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Session 9: Estimating Costs Agenda Homework Discussion Cost Resources Cost Trends Cost Estimating Cost Learning Curves Supply Chain Homework Assignment.

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Presentation on theme: "Session 9: Estimating Costs Agenda Homework Discussion Cost Resources Cost Trends Cost Estimating Cost Learning Curves Supply Chain Homework Assignment."— Presentation transcript:

1 Session 9: Estimating Costs Agenda Homework Discussion Cost Resources Cost Trends Cost Estimating Cost Learning Curves Supply Chain Homework Assignment

2 Trough Capital Cost Estimate Used ASPEN estimating software and Bechtel experience 250 MWe Plant with 3 hours of storage 735 deg F reheat Rankine steam power block, 38% efficiency Therminol HTF and Molten Salt storage $3500/kWe (2005 dollars) Overnight Capital Cost $4400/kWe (2011 dollars) Overnight Capital Cost 2

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4 Cost Trends Commercial Off-the-Shelf (COTS) leads to low cost Development is amortized over the expected production run High temperature metal alloys are expensive Specialty items that are not part of the manufacturer’s main business are often expensive and not always available Costs vary with supply and demand Quotes ROM – Rough Order of Magnitude (+/- varies with supplier) Quote good for a specific amount of time Quote with inflation adjustments Change orders 4

5 Cost Trends Costs must be quoted in what year dollars Costs can be adjusted for inflation using Marshall and Swift Index Costs can be estimated from a quote at another size using a scaling exponent If exponent not known, use 0.6 5

6 Development CostsProduction Costs Prototype Cost Estimate Vendor Quotes Supplier Catalogs Engineering Judgment Labor Estimates Actual Cost Labor hrs and rates Invoices Project Management Design Testing Documentation Prototype Factory Tooling Unit Production Cost (UPC) Unit Production Cost, nth Unit Estimate for UPC Learning Curve and Prototype Cost Vendor Quotes Supplier Catalogs Engineering Judgment Actual Cost Factory labor hrs and rates Invoices Learning Curve Partial Prototype Engineering Cost Estimates 6

7 C = C r (S/S r ) m C = cost for size of item of interest Cr = reference case cost S = size of item of interest Sr = reference case size m = scaling exponent Simple Cost Estimating Formula 7

8 Chemical Engineering Magazine Article 8

9 Cost at = Reference (Index at date of interest)__ Date of Cost (Index at date of reference cost) Interest Consumer Price Index Marshall and Swift Adjusting for Inflation 9

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16 Learning Curves Interesting website Learning Curve Calculator: Aerospace 85% Shipbuilding 80-85% Complex machine tools for new models 75-85% Repetitive electronics manufacturing 90-95% Repetitive machining or punch-press operations 90-95% repetitive electrical operations 75-85% Repetitive welding operations 90% Raw materials 93-96% Purchased Parts 85-88% 16

17 Cumulative Units Unit Cost 1 st Unit Cost Cumulative Cost (shaded area) Nth Unit Cost 1 Nth Unit 17

18 Cost of Electricity (COE) Calculations Cost of Electricity is expressed in $/kWh COE = Fixed Charges + O&M Charges + Fuel Charges Fixed Charges Plant capital cost Fixed charge rate Capacity factor (equivalent % of year plant at rated capacity) Rated capacity O&M Charges (Operation & Maintenance) Based on factored historical data Fuel Charges Fuel cost Plant efficiency Source: The Cost of Energy from Utility-Owned Solar Electric Systems, 1976, ERDA/JPL /3 18

19 Beginning of Life vs. Levelized COE LCOE COEo Energy Cost, $/kWh Time, years Beginning Operational Life End of Operational Life 19

20 Beginning of Life Cost of Electricity (COE O ) COE O = Fixed Charges + O&M Charges + Fuel Charges Fixed Charges = (FCR * CI) / (RC * CF * 8760 hrs/year) FCR = Fixed Charge Rate Cost of Money Taxes and Insurance Depreciation Working Capital RC = Rated Capacity of plant in kW CF = Capacity Factor = equivalent % of year plant operates at RC CI = Capital cost on the first day of operation O&M Charges (Operation & Maintenance) Based on factored historical data Fuel Charges = FC O * 3414 Btu/kWh / η PP FC O = Beginning of Life fuel cost in $/Btu η PP = Overall power plant efficiency 20

21 Example Problem for COE O Fixed Charges = (FCR * CI) / (RC * CF * 8760 hrs/year) = (0.18 * $1.875 B *10 9 /B)___________________ (700 MWe * 1000kW/MW * 0.70 * 8760 hrs/year) = $0.079/kWe Fuel Charges = FC O * 3414 Btu/kWh / η PP = ( $5 MMBtu * 10 6 /MM * 3413 Btu/kWh )/ 0.65 = $0.026/kWh COEo = = $/kWh Given: A natural gas-fired combined gas turbine/steam power plant Rated Capacity = 700 MWeCapital Investment = $1.875 Billion (2008 $s) Capacity Factor = 0.70Efficiency = 65% natural gas to bus bar FCR = 18%Fuel Cost = $5/MMBtu O&M = $ 0.010/kWh 21

22 Levelized Cost of Electricity Levelizes the inflationary effects of fuel and O&M costs over the life of the plant. Fixed Charges – same as in COE O Fuel Charges = (FC PV * 3413 Btu/kWh * CRF k,N ) / η PP FC PV = ((1 + if )/(k-if)) * [ 1 – ((1+if)/(1+k))^N] * FC O CRF k,N = Capital Recovery Factor = k/[1-((1+k)^ -N)] O&M = ((1 + iom )/(k-iom)) * [ 1 – ((1+iom)/(1+k))^N] * OM O Charges Where: if = fuel inflation rateiom = O&M inflation rate k = discount rateN = plant life in years 22

23 USA CSP Supply Chain Fragmented More variation than PV Specialized components Unclear demand for technologies More components needed in pipeline Need government support for US Market Large up-front investment Utilities under-value long-term value of storage 23

24 CSP Supply Chain Challenges Reduce Costs Higher production R&D Automated factories Consolidated services Ex. Flabeg glass mirrors—added field design, performance simulation, EPC management Local Supply Chain Benefits: reduced costs, increased communications and simplified logistics Challenges: Local expertise Demand assurances Government support policies 24

25 Source: G. Gereffi and K. Dubay, Greeneconomy, Chapter 4, Concentrating Solar Power, CGGC 25

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32 Team Project: Costs and COEo Your manager has just read a report on the status of power tower CSP with storage. Estimate the capital investment and COEo for the following assumptions: FCR = 0.12 and 6 hours of storage Location is Imperial Valley with peak insolation of 1000 Watts/square meter Solar multiple is 2.7 Capital cost of field is ________ $/square meter Capital cost of remaining plant is $1500/kWe Power block peak efficiency is 35% O&M is 0.02 $/kWe 1.Draw a block diagram of the plant 2.Calculate the capital investment and COEo 3.Put your work on easel charts 4.Present your work to the class You have 15 minutes to prepare and 15 minutes for class presentations. 32


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