Power Plant Valuation guide
Calculating on the basis of 60:40 ratio revenues are as follows: In terms of the variable costs, we have fuel cost at £30/MWh, O&M costs at £15/MWh; and fixed cost of capex at £10 Mn.
In this paper, we describe a model for power plant valuation that accounts for such important operating characteristics as minimum on- and off-times, ramp time, nonconstant heat rates, response rate and minimum electricity dispatch level. The power plant values and optimal operating policies are obtained by employing stochastic dynamic programming.
Given a set of available generating units, the lowest cost method to meet a power delivery commitment is via merit order loading: each unit is loaded to capacity in order of ascending operating cost until the required amount of power is made available.
In this paper, we describe how real options theory may be applied to value power generation assets. In particular, the model we develop is capable of handling constraints related to minimum on- and off-times, ramp times, minimum dispatch levels and response rates.
Deregulation of energy markets has dramatically changed the environment in which many power generation asset owners operate. In particular, utilities have become increasingly exposed to extremely volatile energy prices. Mismanagement of this risk exposure, even for an efficient power producer, may have a severe impact on its financial position.
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