A Public Utility Is Planning to Construct a High Head $\$ 3000 \mathrm { USD }$

question 15

Essay

A public utility is planning to construct a high head hydroelectric facility. The approximate cost for large facilities is $\$ 3000 \mathrm { USD }$ per $\mathrm { kW }$ installed. The utility is considering two options, a $600 \mathrm { MW } _ { \mathrm { e } }$ facility that would operate at a $70 \%$ capacity factor or an $800 \mathrm { MW } _ { \mathrm { e } }$ facility that would operate at a $65 \%$ capacity factor. If electricity is sold for $\$ 0.13$ per $\mathrm { kWh }$ , estimate the payback period for the additional infrastructure costs for the larger facility. Ignore the cost recovery factor and operating costs.

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Definitions:

Pounds

A unit of currency used in the United Kingdom and other territories, often symbolized as £.

Spreading Effect

The financial strategy of distributing investments across various assets to reduce risk and potentially increase returns.

Fixed Cost

Costs that do not vary with the level of output or activity.

Output

The aggregate production of either goods or services by an organization, commercial sector, or the economy as a whole.