Central Power Generation EconomicsDistributed Energy Systems
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Progress in the state-of-the-art of central power generators suffered under public utility regulation which provided no incentive for utilities to improve their system efficiencies. Under regulation shareholder utility company profits were based on return on investment. This acted as an incentive to pay more per kilowatt of generating capacity than necessary. Since deregulation began by decoupling generating facilities from their regulated distribution systems, this is slowly changing to an incentive to purchase the most economical generation plants to own and operate. One result of this trend is an upsurge in orders for natural gas-fired combined gas/steam turbine cycle power units. They are less expensive to build and cost less to operate. New gas-turbine-based power plants going into commercial service grew from 27,000 Megawatts ("MW") in 2000, to estimates of 48,600 MW in 2001, 66,000 MW in 2002 and 69,000 MW in 2003. This caused turbine suppliers such as Siemens-Westinghouse to double gas turbine production capacity to meet backlogs stretching into 2004. However, with the slow-down in the economy, power demand dropped and many expansion plans were cancelled or modified. The U.S. Department of Energy's Strategic Center for Natural Gas believes that market forces and public environmental policy are converging to clearly make natural gas the fuel of choice. The reason is that gas burns cleaner than coal or oil, and unlike oil, domestic gas resources are abundant. Energy Information Agency predictions agree with those of the National Petroleum Council that the current economic and environmental superiority of gas-based electric power generation will result in dramatic increases in the use of gas for power generation - perhaps to as much as 90% of new electric power capacity in coming years. However, industry concern about long-term natural gas prices continues to sustain interest in coal, nuclear, and hydro power. Central Power Plant Capital CostsBased on a random sample from Platt's Global Power Project Database of projects in the U.S., Canada, Mexico and the UK scheduled for commissioning between the years 2000 and 2004, the following power plant capital cost distribution curves were derived. To these figures must be added the costs of land, sitting, permitting, and zoning for the plant, the cost of the infrastructure to provide fuel to the plant, remove effluents, transmit the power to the grid (which may require adding grid capacity) and absorb carrying costs during construction. This may add from 25% to 50% to bare plant costs. |
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Since open cycle gas turbines on their own lack the efficiency necessary for base load operation, they are either used as peak shavers, or in co-generation applications. In our sample of projects, the average bare plant cost for gas turbine plants was $909/KW. Allowing for infrastructure costs, we estimate that the average full cost would amount to between $1,100 and $1,400/KW. [Click to enlarge Image] |
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Combined cycle power plants utilize the exhaust heat of gas turbine generators to generate steam to drive steam turbine generators in parallel with the gas turbines. This yields cycle thermal efficiencies in the 50% to 55% range. The average bare cost of this type of power plant in our sample was $912/KW. Based on plants currently under construction in the US their fully loaded average cost would amount to about $1,200/KW. Plants of this type with capacities above 300 MW have lower costs - in the $400 to $500/KW range. For example, Calpine is constructing a 550 MW combined-cycle cogeneration plant in Calhoun County, S.C. for $470/kW. [Click to enlarge Image] |
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The cost of hydro-electric plants in the sample average $2,056. Fully loaded costs may average around $2,500/KW. However, if the costs of dams are included this figure may be greatly increased. [Click to enlarge Image] |
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Coal-fired steam plant costs in the sample average $1,953/KW. However, infrastructure costs of transporting coal to a power plant, disposing of the ash and environmental compliance costs are high. The average fully loaded cost of this type of plant is in the range of $2,800 to 3,000/KW. [Click to enlarge Image] |
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Waste-fired steam power plants in the sample cost on average $4,387/KW. Not unlike coal-fired plants peripheral costs are high. We estimate the fully loaded cost of this type of plant at $5,800/KW. [Click to enlarge Image] |
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Biomass-fired steam plant costs in the sample averaged $1,183/KW. Fully loaded the average would come to about $1,600 and 2,000/KW, provided biomass fuel is locally available. [Click to enlarge Image] |
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Wind power farms in the sample cost on average $2,019/KW. Peripheral cost are high, since the farms are remotely located from the point of use of the electricity. It is probable that the overall cost could amount to over $2,500/KW. [Click to enlarge Image] |
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No new nuclear plants are under construction, but from 1971 through 1974, 131 nuclear units were ordered at an average capacity of about 1,100 mega watts. Capital costs rose from $150/KW in 1971 to more than $600 after 1976 and increased to more than $1,200/KW in the early 1980's. Adjusted for inflation these numbers would be very significant in 2001 dollars.
To assess the average capital costs of central power stations in America one
needs to consider the degree of use that is made of each type of power plant. In
the year 2000, coal was still by far the most common fuel for power plants,
followed by nuclear, gas and hydro. Hence, the national average cost of central
power station assets per kilowatt of capacity is skewed toward the two most
expensive types - coal and nuclear and probably averages at least $2,500/kW.
Amortized over 20 to 30 years this average
capital cost of $2,500/kWW translates into a cost of between 1.5 and 2 cents per
kW-Hr. |
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To this amortization burden must be added the cost of fuel, operation and maintenance of the power plant. The sum of these costs vary substantially by power plant type and fuel. Since 1986 when oil and gas prices stabilized after the oil embargo disruptions of the late 1970's, utility power production costs have declined modestly and held steady since 1995. As shown in the adjacent graph, nuclear and coal power has been the least expensive to produce costing about 2 cents per kW-Hr. Oil and gas fired production costs have been higher at about 3.5 cents per kW-Hr. |
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Power Distribution CostsAccording to the American Public Power Association, the average cost of distributing and managing the distribution of electricity is something over 1.4 cents per kW-Hr. Smaller utilities with less than about 9,000 customers face costs closer to 1.5 cents per kW-Hr. Centrally Generated Power Total Costs
These cost figures are significantly lower than their corresponding selling prices. Electricity pricing is differentiated in several ways, varying geographically by region, politically by state, county and municipality; and according to customer size and type. Large customers who may be able to generate their own power enjoy the lowest rates, followed by residential users who are able to exert political leverage; leaving commercial enterprises and small industrial users to pay the highest rates. The rate structures are further complicated by a mixture of fixed and use-based charges as well as time-of-day and peak demand rates. The table lists Y-T-D June figures for 2000 and 2001 use-based charges for the United States.
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Estimated U.S. Electric Average Revenue per kW-Hr to Ultimate Consumers by Sector, Census Division, and State, Year-to-Date
(June) 2001 and 2000
(Cents)Census Division and State Residential Commercial Industrial Other1 All Sectors 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 New England 11.8 11.2 10.5 9.2 8.7 7.4 13.9 14.0 10.6 9.5 Connecticut 10.8 10.8 9.1 9.3 7.6 7.4 9.9 10.6 9.5 9.5 Maine 12.0 11.7 12.8 10.4 7.8 6.3 56.5 24.1 10.9 9.5 Massachusetts 12.0 10.5 10.6 8.4 9.3 7.5 14.5 13.7 10.9 9.0 New Hampshire 12.9 13.5 10.8 11.3 9.3 9.3 14.5 12.3 11.3 11.6 Rhode Island 12.3 11.3 10.8 9.5 10.1 8.1 25.4 12.5 11.3 10.0 Vermont 12.3 12.4 11.2 10.9 7.9 7.4 14.8 12.8 10.7 10.5 Middle Atlantic 11.3 11.0 10.2 8.8 6.0 4.6 6.2 8.6 9.3 8.5 New Jersey 10.0 10.7 9.2 8.6 8.5 6.6 11.5 16.8 9.4 9.0 New York 14.0 13.5 12.6 10.9 5.1 4.8 5.7 8.4 11.0 10.4 Pennsylvania 9.4 8.9 7.8 6.1 5.8 3.9 8.2 8.1 7.7 6.3 East North Central 8.0 8.1 7.2 7.1 4.5 4.3 6.2 6.1 6.4 6.2 Illinois 8.5 8.7 7.1 7.0 4.6 4.2 5.5 5.4 6.6 6.4 Indiana 6.7 6.9 5.9 5.9 3.9 3.8 9.9 9.9 5.2 5.1 Michigan 8.3 8.6 7.8 7.9 5.2 5.0 10.3 10.6 7.1 7.1 Ohio 8.1 8.4 7.8 7.6 4.7 4.5 6.4 6.3 6.6 6.5 Wisconsin 7.8 7.5 6.3 6.0 4.3 4.0 7.4 7.0 6.0 5.7 West North Central 7.0 7.1 5.9 5.9 4.3 4.2 6.2 6.2 5.8 5.7 Iowa 7.7 8.1 6.6 6.4 4.1 3.7 6.1 6.3 5.9 5.7 Kansas 7.5 7.4 6.2 6.1 4.5 4.4 8.5 8.3 6.1 6.0 Minnesota 7.4 7.3 5.8 6.1 4.5 4.5 7.5 7.8 5.9 5.7 Missouri 6.7 6.9 5.7 5.5 4.3 4.5 5.9 5.7 5.8 5.8 Nebraska 6.2 6.2 5.4 5.4 3.7 3.5 6.3 6.4 5.2 5.1 North Dakota 6.4 6.4 5.8 5.9 4.1 4.0 4.3 4.2 5.5 5.5 South Dakota 7.5 7.3 6.5 6.5 4.5 4.5 4.4 4.1 6.5 6.3 South Atlantic 7.8 7.6 6.5 6.2 4.3 4.0 6.4 6.2 6.6 6.2 Delaware 8.2 8.6 6.8 6.2 4.8 4.2 14.3 16.4 6.7 6.3 District of Columbia 7.7 7.7 7.3 7.2 4.5 4.4 7.2 6.6 7.3 7.1 Florida 8.4 7.6 7.0 6.1 5.3 4.7 7.6 6.9 7.5 6.7 Georgia 7.6 7.4 6.7 6.5 4.3 4.0 8.5 8.6 6.3 6.0 Maryland 7.4 8.1 6.1 6.5 4.4 4.0 9.6 8.4 6.4 6.8 North Carolina 7.9 7.8 6.4 6.3 4.6 4.4 6.6 6.4 6.5 6.3 South Carolina 7.4 7.5 6.2 6.2 3.7 3.5 5.8 6.0 5.6 5.4 Virginia 7.5 7.4 5.8 5.6 4.2 3.8 5.2 5.1 6.1 5.9 West Virginia 6.2 6.3 5.5 5.5 3.7 3.8 10.3 9.3 5.0 5.1 East South Central 6.4 6.4 6.2 6.1 3.8 3.8 6.0 6.0 5.3 5.2 Alabama 7.0 6.9 6.6 6.5 3.9 3.8 7.0 7.0 5.6 5.4 Kentucky 5.4 5.3 5.1 5.1 3.0 2.9 4.4 4.4 4.2 4.0 Mississippi 7.2 7.0 7.0 6.6 4.5 4.2 8.6 8.6 6.2 5.9 Tennessee 6.3 6.4 6.3 6.3 4.3 4.5 8.4 8.2 5.6 5.6 West South Central 8.2 7.3 7.5 6.5 5.3 4.1 7.2 6.2 7.0 5.9 Arkansas 7.6 7.3 6.2 5.8 4.4 4.0 7.0 6.7 6.0 5.5 Louisiana 8.6 7.0 8.4 6.6 6.5 4.2 8.9 6.2 7.7 5.7 Oklahoma 7.2 6.6 6.4 5.4 4.6 3.6 5.5 4.4 6.2 5.2 Texas 8.4 7.4 7.7 6.7 5.2 4.1 7.2 6.6 7.1 6.1 Mountain 7.5 7.3 6.5 6.1 4.7 3.9 5.2 5.3 6.2 5.8 Arizona 8.1 8.3 7.3 7.3 5.1 4.9 4.2 4.5 7.0 7.0 Colorado 7.4 7.3 5.6 5.6 4.5 4.4 7.9 8.2 6.0 6.0 Idaho 5.6 5.2 4.8 4.3 3.5 2.9 4.6 4.5 4.6 4.0 Montana 6.7 6.3 6.4 6.1 6.3 2.6 9.0 6.7 6.5 4.6 Nevada 8.7 7.2 8.2 6.6 5.8 4.4 5.0 4.3 7.3 5.8 New Mexico 8.6 8.3 7.5 6.9 5.7 4.3 5.5 5.8 7.1 6.4 Utah 6.7 6.2 5.5 5.2 3.6 3.3 4.3 4.2 5.2 4.7 Wyoming 6.4 6.4 5.4 5.3 3.4 3.4 5.1 4.9 4.4 4.4 Pacific Contiguous 8.3 8.3 8.7 7.6 6.7 4.4 3.9 4.0 7.8 6.8 California 10.2 10.4 10.1 8.7 8.3 5.4 3.7 4.1 9.4 8.2 Oregon 6.0 5.8 5.2 5.1 3.9 3.2 7.0 7.1 5.1 4.7 Washington 5.5 5.2 5.3 4.9 4.7 3.1 4.1 3.6 5.2 4.4 Pacific Noncontiguous 14.4 14.0 12.6 12.1 10.6 10.6 14.4 14.1 12.5 12.3 Alaska 11.9 11.1 9.9 9.2 8.0 7.8 14.5 14.0 10.4 9.9 Hawaii 16.2 16.0 14.7 14.5 11.4 11.3 14.0 14.4 13.8 13.6 U.S. Average 8.25 8.05 7.60 7.03 4.99 4.28 6.15 6.33 7.00 6.47
1/ Includes public street & highway lighting, other sales to public authorities, sales to railroads & railways, sales for irrigation, and interdepartmental sales. Source: Energy Information Administration, Form EIA-826, "Monthly Electric Utility Sales and Revenue Report with State Distributions."To these figures must be added various base charges, fees and taxes which vary widely between jurisdictions and from one utility to another.
On the whole, total electricity prices for small commercial enterprises in the U.S. range from around 10 cents/kW-Hr to close to
20 cents in the worst cases.
