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Methodology for the Estimation of Cost of Load Shedding

CHAPTER 3

Theoretical framework

A firm's habit in case of outages

While learning the firm's action in the occurrence of regular and regular outages we believe the firm manages in a competitive atmosphere while seeking its major objective of income maximization taking into consideration the size of the company. Following could possibly be the possible results:

  • In circumstance if ability outages are believed to be somehow everlasting in character then the maximum size of the firm is lower than in the lack of outages. Henceforth we start to see the possibility of the organization to release some labor.
  • The potential for the company to make some appropriate changes to move through a few of the output which was lost depends on the next characteristics.
  1. The degree of the marketplace situation to be favorable into the firm
  2. If the firm's dependency of the production process is less on electricity then it is much more likely that the firm will make an adjustment.
  3. If the expense of modification is low the company is most likely to go for it.
  4. The firm will embark on an adjustment if the energy outages are large and are expected to be continued for a long period of the time.

Figure 3. 1

Adjustment of a Firm towards Outages

 

Visual representation of the alteration of the equilibrium of a company in the living of vitality outages.

Regarding the sort I stable we see that initially when it's confronted with outages it resultantly reduces its creation from. At the idea the area between price and marginal cost is AB. The larger the quantity of outages the bugger the space of AB is going to be. XY signifies the marginal cost curve of adjustment by the firm. Henceforth incase the XY is too high, then the firm makes no modification.

Now if we see the case of type II company. We see that Y lays between A and B. Therefore the firm makes a decision to make an modification which took its new production level to. So type I company reduced its output by) whereas the increased loss of output encountered type II strong is). The profit loss faced scheduled to outages by type I company is ABC. Whereas lack of earnings of type II organization is BYZC.

Henceforth some adjustments can be favorable under some circumstances. THEREFORE I have used given theoretical framework to develop the methodology for the quantification of the price tag on outages.

Methodology for quantification of costs of outages

As mentioned before that in the lifestyle of regular and constant outages the businesses tend to make adjustments. However the coverage and figure of these changes will rely upon lots of features that I've mentioned above. The technique that I've used for the quantification of the price tag on outages is majorly predicated on that produced by Pasha, Ghaus and Mallik [1989].

I have narrowed down the costs related to outages into two types. The first type is direct costs.

The second type is adjustment costs. While commencing any kind of adjustment mechanisms to recuperate their lost result, it is going to be predicated on cost minimization. A company goes for an adjustment which it considers will be less expensive than the other available options. Therefore a company can select for several adjustment at one time, which will depend on firm's size and the amount of outages.

Direct Costs

Through following strategy we are going to calculate the direct costs of outages.

= number of that time period of incidence of outage daily on average of length i. i = 1, 2, 3, 4, 5. The durations are 0-1/2 hr; Ѕ hr to 1 1 hr; 1 hr to 2 hrs; 2 hrs to 3 hrs; 3 hrs and above.

= amount of result lost during an outage of length i

= restart time after an outage of period i.

The total number of outages through the 12 months is given by

NOUT =

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2)

The total time lost credited to outage is

TOUT =

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3)

Where is the period of the outage.

The probable level of output loss anticipated to outages is given by

LOUT =

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5)

But there's a probability that the organization may not operate for the complete year and for twenty four hours every day. Henceforth, if H is the standard hours worked during the year, the actual outcome lost is given by

ACOUT =

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5)

We will assess the value of the loss through pursuing method.

VOUT = ACOUT. V

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6)

Where V is the value added by the company each hour.

Nevertheless, the organization might undertake adjustment mechanisms to recuperate its lost productivity. If we take as the degree of output which was recovered then we've the the web idle factor cost, NIFC, the following:

NIFC = (1-О») VOUT

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)

Now we will symbolize the spoilage costs.

= spoilage cost (in rupees) in each outage of duration i

Then the spoilage cost, SPC, is derived the following:

SPC =

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8)

Now we can determine the direct costs of outages.

TDC = NIFC + SPC

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9)

Adjustment Costs

Generators Cost

In Pakistan we have generally seen that the main adjustment performed by a company is the investment in generator where they can control the source of energy resource. This is actually the end result of the consistent and prolonged time of ability outages since 2007 and the realization by the companies that these outages are going to stay for a long period and it could even worsen along with gas shortages.

In order to get a substitution of the main electric source which is supplied by the DISCOs, the firm considers its concentration on energy required. While luring on other less expensive changes and the arrangements for the option of original capital for the ownership of generators. The expense of capital so you can get your hands on generators is high relatively to small scale units when compared with large companies.

In order to determine the total costs of owing and running a generator, we've narrowed it right down to specifics.

  • A unit possesses a generator or not
  • The capital cost of the generator
  • Monthly operating cost of gas for functioning the generator
  • Other costs (including labor, maintenance and maintenance cost, etc. ) on the quarterly basis.

On these bases we are going to calculate the expenses of generator.

= capital cost of generator

foc = energy functioning cost per month

opc = other working costs quarterly

So the computation of the twelve-monthly generator cost (GENCO) is really as follows:

GENCO = () + 12(foc) +4(opc)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10)

stands for the price tag on capital and is the speed of depreciation. The blended value of is used as 0. 32.

Once we have considered a company to be operating a generator it means that firm is saving on the supplied by the neighborhood DISCO. So now the (NGENCO), is given by

NGENCO = GENCO - k (TOUT) (ADJG)tf.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11)

Where

K = electricity usage per hour in Kwh

TOUT = total time lost as derived in formula (3)

ADJG = degree of modification by use of generators

tf = tariff per Kwh of the DISCO.

Other Adjustments

These modifications are more or less short run in aspect when electric power outages are considered to be momentary in characteristics:

  • A organization can consider using its present plant, equipment and equipment more intensively in existence of electricity outages.
  • Loss of productivity can be retrieved by working overtime or with the addition of more labor and work shifts.
  • It can be viewed as to change the working hours and timings to more suitable slot regarding to timetable of vitality fill shedding.

The costs related to these changes are not large but majority of the firms havent undertaken these changes. The methodology used for the quantification of the costs has been taken from Pasha, Ghaus and Mallik. They can be displayed by OTC.

Overall, the full total modification cost, TAJCO, is derived as

TAJCO = NGENCO + OTC

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12)

OTC means regular overtime cost

And the full total outage cost, TOUTCO, as follows:

TOUTCO = TDC+ TAJCO

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13)

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