Decision Support System for Power Plant Improvement Investment Using Life-Cycle Cost

Abstract

This research designs and develops a Decision Support System (DSS) for evaluating a power plant improvement investment, given a generation plan, contract accounting and associated technical data. In practice, most owners often decide on an improvement investment by considering forward an immediate short period of revenue and expenses. This decision support system helps the owner take into account a more comprehensive period of cash flows in order to maximize the asset value and make an optimal decision. Specifically, the model calculation is based on the Life Cycle Cost Management (LCCM) under certain business rules. Our proposed evaluation model consists of five steps: 1) Consider the structure of revenue and expenses according to the Power Purchase Agreement (PPA). 2) Analyze accounting and technical data. 3) Estimate demand from the energy plan according to the system operator's yearly report. 4) Incorporate the data according to its business rule and the PPA constraints into the forecasting calculation. 5) Evaluate the investment using economic measures, such as Net Present Value (NPV) and Internal Rate of Return (IRR).