Week 4 - Chapter 5 Flashcards
What does LCOE stand for?
Levelized Cost of Electricity
LCOE is a measure of the average net present cost of electricity generation for a generating plant over its lifetime.
What are overnight costs?
Costs incurred to build a generating plant before it starts operating
These costs include all expenses associated with construction, excluding interest during construction.
What do O&M costs refer to?
Operations and Maintenance costs
O&M costs are the expenses associated with the operation and upkeep of a power plant.
What are fuel costs?
Expenses related to the procurement of fuel for electricity generation
Fuel costs can vary significantly depending on the type of fuel used and market conditions.
What is a discount rate?
The interest rate used to determine the present value of future cash flows
The discount rate reflects the opportunity cost of capital.
What does the discount period refer to?
The timeframe over which future cash flows are discounted
This period typically corresponds to the lifespan of the project.
What is heat rate?
A measure of the efficiency of a power plant, typically expressed in BTU/kWh
A lower heat rate indicates a more efficient plant.
What does busbar cost mean?
The cost of electricity at the point where it is delivered to the grid
Busbar costs reflect the total costs of generating electricity, excluding transmission and distribution costs.
What are decommissioning costs?
Expenses associated with shutting down and dismantling a power plant
These costs include site restoration and waste disposal.
What is real LCOE?
The levelized cost of electricity adjusted for inflation
Real LCOE provides a more accurate representation of the cost over time.
What is the market-clearing price?
The price at which supply equals demand in a competitive market
This price determines the revenue for electricity generators.
What does merit order refer to?
The ranking of power plants based on their marginal costs of generation
Plants with lower costs are dispatched first to meet demand.
What is marginal cost?
The cost of producing one additional unit of electricity
Marginal cost influences the market-clearing price in competitive markets.
What is a supply stack?
A graphical representation of the available generation resources and their costs
The supply stack helps determine which resources will be used to meet demand.
What does PPA stand for?
Power Purchase Agreement
A PPA is a contract between a power producer and a buyer to purchase electricity at predetermined prices.
What are feed-in tariffs (FITs)?
Payments to energy producers for the electricity they generate from renewable sources
FITs encourage the development of renewable energy by providing stable pricing.
What does risk-adjusted return mean?
The return on investment adjusted for the risk taken
This metric helps investors evaluate the potential profitability of projects.
What is balance sheet finance?
Funding obtained based on the financial strength of a company’s balance sheet
This type of finance relies on the company’s assets and liabilities.
What does project finance refer to?
Financing based on the cash flow generated by a specific project rather than the overall balance sheet
Project finance often involves special purpose vehicles to isolate risk.
What are credit enhancements?
Methods used to improve the creditworthiness of a borrower
These enhancements may include guarantees or insurance to attract investors.
