TABLE OF CONTENTS The electricity supply company and the network operating company (which may be a separate organization) must satisfy demand for power by the consumer and obtain sufficient revenue from sales to meet investor requirements and future expansion plans. In order to achieve these goals investment in generating, transmission and distribution plant is necessary. Money on capital projects is spent now in the hope or expectation of sufficient returns or profit at a later date in the future. Investment may be for:
Replacement of equipment possibly to reduce maintenance costs (cost reduction) Fig. 22.1a.
Figure 22.1: (a) Cost reduction project; (b) expansion project
Expansion of transmission or distribution capability to reach more customers Fig. 22.1b.
Provision of new products.
The problem is to find good projects by imagination, alertness and creativity (plus a degree of luck) in order to spot the investment opportunity. Imagine, for example, the problems that international aid agencies might have in trying to identify a good project. They will be inundated with different schemes for projects but only a small number will be viable and be capable of bringing about the required benefits. It is necessary to look at both the financial and the economic costs and benefits of the project before a final investment decision may be made. Financial project investment assessments look at the project purely in monetary terms. Economic appraisals look beyond this and include such intangibles, converted to money...
