Quiz Corner: Calculating the incremental cost of electricity

Jan. 2, 2016

What is the approximate incremental cost of electricity for a plant that purchases electricity at 6 cents per kilowatt-hour (kwh)?

What is the approximate incremental cost of electricity for a plant that purchases electricity at 6 cents per kilowatt-hour (kwh)?

A. $300 per year per kwh
B. $400 per year per kwh
C. $500 per year per kwh
D. $600 per year per kwh

Knowing the incremental cost of electricity is important because it can be used to quickly estimate the annual energy savings associated with a process change and/or an energy conservation project, such as the installation of a variable speed drive. Conversely, you can also use it to quickly estimate energy costs associated with actions that increase energy consumption.

Increasing or decreasing the electrical load by 1 kilowatt for a year can be estimated as follows:

(6 cents per kwh) • (8,760 hours per year) = $526 per year

Answer C is closest to the calculated amount.

Additional complicating factors

This Quiz Corner sheds light on the importance of knowing the incremental utility costs. However, actual calculations for electricity in a typical plant are often more complicated because they may involve time-of-day billing, demand charges, hatchet/ratchet clauses and power factor penalties described in different rate structures.

Similarly, knowing the incremental costs of other applicable utilities in the plant — such as natural gas, coal, waste fuels, industrial gases, cooling water, chilled water, compressed air and steam — is important.

About the Author

David W. Spitzer

David W Spitzer’s new book Global Warming (aka Climate Change): An Understandable Data-Driven Explanation and Pathway to Mitigation (Amazon.com) adds to his over 500 technical articles and 10 books on flow measurement, instrumentation, process control and variable speed drives. David offers consulting services and keynote speeches, writes/edits white papers, presents seminars, and provides expert witness services at Spitzer and Boyes LLC (spitzerandboyes.com or +1.845.623.1830).

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