The Revenue vs. Cost Balance in Power Generation

The detailed economic and financial analysis of power projects is a large and detailed subject (one for a separate course!). Two projects can look quite similar, but produce very different financial outcomes because of changes to key variables in different markets or localities. Policy mechanisms may still play a major role in determining both inputs and outputs to a financial model.

However as part of this “essentials” course it’s certainly worth a quick review of the major variables involved – including tying these back to some of the concepts we’ve discussed previously; such as capacity factor, efficiency and energy density.

Rather than balancing supply and demand, the business case for a power project lies in balancing revenue and cost – or, more accurately, tipping that balance in the direction of revenue!

The following video presentation illustrates this balance: