Professional Documents
Culture Documents
MIT - PSFC
05 OCT 2010
Introduction
Present Value
Should we invest in a power plant?
What is total outflow of cash during the plant
lifetime?
What is the total revenue income during the
plant lifetime
Take into account inflation
Take into account rate of return
Convert these into todays dollars
Calculate the present value of cash outflow
Calculate the present value of revenue
6
NPV > 0
7
$100
$100
=
= $90.91
Pi =
1 + iR
1.1
This is the present value of $100 a year from now
8
Generalize to n years
$P n years from now has a present value to
you today of
P
PV (P ) =
n
1
+
i
(
R)
This is true if you are spending $P n years from
now
This is true for revenue $P you receive n years
from now
Caution: Take taxes into account iR=(1-iTax)iTot
9
PV (Pn ) =
Pn
n
(1 + iR )
Pn = (1 + iI ) Pi
10
1 + iI
PV =
1 + i
Pi
iR > iI
11
12
Cost Components
The cost is divided into 3 main parts
14
Capital Cost
Start of project: Now = 2000 year n = 0
Overnight cost: Pover = $2500M
No revenue during construction
Money invested at iR = 12%
Optimistic but simple
Cost inflates by iI = 3% per year
15
Construction
Dollars
Present
Value
2000
500 M
500 M
2001
515 M
460 M
2002
530 M
423 M
2003
546 M
389 M
2004
563 M
358 M
16
Mathematical Formula
Table results can be written as
PVCAP
Pover
=
TC
1 + iI
n=0 1 + i
Tc -1
TC 1 B
1 + iI
B=
= 0.9196
1 + iR
17
18
POM = $95M / yr
O&M work the same every year
19
1 + iI
(n )
PVOM = POM
1 + iR
The PV of the total O&M costs are
PVOM =
TC +TP -1
(n )
PVOM
n=TC
= POM
TC +TP 1
n =TC
1 + iI
1 + i
1 BTP
= POM B
= $750M
1 B
TC
20
Fuel Costs
6
Fuel burn rate B = 1.08 10 kWhr /kg
Yearly mass consumption
Wth
MF =
= 2.09 104 kg
B
21
Fuel Formula
Yearly cost of fuel in 2000
PF = K F M F = $41.8M / yr
PV of total fuel costs
TP
1
B
= $330M
PVF = PF BTC
1 B
22
Revenue
Revenue also starts when the plant begins
operation
Assume a return of iR = 12%
Denote the cost of electricity in 2000 by COE
measured in cents/kWhr
Each year a 1GWe plant produces
We = IWth = 74.6 108 kWhr
23
1 BTP
1 B
24
Pover 1 1 BTC
+ POM + PF
T
T
C
P
TC B 1 B
3.61
+ 1.27 + 0.56
25
More
More effects not accounted for
Tax implications income tax, depreciation
Site issues transmission and distribution
costs
Cost uncertainties interest, inflation rates
O&M uncertainties mandated new
equipment
Decommissioning costs
By-product credits heat
Different fc base load or peak load?
27
Economy of Scale
Typically
Pref
Pe
B x 1/ 3
28
Why?
Consider a spherical tank
Cost v Material v Surface area: C r 4QR
Power v Volume: P r (4 / 3)QR
COE scaling:
C / P r 1 / R r 1 / P 1/ 3
Conclusion:
C cap
C ref
1B
P
= e
Pref
C n = C 1n C
ln f
C x
ln 2
f = improvement factor / unit: f 0.85 o C = 0.23
30
C 1 = C ref
p
ref
1B
= C ref
N ref
31
Example cont.
Cost of the nth unit
1B
C n = C 1n C
N ref
= C ref
N
n C
C cap = C n = C ref
n =1
1B
N
ref
N
n
n =1
1B
C
N
x C ref ref
N
n Cdn
1C
C ref N ref
=
N BC r N BC
1 C
Analytic method
34
d
0
P (C )dC = 1
C =
d
0
CP (C )dC
T = (C C ) P (C )dC
C 0
A Gaussian distribution is a good model for P(C)
C C 2
)
1
(
exp
P (C ) =
2
1/ 2
(2Q ) TC
2 (TC )
36
Uncertainties
Multiple Uncertainties
Assume we know C and for each uncertain cost.
The values of C are what we used to determine COE.
Specically the total average cost is the sum of the separate costs:
C Tot =
Cj Pj (Cj )dCj =
Cj.
j
2
j (C j j )
Tot =
j Cj
37
Uncertainties
Nuclear Power
An Example
Example
38
Uncertainties
Nuclear Power
Example Continued
Continued
39
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