Economical Analysis Essay

In this section, an economical analysis will be carried out to compare the generation cost of electricity from two different sources. The generation cost of electricity ($/kWh) from PV system as well as gas turbine will be considered. The computation for cost of electricity – irrespective of the source – depends on several factors such as the cost of capital, the productivity and the life of the plant as well as the fuel and operation and maintenance costs. Renewable sources have distinct characteristic of eliminating fuel cost and, as a consequence once the plant is setup, the energy costs are largely fixed and inflation has a slight affect. However, productivity is highly dependent on the site or location; hence the cost of energy cannot be uniquely defined. Generation of electricity by burning fossil fuels incurs elements of costs, which conventionally are not directly attributed to these processes. These costs are termed â€Å"External â€Å" costs. They originate, for example, in subsidies such as additionally provided infrastructure and Research and Development and environmental pollution. In contrast, renewable energy technologies incur marginal external costs. Generation costs may simply be evaluated as follows: G = C R + f + m E where G is the unit cost of energy ($/kWh) C is the initial capital cost ($) R is the annual charge rate (%) E is the annual energy yield (kWh/kW) f is the fuel cost per unit ($/kWh) m is the operation and maintenance cost per unit ($/kWh) The capital recovery factor varies according to the period over which the capital is to be recovered, n years, and the test discount rate, r, thus R = r / (1-(1+r) –n) The cost of electricity from a particular source of supply is therefore dependent upon the particular combination of value of these variables. Table (2) estimates the cost of kWh production from PV systems and Gas Turbine unit. To calculate the generation cost of the Gas Turbine, we assumed 25 years of unit’s lifetime, 8% discount rate, and the unit will operate at its rated power for 8 hours for 9 months a year (2,160 hrs). On the other hand, the generation cost of the PV cells was estimated using PV arrays with panels facing south (Tilt angle 25o), the yearly estimated generated energy was about 1964 kWh/m2/yr and the panel cost of $5/Wp. The calculations indicated that under the assumed rates of interest and capital cost the unit generation cost using PV cells is more than three folds the generation cost of the Gas Turbine. A sensitivity analysis was carried out by varying installation capital cost, and discount rate, Table (1). The results indicate that PV generation can be competitive to that from Gas Turbine when the capital cost drops to $2/Wp and at 8% interest level. The capital cost of PV generation is 30% higher than that of a gas turbine system for the specified parameters. This is contributed to the high installation cost of the PV system and the low conversion efficiency. Further sensitivity analysis of some parameters, namely, conversion efficiency and installation cost were carried out. The results are illustrated in table (2). The results suggested that a reduction of installation cost to 4 $/Wp the generation cost can be competitive to that of a gas turbine. Concluding that: 1. The mathematical modeling indicate that the optimum tilt angle for a plane facing south is 25oC in the State of Qatar, and the year average total daily radiation was a bout 5. 295 kWh/m2. day for 25oC compared to 5. 062 kWh/m2. day for a horizontal surface. 2. Using a photovoltaic system can be more expensive than buying power from the local utility, through the electrical outlet in your wall. However, it is dramatically less expensive than running a power line to a remote area that is currently with out service. 3. Finance rate and loan term are critical economic elements because photovoltaic is capital intensive. The formation of solar bank that makes capital readily available for solar energy systems and below market interest rates with more than 20 years terms should be pursued. 4. The basic economical evaluation of electricity generation in the State of Qatar suggests that photovoltaic technology is not far from being economically feasible. The advanced technology and wide market demand of photovoltaic systems result in improved conversion efficiency and lower unit cost. However, it should be emphasized that photovoltaic systems are clean source of energy and their positive impact on the environment should be taken into consideration. PV systems produce power intermittently because they work only when the sun is shining. More electricity is produced on a clear, sunny day with more intense sunlight and with a more direct light angle, as when the sun is perpendicular to the surface of the PV modules. Cloudy days can significantly reduce output, and of course no power is produced at night. PV systems work best during summer months when the sun is higher in the sky and the days are longer. Because of these variations, it is difficult for PV systems to furnish all the power you need, and are typically used in conjunction with utility-supplied electricity Renewable Resources In 1987, a United Nations commission chaired by Gro Harlem Brundtland, the then Norwegian Prime Minister, was formed to determine how to reconcile economic development with environmental protection. The term ‘sustainable development’ was first used in the commissions’ report, Our Common Future. The report recognized that renewable energy sources are essential for sustainable development because they provide us with constant sources of energy with fewer effects on the environment. It also identified that globally, there was the need for more efficient use of energy and that the industrialized world, especially, had to improve its conservation efforts to lessen the impact of economic development on the environment. Renewable energy sources have been used for centuries. Until the mid-1800s, most of our energy came from two biomass sources, wood and peat. The location of many large plants and mills during the industrial era in Europe and North America was determined by the availability of fast flowing streams to generate power. It was not until the latter stages of the Industrial Revolution, the mid-1850s, and following the widespread incorporation of the steam-engine into factories, that fossil fuel use, mainly coal and oil, became commonplace. By incorporating fossil fuels into the manufacturing process instead of using water, industrialists were not limited to locations by rivers or streams. Plants could be located closer to sources of raw materials, markets or major shipping ports Renewable energy sources has been constantly being sought upon to replace dwindling fossil fuel reserves. The main question is where to look for these renewable energy sources. Some of them, like biomass, have already begun to contribute significantly to power generation in several developed nations like the US. Photvoltaic cells are economically viable in some locations and wind energy, though so far contributing only a tiny fraction, is rapidly expanding in the US and several European nations. The search for renewable energy sources points to photovoltaics, wind, solar thermal electricity, and biomass-produced electricity. These are highly prized due to the ease at which electricity can be transported and converted into othe forms, with the none or low polluting energy that these bestow and because of the potential that these sources may contribute in the near future. The earth’s atmosphere acts like glass in a greenhouse: sunlight can pass through, but the resulting heat cannot escape. Gases, such as carbon dioxide, are particularly effective at trapping heat. When burned, coal, oil and natural gas increase the amount of carbon dioxide in the atmosphere and the earth’s average temperature is raised. Renewable energy initiatives will result in reduced demand for fossil-fuelled electricity generation, thereby reducing greenhouse gas emissions These renewable sources once proven to be technically practical and economically feasible to provide required quantities of power, then there is no doubt that they would be greatly preferrable replace existing energy generation methods. An energy source can be classified as renewable provided the passed the following criterias: 1. there should be and indefinite supply or at least can be harnessed for an extreme length of time. 2. there would be a great reduction in the world pollution. Or at least the pollution released by the manufacturing and generation of power using these resources would not add up to current contributors to pollution. 3. and lastly, the must be able to provide energy self-sufficiency or at the very least provide a great reduction in the energy dependency.