POWER June 2011 - 62

PLANT ECONOMICS
A More Accurate Way to Calculate
the Cost of Electricity
Life-cycle cost of ownership is a common metric used to compare power plant
system alternatives. However, the familiar formula for calculating the cost of
generating electricity omits factors that are becoming increasingly important
to business decisions. A new formula addresses those blind spots by estimating
the value of the part-load performance of cycling combined-cycle plants.
By S. Can Gülen, PhD, PE, GE Energy
P
revious articles proposed more accurate
and consistent definitions of
combined heat and power (CHP) efficiency
( " A Proposed Definition of CHP
Efficiency, " June 2010) and steam plant efficiency
( " Plant Efficiency: Begin with the
Right Definitions, " February 2010). This
article proposes a revision of another common
definition: the unit cost of generating
electricity (COE). COE is a widely used
metric for comparing power plant system
alternatives. Traditionally, it combines a
power generation system's ownership costs
(capital and operating) and thermal performance
(output and efficiency). This metric
is useful when comparing power generation
alternatives that use similar technologies.
The standard formulation of COE is the
sum of capital, fuel, and operations and maintenance
(O&M) costs of plant ownership, as
shown in Equation 1 (see sidebar).
The cost of generation as provided by
this COE formula can be interpreted as the
price at which electricity must be sold in
order to cover all fixed and variable generating
expenses and to match the return on
company's equity implicit in the assumed
cost of money (ß). The COE is limited to
a single operating condition, typically new
and clean rated performance, and is usually
calculated at International Organization for
Standardization (ISO) baseload.
This definition of COE is useful for
initial screening studies and comparison
of baseload combined-cycle (CC) power
plants. At this time, however, many CC
units are relegated to daily cycling operation
that entails frequent starts and stops as
well as large load swings, often to provide
spinning reserve and backup power for renewable
energy generation that is not dispatchable.
Even assuming that natural gas
prices hold steady at their current low level,
gas-fired CC plants are expected to continue
in intermediate and cyclic duty for many
62
Equation 1
where
 = Levelized carrying charge factor or cost of money
C = Total plant cost ($)
H = Annual operating hours
P = Net rated output (kW)
f = Levelized fuel cost ($/kWh [LHV])
 = Net rated efficiency of the combined-cycle plant (LHV)
OMf
= Fixed O&M costs ($ or $/kW-yr)
OMv,b = Variable O&M costs for baseload operation ($/kWh)
 = Maintenance cost escalation factor (1.0 for baseload operation)
Equation 2
1. Typical cyclical duty profile for a combined-cycle plant. This particular
plant's operation is sometimes described as " two-cycled. " Source: GE Energy
120
100
80
60
40
20
Day of week 1
Average (effective)
LF = 76.2%
Midday
part load
5
Weekly (warm) start - 2 hours
10
15
Hour
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POWER | June 2011
Day of week 2
Daily (hot) start
1 hour
Evening
part load
Nightly shutdown
20
25
30
Load (%)
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POWER June 2011

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