Generation Capacity Expansion Planning in Deregulated Electricity ...

Total Revenue/Cost/Profit/Salvage Value, $

8.0E+08

7.0E+08

6.0E+08

5.0E+08

4.0E+08

3.0E+08

2.0E+08

1.0E+08

0.0E+00

10%

12%

15%

17%

19%

22%

24%

26%

28%

31%

33%

35%

IRR, %

Total Revenue Total Annual Cost Total Profit Total Salvage Value

38%

40%

42%

45%

Fig. 2 Variation of firm’s cost and revenue with IRR

2.3.3 Scenario of **Electricity** Price Variations

In this scenario the price of electricity is varied over a range of 85% to 115% of the base price and its

effect on optimal IRR, total profit, total revenue and total firm cost is studied. Fig. 3 shows the

relationship between electricity price and the firm’s optimal IRR. It can be seen from Fig. 3 and Fig. 4

that if the price of electricity **in**creases, both optimal IRR and the total profit starts **in**creas**in**g l**in**early.

Around a price value of 95% of the base price, the optimal IRR **in**creases with a steeper slope (Fig.

3). Because the firm does not have any further budget for **in**vestment, its **in**vestment costs atta**in**s a

maximum limit while its revenue keeps on **in**creas**in**g.

Moreover, s**in**ce the firm’s emission cap is also reached at 95% of base price, its energy generation

is constra**in**ed and thus limit**in**g the generat**in**g costs while revenue keeps **in**creas**in**g because of price

**in**crease, as shown **in** Fig. 5.

19

47%

49%

51%

54%

56%

58%