# How do you calculate cost per unit of electricity?

## Main Question or Discussion Point

How do you calculate cost per unit of electricity over a certain time that a generator produces?

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russ_watters
Mentor
Odd question: It isn't really calculated, so much as just set by market forces and government/utility company collaboration.

So if I was to work out the cost per unit of electricity over the operating life of a generating station, then I'd just use the cost per unit of electricity that the country has set?

K^2
You need to know generator output power, fuel consumption rate, and cost of fuel.

So say:
P = power output in kilowatts.
R = fuel consumption rate in gallons per hour.
C = Cost of fuel in dollars per gallon.

Then electricity costs you R*C/P in dollars per kWh.

If these aren't available, some estimates can be made anyways, but some additional information about generator would be required. Most importantly, type of fuel.

Edit: I'm assuming we are talking about self-cost.

The generators are run by turbines, it's a dam power station (Three Gorges Dam). It has an annual generation of 80TWh/80000000000000KWh. I have to work out the cost per unit of electricity over the operating life of the generating station, so I need to estimate how long it'll last. Is 40 years a suitable estimte?

russ_watters
Mentor
Ok...you mean the production cost, not how much you get by selling it.

For a hydro dam, the variable cost is extremely low since there is no fuel to buy: you just pay the maintenance and operations staff. The primary cost is the fixed cost of building the dam. So you'd take that and divide it by the total production of the dam over its lifetime.

40 years is probably a good estimate for lifespan before major overhaul (turbine replacement), yes.

No, I know the production cost, my teacher said to work out the cost per unit of electricity over the operating life of the generating station.