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Overview of Financial Aspects of Thermal Power Plants

February 20, 2024


Thermal power plants are one of the most basic and vital sources of energy in today’s world. Although they can be expensive to build and do require a lot of maintenance and repair work to remain operational, they are still one of the cheapest forms of energy generation available to us right now.

The financial aspect of thermal power plants is important to understand, as it plays an essential role in the success of these power plants. Let’s have an overview of the financial aspects of thermal power plants:

Thermal Power Plant

The thermal power station or thermal power plant is a thermally efficient generating set capable of burning a variety of solid, liquid, and gaseous fuels to produce electricity. There are many types ranging from fossil fuel-based systems to those that use renewables such as biomass. The working principle of thermal power station in two simple steps:

  1. Typically, a thermal station will use some sort of fossil fuel like coal or natural gas to heat water into steam.
  2. This steam is then used to turn an electric turbine and generator producing electricity.

Thermal power station efficiency: The efficiency and capacity of a thermal station are determined by how well it converts energy from combustion into mechanical energy in its prime mover turbines.

Types of Coal-Based Thermal Power Plants

The various types of thermal power plants based on coal can be broadly classified into four categories. These are:

  1. Steam power generation
  2. Combined cycle power generation
  3. Gas turbine power generation

The role and importance of thermal power plants have been increasing in the U.S. due to the growing demand for electricity and the scarcity of fossil fuels such as gas, oil, etc. In the U.S. thermal power plants account for a major portion (more than 70%) of installed capacity which is in tune with our energy needs.

1. Steam power generation

A thermal power plant converts energy stored in pressurized steam into mechanical work. Most thermal power stations in use around the world burn fossil fuels to produce electricity (fossil fuel thermal power stations).

2. Combined cycle power generation

Combined cycle power generation uses two heat engines in tandem to produce electric power.

  • The gas turbine is used to bring a gas stream, such as natural gas or manufactured gas, up to high temperatures.
  • A heat recovery steam generator then uses heat from the hot exhaust gases to generate steam which drives a steam turbine connected to an electrical generator.

Power can be taken off both turbines and combined with plant generation at any time using static inverters.

3. Gas turbine power generation

A gas turbine or a combustion turbine is a type of internal combustion engine. It has an upstream rotating compressor coupled to a downstream turbine, and a combustion chamber in-between. In a gas turbine, the working fluid is usually pressurized gas like natural gas or propane.

Overview of financial aspects of thermal power plants

Power generation is one of the most capital-intensive industries. In the thermal power sector, initial fixed capital costs are high, as compared to other sources such as hydro and renewable energy. These costs include:

  • Purchase or construction of a coal mine
  • Acquisition of building materials for coal handling system
  • Land acquisition (as per legal requirements)
  • Setting up water supply systems
  • The coal transportation system

Here are some factors that affect the financial aspects of thermal power plants:

  • Investment Cost

The capital cost can be divided into several categories: typically, construction costs, procurement, transmission, and financing costs. The investment cost for a typical thermal plant with a capacity above 500 MW is approximately US$1.5 billion (about $5 per person in the US) expected to increase due to rising construction prices and interest rates. Historically, coal-fired plants have lower costs than oil-fired plants because coal is relatively cheap and more abundant. Coal costs are also stable while oil prices can fluctuate dramatically.

  • Operating cost

Operating costs are important to keep track of because they show the consumption of resources. The operating costs of thermal power plants involve all expenditures related to the plant’s primary activity: which is electricity production in thermal power plants. These costs consist of daily expenses such as labor, fuels, maintenance, etc. The second set of operational costs is longer-term expenses also known as fixed costs which occur regardless of whether the plant runs or not.

  • Supporting cost

Over time, environmental and strategic factors have become very important, which has led to increased costs for thermal power generation. A few of these factors are mentioned below: Environmental: The environmental standards for coal and gas-based thermal plants in India are now comparable to those of developed countries such as Germany and Japan.

Fuel Type & Quality Considerations

Fuel is a vital aspect of a thermal plant; it determines how much heat you’ll be able to produce, and therefore how much electricity you’ll be able to produce as well. The two most popular types of fuel for thermal plants are oil and coal.

  • Coal, one of the cheapest forms of fuel, often contains varying amounts of impurities like sulfur.
  • Oil is also used as a thermal-plant fuel source, but its use has declined over time due to its high cost compared with other fuels. 
  • When using oil as your thermal plant fuel source, you must consider that it produces more pollution than coal when burned—, if your plant doesn’t have an effective emission-control system installed, burning oil can result in harmful pollutants being released into the air.

Balance Energy Generation with Load Requirements

Modern thermal power plants are typically gas or coal-fired to generate electricity for local communities and industries. A thermal plant owner must balance energy generation with load requirements, resulting in a complex decision-making process that impacts plant operations.

Plant managers need to predict a facility’s demand from day to day, hour to hour, and even minute to minute. This requires advanced planning tools that can help visualize how much steam is needed on any given day, allowing for more efficient use of fuel and other operating costs.

  • Prismecs is a leading supplier of thermal power plants

Prismecs is a leading supplier of thermal power plants and engineering, procurement & construction company (EPC). Our services include Engineering, Procurement, and Construction (EPC) for all types of energy and power projects including thermal power plants. We are experienced in the design and execution of coal-based thermal power projects with capacities ranging from 200 MW to 1000 MW.

We also offer turnkey solutions for setting up supercritical steam turbines with capacities ranging from 100 MW to 600 MW. With our international experience in thermal power project execution, we have been instrumental in setting up over 500MW capacities based on supercritical technology. So, contact us at for further information!


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