Question

In: Economics

Suppose an electric utility is considering whether to install a wind farm with 30 megawatts (mw)...

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.


Solutions

Expert Solution

repost the option c and d

To get answer for both option

Thanks


Related Solutions

Suppose an electric utility is considering whether to install a wind farm with 30 megawatts (mw)...
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...
DATA: The basic information about the wind farm: Wind farm capacity (MW) 50 Capital investment (€)...
DATA: The basic information about the wind farm: Wind farm capacity (MW) 50 Capital investment (€) 65 000 000 Period of operation (years) 20 Decommissioning costs (€) 3 000 000 O&M costs (€/kWh) 0.0091 Annual energy production (kWh) 110 000 000 QUESTIONS: Please use the information given above to answer the following questions. In order to make this calculation, we need to convert some of the information we have into annual figures: The levelized cost of energy (LCOE) from a...
Suppose you own some land next to a 50 MW wind farm located on Colorado’s Front...
Suppose you own some land next to a 50 MW wind farm located on Colorado’s Front Range. Your land has a fantastic cliff/ridgeline with an elevation difference of 250 m. Evaluate whether or not you can make money by building a pumped hydroelectric energy storage system on your land that interfaces with the wind farm. Your plan is to capture excess energy from the wind farm or buy energy from the wind farm when electricity prices are low and sell...
Suppose you own some land next to a 50 MW wind farm located on Colorado’s Front...
Suppose you own some land next to a 50 MW wind farm located on Colorado’s Front Range. Your land has a fantastic cliff/ridgeline with an elevation difference of 250 m. Evaluate whether or not you can make money by building a pumped hydroelectric energy storage system on your land that interfaces with the wind farm. Your plan is to capture excess energy from the wind farm or buy energy from the wind farm when electricity prices are low and sell...
Consider a 2.0 MW wind turbine that operates with a capacity factor of 30% (i.e. it...
Consider a 2.0 MW wind turbine that operates with a capacity factor of 30% (i.e. it produces 5,300 MWh/y). The initial cost is $3.5 million. The project life is 30 years and the salvage value is negligible. Maintenance costs are $50,000/y. The minimum attractive rate of return is 7%. For each of the following cases, determine the present value of the project and whether the cost is justified. a. Power can be sold to the grid at $0.055/kWh. (ans. -503200,...
A firm is considering whether to install a new computer system. The computer system costs $800,000...
A firm is considering whether to install a new computer system. The computer system costs $800,000 today and is expected to increase the firm’s productivity so much that the firm will earn $250,000 each year for four years starting one year from today. If the real interest rate is 10%, should the firm install the new computer system? (Make sure that you show the formula in your answer. Show your work.)
An electric utility is considering a new power plant in northern Arizona. Power from the plant...
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $269.63 million,...
An electric utility is considering a new power plant in northern Arizona. Power from the plant...
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would require an initial...
eBook An electric utility is considering a new power plant in northern Arizona. Power from the...
eBook An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would require an...
An electric utility is considering a new power plant in northern Arizona. Power from the plant...
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would require an initial...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT