JOURNAL OF SCIENCE i TECHi Oi uu i T Jiu JJ iUIJ EFFECT OF ECONOMIC PARAMETERS ON THE DEVELOPMENT OF STEAM POWER PLANT IN THE FUTURE ANH HUONG COA NHONG TH6NG SO KINH TE DfiN sy'''' PHAT TRIEN CUA NHA MA[.]
JOURNAL OF SCIENCE i TECHi-.Oi.uu i T Jiu JJ iUIJ EFFECT OF ECONOMIC PARAMETERS ON THE DEVELOPMENT OF STEAM POWER PLANT IN THE FUTURE ANH HUONG COA NHONG TH6NG SO KINH TE DfiN sy' PHAT TRIEN CUA NHA MAY DIEN TUABIN HOI TRONG TUONG LAI Le Chi Kien Universily of Technical Education of Ho CM Minh City Received November 13, 2012; accepted January 15, 2013 ABSTRACT The economic parameters of the power plant such as Interest rate, construction escalat fuel escalation rate, maintenance escalation rate and discount rate can affect the annual leve considerably and change the economic range of the power plants Determining the values o economical parameters In the future is very difficult, especially In developing countries like For this reason, the analysis of the changing rates of Ihe mentioned values is of great impor the planners of the additional capacity In this study, the changing rates of the economic para Vietnam that Influence the annual levelized cost of the steam turbine power plant Is discusse steam tudilne power plant considered for the electncity generathn sector and the economi parameters domineting the plant are determined It is cieady seen that the annual levelized c steam turbine power plant varies with the economic parameters The annual levelized cost in when the constnjctlon escalation rate and the interest rate Increase, however the annual lev cost more rapidly increases with the increase of interest rate It is also shown that the Intere affects considerably the plant having the great capital cost and long construction duration, th the plants having a lower capital cost and a shorter constnjctmn time are influenced much les annual levelized cost is also affected by the fuel price escalation rate, but this rate has the lea of all the economic parameters With the Increase of discount rate, the annual levelized cost in however It Is known that when the load factor Is lower than 10%, the annual levelized cost Is the discount rate is hrgh Therefore, we not need a high discount rate for the load factor gr than 10% The results show that the economic parameters variation has to be taken Into cons in electricity generation planning Keywords- economic parameters, power plant, electricity generation T M TAT Trong nhii miy nhiit dlin, nhCrng Ihdng s6 kinh tS nhu ISI suit, tl suit ting vi }i»y dung, tSng ve nhlSn li$u, tl suit ting vi bio du6ng vi tl suit chiit khiu inh hudng ri din chi phi c diu hing nim vi cO Ihi lim thay dir tlnh kinh ti cua ca nhi miy Vi$c xdc dinh gii tri cic thdng kmh li niy tmng tuong lai li rit khd khin, die biit dii vii cic nuOc dang phit triin Vllf dd I bii bio niy su inh hudng cua cic thdng s6 kinh ti ndu trin din chi phi chia diu hing nim aia n miy nhift didn tuabin hai Vidl Nam di durfc di cip vi nhijng phin tich vi su thay dii ciia c Ihdng sd kinh ti niy li rit quan tnjng cho nhCrng ngudi hoach dinh ki hoach Chi phi chia diu nirn ting tl suit ting vi xiy dung vi ISI suit ting, nhidn, chi phi niy tang manh han suit ting Diiu niy cho thiy li lii suit inh hudng ding ki din chl phi chia diu hing nim cila n/iiJo nhi miy didn c(3 vin diu tu Idn vi thdi gian xiy dung dii Chi phi chia diu hing nim cung bi in ''^"S bdi ll suit ting vi nhidn lifu nhtrng tl suit niy inh hudng It nhit s6 nhCing thdng s6 td din chl phi chia diu hing nim Cimg vd/ su ting ciia ll suit ohiil khiu thi chl phi chia diu him nim CDng ting, nhidn hd s6 tii thip han 10% thi chi phi chia diu hing nim lal thip ti chidl khiu cao Do viy dii vdl nhOng hd si til nhd han 10% thi chOng ta khdng cin thiit phii suit chidt khiu cao TCr kit qui phin tich c() thi thiy rd ring li chi phi chia diu hing nam bi i hudng nhidu vi phuc tap bii cic thdng sd kinh ti ndn cin duac xem xdt k9 ludng lip ki hoa sin xuit didn cOng nhu xiy dung nhi miy didn tuong lal 26 JOURNAL OF SCIENCE & TECHNOLOGY * No 95 - 2013 INTRODUCTION The electricity consumption of countries s continuously increasing because of leveloping social life, increasing population md improving technology Additional power )lants are the most widely employed method to iatisty the increasing demand Different nethods that consider economic criteria can be jsed for steam turbine power plant Using these methods, economic comparisons of power plants have been made in previous studies Sahin and Bekdemir compared the levelized unit production cost ofa combined cycle plant with that of other conventional plants [1], Gungor and Bozkurt realized an economic comparison of the imported fuels fired power plants in the elecfricity generation sector using the unit ower cost in terms of long term production planning [2] One of these methods is the annual levelized cost The annual levelized cost is just a way of spreading the total cost during the economic lifetime of the power plant on an annual basis According to this method, the power plant having the lowest annual levelized cost is selected from among the alternative power plants [3]-[5] Electricity demand changes hourly, daily, weekly, monthly, seasonally and armually Demand changes occur depending on economic factors, climatic conditions and consumers behaviors For that reason, no power plants in the system can be operated for the same duration All plants in the generation system are operated for different durations, and this is represented by the load factor The sum of the operation hours of the plants within a year is known as the actual operation hours The load factor is the ratio of the actual operation hours to the maximum operation hours within a year The load duration curve is constituted of the hourly demands ranked ftom larger to smaller for a year The load duration curve shows the demand period for any specific load and above that load within a year The annual levelized cost of plants varies with the changes of their load factor Therefore, in steam turbine power plant, the change of the annual levelized cost has to be determined by using the load factor so that die lowest value of annual levelized cost can be obtained for the different altematives with the different load factors Overall cost consists of capital, fuel and operation and maintenance (O&M) costs [6] There are three reasons for the change ofthe annual levelized cost owing to the load factor The First reason is that these cost group values and their share of the total can be very different for each power plant The second reason is that fuel costs can change with load factor, while capital and O&M costs are constant For this reason, if the plant has a large fuel cost ratio, the annual levelized cost increases rapidly with load factor The third reason is that the economical parameters affect the annual levelized cost The annual levelized cost of the plant changes with the changes of the economic parameters affecting the cost groups [7] In the developed countries, the economic parameters in the calculation of the annual levelized cost such as interest rate, consfruction escalation rate, fuel escalation rate, maintenance escalation rate are ignored because ofthe economic stability For that reason, all the above references not include these economic parameters in their calculation To analyse the development of steam power generation system in Vietnam in the future, the interest rate, construction escalation rate, fuel escalation rate, maintenance escalation rate are all included in the calculation ofthe annual levelized cost, and discussed in this paper Economic parameters vary with the economic structure of countries Estimations of these parameters over the long term have to be made However, it is quite a difficult task to determine the economic parameters, especially in developing countries Therefore, it is crucial to determine the possible values of the economic parameters influencing the solution of the additional capacity In addition, the dominant economic parameters influencing the electricity generation planning can be understood by analysis of the economic parameters In this study, the economic parameters affecting the annual levelized cost ofthe steam power plant in Vietnam have been determined The armual levelized cost has been analyzed for JOURNAL OF SCIENCE & TECHNOLOGV * No 9S - 2013 the steam turbine power plant in the possible value range of these parameters The most dominant economic parameters have been determined for power plant The annual levelized cost of the power plant for the most probable values ofthe economic parameters has been computed and transferred to the load duration curve As a result, the most convenient parameters of steam power plant has been determined with load factor C O S T ANALYSIS O F E L E C T R I C I T Y GENERATION SYSTEMS The costs of power plant consist of three groups: investment, fuel and operation and maintenance costs Another classification Is constant and variable costs The constant cost consisting of capital cost and O & M cost Is independent of the production quantity, whereas the variable cost consisting of fuel cost depends on the production quantity The amount of fuel cost changes with fuel type, fuel price and energy conversion technology In addition to this, the fluctuating fuel price over time influences the variable costs considerably i;c(o(i+'-)' CAW' ' ^ [Vyear] (3)' Since the electricity production plant are ' constructed in different capacities (N), the annual levelized cost (CSAW) for unit capacity is used in comparing each plant with the othff plants Z C ( ( •!-'•)"' CMB- = ^^=S [$/kW/year] (4) The value of the annual levelized cost of the three cost groups per unit power of the power plant is given as the following equation Z[c,(')-^C/(0•^C„(r)](l• 2.1 Life cycle cost C The varying value of money with time has to be considered in comparing the different parameters Different methods of engineering economy can be used The most often used method is life cycle cost (LCC) From the start of construction ofthe power plant to the end of its economic life, all costs, capital, fuel and O&M costs, are discounted to the date of the start of electricity production The obtained total cost value is named the present value Cpw C.»^ = S c ( r ) ( l + ) - ' the life cycle cost is converted to a series of equal amounts throughout the economic plani life, and the annual levelized cost (CAW) series is obtained [8] (I) l—L where C(t) is the cost in the year t, n is the plant's economic life, L is the construction time and r is the discount rate =- -(5) A'ZC+O"' Equation (6) can be obtained if the cost groups are expanded [8] In the calculation of the capital cost, the linear decreasing capital method is used The capital cost is calculated with the direct construction cost (Ij), capital cost (y) per year, construction escalation ratio' (e,) and interest rate (i) The fiiel cost is determined with the unit iiiel price (F«), thcnnal efficiency (ii,), lower heating value (LHV) and fuel price escalation (Cf) The operation and maintenance costs are characterized by the specific unit and operation cost (c,«)) and the" maintenance escalation rate ( e j The life cycle cost (LCC) of the power systems can be written as the sum ofthe present values of capital costs (Ci), fuel cost (Cr) and 0,tMcost(CJ iCC = C „ ^ - ^ C ^ , ^ C , , , , ( ) 2.2, Annual levelized cost method To compare the costs of different plants L,N£(l-^r)-' (6)1 JOURNAL OF SCIENCE & TECHNOLOGY * No 95 - 2013 where Lf is the load factor [%] between 0% and 10% The results have been transferred to the load duration curve, and the economic load order has been obtained ECONOMIC EVALUATION The parameters affecting annual levelized costs are grouped as technical and economical parameters It Is obvious that not only the technical parameters but also the economic parameters affect the determination ofthe best additional power plants The variable economic parameters between countries, even between regions, also change with time In electricity production technologies, the economic parameters affecting the annual levelized cost are the interest rate, construction escalation mtio, fuel escalation ratio and discount factor The annual levelized cost is affected by the economic parameters differently according to the characteristics of the different production technologies CALCULATION ASSUMPTIONS Table I Technical and economic assumptions of steam turbine power plant Capacity Fuel Construction time Cost investment per year LHVoffiiel Thermal efficiency Economic life year Fuel price Construction cost Operation and maintenance cost Discout rate Construction escalation rate Interest rate Fuel price escalation rate O&M escalation rate Years $/ton $/kW 350 Lignite 12,20,26, 31,11 5091 37 30 5.9 1690 J/kW/year 16 MW Years % kj/kg % % % % % % ANALYSIS OF PARAMETERS EFFECTS 10 Economic parameters have different effects on the constant and variable cost groups As the constant costs are independent of the amount of electricity production, the values of this type of costs are not changed with load factor However, the values of the economic parameters influence the value of constant cost throughout the year The biggest share of the constant costs is capital cost The economic parameters affecting the annual levelized capital cost are the construction escalation rate and the interest rate In the case of 0% and 10 % of construction escalation rate and interest rate, the variations ofthe annual levelized costs with load factor have been depicted in Figure for the construction escalation rate and Figure for the interest rate When the consfruction escalation rate is taken as 10% instead of 0%, the values ofthe annual levelized cost increase depending on the load factor When the load factor is high, the annual levelized cost increase more than when the load factor is low Construction csalaSon rate o l 0% and 10% 60 Loa) Faoor [ K ] 70 80 Fig Variation of annual levelized cost with construction escalation rate 0 ECONOMIC With the technical characteristics of the steam turbine power plant and the economical assumptions, the annual levelized cost of the power plant has been calculated The calculations have been repeated while increasing the economic parameters values Load Factor [%] Fig Variation of annual levelized cost with interest rate JOURNAL OF SCIENCE * TECHNOLOGY * No 95 - 2013 M«n nianceeoUUo i i B o r O H a 1110% 10% f -Fig Variation of annual levelized cost with maintenance escalation rate Fig Variation of annual levelized cost with fuel price escalation rate glM yl 1illO — ' " * - T «) so 60 » 10 Fig Variation of annual levelized cost with discount rate The variations of the annual levelized cost with interest rate increase more rapidly than with the construction escalation rate The maximum increase for the steam turbine power plant is about 245% as the load factor is high Obviously, it can be seen that the interest rate and construction escalation rate affect considerably the plant having the great capital cost and long construction duration This means the plant having a lower capital cost and a shorter construction time is influenced much less The other group of constant costs is t| annual levelized O&M cost The economii parameter affecting this cost is the maintenana escalation rate The value ranges of O&M cost for the steam turbine power plant are illustrated in Figure In the case of increasing ths maintenance escalation rate from 0% to 10%, the total annual levelized cost increases 17%, ' The annual levelized fuel cost is a variable cost, and this value increases with load factor The economic parameter that affects the fuel cost is the fuel price escalation rate The effect of fuel price escalation rate on the steam turbine power plant depends on the annual fuel consumption and fuel price Obviously, for the power plant does not use fuel like tbe hydroelectricity plant, the annual levelized cost is independent of fuel price escalation rate since there Is no fuel consumption The effect of fiiel price escalation rate on the annual levelized cost has been given in Figure Increasing the fuel price escalation fcom 0% to 10% causes the annual levelized costs to increase about 12%, It shows that the fuel price escalation rate does not effect much to the annual levelized cost because the fijel price of steam power plant is very low comparing to the other cost, and because the thermal efficiency relates to the fuel consumption, therefore it seems that the increase ofthe annual levelized costs of plants having low thermal effciency are greater than that for the plants having higher thennal effciency The total annual levelized costs have increased with load factor due to the increasing fuel consumption The economic parameter affecting both the constant and variable costs of die power plant is the discount rale The discount rate is dependent on the economic structures of the counfries The effects of discount rate vary with the plants economic life and total cost values Changing the discount rate from 0% to 10%, the value ranges of the armual levelized costs for the steam power plant are shown in Figure The increases of the armual levelized costs are about 30% in this power plant Because the capital cost relates to the discount rate, therefore it seems that the armual levelized cost of the plant having high capital cost are higher Also from this figure, it is known that when the load factor is greater than 10%, the annual JUURNAL OF SCIENCE & TECHNOLOGY « No 95 - 2013 tevelized cost is high as the discount rate is high iThis result is very significant in designing and determining the load factor for different discount rate CONCLUSIONS In this study, the economic parameters such as interest rate, construction escalation rate, fuel escalation rate, maintenance escalation rate have been included in the calculation of the annual levelized cost of a steam power plant in Vietnam This including is very Important because those parameters are ignored in the previous researches, therefore the results lachieved from this study are much useful for improving the steam power plant in developing countries such as Vietnam The effects of economic parameters on the annual levelized costs of the electricity production steam power plant have been analyzed The results from this study can be summarized as below interest rate affects considerably the plant having the great capital cost and long construction duration This means the plants having a lower capital cost and a shorter construction time are influenced much less Therefore, these plants lose some of their economic advantages - The fuel price escalation rate has the least effect of all the economic parameters, and the total annual levelized costs have increased with load factor due to the increasing fuel consumption - The armual levelized cost increases with the increase of discoimt rate, however, it Is known that when the load factor is lower than 10%, the annual levelized cost is low as the discount rate is high Therefore, we not need a high discount rate for the load factor greater dian 10% These conclusions are very useful and significant for the planner to design and determine the economic parameters for different power plants with different economic and technical conditions However, the development of steam power plant In the future is dependent on not only these parameters but also many other important factors such as engineering, technology, balance on energy consumption etc., therefore it is necessary to study in more detml in the future - The annual levelized cost increases when the construction escalation rate increases, and when the load factor is high, the annual levelized cost increase more than when the load factor is low - The variations of the annual levelized cost with interest rate increase more rapidly dian with the construction escalation rate The REFERENCES Sahin B, Bekdemir S, Economical comparison of combined power cycles plant and determination of economical range, Turkey Energy Congress VI, Vol 4, Izmir: Ajans-Turk Press, 95-116, (1994) Gungor B, Bozkurt G, Economical comparison of imported energy sources in terms of long-term production planning, Energy, Vol.24, 31-44 (1999) El-Kordy MN, Economical evaluation of electricity generation considering externalities, Renew Energy, Vol.25, 317-328 (2002) Erdem HH, Sevilgen SH, Determination ofthe electricity production technologies position of load duration curves by cost part, Intemational Combustion Symposium VII, Ardtara, 503-515 (2002) MacGreger PR, Electric utility integrated resource plarming in the US, 37th GE Turbine State of die Art Technology Seminar, New York, 1-10 (1993) Tank R.H, Al-Khateeb, A computer-based-on-3