How much does it cost to build a new power plant?

The cost of a new power plant varies widely by the technology used, and since cost of technology is a constantly changing variable, cost must be revisited regularly. Two valuable sources for gathering accurate information on the cost of power plant are the US Energy Information Administration (EIA) and Lazard, a leading financial advisory and asset management company. In April 2023 Lazard published its Levelized Cost of Energy Analysis - Version 16. It compares the cost of key forms of electrical power generation, with a focus on Levelized Cost of Electricity (LCOE). However, information is also presented on the capital cost of new facilities that is a key factor within LCOE. Figure 1 summarizes the capital cost information in dollars per kilowatt ($/kW) where kW is the nameplate capacity of the plant (i.e., the maximum generation to be expected given no constraints on fuel). The key technologies from this table, arranged from lowest to highest capital cost per kilowatt capacity (excluding subsidies), are as follows:

• $650 - $1,300 per kW Gas - combined cycle (CC)
• $700 - $1,400 per kW Utility solar photovoltaic (PV)
• $1,025 - $1,700 per kW Wind (onshore)
• $1075 - $1,600 per kW Utility solar PV with storage
• $2,230 - $4,150 per kW Rooftop photovoltaic
• $3,000 - $5,000 per kW Wind (offshore)
• $3,200 - $6,775* per kW Coal
• $4,700 - $6,075 per kW Geothermal
• $8,475 - $13,925** per kW Nuclear

* the upper cost for a coal plant reflects the cost for including carbon capture, which just about doubles the price and which is not yet proven technology at a commercial level. (See OWOE: What is carbon capture and storage (CCS)?)

** the upper cost for a nuclear plant is based on information for the most recent facility under construction in the US (Plant Vogtle - approximately $30 billion for 2 reactors at 1117 MW each. (See OWOE: What does it cost to build a nuclear power plant? ).

As costs for solar and wind technologies have decreased, the capital costs of renewable energy generation facilities have begun to converge with the least expensive conventional generation technology - CC gas plants. However, if one were to select a new power generation facility solely on the basis of capital cost, the technology of choice would be a natural gas plant followed closely by utility-scale PV. Onshore wind and solar PV plus storage would be the next choice.

However, it is worthwhile to examine how a critical factor in the operation of a plant, capacity factor (CF), impacts this comparison. CFs which are the ratio of actual generation on an annual basis to capacity if running full-time are strongly dependent on fuel type. For example, nuclear plants have the highest annual capacity factor over 90%, while onshore wind is in the mid 30% range due to intermittency, and solar is approximately 25% since it only generates electricity during daylight hours. If one adjusts the capital cost per kW by capacity factor, as given by the EIA for 2023 over all plants currently operating in the US, to get a cost per effective kW, the above numbers (using the average of the above ranges) become:

• $1,710 per kW CC Gas (57% CF)
• $3,780 per kW Onshore Wind (36% CF)
• $4,200 per kW Utility solar PV (25% CF)
• $7,380 per kW Geothermal (73% CF)
• $8,890 per kW Offshore Wind (45% CF)
• $10,390 per kW Coal (48% CF)
• $12,040 per kW Nuclear (93% CF)

This information shows that construction of a new CC gas plant for equivalent generation is less than half the price of the next competitor, onshore wind, and about one-third the price of solar PV. However, current production tax credits (PTC) for new wind and investment tax credits (ITC) for new solar plants help close these gaps, as will ongoing technology development.

Although critical to the decision process, capital cost to build a plant is only one of the key input values needed to decide which type of plant should be built at any given time and location. LCOE takes into account operating and fuel costs and provides a more robust measure for decision making, and the parameter LACE (Levelized Avoided Cost of Electricity) allows regional and local variations in current power costs to be taken into consideration. (See OWOE: What are LCOE and LACE?). It should also be noted that the costs associated with intermittency of generation (for renewable resources) and environmental damage, health care, climate change, water usage, etc., (which arise through electricity generation using fossil fuels), are also real costs paid by society but not currently included in either the capital cost comparison or LCOE calculations. (See OWOE: What is the cheapest method for generating electricity today in the US?).

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