FIXED AND VARIABLE COST COMPONENTS INCURRED IN THERMAL POWER PLANT AND WAYS TO IMPROVE COST EFFICIENCY

Electricity is the only form of energy which is easy to produce, easy to transport, easy to use and easy to control. So, it is mostly the terminal form of energy for transmission and distribution. Electricity consumption per capita is the index of the living standard of people of a place or country.
Electricity in bulk is produced in power plants, which can be of the following types:
1. Thermal power plant.
2. Nuclear power plant.
3. Hydraulic power plant.
Thermal, nuclear power plants work with steam as the working fluid. Thermal power plants generate more than 80% of the total electricity produced in the world. Fossil fuels like fuel oil, coal, natural gas are the energy source and steam is the working fluid.
LOCATION OF POWER PLANTS:-
a) Availability of cooling water.
b) Availability of fuel.
c) Cost of land.
d) With coal-fired stations, disposal of ash.
e) Rail and road connections.
Thus, these are the main factors on which concern should be given before erecting a power plant.
POWER PLANT ECONOMICS:-
A power plant should provide a reliable supply of electricity at minimum cost to the consumer. The cost per kWh is determined by:
· Fixed costs(FC), mainly interest, depreciation, insurance, taxes, depending on the capital invested, i.e. on the construction costs of the plant, cost of the building, machinery and the cost of the land.
· Operating and maintenance costs (i.e. the variable costs) costs covering the salaries, wages, overhauling of equipments, repairs including spare parts and miscellaneous expenses.
· Fuel cost (i.e. coal here in the case of thermal power plant), depending on the amount of electricity generated.

The total annual costs (C) in a power plant can be calculated from:

Where I is the interest %, D is the depreciation %, T is the taxes and insurance %, Cc is the construction cost, W is the wages and salaries, R is the repairs, M is the miscellaneous costs, and Cf is the fuel cost.
The costs in the power generation can be reduced by:
1) Selecting equipment of longer life and proper capacities.
2) Running the power station at high load.
3) Increasing the efficiency of the power plant.
4) Carrying out maintenance of power plant equipment to avoid plant breakdowns.
5) Keeping proper supervision, since good supervision is reflected in lesser breakdowns and extended plant life.
6) Using a plant of simple design that does not need highly skilled personnel.
Essential requirements of steam power station design
1) Reliability.
2) Minimum capital cost.
3) Minimum operating and maintenance cost.
4) Capacity to meet peak load effectively.
5) Minimum losses of energy in transmission.
6) Low cost of energy supplied to the customers.
7) Reserve capacity to meet the future demands.

For the power economics let us define some related points.
Capital Cost: Capital costs are those costs which occur only once and are usually limited to the costs of procurement and construction of the facilities prior to the time of commercial operation. Land, building, interest, machinery, installation, taxes, insurance, depreciation costs come under the capital cost.
Operational Cost: It includes
· Fuel cost
· Operating labour cost
· Maintenance cost
· Suppliers
· Supervision
· Operating taxes.

Thus, in the Capital costs land , building, interest, machinery, installation, taxes, insurance, depreciation costs come under the fixed costs. The fixed costs are those which remain fixed irrespective of the number of units we produce.

Thus, in the Operational costs fuel costs, Labour cost (salary & wages), raw materials, maintenance cost, supervision cost, cost of transportation (i.e. bringing the coal and transmission of produced electricity) etc.



TOTAL COST INCURRED= TOTAL FIXED COSTS+ TOTAL VARIABLE COSTS.

In the figure total fixed cost is indicated by a horizontal line i.e. this cost is constant with respect to output. The total variable cost function begins at the origin and increases at a decreasing rate and then increases at an increasing rate. Total cost has the same shape as the total variable cost but is slightly above it. These functions relate an output rate to the total cost of producing that output rate.