Generation Capacity Expansion Planning in Deregulated Electricity ...

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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 increases, both optimal IRR and the total profit starts increasing linearly.

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

3). Because the firm does not have any further budget for investment, its investment costs attains a

maximum limit while its revenue keeps on increasing.

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

is constrained and thus limiting the generating costs while revenue keeps increasing because of price

increase, as shown in Fig. 5.

19

47%

49%

51%

54%

56%

58%

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