Faculty of

Engineering ECONOMIC OPERATION

Tanta
OF POWER SYSTEMS
University
Lecture: 3 Tutorial: 3
Code: EPM3110
Practical: -- Total: 6

Prof.: Ahmed Mohamed Refaat Azmy

Department of Electrical Power and Machine Engineering
Director of the automated library ​project in Tanta University
[email protected] - [email protected]
01229715040
 Capacity factor
The capacity factor takes into account the excess
of the installed power of station more than the
actual required demand
The capacity factor is defined as the ratio of the
average load supplied by a station to the rated
(installed) capacity of this station
The capacity factor is less than or equal to unity

average demand
Capacity factor =
rated capacity of power plant
 Capacity factor
average demand
Capacity factor =
rated capacity of power plant

Multiplying the average demand and the rated

capacity by time, the capacity factor can be
defined as the ratio between the actual energy
produced and that would be produced if the
plant were operated at its full capacity

Annual energy (kWh)

capacity factor =
rated capacity  no. of operating hours
 Utilization factor
The installed capacity is higher than maximum
demand and the excess of power is known as
reserve power
The utilization factor is defined as the ratio
between the maximum demand and the
rated capacity of the power plant

maximum load demand

Utilization factor =
rated capacity of power plant
 Reserve factor
The ratio between the rated capacity of a
power plant and the maximum demand is
known as the reserve factor
Typical value of the reserve factor is
between 1.2 and 1.4
1
Reserve factor =
utilization factor
rated capacity of the power plant
Res. factor =
maximum load demand
 Reserve power

The power system is continually subjected to

unexpected load changes

The generating units supply about 85-90% of

their capacity maintaining the remainder for
emergencies

Some units are kept in the hot status to be

connected to the network as fast as possible
 Reserve power
The need for reserve power arises due to some
abnormal conditions in power system

Sudden unexpected increase in the load demand

Underestimating the load demand due to some

errors in the load forecasting

Forced outage of generators or other equipments

due to stability problems

Local shortage in the generated power (e.g. due to

the outage of a transmission line)
 Reserve power

Reserve Power

Cold Hot (spinning)

reserve reserve
 Reserve Power

Cold Hot (spinning)

reserve reserve

Cold reserve
Some units are kept or reserved for service but they
are not available in the immediate loading
It is a portion of the total reserve power that is
available for gradual utilization
The cold reserve power is the sum of the rating
capacity of all generating units that are not in
actual operation but ready to be loaded
 Reserve Power

Cold Hot (spinning)

reserve reserve

Hot (spinning) reserve

The spinning reserve is defined as the extra
amount of active power that boilers can provide
immediately through governor action
The boilers have to be in the hot status with proper
conditions (pressure and temperature)
The total spinning reserve has to be greater than the
largest generating unit in the power system
 Reserve power

The choice of the operating and standby unit as well

as the distribution of reserve power on different power
plants depends on the following factors:

The start up cost: depends on the start up time “the

time interval between the order of starting to the
moment where the unit delivers power to the network”
Units with high start up cost have not to be frequently
switched on and off. Such units can provide hot
reserve power but not cold reserve power.
 Reserve power
The shut down cost: the cost due to the wasted
energy during the shut down of the unit. It depends
also on the type of the unit
Ramp rate of the unit: the increase of power that
can be obtained from a generator in a specific time
The power cannot be increased or decreased
suddenly but it needs a certain time per kW
This prevents the effective use of slow units (low
ramp rate) for spinning reserve
The total reserve power is not obtained from a single
unit because this would take a long time. The
spinning reserve is distributed over the available
units to get the required power in a short time.
 Base load and peak load
• In the case of using only one power plant, the
capacity of the power generation will be defined
according to the peak value
• The plant will operate at a part of load for prolonged
time, which decreases the efficiency
• Several smaller units are installed with some of them
covering base load and others covering peak load
• The units that cover the base load operate
continuously, while those taking the peak load
operate when required
• All units operate near their rated power with high
efficiency
 Base load and peak load
Power

Peak load
Intermediate load

Base load
Time (h)
0 6 12 18 24
• Base load has almost unvarying value
• Intermediate load varies within certain limits
• Peak load vary randomly
 Base load and peak load

The generating units that operate as base power

plants should have the following characteristics:
• Low operating cost since they operate
continuously
• High capability of operating continuously for long
time
• Low and fast maintenance requirements
• The load factor is very high and reaches unity for
many units
Thermal, nuclear and hydraulic power plants are
conventionally considered as base load plants
 Base load and peak load
The units that operate as peak power plants should
have the following characteristics:
• Very fast response to load variation (high ramp rate)
• Low start up time
• Low start up cost
• Low capital cost for economic operation since they
operate for relatively short time during the year
• Constant voltage and frequency against the load
fluctuations
• The load factor is very low in the range of 0.1-0.6
Steam, gas turbine and diesel power plants are
used as peak power plants.
Economic analysis of power plants
Classification of power-plant costs
 Classification of power-plant costs
Fixed cost
• The capital invested in the installation of the
entire plant
• Independent of the output energy and
maximum demand
• Represents a constant annual cost for the
power plant
• Includes: the cost of land, buildings,
equipment, transmission and distribution
lines with all infrastructures and the cost of
planning and designing the plant
 Classification of power-plant costs
Operating or running cost
• Depends on the number of operating hours
of the power plant and on the output energy
• Includes the annual fuel cost, lubricating oil,
cooling water, maintenance cost and repair
and employees' payments
• Approximately proportional to the output
energy
• The consumption of fuel rate varies
depending on the percentage loading and it
has a minimum value at full load
 Classification of power-plant costs

Semi-fixed cost

• Independent of the output energy

• Depends on the maximum demand
• Includes the annual interest, depreciation on
the investment capital cost, taxes and
insurance
• Almost proportional to the maximum
demand
 Classification of power-plant costs
The total annual cost of energy produced in
a power plant is the sum of the three costs:
Z=a.P+b.E+c
P is the average generated power (kW)
E is the annual energy (kWh)
a, b and c are constants
The designer attempts to minimize the total
annual cost of the plant by the proper choice
of the plant type and suitable distribution of
power on the different power plants
 Peak-load-
dependent
part

Energy-dependent
part

Fixed part
 Total cost

Running Fixed Semi-

cost cost fixed cost
 Interest

Big projects are financed using borrowed money

and hence, the interest on the capital investment
must be considered
If the money is not borrowed, the interest has to
be considered to account for the profit that would
be obtained if the money were invested in other
projects
 Depreciation cost
The depreciation cost represents the annual cost
required to the depreciation caused by wear and tear
of equipment and machines because of the normal
operation
The equipment and machines have to be replaced
after a certain time known as the operating life
It is necessary then to get aside certain amount of
the income to collect sufficient money that is equal to
the capital invested in these machines and
equipment
 Depreciation cost
Initial investment value of all
P
equipment (capital cost)
Salvage value at the end of
S
the life time (Scrap value)

n Life of the equipment in years

A Set aside money per year

r Annual rate of compound interest

x Annual unit depreciation

 Straight line method
Initial
value (P)

0 Life period (Year) n

 Straight line method
Initial
value (P)

Total
depreciation

Salvage
value (S)

0 Life period (Year) n

 Straight line method
Initial
value (P) Depreciation

Total
depreciation
equipment
Value of

Salvage
value (S)

0 N Life period (Year) n

 Straight line method
Initial
value (P) Depreciation

Total
depreciation
equipment
Value of

Salvage
value (S)

0 N Life period (Year) n

 Straight line method
Initial
value (P) Depreciation

Total
depreciation
equipment
Value of

Total
reserve
accumulation
Salvage
Reserve accumulation value (S)

0 N Life period (Year) n

 Straight line method

The straight-line method is the simplest

approach to determine the depreciation cost
of the power plant
It does not take into account the amount of
interest earned by the set-aside money
A fixed annual amount is set aside each year

P −S
A=
n
 Diminishing-value method
The amount set aside per year decreases with the
life of the equipment
The total costs are distributed over the life since the
depreciation charges are high in the first years
where the maintenance cost is low and vice versa
A main disadvantage is the high charges in the first
year, where the plant is still in the build-up stage
Instead of a fixed amount, a fixed rate of
depreciation is applied, where the depreciation is
applied firstly to the original cost and then to the
diminishing value
The amount of interest earned by the set-aside
money is ignored
 Diminishing-value method
Initial
value (P)
Depreciation
Total
depreciatio
n

Total reserve
accumulation
Reserve accumulation Salvage
value (S)
0
N Life period (Year) n
 Diminishing-value method
The value of the equipment and the amount of set
aside money per year at the end of each year are:
At the end of
Value of the equipment set aside money
the:
first year P - x . P = P . (1-x) x.P
 Diminishing-value method
The value of the equipment and the amount of set
aside money per year at the end of each year are:
At the end of
Value of the equipment set aside money
the:
first year P - x . P = P . (1-x) x.P
 Diminishing-value method
The value of the equipment and the amount of set
aside money per year at the end of each year are:
At the end of
Value of the equipment set aside money
the:
first year P - x . P = P . (1-x) x.P

P . (1-x) - x . P . (1-x)
second year x . P . (1-x)
 Diminishing-value method
The value of the equipment and the amount of set
aside money per year at the end of each year are:
At the end of
Value of the equipment set aside money
the:
first year P - x . P = P . (1-x) x.P

P . (1-x) - x . P . (1-x)
second year x . P . (1-x)
= P . (1-x)2
 Diminishing-value method
The value of the equipment and the amount of set
aside money per year at the end of each year are:
At the end of
Value of the equipment set aside money
the:
first year P - x . P = P . (1-x) x.P

P . (1-x) - x . P . (1-x)
second year x . P . (1-x)
= P . (1-x)2
. . .
. . .
. . .
nth year P . (1-x)n x . P . (1-x)n-1
 Diminishing-value method

The value of the equipment at the end of the nth

year is equal to “S”
The annual unit depreciation can be calculated as:

1
 S n
P . (1-x)n = S  (1 − x ) =  
P

S
x = 1− n
P
 Sinking-value method

The amount of interest earned by the saved money

is taken into account

The set aside per year consists of the annual

payment and the earned interest

Compared to the previous two methods, the sinking-

fund method requires smaller annual amount
 Sinking-value method
Initial value
(P) Depreciation

Total
depreciation

Total reserve
accumulation

Salvage
value (S)
Reserve accumulation
0 N Life period (Year) n
 Sinking-value method
The value of the first set aside money will be “A” in
addition to earned interest:
at the end of the first year =A
Second year = A + interest on A =A + A . r = A (1+r)
Third year = A(1+r)+interest on A(1+r)
= A(1+r) + A(1+r).r = A(1+r)2
..
.
and at the end of the nth year = A(1+r)n-1
This represents the accumulation due to the first set aside
money only
 Sinking-value method
For payments and interests in all years, the total amount
of accumulation at the end of the nth year (Y) is the sum of
the amounts accumulated in “n” years:
Y = A + A(1+r) + A (1+r)2 +…+ A(1+r)n-2 + A(1+r)n-1

Due to Due to
last payment first payment
Multiplying the equation by (1+r):

Y(1+r)= A(1+r)+ A(1+r)2 +…+A(1+r)n-1 +A(1+r)n

 Sinking-value method
Subtracting equation the two equations
Y(1+r)= A(1+r)+ A(1+r)2 +…+ A(1+r)n-1 + A(1+r)n
Y = A+ A(1+r)+ A(1+r)2 +…+ A(1+r)n-1
Y.r = -A + A(1+r)n
(1+ r) n
−1
Y .r = A(1 + r ) − A
n
Y=A
r
This value equals the cost of replacement, i.e., Y=P-S:
 
A=
r (P − S )
 (1 + r )n − 1 
 