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W5_Nasser_Getting FOP in RO/GJ required to calculate FC under a PPA.

1.     Problem Definition

OPWP (as a BUYER) entered into a Power Purchase Agreement (PPA) with an ABCD Power Company (GENERATOR) for 15 years. According to the PPA, generator shall make the capacity available and sells the output to the buyer. Accordingly, in monthly basis OPWP pays to the generator the Power Capacity Charges (PCC), the Electrical Energy Charges (EEC) and Fuel Charges (FC).

The FC is paid, based on Gas Price (GPm) and Fuel Oil Price (FOP), to compensate the generator for the theoretical required fuel to be consumed for generated power output. Unlike GPm in RO/GJ, the methodology for calculating FOP in in RO/GJ is not defined in the PPA.

The generator receives a bill from the Fuel Oil (FO) supplier at each fill. FO prices from the supplier given in RO/Litter but not in RO/GJ which is required for calculating the FOP.

In this blog, I will find out what is the best way for getting the FOP in RO/GJ using Multi Attributes Decision Making (MADM).

2.     Identify the Feasible Alternative

Option 1 :
having the FOP in RO/GJ instead of RO/letter in the bill submitted FO supplier in RO

Option 2 :
Finding a methodology to convert the FOP from RO/letter, as submitted in FO supplier bill, to RO/GJ, as required for calculating FC.

3.     Development of the Outcome for Alternative

Looking at the 1st Option, since selling the FO in a unit price/letter is internationally followed method, having the FOP in RO/GJ instead of RO/letter in the bill submitted FO supplier in RO is invalid choice.

Where as in the 2nd option, for FOP conversion from RO/letter to RO/GJ, we need to get FO Density in kg/m3 and Lower Heating Value in kj/kg using the following formula.

FOP in RO/GJ = [(FOP in RO/Letter) / ((FO Density in kj/kg) / 1000) * (LHV in kj/kg) * (10^6)]

4.     Selection Criteria:

My selection criteria will be based on the followings:

- Possible to do
- Accuracy
- Time saving (ready-made)
- Cost saving


Table1: Criteria Analysis Comparison

5.     Analysis and Comparison of the Alternative:

Using Grid Analysis, which is a useful technique for deciding and it is most effective where you have many good alternatives and many factors to consider. The comparison of the above criteria is ranked as following:
  • 1=Possible/ Accurate/ very much/ Yes
  • 0=Not possible/ Inaccurate/ not much /No

Table2: Weight Assessment

6.     Selection of the Preferred Alternative

Notwithstanding both option1 and option2 scored the same, since option 1 is not possible, my selection is option 2 which is FOP to be converted from RO/letter to RO/GJ in monthly basis.

7.     Performance Monitoring and the Post Evaluation of Result

Since the best decision was found to calculate the FOP in RO/GJ, my W6 blog will be about “Selecting methodology for calculating Fuel Oil Price (FOP) for a Generator”. 

8.     References:

     o   The Engineering Toolbox. (n.d.). Density of fuel oils as function of temperature. Retrieved from https://www.engineeringtoolbox.com/fuel-oil-density-temperature-gravity-volume-correction-ASTM-D1250-d_1942.html


o   Hindawi, & Mathematical Problems in Engineering. (2016, April 27). Multiple Attribute Decision Making Based on Cross-Evaluation with Uncertain Decision Parameters. Retrieved from https://www.hindawi.com/journals/mpe/2016/4313247/
o   Mba tools. (n.d.). Grid Analysis. Retrieved from http://www.mbatools.co.uk/Toolbox/DecisionMaking/gridanalysis.htm
o   Planning Planet. (2014, July 2). | Project Controls - planning, scheduling, cost management and forensic analysis (Planning Planet). Retrieved from http://www.planningplanet.com/guild/gpccar/managing-change-the-owners-perspective%20Figures%208-14
o   Terence Holmes. (2015, September 1). Fishbein Models [Video file]. Retrieved from https://www.youtube.com/watch?v=JL1UFF-HJlQ&feature=youtu.be


Comments

  1. Dr. PDGDecember 12, 2017 at 3:05 PM

    Hmmmmmm........ Gotta think about this one a bit..... NORMALLY whenever you use MADM methods and end up with a TIE, it means you either need to ADD more feasible alternatives OR if that is not possible then add more ATTRIBUTES.

    The other option is that this is not the appropriate tool to use for this analysis? That perhaps a pure "benefit to cost" analysis or more traditional IRR, ERR, NPV or payback period analysis would be preferable?

    I will accept this posting but remain very skeptical that this analysis was done as completely or correctly as it could or should have been.

    BR,
    Dr. PDG, Jakarta

    ReplyDelete

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