Enthalpy-Based Steam Pricing

The most common method for steam pricing in the process industry is based on the steam enthalpy. The method is straightforward for a given cost of steam at generation pressure, the price of steam at lower pressure is based on the amount of heat available with this steam in comparison with the heat available for the steam at the generation pressure. In other words, HP steam is generated from boilers and the cost of HP steam can be calculated via equation (17.3). Then, MP and LP steam costs are prorated from the HP cost based on the ratio of enthalpy values. It seems the idea makes sense however, there are fundamental flaws. The method and its limitations can be best illustrated via the example presented next. 

Example 17.2 Enthalpy-Based Steam Cost Calculations 

Solution. If BFW conditions are used as the basis to measure the heat available in steam, the heat available with a steam is equal to the enthalpy difference between the steam and BFW. Thus, the costs for MP and LP can be calculated based on the enthalpy ratio as 

Similarly, the LP steam price can be calculated based on the enthalpy and price of HP steam 

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Clearly, the steam prices show greater disparity compared with that of the enthalpy-based method (Table 17.3). The enthalpy-based steam pricing method... 

TABLE 17.3. Comparison Between Enthalpy and Work-Based Steam Pricing Methods... 

Both enthalpy and work-based steam pricing methods rely on thermodynamic laws as the basis. Cooper (1989) argued that the steam pricing should reflect economic reality. Since the operating cost for a steam system mainly consists of fuel burned for steam generation. Cooper (1989) proposed to use the concept of fuel equivalent (FE) as the basis for steam pricing. In this method, the ratio of FE for steam at different pressures is used to derive the steam prices in placement of the ratios of enthalpy and availability. 

There can be confusion and misunderstanding from plant personnel on steam prices. Are we talking about steam price based on the point of use (marginal steam price) or total steam from the boiler house (average steam price) Should the steam be priced at the point of generation or point of use Does the steam price include both fixed and variable costs Does the average steam price vary for different production rates Why is the steam price obtained based on steam enthalpy instead of costs These are the questions that will become the focus of this chapter. 

Calculate the steam prices based on enthalpy-based method for the steam system in Figure 17.1, which consists of major components of a complex steam system boilers with deaeration and makeup, back-pressure steam turbine, condensing turbine, process steam demand, steam letdown vale, desuperheater, and so on. The economic data are provided in Table 17.1. 

Realizing the shortcomings in the enthalpy-based method, Kenney (1984) proposed to value steam based on the potential work that the steam possesses in comparison with enthalpy. Kenney pointed out that the enthalpy-based pricing method is based on the first law of thermodynamics (energy conservation), while the work-based pricing is based on the second law of thermodynamics (entropy). In thermodynamics, potential work is also termed as availability (a) implying the amount of potential work available. 

The critical question for enthalpy-based, work-based, and FE-based stem pricing methods is Do the steam prices from these methods reflect the true costs The question can be answered the best with the following example. 

The FE-based method attempts to address these issues and is less likely to have inherent dangers in providing misleading steam prices than the enthalpy- and exergy-based methods however, it will be more prudent to use the cost-based method if potential pricing errors are to be avoided. This is because the cost-based method can provide accounting values for steam and power, which reflect the tme costs, and the best approach to economic reality. 

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