What is the Cost to Build a Warehouse?
Power plants are a key component of our critical infrastructure but must remain profitable for investors in order to continue operations. A fundamental factor affecting the profitability of power plants is the total construction cost to bring the facility online. Just as power plants themselves are complex facilities, power plant construction costs are inherently complex. Construction costs for new power plants vary widely depending on the type of electricity generation technology they are harnessing. Both fuel consuming and non-fuel consuming power generation facilities have substantially different construction costs.
Additionally, new construction costs for power plants are moderated by a number of other factors. Some of these factors are inherent to the power producing industry itself. For example, the regulatory environment, access to infrastructure, and the cost of the technology supporting the plant all influence the final construction cost. When discussing power plant construction costs, it is also important to understand how current dynamics in the construction industry as a whole can affect power plant construction costs. These include volatility in core material components for power plants, such as steel or metals, as well as an existing shortage of skilled labor within the construction industry. In this article, we’ll discuss power plant construction costs in the context of the moderating forces affecting costs both specific to power plants as well as forces affecting the construction industry in general.
Power Plant Type VS Cost
One of the core factors affecting construction costs for power generation facilities is the type of proposed facility. Construction costs can vary widely depending on whether they are coal-fired power plants or plants powered by natural gas, solar, wind, or nuclear generator facilities. For investors in power generation facilities, construction costs between these types of generation facilities is a critical consideration when assessing whether an investment will be profitable. Investors must also take into account other factors, like ongoing maintenance costs and future demand in order to determine a favorable rate of return. But central to any calculation is the capital cost required to bring a facility online. As such, a brief discussion of actual construction costs for different types of power plants is a helpful starting point before exploring other dynamics that influence power plant construction costs.
Power plant construction costs are presented as the cost in dollars per kilowatt. The information presented in this section is provided by the EIA. Specifically, we will be using power plant construction costs for power generation facilities constructed in 2015, found here. This information is the most current provided, but EIA is expected to release power plant construction costs for 2016 in July 2018. For those interested in power plant construction costs, publications by the EIA are one of the most valuable sources of information available. The data provided by the EIA is useful to illustrate the complex nature of power plant construction costs, and highlights the multitude of variables that can not only affect power plant construction costs but also ongoing profitability.
Wind
Power plants that relied on the wind as a renewable energy source added the most capacity to the power grid in 2015, without adding to much to fuel costs. Harnessing wind as an energy source has steadily been on the rise in the United States. In 2015, power plants harnessing wind energy added 8,064 megawatts (MW) of capacity. Contrast this with petroleum-based generation plants which added 45 MW of capacity and you can see the explosive growth of power plants reliant on wind energy. Wind power plants were constructed with an average cost of $1,661 per kilowatt of installed nameplate activity. This resulted in a total construction cost of $13,395,684 for 66 generators.
Natural Gas
Power plants that utilize natural gas have been prime drivers for increased grid capacity in recent years, and 2015 was no exception. In 2015 natural gas power plants added a total capacity of 6,549 MW. Natural gas power plant construction costs for the same year averaged $812/kw, for a total cost of $5,318,957 for 74 generators. There are three different types of technology that are utilized in natural gas power plants. Each different technology has a substantial impact on the total construction costs. The majority of capacity was added through combined-cycle natural gas power plants (4,755 MW) and combustion turbines (1,553), while internal combustion engines accounted for only a small fraction of the capacity added (240). This doesn’t tell the complete story, however.
Solar
Solar power plant construction cost, like those for natural gas, is also highly dependent on the underlying technology utilized in the plant. Additionally, the capacity generated by solar power plants is also dependent on the technology utilized. Because of this, the intersection between construction costs and the productive capacity of solar power plants is a central consideration for investors. The average construction cost for all types of solar photovoltaic (PV) power plants was $2,921/kw for a total capacity increase of 3,192 MW. Total construction costs for solar PV plants was $9,324,095 for 386 total generators. These numbers demonstrate that solar plants on average yield less capacity increases per generator when compared to both natural gas and wind. Production levels aren’t static across different types of solar PV installations.
Labor & Material Cost
Labor and materials are two of the core drivers of power plant construction costs, and both are leading to rising construction costs each year across all industries. Keeping abreast of fluctuations in both labor and materials is important when assessing total construction costs for power plants. Power plant construction is generally an extended undertaking. Projects can take between 1 and 6 years for completion at a minimum, with some extending considerably further. The EIA rightly points out that differences between the projected and real cost of materials and construction over the course of the project are important to consider and can have a substantial impact on construction costs.
Construction costs, in general, are rising, but two of the primary drivers of this are material and labor burden. Material costs have risen dramatically in recent months, and may continue to rise should current policy stances be maintained. In particular, tariffs on foreign imports of key metals, including steel, aluminum, and iron, as well as lumber from Canada, are producing dramatic fluctuations in material costs. Real material costs are currently up roughly 10% over July 2017. This trend doesn’t appear to be diminishing for the foreseeable future. Steel is especially important for power plant construction, so continued tariffs on imported steel could result in substantial cost increases for power plant construction of all types.
Process To Get Power Plant Cost Estimate Report
Here I am going to share some steps to get your Power Plant Cost estimate report.
