Calculating LCOE PROBLEM. An investor owned utility is choosing between a coal p

Question

Calculating LCOE PROBLEM.

An investor owned utility is choosing between a coal plant and a natural gas plant. The IOU can afford to build at most one plant. Plant A has a capacity factor of 80% and a capacity of 900 MW. Plant B has a capacity factor of 70% and a capacity of 850 MW. There are no O & M costs. Which of the plants has lower LCOE? Assume an interest rate of 12% and that investment takes place up-front. Show all work, including any spreadsheets. LCOE = sigma^n_t = 0 (total cos t)t/(1 + r)/sigma^n_t = 0 (energygenerated)t/(1 + r)

Explanation / Answer

From the above, it is seen that that Project B has lower LCoE of $3.55/kW than Project B has $5.17/kW. Hence Project B should be accepted.

Particulars PROJECT-A PROJECT -B Working for project A Amount ($) Working for project B Amount ($) a Initial cost $1000 x (900 x 1000)         900,000,000 $600 x (900 x 1000)           510,000,000 b Expected Fuel Cost per year Item No. (v) below 6300 Item No. (v) below 8033 c Present Value anntuity factor PVIFA 12%,30y 8.055 PVIFA 12%,30y 8.055 d PV of Fuel Cost for 30 years $6,300 x 8.055             50,746.50 $8,033 x 8.055 64702 e PV of Total Cost a + d         900,050,747 a + d     510,064,701.79 f Power Gen. (in kW, not in $) over 30 yr. 720,000 kW x 30 yr           21,600,000 595,000 kW x 30 yr              17,850,000 g PV of Power Generated (kW) 21,600,000 x 8.055         173,988,000 17,850,000 x 8.055           143,781,750 h Leverised Cost of Energy ($ /kW) LCOE = e /g 5.17 LCOE = e /g 3.55 Supporting calculations : Particulars : Project A Project B i Total Plant capacity ( in kW) 900 x 1000                 900,000 850x 1000 850,000 ii Investment cost ($) $1,000 x 900,000 kW         900,000,000 $600 x 850,000 kW           510,000,000 iii Power Genration in kW. per year 80% of 900,000kW                 720,000 70% of 850,000kW                    595,000 iv Total Btu (as per Heat Rate) 7000x kW 720,000     5,040,000,000 6000x kW 595,000 3,570,000,000 v Cost for generation ($) (iii) x $1.25/1 million                      6,300 (iii) x $2.25/1 million 8033

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