ECONOMICS OF POWER GENERATION- TARIFF METHODS
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The document discusses essential concepts related to power generation methods, including connected load, maximum demand, and various tariff structures for electricity supply. It outlines different types of tariffs such as simple, flat rate, block rate, and two-part tariffs, explaining their advantages and disadvantages. Additionally, it details the costs associated with electrical energy, categorizing them into fixed, semi-fixed, and running costs.
ECONOMICS OF POWER GENERATION- TARIFF METHODS
- 3. Introduction, definitions of connected load, maximum demand, demand factor, load factor, diversity factor, Load duration curve, number and size of generator units. Base load and peak load plants. Cost of electrical energy-fixed cost, running cost, Tariff on charge to customer.
- 4. 4 Important Terms and Factors Connected load: It is the sum of continuous ratings of all the equipment's connected to supply system. Maximum demand : It is the greatest demand of load on the power station during a given period. Demand factor. It is the ratio of maximum demand on the power station to its connected load i.e., Demand factor =Maximum demand / Connected load The value of demand factor is usually less than 1. Average load: The average of loads occurring on the power station in a given period (day or month or year) is known as average load or average demand. Daily average load =No. of units (kWh) generated in a day/24 hours Monthly average load =No. of units (kWh) generated in a month/Number of hours in a month Yearly average load = No. of units (kWh) generated in a year/8760 hours
- 26. TARIFF The rate at which electrical energy is supplied to a consumer is known as tariff Objectives of tariff. Like other commodities, electrical energy is also sold at such a rate so that it not only returns the cost but also earns reasonable profit. Therefore, a tariff should include the following items : (i) Recovery of cost of producing electrical energy at the power station. (ii) Recovery of cost on the capital investment in transmission and distribution systems. (iii) Recovery of cost of operation and maintenance of supply of electrical energy e.g., metering equipment, billing etc. (iv) A suitable profit on the capital investment.
- 27. Characteristics of a Tariff (i) Proper return : The tariff should be such that it ensures the proper return from each consumer. In other words, the total receipts from the consumers must be equal to the cost of producing and supplying electrical energy plus reasonable profit. (ii) Fairness : The tariff must be fair so that different types of consumers are satisfied with the rate of charge of electrical energy. Thus a big consumer should be charged at a lower rate than a small consumer. It is because increased energy consumption spreads the fixed charges over a greater number of units, thus reducing the overall cost of producing electrical energy. (iii) Simplicity : The tariff should be simple so that an ordinary consumer can easily understand it. A complicated tariff may cause an opposition from the public which is generally distrustful of supply companies. (iv) Reasonable profit : The profit element in the tariff should be reasonable. An electric supply company is a public utility company and generally enjoys the benefits of monopoly. (v) Attractive : The tariff should be attractive so that a large number of consumers are encouraged to use electrical energy. Efforts should be made to fix the tariff in such a way so that consumers can pay easily.
- 28. Types of Tariff 1. Simple tariff. When there is a fixed rate per unit of energy consumed, it is called a simple tariff or uniform rate tariff. In this type of tariff, the price charged per unit is constant i.e., it does not vary with increase or decrease in number of units consumed. The consumption of electrical energy at the consumer’s terminals is recorded by means of an energy meter. This is the simplest of all tariffs and is readily understood by the consumers. Disadvantages (i) There is no discrimination between different types of consumers since every consumer has to pay equitably for the fixed charges. (ii) The cost per unit delivered is high. (iii) It does not encourage the use of electricity. 2. Flat rate tariff. When different types of consumers are charged at different uniform per unit rates, it is called a flat rate tariff. In this type of tariff, the consumers are grouped into different classes and each class of consumers is charged at a different uniform rate. The different classes of consumers are made taking into account their diversity and load factors. The advantage of such a tariff is that it is more fair to different types of consumers and is quite simple in calculations.
- 29. Disadvantages (i) Since the flat rate tariff varies according to the way the supply is used, separate meters are required for lighting load, power load etc. This makes the application of such a tariff expensive and complicated. (ii) A particular class of consumers is charged at the same rate irrespective of the magnitude of energy consumed. However, a big consumer should be charged at a lower rate as in his case the fixed charges per unit are reduced. 3. Block rate tariff. When a given block of energy is charged at a specified rate and the succeeding blocks of energy are charged at progressively reduced rates, it is called a block rate tariff. In block rate tariff, the energy consumption is divided into blocks and the price per unit is fixed in each block. The price per unit in the first block is the highest** and it is progressively reduced for the succeeding blocks of energy. For example, the first 30 units may be charged at the rate of 60 paise per unit ; the next 25 units at the rate of 55 paise per unit and the remaining additional units may be charged at the rate of 30 paise per unit. The advantage of such a tariff is that the consumer gets an incentive to consume more electrical energy. This increases the load factor of the system and hence the cost of generation is reduced. However, its principal defect is that it lacks a measure of the consumer’s demand. This type of tariff is being used for majority of residential and small commercial consumers.
- 30. 4. Two-part tariff. When the rate of electrical energy is charged on the basis of maximum demand of the consumer and the units consumed, it is called a two-part tariff. Total charges = Rs (b × kW + c × kWh) where, b = charge per kW of maximum demand c = charge per kWh of energy consumed This type of tariff is mostly applicable to industrial consumers who have appreciable maximum demand. Advantages (i) It is easily understood by the consumers. (ii) It recovers the fixed charges which depend upon the maximum demand of the consumer but are independent of the units consumed. Disadvantages (i) The consumer has to pay the fixed charges irrespective of the fact whether the has consumed or not consumed the electrical energy. (ii) There is always error in assessing the maximum demand of the consumer
- 31. 5. Maximum demand tariff. It is similar to two-part tariff with the only difference that the maximum demand is actually measured by installing maximum demand meter in the premises of the consumer. This removes the objection of two-part tariff where the maximum demand is assessed merely on the basis of the rateable value. This type of tariff is mostly applied to big consumers. However, it is not suitable for a small consumer (e.g., residential consumer) as a separate maximum demand meter is required. 6. Power factor tariff. The tariff in which power factor of the consumer’s load is taken into consideration is known as power factor tariff. In an a.c. system, power factor plays an important role. A low power factor increases the rating of station equipment and line losses.
- 32. 7. Three-part tariff. When the total charge to be made from the consumer is split into three parts viz., fixed charge, semi-fixed charge and running charge, it is known as a three-part tariff. i.e., Total charge = Rs (a + b × kW + c × kWh) where a = fixed charge made during each billing period. It includes interest and depreciation on the cost of secondary distribution and labour cost of collecting revenues, b = charge per kW of maximum demand, c = charge per kWh of energy consumed.
- 33. Cost of Electrical Energy The total cost of electrical energy generated can be divided into three parts, namely (i) Fixed cost (ii) Semi-fixed cost (iii) Running or operating cost (i) Fixed cost. It is the cost which is independent of maximum demand and units generated. The fixed cost is due to the annual cost of central organisation, interest on capital cost of land and salaries of high officials. The annual expenditure on the central organisation and salaries of high officials is fixed since it has to be met whether the plant has high or low maximum demand or it generates less or more units. Further, the capital investment on the land is fixed and hence the amount of interest is also fixed. (ii) Semi-fixed cost. It is the cost which depends upon maximum demand but is independent of units generated. The semi-fixed cost is directly proportional to the maximum demand on power station and is on account of annual interest and depreciation on capital investment of building and equipment, taxes, salaries of management and clerical staff. The maximum demand on the power station determines its size and cost of installation. The greater the maximum demand on a power station, the greater is its size and cost of installation. (iii) Running cost. It is the cost which depends only upon the number of units generated. The running cost is on account of annual cost of fuel, lubricating oil, maintenance, repairs and salaries of operating staff.
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