = $665.50 Fourth year $665.50 + 0.1 x $665.50 = $732.05 Fifth year $732.05 + 0.1 x $732.05 = $805.26

It is evident that the interest earned on the preceding interest accumulation causes the annual indebtedness to grow at a increasing rate. It can be shown that the future sum, S, is given by

S = P (1 + i)n

where P is the principal, the initial sum invested; i is the interest rate, and n is the number of investment periods, in this case the number of years. Here the factor multiplying the principal,

S / P = (1 + i)n

is called the compound amount factor, CAF. The difference between simple and compound interest may not be spectacular for short investment periods but it is very impressive for long periods of time such as the operating life of a power plant. For our

example, the CAF is (1 + 0.1)5 = 1.6105, and S = 500(1.6105) = $805.26. Now, consider the following closely related problem.

EXAMPLE What sum is required now, at 8% interest compunded annually, to produce one million dollars in 25 years? Solution The future sum is S = P (1 + i)n = 1,000,000 = P (1 + 0.08)25 Solving for P, the present sum is 1,000,000/(1.08)25 = $146,017.90. Thus, compound interest brings a return of almost over seven times the original investment here. The 162 same present sum invested at 8% simple interest for twenty-five years would produce a future sum of less than half a million dollars. _____________________________________________________________________ In the example, the inverse of the CAF was used to determine the present worth of a future sum. The inverse of the CAF is called the present-worth factor, ( PWF):

PWF = P/ S = 1 / (1 + I)n

Thus we see that the time value of money is related to the compound interest that can be earned, and that taking compounding into account can be important. To recklessly adapt an old adage, .A dollar in the hand is worth two (or more) in the future (if invested wisely)..

Capital Recovery Another important aspect of compound interest is the relationship between a present sum of money and a regular series of uniform payments. Consider a series of five annual payments of R dollars each, when the interest rate is i. What is the present dollar equivalent of these payments? Applying the CAF as in the preceding example,with R as the future sum, the present sum associated with the first payment is R/(1 + i).

The present sum associated with the second payment is R/(1 + i)2. Thus the present worth of the five payments is

P = R [ (1 + i) . 1 + (1 + i) . 2 + (1 + i) . 3 + (1 + i) . 4 + (1 + i) . 5 ] It may be shown that this expression can be written as P = R [(1 + i)5 . 1]/[i(1 + i)5]. The factor multiplying the annual sum R is called the series present-worth factor, SPWF, which for n years is: SPWF = P/ R = [(1 + i)n . 1]/[i(1 + i)n]

Solving for R, we obtain an expression for the regular annual payment for n years needed to fund a present expenditure of P dollars at an interest rate i. The resulting factor is called the capital recovery factor, CRF, which is the reciprocal of the series present worth factor:

CRF = R / P = i(1 + i) n / [(1 + i) n . 1]

EXAMPLE What uniform annual payments are required for forty years at 12% interest to retire the debt associated with the purchase of a $500,000,000 power plant?

Solution Using equation (4.2), we get R = Pi (1 + i)/[(1 + i) n . 1] = 5108(0.12)(1 + 0.12) 40/(1.1240 . 1) = $60,651,813 This sum may be regarded as part of the annual operating expense of the plant. It must be recovered annually by the returns from the sale of power. _____________________________________________________________________

A Preliminary Design Analysis of a 500-MW Plant Consider the design of a 500-megawatt steam power plant with a heat rate of 10,000 Btu/kW-hr and a water-cooled condenser with a 20F cooling-water temperature rise produced by heat transfer from the condensing steam. The plant uses coal with a heating value of 10,000 Btu/lbm. Let us estimate the magnitude of some of the parameters that characterize the design of the plant. The reader should verify carefully each of the following calculations.

A 500-megawatt plant operating at full load produces 500,000 kW and an annual electrical energy generation of

500,000 _ 365 _ 24 = 4.38 109 kW-hr With a heat rate of 10,000 Btu/kW-hr, this requires a heat addition rate of 500,000 _ 10,000 = 5 109 Btu/hr Coal with an assumed heating value of 10,000 Btu/lbm must therefore be supplied at a

rate of 5 109 / 104 = 500,000 lbm/hr or 500,000 / 2000 = 250 tons/hr.

A dedicated coal car carries about 100 tons. Hence the plant requires 250 /100 = 2.5 cars per hour of continuous operation. A coal unit train typically has about 100 cars. Then the plant Needs 2.5 _ 24 / 100 = 0.6 unit trains per day, or a unit train roughly every two days.If coal costs $30 per ton, the annual cost of fuel will be 30 _ 250 _ 24 _ 365 = $65,700,000 The cost of fuel alone per kW-hr, based on 100% annual plant capacity, will be 65,700,000/(500,000 _ 365 _ 24) = $0.015/kW-hr _ 1.5 cents/kW-hr

The annual plant factor, or annual capacity factor, expressed as a decimal fraction , is the ratio of the actual annual generation to the annual generation at 100 % capacity. If the coal has 10% ash, the plant will produce 250 _ 0.1 = 25 tons of ash per hour.Under some circumstances the ash may be used in the production of cement or other paving materials. If it is not marketable, it is stabilized and stored in nearby ash ponds until it can be moved to a permanent disposal site. Similarly, if 2% of the coal is sulfur and half of it is removed from the combustion products, 2.5 tons per hour is produced for disposal. If the sulfur is of sufficient purity,it may be sold as an industrial chemical.With an air-fuel ratio of 14, an air flow rate of 14 _ 500,000 = 7,000,000 lbm/hr is required for combustion. This information is important in determining the size of the induced- and forced-draft fans, that of their driving motors or turbines, and of the plant.s gas path flow passages. The heat rate of 10,000 Btu/kW-hr corresponds to a thermal efficiency of 3413/10,000 = 0.3413 or 34.13%. If we approximate the heat of vaporization of water as 1000 Btu/lbm, the throttle steam flow rate, with no superheat, would be about 10,000 _ 500,000 / 1000 = 5,000,000 lbm/hr This determines the required capacity of the feedwater pumps and is important in sizing the passages for the water path. The above thermal efficiency implies that about 65% of the energy of the fuel is rejected into the environment, mostly through the

condenser and the exiting stack-gas energy. As an upper limit, assume that all of the heat is rejected in the condenser. Thus (1 . 0.3413)(5 109) = 3.29 109 Btu/hr must be rejected to condenser cooling water. With 20 water temperature rise in the condenser, this rate of cooling requires a cooling-water flow rate to the condenser of 3.29 109/(1.0 20) = 1.65 108 lbm / hr assuming a water heat capacity of 1.0 Btu/lbm-R. This gives information relevant to the design sizing of cooling-water lines, cooling towers, and water pump capacities. These back-of-the-envelope calculations should not be regarded as precise, but they are reasonable estimates of the magnitudes of important power plant parameters. Such estimates are useful in establishing a conceptual framework of the relationships among design factors and of the magnitude of the design problem.

EXAMPLE

Relating to the above rough design of a 500-MW plant, and assuming the capital cost information of Example 4.3, determine the capital cost per kW of generation capacity and estimate the minimum cost of generation for the plant if it is predicted to have an annual plant factor of 80% and maintenance and administrative costs of $0.007 /kWhr. Solution The unit cost of the power plant is $500,000,000/(500 _1000) = $1000 per kW-hr of capacity. The capital cost part of the annual cost of power generation is (60,651,813 _100)/(365 _ 24 _ 0.8 _500,000) = 1.73 cents per kW-hr The cost of coal was determned to be 1.5 cents/kW-hr. The minimum cost of producing electricity is then 1.73 + 1.5 + 0.7 = 3.93 cents per kW-hr _____________________________________________________________________