2. PRESENTATION CH# 4 Economics Of Power System  GROUP MEMBER:. KASHIF ISHTIAQ (BSEE 01113056 ). RANA MASHOOD

3. Economics of power generation: The art of determining the per unit cost of production of electrical energy is know as economics of power generation That’s unit is (KWH) Interest: The cost of useful money is know as interest A power station is constructed by investing a huge capital. This money is generally borrowed form banks or other financial investor The rate of interest depends upon market position and other factors and may vary from 4% to 8% per annum.

4. Depreciation: The decrease in the value of the power plant equipment and building due to constant use is know as depreciation Every power station has a useful life ranging from fifty to sixty year. From the time the power station is installed. Its equipment steadily deteriorates due to wear and tear so that there is a gradual reduction in the value of the plant. This reduction is the value of plant every year is know as annual depreciation Cost Of Electrical Energy  Fixed cost  Semi fixed cost  Running cost

5. Fixed cost: it is the cost which is independent of maximum demand and units generated.fixed cost is due to annual cost of central organization, interest. on capital cost of land and salaries of high official. Semi fixed cost: It is the cost which depends upon maximum demand but is independent of units generated. That cost is directly proportional to the maximum demand on power station and is on account of annual interest and depreciation on capital investment of building. Running cost: that cost is depend upon only upon the number of units generated.e.g fuel cost, lubrication cost, maintenance cost, repair cost, salaries of operating staff.

6. Expressions for Cost of Electrical Energy Three part form Total annual cost of energy = Fixed cost + Semi-fixed cost + Running cost = Constant + Proportional to max. demand + Proportional to kWh generated. = Rs (a + b kW + c kWh) a = annual fixed cost independent of maximum demand and energy output. I. b = constant which when multiplied by maximum kW demand on the station gives the annual semi-fixed cost. c = a constant which when multiplied by kWh output per annum gives the annual running cost

7. Methods of Determining Depreciation  Straight line method:  Diminishing value method:  Sinking fund method: Straight line method: Annual depreciation charge = (P –S)\n where P = Initial cost of equipment n = Useful life of equipment in years S = Scrap or salvage value after the useful life of the plant

8. Diminishing value method Value of equipment after n yera: Formula: p(1-x)^n P = Capital cost of equipment n = Useful life of equipment in years S = Scrap value after useful life Depreciation for the first year = xP = P[1 − (S/P)^1/n]

9. Sinking fund method: P = Initial value of equipment n = Useful life of equipment in years S = Scrap value after useful life r = Annual rate of interest expressed as a decimal Cost of replacement = P − S Amount q deposited at the end of first year becomes = q (1 + r)^n − 1

10. NUMARICAL:

19. DISCUSSION QUESTIONS Q# What is the importance of interest on capital investment in calculating the cost of electrical Energy ? ANS # Because we pay interest to the bank and investor.and that payment value is include with generation cost because bank give loan for build a plant and that interest is included the cost of per unit.

20. Q# What is the significance of depreciation in the economics of power generation ? ANS# it is very import factor in power plant. Because govt supply us electricity at no loss no profit bias.so at plant life end whenever.then we need new plant. Because plant is depreciation due to wear and tear.so we have also amount of new plant buildup. Mostly plant life is 50-60 year then we need new power plant.

21. Why is fixed cost independent of maximum demand and units generated ? ANS# because our building rent staff salaries, other bills are fix and the do not depend with numb of unit.