ABSTRACT
Adapted from Carol A. Dahl (2004), “International Energy Markets’’, Pennwell Corporation, USA, p. 92.
1. Calculate the electricity costs of a small village community, on the basis of the following particulars:
Costs of electricity generation
TC = FC+ VC(Q)
where TC is total cost; FC is fixed cost; Q is quantity of production (kWh/yr) VC is variable cost; VC(Q) is a variable cost which is a function of Q
P is electricity cost in US cents/kWh
P=75 – 4Q TC=80+19Q – 0.25Q2 FC=80 VC=19Q – 0.25Q2 AFC=FC/Q=80/Q AVC=VC/Q=19−0.25 MC=19−0.50Q
Total cost for producing 30 units is TC=80+19 ∗ 30-0.25 (302)=425 cents=$4.25 Average fixed cost for 30 units= AFC=80/30=2.67 cents AVC=19−0.25Q=19−0.25 ∗ 30=11.5 cents MC=Marginal cost of the 30th unit is=19−0.5 ∗ 30=4 cents There will be economies of scale. As more electricity is produced, unit costs will fall.
2. Calculate the real cost per kWh ($k) of wind power, on the basis of the following particulars. Turbine lasts for 20 years. Turbine runs in full capacity at 25% of the time. Dicount (interest) rate: 10% Capital cost of a 2MW wind turbine @ $1500kW=$3,000,000/- Installation and maintenance costs=250,000 Total cost that needs to be recovered over 20 years=$3,250,000/- In a year, the turbine generates 2000 kW ∗ 0.25 ∗ 8766hrs=4,383,000 units ($k)=3,250,000/4,383,000/20i=01/1+0.10)i)=$0.746 per kWh
