The average specific cost of energy from the biomass-based generation plant con­sidered here can be finally determined as:

Specific Cost associated with plant installation = 3.35 US cents/kWh

Maintenance cost of power plant (assumed 10% of above) = 12 US cents/kWh Cost of fuelwood =4 US cents/kWh

Total Specific Cost = 29.4 US cents/kWh

The contributions to the final unit cost from different cost components are shown in Table 10.5. It can be seen that the major components of the unit energy cost are those associated with plant installation and felling and processing.

The variation of specific energy cost with plant factors at a typical installation cost of US$ 1500 per kW, is given in Figure 10.3. It can be seen that even at an optimistic annual plant factor of 80 per cent, the specific energy cost is as high as 7 US cents/kWh. To maintain this plant factor, a 100 kW plant needs an energy plantation of 50 ha, continuously being planted, maintained and harvested.

It is generally accepted that renewable energy sources become more attractive in comparison to traditional means of electricity generation, when lower discount rates are used for economic analysis. The variation of specific energy cost with the discount rate is shown in Figure 10.4. Even at a discount rate as low as 2 per cent, the specific energy cost tends to be as high as 5.3 US cents/kWh. This is mainly because of relatively high operational costs associated with biomass-based power plants compared with other forms of renewable energy based electricity generating systems.

When considering possible involvement of the private sector in the development of biomass-based electricity generation, it is important to investigate the effect of the

power purchase tariff of the utility on the Internal Rate of Return on Equity (ROE) of the investor. Figure 10.5 shows the variation of power purchase price to be agreed with the utility for different ROE expectations of the developer of a biomass-based plant.

In Figure 10.5, it is assumed that the plant is offered with a grant component of approximately 30 per cent, while the remaining 70 per cent comes from the developer as equity. The plant is assumed to be operating at a plant factor of 60 per cent. Private sector developers usually expect an ROE of at least 20 per cent and such ROE expectations result in a required minimum power purchase price of approximately

9.5 US cents/kWh.