Feasibility study for an independent power producer project in Jordan -

Abstract

BUTEC s.a.l. is an engineering, procurement and construction (EPC) contractor operating in the MENA and GCC regions. BUTEC is considering applying to the tender of a new potential project for developing a power production plant in Jordan. This is a turnkey project where the Jordanian government is providing general requirements for the design of the plant; while the contractor is appointed to be an independent power producer (IPP) responsible for designing, procuring, constructing and operating it. Fuel will be supplied by the government in turn for buying the electric energy produced at a cost per kWh. The design of the IPP project involves choosing one power production method among many alternatives; this depends on the technology proposed by the original equipment manufacturers (OEM’s), where eventually the most optimal one will be chosen. A feasibility study is conducted for the IPP project in order to determine the most feasible alternative, based upon which BUTEC will submit its tender documents. This is done by first developing twelve different alternatives for the power production method and calculating the levelized cost (LC) of each. The LC is an indicator used to compare the different alternatives; it is the minimum price of electric energy to be sold at which the project breaks even over its lifetime. It encompasses all costs needed to develop and operate the IPP project which include: capital expenditure, operation and maintenance cost, fuel cost as well as the cost of capital. The study concludes that the cheapest alternative is to use a reciprocating engine technology supplied from Z, operating as a combined cycle mechanism using natural gas. However, there are many factors, other than the cheapest cost, that should be considered when choosing the optimal alternative to bid upon. These include: the net present value of the project, the actual energy generated to be sold, in addition to the effect of the variability of some factors included in the LC calculations such as the fuel cost.