Question

Suppose an electric utility is considering whether to install a wind farm with 30 megawatts (mw) of capacity or a natural gas generator that would produce the same amount of annual electricity. An engineering study showed that the site for the wind farm would produce a load factor of 25 percent. (Actual generation would be 25 percent of capacity on average over the course of a year.) The natural gas plant could be operated with a load factor of 50 percent. Capital costs for the wind farm would $1.5 million per megawatt, compared to $1.0 million per megawatt for the natural gas plant. Operating costs for both plants would be $2 million per year excluding fuel costs.

a. If the gas plant has a thermal efficiency of 0.4 (that is, 40 percent of the energy in the fuel gets converted to electric energy), and the cost of natural gas is $5 per million Btu, how much natural gas would be needed, and what would be the annual fuel cost for the gas plant? Show your calculations, including the assumptions you make about converting Btus to mwh.

b. What would be the levelized cost of electricity per mwh from the wind farm and from the natural gas plant, assuming a 10 percent annual interest rate and that both facilities have a 25 year life? Explain your calculations. Which is the least cost source of electricity?

c. The electric utility is investor-owned and subject to rate of return regulation. The capital costs are allowed in the rate base, but not operating or fuel costs. If the regulatory agency allows the firm to earn a 10 percent return on the rate base, what would be the regulated price of electricity with each type of generation? Which source would the utility prefer? Explain how you derived your answer.

d. If the electric utility has to pay an emission fee of $25 per metric ton of carbon dioxide emitted from fuel consumption, what would be the effect on the levelized cost of power and the regulated price? Use the emission factors for natural gas combustion on the EIA's website to derive your answer.

Answer 1

repost the option c and d

To get answer for both option

Thanks