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In order to compare the relative costs of two sources of power supply the difference in the cost of transmission necessary to deliver each supply to the main network must also be considered. In the following table representative costs for distances of 200, 100, and 50 miles are estimated, using the voltages and capital costs developed by F. F. Fowle for transmission lines but applying a reserve factor of 1.50 to arrive at such costs on a dependable basis.

Cost of transmission

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1 Assuming overall efficiency of 90 percent and losses of 2.2 percent in voltage transformation.

Transmission losses are not included in the above costs. The over-all efficiency of transformation and transmission is generally kept at 90 percent or better by design, and the loss in power is charged against the power supply. It is not provided by generating power at the end of the line, as assumed in Mr. Fowle's analysis. In other words, the delivered cost of hydro power (or steam-generated power) consists of the total combined costs of generation and transmission divided by the delivered power.

HYDRO. GENERATION OPERATING EXPENSES

Aside from fixed charges the only costs of hydro generation are the operating pay roll and supplies, and current maintenance. The accrual of a depreciation reserve provides for such renewals and replacements as are not ordinarily a matter of current maintenance. The annual operating and maintenance expenses used for this analysis are shown in the following table:

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1 The modern tendency is to make small hydro stations completely automatic. This accounts for the $2 per kilowatt upper limit of cost. Where operating costs would tend to exceed this amount automatic operation is indicated.

The above units reflect the level of expenses currently reported by New York State utilities operating hydroelectric stations.

DETERMINATION OF ECONOMIC LIMIT OF HYDRO INVESTMENT

Having arrived at standard costs for steam generation, voltage transformation, and transmission on a dependable basis, it is now possible to determine the economic limits for investment in dependable hydro capacity under a variety of conditions.

The method is briefly to work back from the main network to the hydro site to determine the investment in the hydro station which enables it to place energy on the network at a cost equal to the standard steam cost for equivalent power supply. This method may be described as follows:

1. The first step considers the fact that transmission losses will reduce the power supply generated at the hydro station by approximately 8.9 percent when it reaches the network where it must compete with steam. This assumes an over-all transmission efficiency of 90 percent, with 1.1 percent losses chargeable to each voltage transformation. If the alternative steam supply may be located on the network, and is not reduced by line losses, each kilowatt of hydroelectric power generated will provide only 0.911 of a kilowatt of supply at the network and must, therefore, meet the cost of 0.911 of a kilowatt of steam power delivered on the network. We, therefore, begin by taking 91.1 percent of the cost of the steam-generated energy delivered on the network as our measure of what can be paid for each kilowatt of hydro-generated power delivered on the network.

2. The next step takes account of the fact that each kilowatt of hydro-generated power must carry its share of the cost of transmission to the network, both step-up voltage transformation at the plant and the line-cost differential which may result from the respective locations of the two power sources with reference to the network. It also takes account of the fact that each kilowatt of hydro-generating capacity must carry its share of the cost of operating the hydro station. We, therefore, deduct the cost differential of transmission and the cost of hydro-plant operation per kilowatt of dependable capacity from the allowable cost of generation as derived above in order to secure our

measure of the amount available for fixed charges on hydro-station investment.

This final result represents the upper economic limit of fixed charges which the proposed hydroelectric development can bear and still deliver power to the network at a cost equal to that of a corresponding steam-power supply.

Capitalizing this figure at 6 percent gives the investment cost per kilowatt of dependable capacity permissible for a Government hydroelectric project.

Treated in the normal manner of power-cost analysis this value so determined, when the fixed charges, operating charges, transmission investment, and transmission losses are added, will give a figure that equals the standard steam cost first established.

If the actual cost of the hydro project is less than the product of the economic limit times the dependable capacity, a saving will result from the hydro power as compared with generation of the equivalent power by steam.

This saving will be available for rate reductions, or it may be used to subsidize the other elements in the watershed developments, as envisioned in the conservation policy of the Federal Government.

The following tables show the detailed application of the method described above to the determination, under conditions which are typical of actual and potential Government hydro projects, of the economic limits of investment in such projects per kilowatt of dependable capacity. Small hydroelectric plants-- Development of economic investment limits for public

projects based on costs of alternative steam generation by companies

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Grid voltage, kilovolts....
Coal delivered at $2.50 per ton:

$24. 56

$24. 50

$30. 55

$29.70

1 24. 56

22.321 30. 55

27. 06

1. 32

.69 2. 20

1. 32

.72 2. 20

2. 20

2. 20

2. 20

4. 21

2. 20

4. 24

22. 36

18. 11

28. 35

22.82

Steam cost per kilowatt-year.
Steam cost per 0.911 kilowatt-year, equivalent to 1 kilowatt of hydro

power reduced by transmission losses.. Hydro costs:

Transmission mileage.
Voltage transformation..
Operation and maintenance.

Total.......
Balance available for hydro plant charges..
Economic investment limit per kilowatt of dependable hydro capacity

with 612 percent fixed charges.. Coal delivered at $4 per ton:

Steam cost per kilowatt-year..
Steam cost per 0.911 kilowatt-year equivalent to 1 kilowatt of hydro

power reduced by transmission losses. Hydro costs:

Transmission mileage.
Voltage transformation..
Operation and maintenance.

Total.
Balance available for hydro plant charges..
Economic investment limit per kilowatt of dependable hydro capacity

with 642 percent fixed charges..

344.00

279.00

436.00

351.00

27. 51

27. 40

35. 28

34. 50

1 27. 51

24. 95

1 35. 28

31. 40

1. 32

.69 2. 20

1. 32

.72 2, 20

2. 20

2. 20

2. 20

4. 21

2. 20

4. 24

25. 31

20. 74

33. 08

27.16

389.00

319.00

509.00

417.00

1 No transmission loss for plants serving local load.

Medium hydroelectric plantsDevelopment of economic investment limits for public

projects based on costs of alternative steam generation by companies

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Grid voltage, kilovolt.
Coal delivered at $2.50 per ton:

Steam cost per kilowatt-year
Steam cost per 0.911 kilowatt-year equivalent to 1 kilowatt of hydro

power reduced by transmission losses.

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Hydro costs:

Transmission mileage.
Voltage transformation..
Operation and maintenance.

.69.

1. 86

.87 1. 38

1. 32

72 1. 38

1. 38

1. 38

Total.

3. 39

4. 11

3. 42

4. 14

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Balance available for hydro-plant charges..
Economic investment limit per kilowatt of dependable hydro capacity

with 644 percent fixed charges.. Coal delivered at $4 per ton:

Steam cost per kilowatt-year.
Steam cost per 0.911 kilowatt-year equivalent to 1 kilowatt of hydro

power reduced by transmission losses.

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Hydro costs:

Transmission mileage.
Voltage transformation.
Operation and maintenance.

1.32

69 1.38

1. 86

.87 1. 38

1. 32

.72 1. 38

1. 38

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Balance available for hydro-plant charges.
Economic investment limit per kilowatt of dependable hydro capacity

with 612 percent fixed charges.

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Large hydroelectric plants- Development of economic investment limits for public

projects based on costs of alternative steam generation by companies

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Grid voltage, kilovolts...
Coal delivered at $2.50 per ton:

Steam cost per kilowatt-year.
Steam cost per 0.911 kilowatt-year equivalent to 1 kilowatt of hydro

power reduced by transmission losses.

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Balance available for hydro-plant charges.
Economic investment limit per kilowatt of dependable hydro capacity

with 614 percent fixed charges. Coal delivered at $4 per ton:

Steam cost per kilowatt-year.
Steam cost per 0.911 kilowatt-year equivalent to 1 kilowatt of hydro

power reduced by transmission losses.

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. 88

Total.

3.61

5. 12

3. 64

5. 12

21. 74

20. 23

28. 11

26. 00

Balance available for hydro-plant charges.
Economic investment limit per kilowatt of dependable hydro capacity

with 644 percent fixed charges.

335.00

311.00

432.00

409.00

The results of this analysis, showing the economic limits of investment in public hydroelectric-generating projects, expressed as a unit cost per kilowatt of dependable capacity made available by the development, may be summarized as follows: Limit of economic investment in public hydroelectric power projects per kilowatt of

dependable capacity, based on costs of alternative private steam generation on network 1

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i These limits will raise as the steam station supply line distance increases from zero, due to the attendant transmission costs and line losses.

To further condense the summarization of these analyses, the following conclusions may be drawn:

Assuming alternative private steam generation on the network and depending on the distance from the transmission network, the voltage of the network, and the size of the development, the following range of unit investment per kilowatt of dependable capacity may be applied to public hydroelectric power projects:

i. In areas where fuel can be delivered to condensing water for a price equivalent to $2.50 per ton, the economic limit of investment in hydro plants per unit of dependable capacity will range from $269 to $344 per kilowatt for system-load factor plants and from $342 to $436 per kilowatt for base-load plants.

2. In areas where fuel can be delivered to condensing water for a price equivalent to $4 per ton (or $1 per barrel for fuel oil), the economic limit of investment in hydro plants per unit of dependable capacity will range from $311 to $389 per kilowatt for system-load factor plants and from $409 to $509 per kilowatt for base-load plants.

These costs are exclusive of investment in step-up substation and switching equipment at the hydro plant.

APPENDIX 4. TABLES

The following tables set forth the details of the power authority's revisions to the F. F. Fowle estimates as presented in a paper before the Midwest Engineering Conference at Chicago, April 22, 1936. They consist of

A. Steam generating costs. Table showing revision of F. F. Fowle estimates to determine equivalent costs of hydroelectric generation delivered at load centers.

B. Hydroelectric generating costs. Table showing revision of F. F. Fowle estimates to reflect correct data on major Federal conservation projects: (1) Correction of original data used by Mr. Fowle, (2) using correct dependable capacity and capital costs.

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