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Exercise 3 2024

The document outlines the course structure and requirements for Energy Economics at LUT University, detailing quizzes, grading criteria, and exercise tasks related to heating plants. It includes specific instructions for completing quizzes and calculations, as well as examples of financial equations relevant to energy economics. Additionally, it presents data for analyzing the costs and efficiency of two heating plants using different fuels.

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3 views

Exercise 3 2024

The document outlines the course structure and requirements for Energy Economics at LUT University, detailing quizzes, grading criteria, and exercise tasks related to heating plants. It includes specific instructions for completing quizzes and calculations, as well as examples of financial equations relevant to energy economics. Additionally, it presents data for analyzing the costs and efficiency of two heating plants using different fuels.

Uploaded by

majvand
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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LUT University/ENTE

BH61A0201 Energy Economics


BH61A020E Energy Economics for EnTeDI

Hints for the Moodle problem


- 6 quizzes based on the exercises.
- Published in Moodle after each exercise class, open about 2 weeks (check the deadlines
in Moodle), the third deadline is 12.3.2024 at 23.59.
- Time limit 2 hours.
- In your answer, use point "." as decimal separator (not dot ",").
- Give the answer with asked number of decimals.
- Remember to check what is the asked unit of the answer.
- Use exact values as you proceed with the calculating.
- Moodle quizzes are part of the final grading in the course. Each quiz is graded.
- BH61A0201 Energy Economics: Final grading numerical, paper exam 80 % and
moodle quizzes 20 %.
- BH61A020E Energy Economics for EnTeDI: Final grading pass/fail. No exam. Lecture
problems and quizzes. To pass the quizzes you should earn at least 3 points out of the
total 6.
- Save your calculations.

EXERCISE 3
1 Two 5 MW heating plants, one using woodchips and other heavy fuel oil as fuel, have the
following information:

Woodchips Light fuel oil


Investment cost, [m€] 5,5 2
Fixed operation costs percent of 3% 2%
investment per year
Fuel price 35 €/MWh 1,2 €/l
Other variable costs [€/MWh] 2,0 0,5

Efficiency 87 % 90 %

Other variable costs are reported here per heat megawatt hours. Lower caloric value of light fuel
oil is 11,97 MWh/t and density 0,834 t/m3. Rate of interest is 5 % and economic lifetime 15 years.

a) Solve the linear cost functions of the heating plants (kustannuskarakteristika or


kustannussuora in Finnish)
b) Draw the cost characteristics in units of [€/kW, year] as function of annual full-capacity
operating hours.
c) Show the production costs (separate different type of costs) as bar diagram (stacked
column) in units of €/MWh, for annual full-capacity operating hours as 3000 h/year.

2. The load duration curve of heat demand of a community is shown in the figure below.
LUT University/ENTE
BH61A0201 Energy Economics
BH61A020E Energy Economics for EnTeDI
Heat demand is planned to be covered by type of power plants introduced in problem 1. Design
the optimal sizing for the heat plants and show the solution in the figure below.

Community load duration curve of heat deamand

10
9
8
7
6
P [MW]

5
4
3
2
1
0
0 1000 2000 3000 4000 5000 6000 7000 8000 8760
th [h/ year]
LUT University/ENTE
BH61A0201 Energy Economics
BH61A020E Energy Economics for EnTeDI
Basic concepts in Energy Economics
Present value factor 𝒗𝒏,𝒊
Every payment is assumed to happen in the end of the year at issue.
1
Equation: 𝑣𝑛,𝑖 =
1+𝑖 𝑛

Example: The present value of one monetary unit ten years from now with 8 % rate of interest is
about 0,46.

n/i 5% 6% 7% 8% 10 % 12 % 15 % 20 %
1 0,95238 0,94340 0,93458 0,92593 0,90909 0,89286 0,86957 0,83333
2 0,90703 0,89000 0,87344 0,85734 0,82645 0,79719 0,75614 0,69444
5 0,78353 0,74726 0,71299 0,68058 0,62092 0,56743 0,49718 0,40188
10 0,61391 0,55839 0,50835 0,46319 0,38554 0,32197 0,24718 0,16151
20 0,37689 0,31180 0,25842 0,21455 0,14864 0,10367 0,06110 0,02608

Present value factor of periodic payments 𝒂𝒏,𝒊


Every payment is assumed to happen in the end of the year at issue.

1+𝑖 𝑛 −1
Equation: 𝑎𝑛 ,𝑖 =
𝑖 1+𝑖 𝑛

Example: The combined present value of the series of one monetary unit annual payments for 10
years based on a 5 % rate of interest is about 6,7.

n/i 5% 6% 7% 8% 10 % 12 % 15 % 20 %
1 0,95238 0,94340 0,93458 0,92593 0,90909 0,89286 0,86957 0,83333
2 1,85941 1,83339 1,80802 1,78326 1,73554 1,69005 1,62571 1,52778
5 4,32948 4,21236 4,10020 3,99271 3,79079 3,60478 3,35216 2,99061
10 7,72173 7,36009 7,02358 6,71008 6,14457 5,65022 5,01877 4,19247
20 12,46221 11,46992 10,59401 9,81815 8,51356 7,46944 6,25933 4,86958

Annuity factor 𝒄𝒏,𝒊


The value of payment at present is changed to annual payments.

𝑖 1+𝑖 𝑛
Equation: 𝑐𝑛 ,𝑖 =
1+𝑖 𝑛 −1

Example: If one monetary unit present payment is changed to annual payments for 10 years using 8
% rate of interest the annual loan payment and interest make together about 0,149 annually.

n/i 5% 6% 7% 8% 10 % 12 % 15 % 20 %
1 1,05000 1,06000 1,07000 1,08000 1,10000 1,12000 1,15000 1,20000
2 0,53780 0,54544 0,55309 0,56077 0,57619 0,59170 0,61512 0,65455
5 0,23097 0,23740 0,24389 0,25046 0,26380 0,27741 0,29832 0,33438
10 0,12950 0,13587 0,14238 0,14903 0,16275 0,17698 0,19925 0,23852
20 0,08024 0,08718 0,09439 0,10185 0,11746 0,13388 0,15976 0,20536

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