Page 97 - Piston Engine-Based Power Plants

88 Piston Engine-Based Power Plants

Large engines-based plants may have generating capacities of
several megawatts: For the largest slow-speed diesel plants the total
capacity could be up to 80 MW. Plants of this size will require serious
economic evaluation before they are constructed. This will often involve
the use of an economic model called the levelized cost of electricity
(LCOE) model, a lifetime cost model which allows a comparison to be
made between different generating technologies. Using this model, the
price of electricity from a range of potential power plant technologies
can be compared, and a choice made based on cost.

COST OF ELECTRICITY

The cost of electricity from a power plant of any type depends on a
range of factors. First there is the cost of building the power station
and buying all the components needed for its construction. In addition,
many power projects today are financed using loans so there will also
be a cost associated with paying back the loan, with interest. Then
there is the cost of operating and maintaining the plant over its life-
time, including fuel costs if the plant burns a fuel. Finally the overall
cost equation should include the cost of decommissioning the power
station once it is removed from service.
It would be possible to add up all these cost elements to provide a
total cost of building and running the power station over its lifetime,
including the cost of decommissioning, and then dividing this total by
the total number of units of electricity that the power station actually
produced over its lifetime. The result would be the real lifetime cost of
electricity from the plant. Unfortunately such as calculation could only
be completed once the power station was no longer in service. From a
practical point of view, this would not be of much use. The point in
time at which the cost-of-electricity calculation of this type is most
needed is before the power station is built. This is when a decision is
made to build a particular type of power plant, based normally on the
technology that will offer the least cost electricity over its lifetime.
In order to get around this problem economists have devised a
model that provides an estimate of the lifetime cost of electricity before
the station is built. Of course, since the plant does not yet exist, the
model requires that a large number of assumptions be made. In order
to make this model as useful as possible, all future costs are also