Question & Answer: Question 1 (10 points): In class we calculated the LCOE (or bid price) for a power plant with thefollowing parameters:…..

Question 1 (10 points): In class we calculated the LCOE (or bid price) for a power plant with thefollowing parameters:

Overnight cost of $10 billion

Lifetime of 30 years

Annual output of 8.64 million MWH

Marginal cost of $20/MWh (so total operating costs per year are $20/MWh  8.64 million MWh = $172.8 million per year)

Discount rate of 5%

Re-calculate the LCOE with the following additional information:

The plant faces a tax rate of 34

%The plant must maintain a fuel inventory valued at $20 million, beginning in Year 0

This inventory is liquidated at face value ($20 million) at the end of the plant’s lifetime.Capital costs are depreciated via straight-line depreciation over the life of the plant.The plant has no salvage value and there are no other working capital requirements.Remember to use the correct units in your answer for LCOE ($/MWh).