Basic Power Gen Cost Information

Periodically, it’s worth revisiting the cost of generating electricity when using different methods.

Until recently, the objective was to produce electricity at the lowest possible cost.

This was seen as being best for consumers, who need to use electricity for lighting, refrigeration, air-conditioning and other modern day necessities, where the cost of electricity can jolt consumer pocket books.

It was also seen as being best for industry, where the cost of electricity is an important cost to manufacturers, especially when competing internationally to support jobs in the United States.

Now, as concern over climate change has gripped the energy industry, the resulting higher costs are having an effect.

For example, the cost of cloud computing, based on server farms using large amounts of electricity, can affect companies such as Amazon, and indirectly their customers.

Today, largely because of the drive to cut CO2 emissions, renewables are seen as being  more important than generating electricity at low cost.

The difference in these costs are largely overlooked by extreme environmentalists in their efforts to promote renewables, such as wind and solar.

Table I shows the cost of building various types of power plants based on their nameplate ratings1. These investments need to produce a return to those who provide the funds for building the power plants.

 

TABLE 1

Method

Investment Cost per Nameplate Kilowatt

Natural Gas Combined Cycle $1,100/KW
Traditional Coal $2,000/KW
Wind, Land-Based $2,000/KW
Solar PV $2,400/KW
Ultra Supercritical Coal $2,800/KW
Solar Concentrating, without thermal storage $4,500/KW
Wind, Off-Shore $5,000/KW
Integrated Gasification Combined Cycle $5,500/KW
Nuclear $6,000/KW
Solar Concentrating, with 6 hours thermal storage $8,000/KW

 

Natural gas (NGCC) power plants require the smallest investment, and while natural gas prices are below $4 per million BTU, will generate the least expensive electricity; above $4 per million BTU, coal is likely to generate electricity at lowest cost.

Gas turbine power plant. Photo by D. Dears
Gas turbine power plant. Photo by D. Dears

 

Note the reference in Table 1, to nameplate rating. Nameplate rating is important when evaluating the real investment cost, because some power plants can generate electricity more consistently. Capacity factor is a measure of how much electricity a power plant actually produces, compared with the amount it could theoretically produce based on its nameplate rating.

A nuclear power plant typically has a capacity factor of 90%, while land-based wind turbines typically have a capacity factor of 30%.

This means that a nuclear power plant produces three times more electricity than a wind farm of comparable size, where size is based on name plate rating.

The capacity factors for coal and NGCC are approximately 85%.

The capacity factor for offshore wind is typically 39%.

The capacity factors for PV solar and CSP solar, without thermal storage, are approximately 16% and 25% respectively. With 6 hours of thermal storage, CSP capacity factor is increased to approximately 45%, according to a report by the CSP industry2.

The effect of these disparities in capacity factor can be seen by adjusting the investment cost for the amount of electricity each dollar of investment actually produces, Table 2.

 

TABLE 2

Method

Adjusted Investment Cost per Nameplate Kilowatt

Natural Gas Combined Cycle $1,300/KW
Traditional Coal $2,400/KW
Wind, Land-Based $6,700/KW
Solar PV $15,000/KW
Ultra Supercritical Coal $3,300/KW
Solar Concentrating, without thermal storage $18,000/KW
Wind, Off-Shore $12,800/KW
Integrated Gasification Combined Cycle $5,900/KW
Nuclear $6,700/KW
Solar Concentrating, with 6 hours thermal storage $17,800/KW

 

The much higher investment required for wind and solar of various types for the electricity actually generated, almost guarantees that electricity produced by these methods will be more expensive than from coal and natural gas, even if there is no cost for fuel.

Various organizations try to calculate the Levelized Cost of Electricity (LCOE), that incorporates operating costs as well as investment, but these are too often rigged to get the desired answer.

The EIA, for example, adds the hypothetical cost of CO2, at $15 per ton of CO2, when calculating the LCOE for coal, which makes it appear as though wind is competitive with coal. This is a political statement by this administration.

The EIA statement on LCOEs says that a 30 year life is used for their calculations, but wind turbines only have a 20 year life — and possibly less.

That’s why looking at investment costs, adjusted for capacity factor, gives a clearer picture.

Without subsidies, investors wouldn’t be able to obtain a satisfactory return on wind and solar investments.

In the United States, wind farms receive 2.2 cents per kWh for the electricity they produce.

In Germany, offshore wind farms receive 19 cents per kWh.

Without these subsidies, it’s doubtful people would invest in wind farms.

Americans need to decide whether their interests are best served by low cost electricity or using tax payer dollars to cut CO2 emissions.

 

Notes:

  1.  The costs for wind and solar do not include the added cost of storage which must be installed if either is to become a significant grid component.
  2. There are different types of CSP systems. There are tower, parabolic trough and dish concentrating solar power systems. Similarly, with PV solar some systems track the sun, others do not. The above investment cost reflects averages drawn from multiple sources.

A report published by advocates of CSP contains information on various solar systems and is available here,
http://www.csptoday.com/global-tracker/documents/8OctoberPVvsCSPAFinancialComparison.pdf

 

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0 Replies to “Basic Power Gen Cost Information”

    • Thanks. I appreciate your comment.
      It would be interesting to see the results of a national poll on this issue.
      Unfortunately, the media doesn’t seem interested in the question.

    • Thanks for your comment.
      The Wikipedia article you refer to, adopts the EIA’s LCOEs, therefore, as mentioned in my article, the LCOE for coal has a penalty added of $15 per ton of CO2 emissions which distorts the actual LCOE of coal and makes it appear as though wind is competitive … which it is not.
      Furthermore, as mentioned in my article, the EIA uses a 30 year payback period for wind even though the life of the wind turbine is only 20 years. In other words, they assume the wind turbine is generating electricity when the turbine no longer exists. That’s the only explanation I can see for their statement.
      The openEI data says Capacity factor for wind is 38% which overstates real world applications. 30% is closer to actual conditions. The same can be said for offshore wind and PV solar.
      My use of $/KW for electricity actually being produced, is a more realistic way of comparing the various types of generation. It does leave out fuel costs, but the disparity between the cost of building the plants are huge when the capacity factor is included in the calculation.
      The fact that the EIA and Wikipedia actually distort the LCOE of coal tells me they are making a political rather than a financial statement.

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