This technical assessment guide has been compiled for the benefit of Electric Power Research Institute members, providing a common basis for evaluating electric energy research and development alternatives. This volume is a reference guide to economic planning methodologies for power generation. It contains detailed sample calculations to illustrate the solution to common evaluation techniques.
This edition provides updates to Volume 3, published 1999, to account for the ongoing structural and market changes in the industry. Section 1 presents an overview of the key regulatory changes that have moved the electric power industry toward a more competitive environment. Section 2 reviews the basic concepts involved in the economic evaluation of utility resources—present values, current versus constant dollars, the discount rate, and levelized costs. The next section, Section 3, covers the capital cost components of electric investments. Section 4 is a primer on the conventional method for electric utility economic evaluation—the revenue requirement method. This is followed in Section 5 by a description of the methodology underlying engineering economic analysis. Section 6 provides information on methods of economic evaluation used by nonutility power producers that are based on profitability goals instead of revenue requirements.