Question
Download Solution PDFWhich component of the total cost of electrical energy is proportional to the energy generated (kWh)?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe running cost, also known as variable cost, of electrical energy is the one that's proportional to the energy generated (kWh).
Concept:
- Fixed costs are costs that do not change with the amount of electricity generated. These typically include costs such as the cost of the power plant itself, salaries of permanent staff, and other overhead expenses.
- Running costs, or variable costs, change with the amount of electricity generated. These costs typically include fuel costs, water usage for hydro plants, and other costs that increase with the amount of electricity produced.
- Depreciation cost is linked to the value of the assets over time, not directly proportional to the energy generated.
- Semi-fixed costs are those costs that have both the properties of fixed costs and variable costs. For instance, maintenance can be a semi-fixed cost. They're partially constant but may increase with the usage or the output of the plant.
Therefore, among the provided options, the component of the total cost of electrical energy that is proportional to the energy generated (kWh) is:
Running cost
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