EBF 483 Spring 2013 Homework 3 Due: Beginning of class on Thursday, January 31 Instructions: Please answer all questions clearly and completely. If you use graphs or tables in your answers, they must be clear enough that the graders can understand them (this means labeling axes, variables, and so forth). If a question requires you to make calculations, you must show your work. Your homework must be typed up and pages must be stapled together — the instructors will not accept homework that is handwritten or unstapled. See the syllabus for other formatting details. Each question is worth ten (10) points. 1. The Hammond Electric Company needs to build a new base- load power plant. Hammond Electric has two technology options, and it wants to choose the option with the lowest annual revenue requirement (ARR). Plant A has an overnight cost of $1,400 per kW, a heat rate of 8,000 and a fuel cost of $2 per mmBTU. Plant B has an overnight cost of $1,000 per kW, a heat rate of 9,500 and a fuel cost of $4 per mmBTU. Plot the ARR as a function of capacity factor (see the lecture slides on ARR or the supplementary reading from the Stoft book) for the two plants. Which plant should the company build, if the plant is expected to have a capacity factor of cf = 0.8? At what capacity factor would the company be indifferent between the plants? In your response, assume that r = 0.1 and T = 30 years. 2. Calculate the Levelized Cost of Energy (LCOE) for the two power plants shown in the table below. For both plants, assume that the capacity factor is cf=0.9, r = 0.12 and T = 30 years. Ignore O&M costs for both plant types. Plant Type Overnight Cost Heat Rate Fuel Price Coal $1,200/kW 8,000 BTU/kWh $3 per mmBTU Natural Gas $800/kW 7,000 BTU/kWh $8 per mmBTU Holding all other variables constant, how low would the price of natural gas need to get for the LCOE of the gas plant and the coal plant to be identical? 3. Calculate the Levelized Cost of Energy (LCOE) for a solar photovoltaic (PV) array with O&M costs of $2 per MWh, an overnight cost of $3,500 per kW and a capacity factor of 0.15. Assume that r = 0.1 and T = 20 years. 4. Module costs for solar PV have been declining rapidly in recent years. Many experts believe that solar PV will soon achieve grid parity – the point where module costs will be equal to the average retail cost of energy (and thus rooftop solar PV would be competitive with electricity purchased from the utility). Assuming that O&M costs do not change, and that the average retail cost of power is $120 per MWh, how far would overnight costs have to fall before solar PV achieves grid parity?