Heat Rate of Power Plants: A Guide to Power Plant Efficiency
Power plants operating in deregulated markets are generally dispatched by grid operators from the least to the most expensive cost of delivering electricity. The concept of the heat rate of power plants therefore plays a pivotal role. More efficient plants use less input fuel to create electricity compared to peer power plants that require more fuel to generate electricity. In this blog post, we’ll unravel why the heat rate of power plants is important, show how to calculate a heat rate and explain why power plant efficiency and economics are key metrics for plant owners and operators.
Understanding Heat Rate
In its most simplistic form, the heat rate represents how efficiently a power plant transforms its input thermal energy into electrical energy. The heat rate tells us how much energy, measured in British Thermal Units (BTUs), is needed to produce one kilowatt-hour (kWh) of electricity. 3,412 BTUs are required to produce one kWh of electricity.
One way to think about the heat rate is that more efficient power plants require less input fuel to create electricity. For example, if the heat rate of power plant A is lower than the heat rate of power plant B, this means power plant A is more efficient than power plant B. Plant A needs less input fuel than Plant B to create the same amount of electricity.
Heat Rate Formula Step-by-Step
An easy way to calculate the heat rate is to divide the thermal energy going into the power plant by the electrical energy coming out of the plant. Let’s assume you have a 100% efficient power plant. In other words, for every 1 kWh of electricity output, the input is 1 kWh. In thermal energy terms, 1 kWh = 3.6 megajoules = 3,412 BTUs.
Heat rate is expressed in BTUs per net kWh generated. Net generation is the amount of electricity supplied to the electrical grid from the power plant. This generation assumes all of the electricity required to power the plant and its other equipment, such as feeding systems, boilers, cooling equipment, and pollution control devices.
Power Plant Efficiency Calculations
Economics drives power markets so power plant efficiency is the name of the game for plant operators. Heat rate is the inverse of efficiency so you want a low high rate and high efficiency. A high heat rate and low efficiency could mean your power plant isn’t dispatched to the market by a grid operator.
To calculate the thermal efficiency of a power plant divide 3,412 BTU by the heat rate. For instance, if a coal power plant has a heat rate of 10,000 BTU/kWh, its thermal efficiency would be 3,412 BTU / 10,000 BTU/kWh or 34%. In contrast, let’s say a combined cycle gas plant has a heat rate of 6,500 BTU/kWh translating to a thermal efficiency of 52% (3,412 / 6,500).
Factors Affecting Heat Rate
Power plant owners generally strive to have their resources running as frequently as possible for the least cost possible. To make this happen, assessing a plant’s efficiency, operating conditions, maintenance practice, and fuel quality is key to improving the heat rate. The lower the heat rate the higher the efficiency the more likely the resource will be dispatched.
If high efficiency and low heat rate are what you’re after, a sound operations and maintenance plan and access to high-quality fuel are key. Power plants are typically dispatched based on least to highest cost so running a plant more often generally means a plant is more efficient.
Heat Rate Comparison of Different Power Plants
All power plants are not created equal in terms of heat rates. Whether it’s a coal-fired plant, a natural gas plant, or a diesel power plant, the heat rate serves as a valuable metric to compare resources against one another. Plant owners use the efficiency and heat rate of the resources in their fleet to determine which plant converts fuel into electricity the best.
Per the EIA, the historical average heat rate of coal and nuclear plants are ~10,000-10,500 BTU/kWh, and natural gas plants are ~7,500-8,000 BTU/kWh. Natural gas plants generally have lower heat rates because less input fuel is required to generate electricity. The location and markets where these power plants operate may change the heat rates outside of these EIA ranges.
Heat Rate Impact on Power Plant Economics
When my goal is to get tasks accomplished, efficiency is what I’m after. The same can likely be said about power plant operators. They’re after efficiency as a less efficient power plant impacts the economics of the asset they’re managing. In heat rate terms, a lower heat rate means lower fuel consumption leading to lower operating costs.
Most people aren’t power plant operators. However, if you think about power plant economics in terms of running a business, the lower the operating costs the better it is for the economics of your business. One of my goals as a business owner is to keep operating costs low not only to be more efficient but also to efficiently deploy my investor’s capital.
Conclusion
Heat rate is the amount of thermal energy (BTUs) required to produce one kilowatt-hour of electricity. Remember, the lower the heat rate the more efficient the power plant because less input fuel is required to produce electricity. As the energy transition continues, it’s safe to assume less-efficient power plants will be pushed out of the market due to poor economics primarily as a result of high heat rates.
