Projects in the electricity supply industry live for a long time. As already mentioned, 25-30 years is a normal useful life for a conventional power station. Operational cost (mostly fuel, maintenance and salaries) can vary significantly over time and from one region to another. Therefore, in this chapter we shall be only concerned with financial discount rates relevant to financial flows. Welfare economics have a different social discount rate, which is introduced in Chapters 4 and 8. Operational cost (mostly fuel, maintenance and salaries) can vary significantly over time and from one region to another. Therefore, it is not possible to assess long-term costs and performance with great certainty or to accurately compare different generation facilities. What is important is to understand the underlying procedures for analysis and apply them in an intelligent way.

Chapter Contents:

• 3.1 Discounting
• 3.2 Discounted cash flows
• 3.3 Net present value
• 3.4 Accounting for inflation in cash flows
• 3.5 Considerations in present valuing
• 3.5.1 Future and past valuing
• 3.5.2 Annuity factor
• 3.5.3 Capital recovery factor or equivalent annual cost
• 3.5.4 Grouping monthly and hourly flows
• References

Inspec keywords: costing; electricity supply industry

Other keywords: financial discount rates; operational cost; electricity supply industry; financial flows; social discount rate

Subjects: Power system management, operation and economics