The Tennessee Valley Authority (TVA) wants to construct a 150-MW peaking power plant to meet the...

  

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The Tennessee Valley Authority (TVA) wants to construct a 150-MW peaking power plant to meet the demand for additional electricity. Two alternatives are under consideration. One is to construct a combustion turbine plant, which is particularly well suited for peaking operation because of its low capital cost. Its most serious disadvantage is its poor thermal efficiency, which affects the fuel and operating costs. Also under consideration is a fuel-cell plant, which provides better thermal efficiency even though it is relatively more expensive to construct. Assume the fuel and operating costs are expected to increase at the rate of 6% per year, even though the amount of energy produced is expected to be the same each year. The fuel cost in any year n is represented by the following expression: (C)(H)(U)( where Fn = The operating cost in any year n is given by where 8,760 hours/year 106 PnPn-1(1+0.06). On-(C)(H)(U) -)Pn 8,760 hours/year 106 -) Qn QnQn-1(1+0.06). It would be two years before either plant would be in full commercial operation. The revenue generated each year is assumed to be the same and to exceed total AE(i) cost for either plant. Shown below are the economic and operating data associated with each type of generating plant. (Assume all construction costs occur when the plant commences full commercial operation.) C-Plant Size (kW) H = Heat rate (btu/kWh) U = Plant utilization factor N = Economic service life (years) Postarting fuel cost ($/106 Btu) Qo-starting maintenance cost ($/106 Btu) Construction cost ($/kW) Other annual expenses (insurance, tax, depreciation, and maintenance cost) as a fixed % of construction costs Salvage value as fixed % of construction cost Combustion Turbine 150,000 12,700 15% 25 2.2 0.19 175 6% -1% Fuel-Cell Plant 150,000 9,300 15% 25 2.2 0.19 240 6% -1% a) For an interest rate of 12%, determine which alternative is more attractive to undertake (AE(i) cost comparison over commercial operation period). b) By using the incremental BC ratio (B-C)/I, what alternative would be chosen? c) By using the incremental BC ratio B/(1+C), what alternative would be chosen? Discuss any difficulty associated with applying the BC ratio to the problem d) For a lower utilization factor at 5%, repeat (a), (b), and (c) The Tennessee Valley Authority (TVA) wants to construct a 150-MW peaking power plant to meet the demand for additional electricity. Two alternatives are under consideration. One is to construct a combustion turbine plant, which is particularly well suited for peaking operation because of its low capital cost. Its most serious disadvantage is its poor thermal efficiency, which affects the fuel and operating costs. Also under consideration is a fuel-cell plant, which provides better thermal efficiency even though it is relatively more expensive to construct. Assume the fuel and operating costs are expected to increase at the rate of 6% per year, even though the amount of energy produced is expected to be the same each year. The fuel cost in any year n is represented by the following expression: (C)(H)(U)( where Fn = The operating cost in any year n is given by where 8,760 hours/year 106 PnPn-1(1+0.06). On-(C)(H)(U) -)Pn 8,760 hours/year 106 -) Qn QnQn-1(1+0.06). It would be two years before either plant would be in full commercial operation. The revenue generated each year is assumed to be the same and to exceed total AE(i) cost for either plant. Shown below are the economic and operating data associated with each type of generating plant. (Assume all construction costs occur when the plant commences full commercial operation.) C-Plant Size (kW) H = Heat rate (btu/kWh) U = Plant utilization factor N = Economic service life (years) Postarting fuel cost ($/106 Btu) Qo-starting maintenance cost ($/106 Btu) Construction cost ($/kW) Other annual expenses (insurance, tax, depreciation, and maintenance cost) as a fixed % of construction costs Salvage value as fixed % of construction cost Combustion Turbine 150,000 12,700 15% 25 2.2 0.19 175 6% -1% Fuel-Cell Plant 150,000 9,300 15% 25 2.2 0.19 240 6% -1% a) For an interest rate of 12%, determine which alternative is more attractive to undertake (AE(i) cost comparison over commercial operation period). b) By using the incremental BC ratio (B-C)/I, what alternative would be chosen? c) By using the incremental BC ratio B/(1+C), what alternative would be chosen? Discuss any difficulty associated with applying the BC ratio to the problem d) For a lower utilization factor at 5%, repeat (a), (b), and (c)

Answer rating: 100% (QA)

a The fuelcell plant is more attractive to undertake as its AEI cost is lower Assuming a discount rate of 12 the present value of the fuel costs for the combustion turbine plant is PV C H106 U 60 11 r... View the full answer