Economic evaluation of private power production under uncertainties

Abstract

Private power production is becoming an increasingly important source of electricity generation. In developing countries, build-operate-transfer (BOT) arrangement has emerged as a dominant form of private investment. Pricing private power production at its avoided cost is the breakeven point for the utility in economic evaluation, and uncertainties must be taken into account. In this paper, an approach of calculating the breakeven cost to the utility of a BOT power plant whose contract lasts for 10-25 years is proposed. The proposed approach requires the computation of production costs from long-term generation expansion planning (GEP) under future uncertainties. To facilitate the inclusion of constraints introduced by BOT plants in GEP and uncertainties, a genetic algorithm method is utilized in GEP. The breakeven cost is a useful measure in the economic evaluation of BOT power plants. An example is presented to illustrate the economic evaluation of BOT plants using the concept of breakeven cost. © 2002 Elsevier Science Ltd. All rights reserved.