In this article, I will share the sub-divisions of the cost of electrical energy produced by a power plant station.
The cost of electrical energy production includes different costs.
To calculate the appropriate cost of electrical energy produced by a power plant station, you will have to know all the sub-divisions.
It’s important to know that cost of electrical energy to be able to figure out a way to generate profits from the investment, keep financial records of the power plant, determine how much to sell the electrical energy to the consumers and many more details.
Without wasting time, let me share what you should know about the cost of electrical energy produced by a power plant station.
The total cost of electrical energy produced by a power plant station is sub-divided into the following categories;
1. The capital cost of the power plant station.
The capital cost of the power plant station includes all costs that were managed to erect it.
The capital cost can be sub-divided further into the following costs;
Cost of the land; this is the total budget that was used to obtain the piece of land where the power plant station stands now.
All the amount of money that was used to get the piece of land will add up to the total cost of the land.
Cost of the building; the cost of the building includes the total budget that was used to build the entire power plant station.
All the building materials bought the manpower behind the construction and its contraction; all will add up to the total cost of the building.
Any amount of money spent to ensure the power station building is standing will add up to the total cost of the building.
It’s also needed to determine the total cost of electrical energy produced by a power plant.
The cost of equipment for the power plant station; includes the budget of money spent on buying all the components and machines needed for the power plant station.
This equipment can be transformers, generators, power cables, turbines, boilers etc.
All these pieces of equipment that complete the power station, their costs are added up to come up with the cost of the electrical energy being generated.
It doesn’t include the maintenance part, only the cost of purchasing them.
The cost of installation; the cost of installation includes the budget that was put in when the power plant station equipment and types of machinery were installed.
For the power plant station to start working, all the components must have gone through installation.
All the installation needs money to be done.
The operators behind the installation have to be paid, this cost adds up to the total cost of electrical energy produced by the power plant station.
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The cost of designing and planning the power plant station; the power plant station had to be designed and planned and that is where this cost comes in.
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All the design of the power plant and planning needed money. Professionals were hired to do this design and plan to avoid any problems in the future.
The strategic location of the power station, the entire building and how the pieces of equipment are going to be laid out in the power plant station had to be done for a cost.
All these costs add up to the total cost of the electrical energy produced by the power plant.
2. Fixed cost of the power plant station
These are the costs of the power plant station that will always be there no matter what happens.
They don’t change at all since they are needed for the power plant station to keep running.
The fixed cost of the power plant station also adds up to the total cost of electrical energy produced by the power plant station.
The fixed cost of the power plant station is sub-divided into the following;
Interest, taxes and insurance on the capital cost; the interest, taxes and insurance of the power station will always be there to keep the power plant running.
And that is why it’s placed into this category of fixed cost.
The general management cost of the power station; is the cost needed to keep the power plant station running.
Any amount of money that is put into the power plant station to keep it running will be placed in this category of general management cost.
This cost will always be there as long as the power plant is functional.
The general management cost of the power station adds up to the total cost of electrical energy produced by the power plant station.
The maintenance, the personnel, the fuel and transportation and etc add up to the management cost of the power station.
Depreciation cost of the power plant station; this is the amount of money set aside every end of the year from the main income of the power plant station to take care of the depreciation caused by age of service, wear and of the plant components and machines.
No matter what happens, this money should be deducted from the income so that it can be used to repair and replace any machine or components that are no longer effective in the power plant.
The depreciation cost of the power plant station also adds up to the total cost of electrical energy produced by the power station.
Lastly…
It’s important for one to determine the total cost of electrical energy produced by the power station to figure out the rates at which the energy will be sold to the consumers.
The power plant station needs to make profits to be able to run effectively and benefit the owner and all the personnel behind it.
Knowing the total cost of electrical energy production can give one an idea of how the profits can be used in the power plant to keep it developing and keep reference records that may be needed in the future if the power plant is to be sold out to another company.
There are so many benefits of knowing the total cost of electrical energy produced by the power plant which I can’t mention all.
Thanks for reading, if you have any questions you should leave your comment. See you in my next article.
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