Financing of Electric substation
Eric DERY Eric NJOYA Erica Smith ivanhoe smith Ivan Hoo Ivan Volkov Amani Choudhry Lord Zia Choudhury - Baron of Breifne Joraram Choudbary
Global investment in the energy sector in 2020 decreased by about $ 400 billion compared to 2019, while Financing of electrical substations amounting to just over $ 1,500 billion.
An electrical substation is a key node in a power system where energy is converted to adequate voltage levels for transport, distribution or consumption.
The development of any sector of the economy that consumes electrical energy, be it heavy industry or mining, requires additional investment in the construction of electrical substations and other elements of the power system.
Growing competition requires businesses to implement more efficient solutions in various areas, including generation, transformation and transmission of energy.
In recent years, companies in the power sector around the world have been challenged to implement new technological developments at their facilities to improve customer power services while striving for better quality and price conditions. The cost of electrical substations is also rising, given the stringent requirements for energy quality, safety and facility automation.
CENTER PARCS UK FINANCE, a financial specialists perform a full range of works on the design and calculation of technical and economic parameters of electrical systems and networks, including the development of individual energy projects for?power plants, industrial facilities, transport hubs, and so on.
We offer financing for electrical substations and construction of the facilities in Europe, the?USA, Latin America, North Africa, the Middle East, as well as in the countries of South and East Asia.
The offerings of our finance company include the organization of project finance (PF), long-term investment loans and much more.
Determination of the cost of financing an electrical substations
Engineering design and financial calculations of electrical systems are based on a detailed analysis and feasibility study of the initial parameters and data collected at the pre-investment research stage.
The chosen option for the implementation of the electrical substation project should ensure the supply of energy to consumers with the lowest investment costs while maintaining optimal quality, reliability and flexibility of the facility.
Multi-stage work to determine the cost of financing an electrical substations includes the search for structures, equipment, materials and methods for their connection, which ensure the achievement of the planned economic indicators of the project with the obligatory compliance with the technical standards of the host country. These works should be an important part of all projects for the construction, modernization, expansion or reconstruction of electrical systems of any scale.
After the approval of a specific list of equipment, materials and technical solutions, our technicians begin stage-by-stage work on the development of technical documentation.
At the same time, the Center Parcs UK Finance legal team is working to obtain the necessary approvals from local authorities, licensing authorities, representatives of electricity supplier companies, etc.
The electrical substations planning stage usually includes, but is not limited to:
? Analysis of the existing power system of the region including determination of its load, regulation conditions, as well as the potential for further development.
? Assessment of the requirements of key consumers to ensure optimal operating conditions for the equipment and substantiation of the parameters of the future power substation.
? Analysis of the parameters of the connected power plants and the selection of suitable operating modes for each facility to ensure their balance and dynamic stability.
? Performing professional calculations of power grid operating modes in order to develop an optimal scheme of electrical equipment including transformers, automation, protection systems, compensating devices and other units.
? Estimation of the required costs, including the purchase of materials and equipment, site preparation and the cost of professional services, including the services of construction contractors, independent consultants, etc.
? Preparation of a detailed report with technical and economic indicators of the future system, stages of construction, funding requirements.
The engineering design and financing of electrical substations in general covers an extremely wide range of practical issues.
Along with a systematic approach, which should be aimed at solving strategic business problems, the engineering team is faced with numerous narrow technical problems, such as the most rational choice of protection and automation devices.
There are many techniques used to estimate project costs in the early stages of development. These methods, widely used in areas such as electrical engineering, include?Phased Estimating,?Multi-Element Estimating,?Factoring Estimating, and?Parametric Estimating, among others.
In general, the cost of electrical substations today can reach several tens of millions of euros, which depends on the type of facility, capacity, location, the degree of technical complexity of the project and a number of other factors.
The schedule of financing for the electrical substations and the amount of funds received at each stage of construction should be drawn up individually, taking into account the conditions of a specific project and the requirements of stakeholders.
Factors affecting the cost of an electrical substation
When starting the engineering design of an electrical substations, it is necessary to clearly define its place in the power system, to determine the function that it should perform today and tomorrow.
When determining the parameters of a substation under construction, it is important to clarify the investment efficiency indicators.?Investment?decisions are made on the basis of analytical information obtained from various sources.
The cost-benefit principle states that value is created when the benefit of a solution exceeds its cost.
The financial cost of the construction of an electrical substation is formed under the influence of the following three variables:
? Cash flow of the investment project. ? Time of project implementation from idea to commissioning. ? Risks and uncertainties associated with the project.
Any financial decisions made by project initiators and investors are closely related to the value of money over time.
The money received the next year is worth more than the same amount when it was received in the fifth or tenth year of construction. Most financial decisions made at the large business level must take into account the change in the value of money over time.
The most important factors affecting the cost of financing an electrical substations are the type of facility and its location in the system.
Finding the optimal solution is often difficult and requires deep economic and technical analysis.
When choosing a specific technical solution for a substation, several factors are taken into account, such as the location of the substation and the length of the associated low voltage circuits, the type and layout of the site, the characteristics of medium and low voltage networks for connection.
Both investment and operating costs are taken into account when preparing an engineering project. The costs of construction of a substation, power lines and installations constitute the main costs incurred from the moment of making a decision on construction until the moment of putting this substation into operation. Operating costs mainly include the cost of purchasing electricity, maintenance, repairs and energy losses. The exact proportions of these costs differ for each project.
It is worth analyzing these costs not only at the construction stage, but also in the context of the long-term operation of the facility.
The substation should be designed in such a way as to ensure the appropriate quality of electricity supplied to consumers at the lowest possible cost. The power quality is determined, among other things, by the level of voltage harmonics, frequency, symmetry of the supply voltages. The substation must be flexible, that is, it must easily adapt to connecting new loads or increasing existing loads. It should also be simple and safe to use.
Factors affecting the cost of an electrical substation are listed below:
? The location of the substation and the length of the MV and LV circuits connected to it, which should be as short as possible.
? The type and design features of the facility that directly affect the use of space and the requirements for the site and premises.
? The power of the step-down transformer in relation to the existing or anticipated future electrical load.
? Investor requirements and operating conditions governing the selection of electrical equipment and ancillary installations.
The investment costs of a substation and transmission line spent during the construction and installation period represent any costs incurred from the moment the decision was made to build a given facility until its normal operation.
Investment costs include the following:
? Material costs (transformer equipment, protection systems, line conductors, supports, cables, fittings and other elements and materials).
? Costs related to construction (operation of equipment used in the construction of the substation, planning of works and hiring of personnel).
? Design and administrative costs (e.g. development of project documentation, obtaining official building permits).
Operating costs include the following:
? Costs for the purchase of electricity, as well as associated costs to cover energy losses (the latter depend on the resistivity of cables, expected power and consumer demand for electricity).
? Costs associated with the maintenance, repair and maintenance of an existing electrical substation and its equipment.
? The cost of a system failure (in other words, the cost of undelivered energy). The cost of energy not delivered as a result of equipment failures is determined based on the failure rate, taking into account the average number of failures per year and the average duration of failures.
Based on the experience of numerous implemented industrial and energy projects, our professional team can compare alternative options for the construction of electrical substations, choosing the optimal solution for the customer.
The financing of electrical substations requires in-depth knowledge and experience due to the numerous technical and economic factors affecting a project.
For example, the location of the substation close to energy consumers allows to reduce the cross-section of wires due to less voltage drop at a distance. This, on the one hand, reduces investment costs, however, reducing the cross-section of the wires in this case increases the operating energy losses.
When placing transformer equipment inside the premises where energy consumers are located, there is no need for the construction of an overhead power transmission line.
The disadvantage of this option is the need to allocate the appropriate equipped space, which may be associated with additional investment.
When choosing the design of the future electrical substation, our engineering team must find a balanced approach to parameters such as efficiency, loss rate, safety, access and ease of use, compact design, equipment size and weight, initial investment and maintenance costs. The final decision always rests with the investor.
When making calculations for large capital-intensive projects carried out over several years, financiers take into account discounting formulas that translate future flows into current values.
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