Bha61a0201 Energy Economics Smart Grids

Yassmine Maioui 0530612

BH61A0201 Energy Economics

Homework 3

The calculation of the linear cost function of the heating plant

We know that the linear cost function is expressed in the following form:

k_k [€/(kW,a)]+ k_m [€/MWh]

Where k_k are the fixed costs of energy production expressed in €/(kW,a)

k_m are the variable costs of energy production expressed in heat megawatt hours

The first step consists of calculating the fixed costs and they are defined as the following:

k_k=(c_(n,i )×I+Kk)/P

Where c_(n,i ): Is the annuity factor

P: Power of the plant

I: Investment costs expressed in Euro, in our case the investment costs are not expressed in terms of variable costs, therefore, they should be divided by the power output of the plant.

Kk: Fixed operations and maintenance costs.

c_(n,i )=(i×〖(1+i)〗^n)/(〖(1+i)〗^n-1)

c_(15,5 )=(0,05×〖(1+0,05)〗^15)/(〖(1+0,05)〗^15-1)

c_15,5=0,096354

The fixed costs are expressed in terms of addition of capital costs K_c and fixed operations costs K_Kk

K_c =(0,096345×8000000)/25000=30,8304 €/(kW,a)

K_Kk=(0,025×8000000)/25000=8 €/(kW,a)

k_k =K_c+K_Kk

k_k =38,8304 €/(kW,a)

The variable costs defined as k_m are composed of the fuel costs and other variable costs. One should note that the fuel costs is the fuel price divided by the annual efficiency of the heating plant. The other variable costs will not be divided by the efficiency as they are already reported per produced thermal energy unit, in order words, their unit is €/MWh.

Therefore, we obtain the following:

k_m=30/0,89 €/MWh+2 €/MWh