Electrical Power Economics/Introduction/Part3

Electrical supply companies (usually called Utilities) have to make profit for the effort of producing; transmitting and distribution of electrical energy. It is thus desirable that the perunit cost of production is as low as possible, that is to say that it must be cheap for them to produce electricity and yet be able to make profit from the amount that they will be selling each unit to the consumer.

The following factors influence the production cost of electrical energy:

1. cost of land and equipment
2. Depreciation of equipment
3. Interest on capital investment

We can now define the economics of power generation as:

The art of determining the per unit ( 1kWh ) cost of production of electrical energy