How does the load factor impact the cost of a unit (kWh) of electricity?

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SSC JE Electrical 07 Jun 2024 Shift 3 Official Paper - 1

Answer 1

Load curve:

The curve showing the variation of load(in kW) on the power station concerning time(X-axis) is known as a load curve.
The area under the load curve gives the number of units generated or energy consumed.

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The load factor directly impacts the cost of a unit (kWh) of electricity in the following ways:

1.) Higher Load Factor Leads to Lower Generation Costs per Unit:

When the load factor is higher, it means that the electricity usage is more consistent over time, and the power plants are operating more efficiently and closer to their full capacity.
This reduces the cost per unit of electricity because the fixed costs of running the power plant (such as capital costs, maintenance, and labor) are spread over a larger number of units (kWh) produced. As a result, the generation cost per unit of electricity decreases.

2.) Higher Load Factor Reduces Demand Charges:

The load factor primarily affects demand charges, these charges can also indirectly influence the overall cost per kWh. Higher load factors reduce demand charges, leading to a lower overall cost.

So, a higher load factor leads to lower generation costs per unit and thus a lower cost per kWh of electricity.