# Economics of Power Generation objective Questions With Explanation - 1

1. Load factor of a power station is defined as
B. average load x maximum demand
demand)1/2

Explanation:
• The ratio of average load to the maximum demand during a given period is known as the load factor.
• The load factor may be daily load factor, monthly or annually if the period considered is a day or month, or year.
• The load factor is always less than 1 because the average load is smaller than the maximum demand.
• It plays a key role in determining the overall cost per unit generated.
• The higher the load factor of the power station, the lesser will be the cost per unit generated, is because a higher load factor means lesser maximum demand.
• The station capacity is so selected that it must meet the maximum demand.
• Now, lower maximum demand means a lower capacity of the plant which reduces the cost of the plant.

2. Load factor of a power station is generally
A. equal to unity
B. less than unity
C. more than unity
D.  equal to zero

Explanation:
• The load factor may be daily load factor, monthly or annually if the period considered is a day or month or year
• Load factor is always less than 1 because the average load is smaller than the maximum demand
• It plays a key role in determining the overall cost per unit generated
• Higher the load factor of the power station, lesser will be the cost per unit generated, it is because higher load factor means lesser maximum demand
• The station capacity is so selected that it must meet the maximum demand
• Now, lower maximum demand means a lower capacity of the plant which reduces the cost of the plant

3. Diversity factor is always
A. equal to unity
B. less than unity
C. more than unity
D. more than twenty

Explanation:
Diversity factor:
• The ratio of the sum of individual maximum demands to the maximum demand on the power station is known as a diversity factor.
• A power station supplies load to various types of consumers whose maximum demands generally do not occur at the same time.
• Therefore, maximum demand on the power station is always less than the sum of the individual maximum demands of the consumer.
• Hence diversity factor is always greater than
• The knowledge of diversity factor is vital in determining the capacity of the plant equipment.
• The greater the diversity factor, the lesser is the cost of generation of power.
• Because greater diversity factor means lesser maximum demand.
• Now, lower maximum demand means a lower capacity of the plant which reduces the cost of the plant.
• The diversity factor of a power station is always greater than 1. The diversity factor plays a vital role in the determination of cost of generation of power. The greater is the diversity factor, the lesser is the cost of generation of power.

4. Load factor for heavy industries maybe taken as
A. 10 to 20%
B. 25 to 40%
C. 50 to 70%
D. 70 to 80%

Explanation:
• Load factor is always less than one because the average load is smaller than the maximum demand.
• Higher the load factor indicates average demand is close to maximum demand that means variation in load is less
• Load factor for heavy industries may be taken as 70 to 80 ​%

 Type of load Demand factor Diversity factor Load factor Domestic 70-100% 1.2-1.3 10-15% Commercial 90-100% 1.1-1.2 25-30% Industrial 70-80% 1.3-1.6 60-65% Agricultural 90-100% 1-1.5 15-25%

A. 10 to 15%
B. 30 to 40%
C. 50 to 60%
D. 60 to 70%

Explanation:
• Load factor is always less than one because the average load is smaller than the maximum demand.
• Higher the load factor indicates average demand is close to maximum demand that means variation in load is less
• Load factor for heavy industries may be taken as 10 to 15​%
 Type of load Demand factor Diversity factor Load factor Domestic 70-100% 1.2-1.3 10-15% Commercial 90-100% 1.1-1.2 25-30% Industrial 70-80% 1.3-1.6 60-65% Agricultural 90-100% 1-1.5 15-25%

6. Annual depreciation cost is calculated by
A. sinking fund method
B. straight line method
C. both A and B
D. none of the above

Answer: C. both A and B

Explanation:
Depreciation
• It is the gradual exhaustion of the usefulness of a property.
• This may be defined as the decrease or loss in the value of a property due to structural deterioration, life wear and tear, decay, and obsolescence.
Methods of depreciation
Different methods to calculate depreciation are as follows :
a) Straight-line method
b) Constant percentage method
c) Sinking fund method
d) Quantity survey method

Straight line method:
• It is the simplest method of depreciation.
• In this method it is assumed that the book value of an asset will decrease by same amount every year over the useful life till its salvage value is reached.
• In other words, the book value of the asset decreases at a linear rate with the time period.
Constant percentage method:
• In this method, it is assumed that the property will lose its value by a constant percentage of its value at the beginning of every year.
Sinking Fund Method:
• In this method, the depreciation of a property is assumed to be equal to the annual sinking fund plus the interest on the fund for that year, which is supposed to be invested on interest bearing investment.

7. Depreciation charges are high in case of
A. thermal plant
B. diesel plant
C. hydroelectric plant
D. None of the above

Explanation:

Depreciation:

• Depreciation in simple terms means the decrease in the monetary value of an asset because of its wear and tear over the years.
• It may also become obsolete because of technological advancements over the years.
• It refers to determining the monetary value of the asset spread over its useful life years.

Depreciation for different Power Plant:

 Types of Power Plant Depreciation Hydropower plants 0.5% to 1.5% Wind power plants 0.5% to 1.5% Diesel plants 5% to 8% Thermal power plants 10% to 25%

Important Notes:

Depreciation:

• Depreciation in simple terms means the decrease in the monetary value of an asset because of its wear and tear over the years.
• It may also become obsolete because of technological advancements over the years.
• It refers to determining the monetary value of the asset spread over its useful life years.

Depreciation for different Power Plant:

 Types of Power Plant Depreciation Hydropower plants 0.5% to 1.5% Wind power plants 0.5% to 1.5% Diesel plants 5% to 8% Thermal power plants 10% to 25%

Important information:

Methods for calculating depreciation:

• Sinking Fund Method
• Straight-line Method
• Constant percentage method
• Declining balance method

Sinking fund method:

• It helps in making arrangements for the funds that can be used to replace the product after its useful life is over.
• Using this method companies can arrange funds over the years for the replacement of an asset, that would have been a sudden huge payment otherwise.
• In this method, the depreciation of a property is assumed to be equal to the annual sinking fund plus the interest on the fund for that year, which is supposed to be invested on interest-bearing investment.
Straight-line Method:
• In the Straight line method, it is assumed that the property losses its value by the same amount every year.
• A fixed amount of the original cost is deducted every year so that at the end of the utility period, only the scrap value is left.

Constant percentage method:
• In the cost percentage method, it is assumed that the property will lose its value by a constant percentage of its value at the beginning of every year.

Declining balance method:
• Used when the depreciation is rapid in the initial years after purchase and then there is steady depreciation.
• Depreciation = current book value ×  depreciation rate
• As the Current Book Value (CBV) is higher in the initial year's depreciation is also rapid then.
• In later years with a decrease in CBV, depreciation also decrease

8. Demand factor is defined as

Explanation:
Demand factor:
• It is defined as the ratio of maximum demand on the power station to its connected load.
• The value of the demand factor is usually less than 1.
• It is because maximum demand is always less than the connected load.
• The knowledge of the demand factor is vital in determining the capacity of the plant equipment.
Important Notes:
Utilization factor:
• It is the ratio of maximum demand on the power station to the rated capacity of the power station.
• Utilization factor = maximum demand / rated capacity

Diversity factor:
• The ratio of the sum of individual maximum demands to the maximum demand on the power station is known as a diversity factor.

Plant capacity factor:
• It is the ratio of actual energy produced to the maximum possible energy that could have been produced during a given period.

A. cost of generation per unit power is increased
B. total plant capacity is utilized for most of the time
C. total plant capacity is not properly utilized for most of the time
D. none of the above

Answer: B. total plant capacity is utilized for most of the time

Explanation:
• The ratio of average load to the maximum demand during a given period is known as the load factor.
• The load factor may be the daily load factor, monthly or annually if the period considered is a day or month, or year.
• The load factor is always less than 1 because the average load is smaller than the maximum demand.
• It plays a key role in determining the overall cost per unit generated.
• The higher the load factor of the power station, the lesser will be the cost per unit generated, is because a higher load factor means lesser maximum demand.
• The station capacity is so selected that it must meet the maximum demand.
• Now, lower maximum demand means a lower capacity of the plant which reduces the cost of the plant.
Diversity factor:
• The ratio of the sum of individual maximum demands to the maximum demand on the power station is known as a diversity factor.
• A power station supplies load to various types of consumers whose maximum demands generally do not occur at the same time.
• Therefore, maximum demand on the power station is always less than the sum of individual maximum demands of the consumer.
• Hence diversity factor is always greater than 1.
• The knowledge of the diversity factor is vital in determining the capacity of the plant equipment.
• The greater the diversity factor, the lesser is the cost of generation of power.
• Because greater diversity factor means lesser maximum demand.
• Now, lower maximum demand means a lower capacity of the plant which reduces the cost of the plant.

A. average power used during the period
B. average kWh (kW) energy consumption during the period
C. either of the above
D. none of the above

Answer: B. average kWh (kW) energy consumption during the period

Explanation: