Financial Benefit Evaluation Model of Power Grid Investment based
on Information Entropy
Qingsheng Liu, Chenghe Zheng, Chi Xie*, Mingxia Lin and Xinyu Pan
State Grid Telecommunication Yili Technology Co., Ltd. Fuzhou, China
Keywords: Information Entropy, Power Grid, Investment, Financial Benefit, Evaluation Model.
Abstract: As an infrastructure, power grid construction project is of great significance to ensure social and economic
development. The basic status and development needs of the power grid determine that the power grid needs
corresponding investment, and the investment benefits of the power grid are often both social and economic
benefits. It is incorrect to pay too much attention to economic or social benefits. At the same time, the benefits
obtained by the investment project itself generally can not recover the investment, and the power grid
investment is mainly digested in the price increase. This is an important difference between power grid
investment projects and general projects. Therefore, financial performance evaluation model of power grid
investment based on information entropy is designed. Firstly, the characteristics of power grid investment
benefit are analyzed. Secondly, the evaluation principle of power grid investment benefit is designed. Finally,
financial performance evaluation model of power grid investment based on information entropy is
constructed. The example analysis shows that the evaluation effect of the designed evaluation model is good
and has certain application value.
1 INTRODUCTION
The operation of power grid enterprises is facing
great pressure. First, the coal price remains high,
which promotes the on grid electricity price of power
generation enterprises to increase significantly.
Second, affected by the national macro-economic
regulation and industrial structure adjustment, the
sales price is strictly controlled by the government.
The adjustment is becoming more and more difficult,
and profit margins of the company is double
squeezed. Third, with the expansion of the company’s
asset scale, depreciation, power grid operation and
maintenance costs rise rapidly. At the same time,
large-scale financing and huge financial costs make
power grid enterprises face unprecedented difficulties
and pressure. Therefore, how to avoid inefficient and
ineffective investment, scientifically arrange
investment projects, reasonably grasp investment
timing, pay attention to input-output benefits,
effectively prevent and avoid business risks, and
steadily improve the economic benefits of power grid
has become an urgent problem to be deeply studied
and solved.
Foreign research on investment benefit evaluation
of power enterprises mainly involves engineering and
technical problems such as power supply reliability
and financial aspects such as electricity company
financing and risk. For example, the analysis of
competitive power generation market has been
introduced in power market reform in Britain,
Norway, Canada and the United States. Generation
capacity planning, power trading, uncertainty and
risk of power market are researched. For the loss of
power revenue and the increase of overall cost and
expenditure caused by non-technical losses in the
operation of some national power grids, this paper
puts forward the research on the methods of loss
evaluation and management
. The reliability and
quality of power system, the cost of appropriate
system safety and reliability level, and the degree of
power generation facilities and transmission capacity
required to meet the demand level of consumers are
researched. The research on benefit evaluation of the
power industry mainly focuses on the power
generation. That is, the cost-benefit analysis, asset
portfolio and risk management of power generation
companies. For example, power generation
evaluation studies capacity and fixed asset
investment opportunities under irregular conditions
in the power market. And investment opportunity
decision analysis tools for hedging transactions and
936
Liu, Q., Zheng, C., Xie, C., Lin, M. and Pan, X.
Financial Benefit Evaluation Model of Power Grid Investment based on Information Entropy.
DOI: 10.5220/0011359500003440
In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 936-940
ISBN: 978-989-758-593-7
Copyright
c
2022 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
risk management.
In the research of benefit evaluation methods,
domestic scholars have put forward many evaluation
methods. For example, analytic hierarchy process,
Delphi method, with or without comparison method,
optimal combination prediction, fuzzy
comprehensive evaluation and other methods are
integrated and applied to the post evaluation of
national rural power grid construction and
transformation projects, and an evaluation method
system composed of multiple methods and a
comprehensive evaluation model integrated with
multiple models are established. Evaluation index
system of power grid investment project is
constructed. Research on comprehensive evaluation
model of power grid construction project investment
based on improved analytic hierarchy process is
constructed.
2 DESIGN OF FINANCIAL
BENEFIT EVALUATION
MODEL OF POWER GRID
INVESTMENT BASED ON
INFORMATION ENTROPY
2.1 Analyze the Investment Benefit
Characteristics of Power Grid
Power grid investment refers to the investment in the
new construction, expansion and technical
transformation of power transmission and
transformation projects. According to the current
investment system, the power company only invests
in the power transmission and transformation projects
within the provincial network as project's legal
person, including all power transmission and
transformation projects of 500 kV ~ 110 kV. Power
grid investment evaluation involves the whole
process of power grid investment, and the impact of
different stages on power grid investment is different.
The process of power grid investment generally
includes five stages, power grid investment planning,
early stage, planning, construction and operation. In
the stage of power grid investment and operation, two
main tasks are mainly carried out, namely, the
production and operation management of power grid
investment projects and the post evaluation of power
grid investment projects. After the completion
acceptance of the power grid investment project, it
can be put into production and operation and organize
the recovery of investment after going through the
necessary formalities. In the production process of
the investment project, the daily operation of the
project shall be carried out in strict accordance with
the general objectives and other sub objectives
determined in the investment plan. After the fixed
assets are delivered for use, it is the productive stage
or use stage of investment movement. The production
results and the useful effect of fixed assets are the
output form of this stage. The comparison between
investment and the production results and use effect
of this stage is the second level of investment benefit.
The benefits of these two levels restrict each other
and constitute the whole content of power grid
investment benefits.
2.2 Evaluation Principle of Investment
Benefit of Designed Power Grid
In the early 1950s, China’s power design department
learned from the experience of the former Soviet
Union, and the economic comparison of construction
projects adopted the compensation period method or
recovery period method and calculation expenditure
method. The calculation formula of this method is as
follows (1).
21
12
K
K
T
CC
−
=
−
(1)
In Formula (1),
T
represents the compensation
period.
1
K and
2
K represent the scheme
investment.
1
C a n d
2
C represent the annual fee of
scheme investment. The code for kinetic energy
design of thermal power plants issued in 1956
stipulates that
T
≤10~15 years. The interim
measures for economic comparison in power system
issued in 1964 stipulates that
T
≤6~7 years. The
compensation period of hydropower projects is
longer than that of thermal power and power
transmission and transformation projects. With the
shortage of funds, there is a decreasing trend of
T
.
When comparing the two schemes, if the above
discriminant is met, it is considered that the second
scheme with more investment is economically
reasonable. At this time, the expenditure formula is as
follows (2).
1
H
i
HC EK=+ (2)
In Formula (2),
i
K represents the investment of
a scheme.
H
E represents the economic benefit
coefficient. The following four aspects should be
considered. Firstly, it is necessary to calculate the
capital discount principle. The formula is shown in
Financial Benefit Evaluation Model of Power Grid Investment based on Information Entropy
937
Formula (3).
(1 )
(1 )
y
y
FP i
PF i
=+
=+
(3)
In Formula (3),
F
represents the median value.
P
represents the present value.
y
represents the
calculation period.
i
represents the period or
discount rate.
(1 )
y
i+ represents the compound
interest coefficient. If the bank requires quarterly
settlement, conversion is required. The calculation
formula is as follows (4).
4
'
11
4
i
i
=+ −
(4)
In Formula (4),
'
i
represents the interest rate
settled quarterly. The repayment method after the
enterprise loan is determined according to the loan
contract signed with the bank. It can be repaid in the
same amount of principal and interest or the same
amount of principal, or in other ways agreed by both
parties. At present, the repayment of principal and
interest is mostly equal, and the calculation Formula
(5) is as follows.
(1 )
(1 ) 1
y
y
ii
AP
i
+
=
+−
(5)
In Formula (5),
A
represents the equivalent
repayment amount. At this time, the equivalent
repayment coefficient can be calculated according to
Formulas (1) ~ (5). The calculation formula is shown
in Table 1 below.
Table 1: Equal repayment coefficient.
i/y 10 15 20 25 30
5.0％
0.130 0.096 0.080 0.071 0.065
7.5％
0.146 0.113 0.098 0.090 0.085
10％
0.163 0.131 0.117 0.110 0.106
12.5％
0.181 0.151 0.138 0.132 0.129
15％
0.199 0.171 0.160 0.155 0.152
It can be seen from Table 1 that due to inflation,
the operating costs in some years increase year by
year. In order to consider this factor, the leveling
method needs to be adopted. The calculation results
of the leveling coefficient at this time are shown in
Table 2 below.
Table 2: Flattening coefficient.
b
/
y
10 15 20 25 30
2％
1.12 1.18 1.24 1.31 1.40
4％
1.25 1.39 1.55 1.73 1.94
6％
1.43 1.64 1.95 2.33 2.79
As can be seen from Table 2, inflation has a great
impact on the annual interest rate. In recent years, due
to the steady decline in prices, interest rates have also
been greatly reduced. When forecasting is difficult, it
is also stipulated to adjust interest rates accordingly
with price changes. Under the condition of market
economy, profit is the purpose of production and the
most concerned problem of investors. Under the
condition of planned economy, it is only the condition
required to expand reproduction. It is a matter of
concern to the state, and there are great differences due
to the industry. Under the condition of market
economy, investors attach great importance to the
analysis of economic benefits. Under the condition of
market economy, the time value of funds is fully
considered and calculated by dynamic theory, while
under the condition of planned economy, static
calculation is adopted and only the impact on
investment backlog is considered. Under the condition
of market economy, the impact of inflation is fully
considered. This factor is not considered under the
condition of planned economy. Under the condition of
market economy, the price is adjusted by the market
and basically conforms to the value. Under the
condition of planned economy, the price is determined
by the state and often deviates from the value.
Therefore, the shadow price should be considered for
national economic evaluation. The schematic diagram
of evaluation principles is shown in Figure 1 below.
Principle of
power grid
benefit analys is
Systematic principle
Dynamic principle
Simplicity principle
Principle of operability
Principle of objectivity
Figure 1: Schematic diagram of financial benefit
evaluation principle of power grid investment.
It can be seen from Figure 1 that the evaluation
characteristics mainly depend on the basis and essence
of evaluation activities and cognition. From the
evaluation concept and value characteristics, the main
characteristics of evaluation are as follows. The
purpose of evaluation is to understand and evaluate
the objective value. The essence of value is a
relationship between subject and object, which must
BDEDM 2022 - The International Conference on Big Data Economy and Digital Management
938
include both sides of the relationship. Value is
embodied in the interaction between subject and
object. But evaluation is not to create value, but to
recognize value and guide people to create value.
Evaluation results are non-unique. Evaluation is a
subjective activity of understanding and evaluating
value, which varies with different subjects. Because
evaluation is a subjective activity, and the evaluation
subject varies and changes in interests, needs, values,
choices, emotions and will. Evaluation always
changes with the change and development of the
evaluation subject. The evaluation result must be non-
unique.
2.3 Construction of Power Grid
Investment Benefit Evaluation
Model based on Information
Entropy
The internal benefits of the project reflect the benefits
that can be captured by the project itself. Generally
speaking, the financial benefit of the project is
reflected at a reasonable price after adjusting the
transfer cost, which is the internal benefit of the
project. This is because intangible benefits are
generally not measured at ready-made prices, but
they do belong to benefits, because they can be
reflected through the growth of national income. The
investment benefits of power grid are mainly
reflected in the benefits of increasing power supply,
reducing network loss, loss free power and so on.
This factor should be considered in the power
price increase. With the strengthening and
improvement of provincial network and urban
network, compared with these projects, the loss is
likely to decrease, and this benefit should also be
taken into account. Power loss further leads to the
decline of power supply capacity, which involves
whether compensation for installed capacity needs to
be considered. Although this problem does not exist
for the legal person of power transmission and
transformation project, it does exist from the
perspective of the whole network and can not be
considered in the current financial evaluation
method. Therefore, the benefit evaluation model of
this method is shown in (6).
2
2
C
H
W
APPT
nW
τ
Δ= Δ××Δ × （6）
In Formula (6), 𝑛 represents the number of
transformers.𝑊
represents the rated capacity of the
transformer. 𝑊 represents the maximum load.
𝛥𝑃represents the copper loss of the transformer with
rated capacity. 𝛥𝑃
represents the iron loss of the
transformer with rated capacity. 𝑇 represents the
operating hours of the transformer and
τ
represents
the loss hours. Costs and expenses refer to material
consumption, labor remuneration and various
expenses incurred by project's legal person in the
process of production and operation. The total cost
includes product cost and financial expenses. The
financial situation of the project is predicted during
the calculation period, so as to comprehensively
reflect the financial benefits of the project and
provide investment decision-making basis for the
project investor and financial department. Therefore,
the correct financial evaluation of power grid
construction projects is of great significance to
improve investment benefits.
3 CASE ANALYSIS
3.1 Overview
In 2019, the maximum power supply load of a power
grid in the whole society is 326,000 dry watts. The
power of the whole region is mainly connected with
the large power grid by four 220KV lines. With the
deepening of investment attraction in Beilun District,
extra large power users have settled in Beilun, and the
power demand in Beilun will increase sharply. In
2020, Beilun district needs 739,000 KW of power
supply from the large grid. The original 220 KV
transmission line will be difficult to meet the rapidly
rising power demand in Beilun District. Therefore, in
order to ensure the sustainable economic development
of Beilun District, meet the needs of the continuous
and rapid growth of local power consumption level,
ensure the safe and stable operation of power grid, and
optimize the 220 KV power grid structure of Beilun
District, it is necessary to build a 500 KV Yongdong
power transmission and transformation project in
2020. At this time, the list of indicators involved in the
calculation is shown in Table 3.
Table 3: List of indicators.
Indicator name Attribute
Increased power supply per unit
investment
Positive index
Power su
pp
l
y
of unit fixed assets Positive index
Income from fixed assets of new units Positive index
Power loss reduction Positive index
Capacity load ratio（220kv）
Moderate index
Capacity load ratio（110kv）
Moderate index
Power supply per unit substation
capacity（220kv）
Positive index
Financial Benefit Evaluation Model of Power Grid Investment based on Information Entropy
939
As shown in Table 3, the current indicators are
perfect and can be used for subsequent financial
benefit model analysis and testing.
3.1 Application Effect and Discussion
The financial benefit analysis model of power grid
investment designed in this paper and the traditional
financial benefit analysis model are used for benefit
analysis and test respectively. Compared with the
standard benefits, the application effect is shown in
Figure 2 below.
month
Benefit (10000 yuan)
1000
2000
3000
4000
5000
6000
1357 9
standard
this paper
tradition
Figure 2 Application effect
It can be seen from Figure 2 that the benefit
analysis method designed in this paper fits the
standard better, which proves that the benefit analysis
effect of the method designed in this paper is better
and more accurate, so it has certain application value.
4 CONCLUSION
The methods discussed in this paper only supplement
and improve the deficiencies existing in the current
economic evaluation methods of power grid
construction projects, and the factors and methods
considered also have their specific environment.
Although it has little impact on the financial
indicators of the project itself, it also has little impact
on the price increase of electricity. However, in terms
of scope, the number of power grid construction
projects is very large. Therefore, the small differences
in price increase of each project are finally
superimposed and reflected in the electricity price.
Therefore, the benefit evaluation of power grid
construction projects needs further in-depth research.
It is hoped that a more scientific and comprehensive
economic evaluation method of power grid
construction projects in practice is further explored,
so as to provide a basis for scientific decision-making
of the project and a reasonable basis for price
increase.
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